Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry First Quarter Fiscal Year 2021 Conference Call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. We have also made available, in the Investor Relations section of our website at kornferry.com, a copy of the financial presentation that we will be reviewing with you today. Before I turn the call over to our host, Mr. Gary Burnison, let me first read a continuation statement to our investors. Certain statements made in this call today, such as those relating to future performance, plans, and goals, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, which are beyond the company's control. Additional information concerning such risks and uncertainties can be found in the release relating to this presentation and in the periodic and other reports filed by the company with the SEC, including the company's annual report for fiscal year 2020 and in the company's soon-to-be-filed quarterly report for the quarter ending July 31, 2020. Also, some of the comments today may reference non-GAAP financial measures, such as constant currency amounts, EBITDA, and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measure, is contained in the financial presentation and earnings release relating to this call, both of which are posted in the Investor Relations section of the company's website at www.kornferry.com. With that, I will turn the call over to Mr. Burnison. Mr. Burnison, please go ahead, sir.

Okay. Thank you, Stephen. And good afternoon. Good morning, everybody. It's been six months since the pandemic was officially declared, and I think the world is at the beginning of an Iron Man triathlon. It's not just a marathon, but a triathlon of endurance, agility, and change. In fact, I think over the next two years, we're going to see more change than we've seen in the past ten. Change will circle humanity. And in business, different work will need to get done, and work will need to get done differently. Almost every company on the planet is going to have to reimagine their business, whether that's rethinking their organizational atmosphere, their structure, roles, responsibilities, how they compensate, how they engage, how they develop their workforce because change is going to be all around us. They're going to need to hire learning agile, diverse talent, and do so in a more inclusive ethos and in an increasingly digital world, and that's the essence of Korn Ferry's business: to enable people and organizations to exceed their potential, to be more of them. In early March, we were announcing the best results in our history. Record fee revenue and a continued transformation from a monoline firm to an organizational consultancy. Then, the world temporarily paused. Certainly, that pause temporarily impacted our business. During the first quarter of our fiscal year, we generated about $344 million in fee revenue, which was down about 28% in constant currency, but I think the key word is temporary. As we alluded on our last call, we're continuing to see green shoots, with July new business better than June, June better than May, and May better than April. Trailing new business for the three months ended August was down about 13% year-over-year combined, which is obviously more positive than we saw in our first quarter and what we saw when the world stopped in April. In fact, August new business was only down about 6% year-over-year. So, really good news. July new business was up 34% over June. So, again, green shoots that we're seeing. And I think more than anything I'm proud, of our organization, motivated by how we’ve positioned ourselves for the opportunity ahead, and we face this crisis from a position of strength, not only when you consider the breadth and depth of our solutions, but when you consider our balance sheet. And the foundation of the firm has been to ground it in IT and data, and that continues to be the backbone of Korn Ferry. We've got rewards data on over 20 million people, 25,000 companies. We've done almost 70 million assessments. We have thousands of organizational benchmark data. We've got thousands of success profiles. Every year, we train and develop a million professionals a year. And certainly, last but not least, we place a candidate each business hour every three minutes. And so, we're using this time of change not only to have an impact with our clients, but also to reimagine our own business. And that includes moving from analog to digital, including in our assessment and learning business, which today is almost 25% of the company. And we're certainly shifting that business. We've done more virtual sessions in the last couple of months than we've done in the last many, many months. The pipeline is good. We pivoted very quickly. I can't be prouder of our team. And when you look at the uptick here month-over-month in both our consulting and digital new business, you can see that something's working. And on the recruiting side, that's another place where we are reimagining that business as well through AI and technology and a lot of the platforms that we use in RPO. We've taken this IT out to the marketplace. I'm very proud of the stance we have taken. I think our biggest opportunity as a company is to recast the Korn Ferry brand. We recently launched Leadership U, a curriculum that helps leaders take on today's challenges. More importantly, amid all the calls for change, we're amplifying our voice not only on diversity, but also in equity and inclusion both within Korn Ferry and among our clients. We know from our research that diversity is a fact, engagement is an emotion, but inclusion is a behavior. Our focus on D&I actually started eight years ago – actually it was two days ago, eight-year anniversary of us making an investment in a company then called Global Novations. We've turned that into what I consider, to believe, the best D&I consulting business in the world. Our July consulting new business was the fourth highest month in our history. That was driven in part by the strong voice we've taken not only around the pandemic, but also around D&I. I'm also proud and pleased to say that we're launching Leadership U for Humanity, a nonprofit venture of the Korn Ferry Charitable Foundation focused on developing the total mosaic inside communities and within corporations. One of our partners will be the Executive Leadership Council, an absolute preeminent organization. Their mission is to develop and increase the number of successful black executives around the globe, and our goal is to develop a million new leaders from diverse backgrounds using our Korn Ferry Advance and Leadership U platforms. Not only do we demonstrate what we say, but we're not just talking about it; we're being about it and providing a systemic solution to a systemic issue. Out of tomorrow's change, a new order is emerging, and Korn Ferry is going to help drive that change. Helping people and organizations be more than. With that, I am joined here by Bob Rozek and Gregg Kvochak. Before we entertain questions, I'll turn it over to you, Bob.

Great. Thanks, Gary, and good afternoon and good morning. Before I jump into the first quarter results, I want to elaborate on a couple of points that Gary talked about. I think he's absolutely right concerning the amount of change that will take place in the next two, even three or four years. We're already seeing it in our clients. I truly believe that Korn Ferry is uniquely positioned to lead companies through this change. The data, IP and know-how that Gary talked about really sits at the center of our organization and permeates all of our solutions, and that provides a common harmonized language for talent that's truly core to our One Korn Ferry integrated approach to helping clients solve their thorniest business issues through their most valuable asset: the people. Again, I believe we're uniquely positioned because we're the only firm that has the end-to-end data, IP, and know-how to address every aspect of an employee's engagement with his or her employer. Not only do we have first-mover advantage, but in my opinion, our position and our collection of assets is virtually impossible to replicate. So, as I sit here today, in the midst of this wave of change, my optimism for Korn Ferry's future growth prospects has never been higher. Now, let me turn my attention to the first quarter. I'll start with a few highlights before turning it over to Gregg and then I'll come back on and address recent new business trends. For the first quarter of fiscal year 2021, our fee revenue was $344 million, down about 28% in constant currency. More importantly, our monthly fee revenue trends within the quarter showed signs of stabilization. Consolidated fee revenue in May was down about 34% year-over-year, while June and July were down 27% and 26% respectively. For each of our service offerings, we saw fee revenue slowly at different rates, which really was in line with our expectation and reflects the diversification and mix shifts that we've been communicating. Specifically, fee revenue in the first quarter, measured at constant currency, was down 37% for executive search, 35% for professional search, our consulting was down 26%, RPO was down 22%, and digital was down 2%. Driven by the revenue contraction, our consolidated adjusted EBITDA for the first quarter was $10.6 million, with an adjusted EBITDA margin of 3.1%, and our adjusted fully diluted loss per share of $0.19. Our balance sheet and liquidity remain strong. At the end of the first quarter, cash and marketable securities totaled $733 million. Excluding amounts reserved for deferred compensation and for accrued bonuses, and net of the funds used to right-size the firm, our investable cash balance at the end of the first quarter was about $511 million, and that's up about $150 million year-over-year. We continue to have undrawn capacity of $645 million on our revolver. So, all together, we have close to $1.2 billion in liquidity to manage our way through the COVID-19 crisis and to invest back into the business through the recovery. Last, we had about $400 million in outstanding debt at the end of the quarter. Finally, during the quarter, we completed our restructuring actions to size the firm for the anticipated current levels of revenue. As you will recall, in April, just before the end of our fiscal fourth quarter of FY 2020, we announced a number of cost actions targeted at both compensation expense, which included layoffs, furloughs, and across-the-board salary cuts, as well as other actions focused on the reduction of G&A. Combined with the actions completed in the first quarter, we have initially reduced our cost base by about $321 million annually. I'm now going to turn the call over to Gregg to review our operating segments in more detail.

Okay. Thanks, Bob. Starting with our Digital segment, global fee revenue for KF Digital was $56 million in the first quarter and down approximately $2 million or 2% year-over-year measured at constant currency. The subscription licensing component of KF Digital fee revenue in the first quarter was approximately $21 million, which was up $6 million year-over-year and flat sequentially. New business in the first quarter for the Digital segment was down approximately 3% globally year-over-year at constant currency, with the subscription and licensing component up approximately 40%. Adjusted EBITDA in the first quarter for KF Digital was $7.9 million, with a 14.2% adjusted EBITDA margin. Now turning to Consulting. In the first quarter, Consulting generated $99 million in fee revenue, which was down approximately 26% year-over-year at constant currency. As clients settled into their new work-from-home protocols and became more familiar with our virtual delivery capabilities, new business for our Consulting services has begun to improve. Measured year-over-year at constant currency, new business in the first quarter of our Consulting segment was down approximately 4%, led by North America where new business was up 11% year-over-year. Adjusted EBITDA for Consulting in the first quarter was $6.6 million, with an adjusted EBITDA margin of 6.6%. RPO and professional search generated global fee revenue of $68 million in the first quarter, which was down 27% year-over-year at constant currency. RPO fee revenue was down approximately 22% and professional search fee revenue was down approximately 35% year-over-year, measured at constant currency. Adjusted EBITDA for RPO and professional search in the first quarter was $6 million, with an adjusted EBITDA margin of 8.8%. Finally, for Executive Search, global fee revenue in the first quarter of fiscal 2021 was approximately $120 million, which compared year-over-year and measured at constant currency was down approximately 37%. At constant currency, North America was down 38%, while both EMEA and APAC were down 35%. The total number of dedicated executive search consultants worldwide at the end of the first quarter was 510, down 59 year-over-year and down 46 sequentially. Annualized fee revenue production per consultant in the first quarter was $900,000. The number of new assignments opened worldwide in the first quarter was 1,115, which was down approximately 34% year-over-year, but up 9% sequentially. Adjusted EBITDA for Executive Search in the first quarter was approximately $8.1 million, with an adjusted EBITDA margin of 6.7%. I'll turn the call back over to Bob to discuss some of our recent monthly new business trends.

Great. Thanks, Greg. Globally, year-over-year declines in monthly business exiting fiscal year 2021 Q1 and entering the second quarter continued to stabilize. Excluding new business awards for RPO, global new business measured year-over-year was down approximately 31% in May, down 25% in June, rebounding to down 5% in July. Measured sequentially, June new business was up 17% over May, and July new business was up 34% compared to June. With summer vacations, August is a seasonally slow month. It normally is lower relative to July. Measured year-over-year, August new business was stable and down about 6%, which is in line with what we saw in July. Monthly new business trends have varied by segment and have, in some cases, been choppy month to month. Digital new business was up 3% year-over-year in June, down 5% year-over-year in July, and up 10% in August. Likewise, Consulting new business was down 28% year-over-year in June, rebounding to up 34% in July and up 10% in August. For Executive Search, new business was down 34% year-over-year in June, improving to down 27% in July and was down 19% in August. Finally, Professional Search new business was down 15% year-over-year, falling to down 23% in July and August. With regards to RPO, a strong quarter of new business, with $56 million of global awards, comprised of $32 million of new clients and $24 million of renewals and extensions. We continue to have a strong pipeline of new business in the RPO world. Approximately two months have passed since our last earnings call. Yet there remains significant uncertainty about the ultimate impact of COVID-19 on society and global economies. Currently, governments are struggling to balance reopening and reengaging in an effective way against the maintenance of an environment that fosters the health and safety of everyone. There is no playbook. This effort takes on many forms, and there's not a clear path to success. Further, it's unclear whether certain governmental aid programs that were put in place to provide financial assistance to impacted businesses and individuals will remain in place or for how long. The unprecedented nature of the current environment, combined with many unanswered questions and rapidly changing data points, like the recent acceleration of corporate layoffs and the potential outcome of the US presidential election, continues to cloud the near-term predictability of our business. Consistent with our approach, for the last two earnings calls, we will not issue any specific revenue or earnings guidance for the second quarter of fiscal year 2021. That concludes our prepared remarks. We're glad to take any questions you may have.

Our first question will come from George Long.

You indicated that July new business trends were down 5% year-over-year, whereas August new business was down 6% year-over-year. Could you talk about what contributed to the moderation in the piece of improvement in new business trends overall and perhaps by segment?

If you look, the good news is obviously the headline numbers on the quarter were not spectacular, but the world stopped in April, and you're going to see that with GDP. But what we have seen is a very steady upswing in new business. As Bob indicated, July was better than June, which was better than May. So, that's really good news. When we look at August, overall, we were down about 6%. Executive Search was down 18% if you just isolate the month of August, and Consulting and Digital were actually up 10%. So, I think that when you look at the platform as a whole, the business is reacting almost in line with what we thought it would do. And when you look at the drivers of Consulting and Digital, I would say I would point to, number one, transformation and the fact that every company – different work needs to get done, and work needs to get done differently. So, every company in the world is going to have to reimagine their business, and that starts with the organization and its people. When there's transformation, there's usually a pause. Then, the next step is with people. So, we've certainly seen that. We're starting to see early signs of that in our Consulting and Digital business. I think the other broad stroke I would put on the new business trends is our D&I business, which is – before this was about a mid-eight-figure business, and we've seen over the last few months about a 50% uplift in how we can help companies not just deal with diversity, because that's a fact, but more importantly how you deal with inclusion, which is a behavior. So, I would point to those two and then I would point to one other, which ties to transformation, which is around developing a workforce and creating a more learning agile workforce that can operate in a digital world with an inclusive ethos. So, those are, I think, the broad strokes on the business. You're seeing, obviously, an uptick in search, which is good. From an industry standpoint, it's much like you would probably intuitively think. The consumer area has seen improvement, but not as much as, say, life science. Life science has been, as you would guess, certainly stronger. Those would be the broad strokes. Obviously, energy has been challenged over the past few months, but that would be my kind of 38,000-foot view.

Just so you know, on the wise counsel of Toby after our last earnings call, we actually put a slide into the earnings call presentation that's posted. That shows the new business by each line of business. That's on page seven.

And as a follow-up, could you provide some perspectives around how you expect the trends that you're seeing in new business to translate into revenue or fee performance? It sounds like clients aren't canceling. So, retention rates aren’t changing. So, it's really the pace of new business that's ultimately going to drive fee revenue performance. It sounds like it's ultimately delayed rather than cancellation. So, could you provide some perspectives on how you expect the translation of new business into fee revenue?

The search businesses are rather straightforward. That translates to revenue generally over 90 days, and when you look at the Consulting and Digital business, you'd find that essentially 50% of it gets recognized in, say, within 12 months, and then the balance is going to be over the next 13 months to 35 months. The RPO business is not materially different from that. And what I would say, there are a couple other trends too. We've certainly seen a shift towards bigger engagements. That was a strategic pillar of ours going back a couple of years. We're now really starting to see more impactful engagements. That's something that is coming through. I think the other thing that Bob could maybe allude on is that, when you look at the digital business, we've all talked for a while about moving that business to a subscription-based model. And that digital business, we obviously made a push towards digitizing that. But the reality is when this pandemic hit, still a lot of the business was delivered in the classroom. We have gone – we are all over that, moving that to a digital offering. One of the things is to increase the amount of subscription-based business from digital. So, Bob, do you want to comment on that?

Yeah. So, George, just so you know, the subscription business, I'll give it to you over the last three quarters, including Q1. It was right around $21 million. So, that demonstrates the durability of that revenue in the current environment that we're operating in. The piece of that, I think the better news is, if you look at the new business, our subscription offerings, it was about $23.5 million in Q1. That's up 42% year-over-year, and even quarter sequential, it's up about 16%. So, again, as Gary indicated, part of the strategy in the diversification is also creating more durable revenue streams, and we're starting to see that take shape. Even when we talked about the larger engagements, when you stratify the – whether it's digital or consulting into the large engagements for Digital, we consider that over 250 for consulting, we consider that over 500. We're seeing growth in those large engagements year-over-year and quarter sequential versus the smaller, more transactional engagements. That's where we see the decline. So, again, these are data points at this point, but we are starting to see really the strategy come to life that we've been talking about.

Our next question will come from the line of Tobey Sommer.

Just a quick follow-up, if I could, on the new business trends. What's contract duration like, or new business trend duration, if you could speak about a little bit by segment? And in particular, the D&I wins that you have, are those on the longer side? Just trying to think about as far as how it'll play out in the model.

We hope that the D&I is definitely not going to be 90 days, but it's not going to be as long as the balance of the portfolio. There's going to be real change. From what I can tell talking to CEOs, people are taking this very, very seriously, particularly in the United States. I would guess that much of that will have a shorter tail. If I describe that the search businesses have a tail of, say, 90 days or so, and the Consulting, Digital, RPO businesses have revenue recognition of about 50% within 12 months, then the balance over, say, 36 months, I think this D&I business will be somewhere in between.

How should we think about the temporary cost cuts being reabsorbed into the business? Again, from a modeling perspective, it's a pretty significant variable for us to contemplate.

I would think about it – when we laid out the cost cuts, our goal was – number one, I guess as I step out, this was a humanitarian crisis. We pulled out a contingency playbook a year ago and did a number of things to prepare for a turn. We didn't envision this kind of turn. But in early March – we obviously saw this in China about the third week in January – when we looked at this, we said this is a humanitarian crisis. Let's go into this with the view of preserving as much muscle as we can to accelerate through the turn. Last time, when I go back 12 years, Korn Ferry business grew fivefold from the trough, clearly over a period of years, both inorganically and organically. Within four quarters of the trough, the business was up 60%. So, we said, okay, let's try to save as many jobs as possible. Unfortunately, we did have to make the decision to let go some very, very good people, which troubled us, and then we took some other actions that were more temporary in nature. When you look at it in total, on an annualized run rate, we said we would reduce the cost base by about $320 million. Essentially, half of that was more permanent in nature, and half of it would be variable. When you look at this quarter on that variable piece, you'll probably find that 40% or so of that variable came back in, maybe a little bit less into the first quarter. Something like that. Bob can provide the specific numbers. We're not providing guidance just given how quickly the world seems to change from day to day. The way I would look at this is just say, okay, you did $345 million in revenue – in fee revenue this quarter, which reflected the world stopping in April. If that were to go up, say, pick a number, say, $25 million, how would that margin expand? I would probably point you to – on that first $25 million, it would probably go up 100 basis points to 150 basis points. As you go up the ladder in $25 million increments, you'll see more leverage and more flow-through to EBITDA. That's kind of how I would think of it in very broad strokes.

It's actually pretty spot on, Gary. The percentage you talked about, 40%, is actually 41%. So, you're spot on. The model that you laid out is exactly how we view the world.

If I could ask another one, with that in mind and investors looking at businesses in the storm, we're trying to see what they'll be like when things are more normal and we're just worried about economic forces and not the humanitarian crisis you articulated. What kind of revenue level do you think the company would need to hit to operate at the old EBITDA margins of around 16%? Because that kind of analysis is going to be integral to long-only building a position amid this turmoil?

I hear you. I think you first have to look, do you believe in the company's strategy of creating a preeminent organizational consultancy, taking strategy, synchronizing with an organization and talent driving superior performance? I think we're at the very, very beginning of that journey. What I would say is, number one, it really does depend on the mix of business in what happens here. I think there's going to be, again, more change in the next two years than in the last ten years. That change is going to encompass a lot of different factors, including the C-suite, because what you're going to find is, for a whole host of reasons, there are going to be a lot of chairs that are going to get reshuffled. People may make personal decisions. There could be demographic issues and considerations. For a number of reasons, that would not surprise me in the least that once companies get past this neutral zone and really move to offense. I'm not suggesting companies haven't done that. Clearly, there have been a number that have. But now, you're really going to determine winners and losers. You're absolutely right. Korn Ferry and its past performance, we grew the company fivefold from the last trough. From the trough 12 years ago, within four quarters, it grew 60%. It depends on, number one, if you consider this to be a trough. If you do and apply that same sort of logic to where we were in the first quarter, I think you could reasonably conclude that we would be back at those margin levels for sure. So, we think we've taken the right step not only on the cost side, but much more importantly on the top line side, about how we can help companies really deliver on change, whether that's D&I, sales effectiveness, M&A, transformation, or the reshuffling of the C-suite. I feel very confident in that.

If we just take the mix shift out of it, can you be at the old margin at a lower revenue level because of the cost cuts you've taken?

Yes.

We have a question from the line of Sam Kusswurm.

My question relates to Executive Search. Are there certain client groups that demand has trended particularly better or worse throughout the quarter here?

You got a little muffled. Could you repeat that, I'm sorry, one more time?

Yeah. Within Executive Search, are there certain client groups that demand has trended particularly better or worse than throughout the quarter?

When you look at it, clearly, the life sciences area has trended better. On the other end of it, there's been certain aspects of the industrial business, such as energy, that haven't trended as well. Those would probably be the barbells. I'd also say that professional services has not trended well. Given what we're seeing in manufacturing activity and all of that, I'm not so sure that those trends that I just alluded to would continue. But I would say those are the outliers. Things like wealth management and asset management have done reasonably well in this environment.

Maybe switching gears then a little bit, in prior cycles, when coming out of a recession, were there more favorable opportunity for market share capture from struggling competitors or even additional acquisition opportunities?

For sure. One of the things we did a year ago is we planted a lot of M&A seeds. As you know, we've done 13 acquisitions, and 12 of those were really kind of sole sourced where the company wasn't necessarily for sale. We planted a lot of M&A seeds going back a year ago. There will undoubtedly be those kinds of opportunities. When we look at the market, we size the market at somewhere between $200 billion and $250 billion. When you look at that market sizing, you would find that the areas of learning and development represent a disproportionate size of that market. We are keenly focused on growing that learning and development business. The executive search market, although incredibly strategically important to Korn Ferry, is probably no more than $5 billion. The professional search market is probably four or five times the size of the executive search market. We look at that as a much broader market. We also focus on the RPO piece of the business as well, which has continued to deliver incredible quality renewals as well as new logos. We think there is that opportunity, and there's that opportunity to also bundle services together.

This is Bob. Just to elaborate on the point Gary made earlier too, when you think about the cost savings that we put in place, Gary mentioned about 50% of those relate to position elimination; the other 50% were other actions. It was a very conscious decision on our part to do that. We retained, as Gary indicated, the muscle to enjoy more than our fair share of the recovery. As you think about us coming out the other side of this, our participation in that recovery has us positioned to enjoy more than our fair share of that.

We have a question from the line of Mark Marcon.

One, this relates to some of the cost actions that you took over the last five months. From the permanent side, what percentage of that has already gone through here in the first quarter? Are there more benefits to see in terms of the permanent reductions as it relates to the financials?

Bob, you should answer that.

Mike, I would think about it, again, more from the perspective – because, again, we're trying to balance the temporary cuts that we've got programmed in place for the organization to share some of the economics back to the employee to sort of mute the impact of the pay cuts. As you think about it, I would think about the way that Gary described it: If you assume the trough was this quarter and you have $25 million increments, you're going to get 150 basis point margin improvements up to probably around maybe a little bit north of $400 million in revenue. Once you get past that point, you'd be looking at a more normalized flow-through.

Gary, you've described this as potentially a triathlon. You've been through multiple cycles. Obviously, this one's unprecedented in several respects. But how do you think most of your clients are going to react in terms of going into offense, engaging in terms of some of the changes that you could help them with? What's that pacing going to look like? And in terms of reshuffling organizations, how quickly do you think that's going to occur?

I think the elephant in the room is fiscal stimulus. There’s a substantial - the punch bowl is spiked big time. The really hard piece of the algebra is gauging the fiscal stimulus and whether that continues. As you know, there are some countries where that's scheduled to end in October. That certainly has an overriding impact on the economic landscape. I would say we are starting to see, we've clearly seen it in the D&I space. There's no doubt about it. In terms of transformation, yes, we are starting to see that. I firmly believe that there is more change here in the next two years than in the last ten years. I think it's going to be incredibly widespread. A lot of the changes that we're seeing, people are not going to go back. I'm envisioning – you can see it in our Consulting business. I do envision that to be pretty widespread, but I think the overarching question there is the stimulus question because that impacts companies' liquidity and the degree of change they can actually actualize, and that one is hard to handicap. My intuition would be that, for any politician, it would be very, very hard to stop spiking the punch bowl. But you never know.

I'll give you a data point on that. As we are looking at the second quarter, whether it's money coming back to Korn Ferry or money going to our employees, we're estimating that level of aid is going to drop by about 30% from what we saw in the first quarter. It's a big factor, as Gary indicated, in terms of what we see going forward.

If we don't see a resumption with regards to that stimulus, do you anticipate that perhaps some of that choppiness that we've seen from month to month in some of the businesses could continue?

Yes. How could you have 50% of Americans making more unemployed than employed? There's some startling data points that you know better than I. Yes, that's a definite risk factor.

Can you talk a little bit about some of the new business trends that you indicated on a monthly basis? In terms of the variance, what drove some of the choppiness? Like, were there big engagements that were coming through? And then, some pulled back? I'm talking specifically in Professional Search, you ended up seeing some improvement there in terms of going from June to July. It was getting better from May to June and then dipped off in July. Was that related to the spike in terms of COVID? And same thing with Digital. On the flip side, Consulting ended up jumping dramatically in July. Was that D&I?

Yes. You're absolutely right. As Bob said, one of the things we've talked about for a while is we've tried to move the organization towards being in the business outcome business. So, moving to solutions, more anchored around outcomes and business impact. We've certainly seen a shift, as Bob indicated, towards larger engagements. I think you're going to see that on the consulting side, in particular, where there could be, in any particular month, to be a large engagement that is hit. I think some of the most validating things to me have been not only the stance we've taken publicly around issues but some major wins. These are major companies that have turned over either part of their leadership development to us, their leadership journeys, helping companies move from analog to digital. These are major wins with brand name logos that Korn Ferry never would have done 12 years ago. The company's positioned completely differently today. Yes, you're absolutely going to see some of that. Is it going to be like the RPO business that tends to be really lumpy? I'm not sure. But clearly, yes, you're absolutely right. The Professional Search, I wouldn't read too much into that. In June, we saw a huge upswing in Professional Search. But again, you had pent-up demand from the world stopping in April, so I'm not so sure I would read much into that. Overall, when you look at the Consulting and Digital business, you would point to transformation, D&I, and learning and development. Some of those things are very related.

Absolutely. Mark, let me give you some data points on that. The new business in our Digital business, year-over-year, the engagements above 250 were actually up 5%; quarter sequential was up 13%. Our Consulting new business, and we draw a line for large engagements there at $500,000, that was actually up 80% year-over-year and almost 50% quarter sequential. You can see the real shift, as Gary indicated, towards a strategic shift towards large engagements.

Can you talk a little bit about two different things? One, what you're doing in terms of changing and transforming yourself? Some elements are relatively obvious in terms of the sales training piece and moving to virtual, but what are some of the other elements that are changing? And what would some of the longer-term impacts be on the margin structure? And then secondly, when we think about some of the leadership development in analog to digital engagements that you're doing, D&I is fairly obvious in terms of what you'd be doing for clients, but can you talk about the engagements you're seeing, like the specifics, with regards to the types of engagements you're seeing now from some of the larger clients where you're seeing some of those big growth rates?

The broad brush is analog to digital. Companies are increasingly looking at their workforce and saying, 'How learning agile are we?' To make that move from analog to digital, it's not only strategy, but then you've got to say, 'Okay, what kind of workforce do you have?' Right? Do you have people that are mentally agile, strategically agile, people agile? We have real IP that will go in and say, 'Okay, this is where you're trying to move the company directionally now, this is what we think it's going to look like in two years. What type of workforce do you need?' Then, measure that workforce today. If there's a gap, 'Okay, these are the learning journeys that you go through.' So, I would say that's number one – in terms of a broad thesis, that's number one. As you said, the D&I is, yes, maybe it is more obvious, but even though it's more obvious on the surface, it's much more systemic. It is much harder for organizations to drive that change, not around diversity, but around the behavior of inclusiveness. That is a leadership journey. We haven't seen much around the M&A space. I wouldn't be surprised if that kicks in at some point here. Sales effectiveness, we've got a very, very world-class business there. We have been helping companies on how they engage with customers virtually. That is a big topic of conversation today. You've seen that. I think with our own business, we are trying to do the same thing. Number one, I think our biggest opportunity is to recast the brand and make the brand synonymous with organizational performance. Hopefully, people have seen what we've done in terms of making the brand more elastic. Second for us, just like our clients, is analog to digital, and that's not just in our learning business and assessment business, which is almost 25%. It's also in our core recruiting businesses. We're pushing very hard around what we can do there in terms of using our technology and AI and the things we use in our RPO business across the entire recruiting platform. That would be number two. We continue to look at M&A. There's nothing that's executable right now, but we've planted a lot of seeds there. The fourth piece is our own talent, whether that is developing from within or adding talent from the outside. That's another leg of our playbook that we said we would try to actualize here, accelerating through the turn.

And our last question will come from the line of Marc Riddick.

Thanks for the detail that you've provided up to this point. I just wanted to touch a little bit on where you are with marquee accounts and the progress that's been made there, certainly with everything going on. And just also wanted to get a sense of, with the folks that were kind of in that marquee group, if the actions that you're seeing there or the plans that you're seeing there are different from maybe the rest of the clientele up there. Any particular traits that we should be thinking about as far as maybe some of your marquee customers are doing as opposed to others?

I'll make some broad comments and then maybe Bob, if there's any data that you happen to have at your fingertips. We really do believe that when you look at a world-class professional services firm, 35% to 40% of the portfolio would be driven by loyal, repeatable, sustaining clients of scale. That's where we are moving to. That's our true north. We have about 300 accounts between marquee and regional that we would consider as part of that. We need to continue to develop from within and bring in account leaders, which is a completely different game than Korn Ferry has played in the past. We've got to be aggressive in that. I will say that I can't mention the wins, but there's been some validating wins with major logos, who not only picked our solution because of our technology platform – so we started a B2C business that is relatively small financially, but we've put 100,000 people through that, around being the world's gymnasium to exercise your career. As part of that, we developed what has now been validated as a world-class technology platform. Some of the wins, in fact, we've even gotten into career transition services. Some of those wins have been from marquee and regional accounts where we've then had a dedicated effort for many quarters. I think, clearly, when I look at some of the marquee wins, they are from marquee accounts. Bob, I don't know if there’s any data that you happen to have at your fingertips.

Mark, if you go back to where we finished last year, the marquee and regional accounts were about 32%, 33% of our total revenue. As Gary just alluded to, the program we put in place with account leaders, account managers, again, is demonstrating that our strategy is paying off with the larger engagements. The first quarter, the marquee and regional accounts were about the same as where we ended last year. But with the change we're seeing in larger engagements, we expect that group of accounts to grow as a percentage of our total revenue over the next couple of years.

That's certainly encouraging. And then, I guess, the final question for me is, and you touched on this a little bit as far as the potential of acquisitions, but I guess maybe I can ask in a slightly different way, are there any pieces that you look at now that you feel Korn Ferry is missing or things that you'd like to enhance? I know you've talked about enhancing the digital and recurring revenue streams and things, but I was wondering if there are any observations over the last few months that have made any shifts in some of the overall acquisition wish list.

The organizational strategy and learning and development clearly are our big pieces. The digital aspect of that. If you look at our research, what it would suggest is that for – the number one predictor of success is learning agility. But on top of that, for people to actually even find their potential, let alone exceed it, people need opportunity. Our research, be it on female leaders, black leaders, across the board, you have to have opportunity, mentorship, sponsorship, and there needs to be development. We believe that learning and development, albeit it's going to be delivered completely differently, at least for the next few years, is a sustaining area where Korn Ferry wants to help people exceed their potential, for sure. I'd point to those two. Obviously, we have some other lenses, but that would probably be the biggest.

I would now like to turn the conference call back over to Mr. Burnison for any closing remarks.

Okay. Well, listen, I thank everybody for joining us. Clearly, the first quarter headline numbers were not spectacular, but the good news is that the company is positioned to accelerate through the turn. More importantly, when you look at the new business, it's clearly encouraging. Our business, in essence, is to enable people and organizations to exceed their potential, and I think this company is better positioned than it's ever been. So, with that, thank you very much for your time. Have a good rest of your day. Thank you.

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