Korn Ferry at Robert W Baird Global Consumer, Technology & Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : That's a great description. One of the things that in addition to broadening the firm is and being able to fulfill all sorts of different client requests, you've also made the company a little bit less cyclically sensitive. Wondering if you can describe that a little bit. And just in terms of how you would rate the levels of sensitivity from a cyclical perspective across the different offering? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 1:40PM, KFY.N - Korn Ferry at Robert W Baird Global Consumer, Technology & Services Conference

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Great. Wondering if you can talk a little bit about how -- Brian, you've been spearheading this for a while. how do you identify the right acquisition targets? How do you go about looking at them? What is the level of feedback that you're getting from clients, internal partners in terms of what the rate that is?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : And so when you're looking at new companies, what is the feedback that you're getting? I remember attending our Korn Ferry consultants meeting that I was presenting at. And I was struck. You had a consulting organization that focuses on acquisitions. And they were talking a little bit about best practices. And it sounded like a lot of the feedback was actually related to what clients were asking for. Can you talk a little bit about that?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : You mentioned that healthy degree of skepticism. That was initially being expressed by some of the consultants. How has that changed? What's the feedback now? How is the cultural alignment? How long does it take for the executive search consultants to feel comfortable in terms of recommending the services of a newly acquired?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Great. How much does the average executive search consultant derive in terms of compensation from the referrals?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Great. Brian, you are in an interesting position because you work as part of the key management group within a cyclically sensitive organization. And yet you're out there, and you're looking for new deals. How informed do you become about like where we are in the cycle in terms of pursuing acquisitions here?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : How do you think about valuations? Because one thing, as external shareholders, they're looking at how Korn Ferry as an overall entity is being valued and thinking about one potential use of cash. Is this basically buybacks and buying yourself which is now composed of multiple entities that you paid various prices for? And we take a look at your current valuation. It obviously reflects high level of concern about the macro environment. And so for the 28 years that I've been following the space, the multiples contract ahead of the year earnings, and that's what we've seen. So how do you think about like how much -- what seems reasonable to pay for acquisitions in a time period where the public equity is actually quite depressed?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : And so there is always the bid and the ask. In terms of the ask, you said they haven't come down very much, but how do you broach those discussions? How do you actually say, hey, look, here's what -- this is the most anticipated recession if it comes to fruition that we've ever had. How do you talk to them about like, hey, we're coming off of a cyclical upswing? Things are moderating. How do you broach that subject?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : But what do you think most public investors don't appreciate about the whole process? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 1:40PM, KFY.N - Korn Ferry at Robert W Baird Global Consumer, Technology & Services Conference

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : The process.

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Yeah.

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : And Brian, you have a lot of history in terms of multiple acquisitions with Korn Ferry. Which deal was the one that you'd say, hey, I learned a lesson from this, just in terms of, incrementally we would approach things a little differently? What are some of the learnings that you've had over the process?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Okay. Can you talk a little bit about the latest opportunity group that you're filling out the portfolio in. It's considered to be professional search. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 1:40PM, KFY.N - Korn Ferry at Robert W Baird Global Consumer, Technology & Services Conference There's also some professional staffing. Some investors have wondered about how does that change the perception of Korn Ferry. Does it dilute the brand equity at all?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : How do you look at the business? And then also, you know, when we think about the natural margin profile of a staffing and professional search business relative to the overall portfolio, what does that end up doing to the margins?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Yeah, they do. So you're paying more for -- how are you thinking about the margin profile of Korn Ferry from a longer-term perspective because it's been increasing over the years, even during down cycles? The trough multiples or the trough margins continue to go up. So how do you think about that?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Okay. In terms of the synergies that you typically end up generating, can you talk a little bit about that? Because the one thing that really seems appealing to me, particularly with regards to the interim on professional search area is you acquire a company like say, the Lucas Group as an example. And they may be really good performers, but the brand name doesn't have the same resonance as Korn Ferry. So you convert them over to the Korn Ferry brand name. They automatically have a higher level of credibility, both with prospects and with candidates. But what are you seeing from a tangible real post-acquisition analysis in terms of the uplift?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : That is. When you think about the longer-term vision for Korn Ferry, it's obviously changed dramatically over the entire time that you've been part of the organization. Brian, if we think about like, okay, what's Korn Ferry going to look like 5 or 10 years from now, can you give us a sense like -- I've heard about like what the Board targets are in terms of your overall revenue. But can you talk a little bit about -- what do you feel comfortable sharing with regards to aspirational size of the organization where Korn Ferry will end up fitting in terms of the mindset of most decision makers? How they're going to perceive the organization? And what that mix of business is going to look like?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Right. What's paid $10 billion. That's a round number. So that's easy to do the percentages. So $10 billion, what percent would be executive search?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Okay. Let's go for another non-answer.

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : All right. So when we think about like interim professional staffing, those are big category.

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Lots of targets out there that you could potentially bring on. How big could that be?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : And you mentioned, obviously consulting was one of the core areas that you'd gone into. You mentioned potentially going outside of pure human capital consulting and into more strategic areas. Can you elaborate a little bit on that? Like what would be an appropriate -- how should investors think about what might be a target in that category?

Question: Mark Marcon - Robert W. Baird & Co. - Analyst : Great. Generative AI and large language models have basically been a key topic throughout this conference. When you think about the longer-term implications of generative AI and LLM, how does that influence what you look at or how you're thinking about companies fitting into the business? There are some serious investors who wonder about like, hey, might certain jobs get displaced because of generative AI. How do you think about that?