Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry's Second Quarter Fiscal Year 2022 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 a copy of the financial presentation that we will be reviewing with you today. Before I turn the call over to your host, Mr. Gary Burnison, let me first read a cautionary statement to investors. Certain statements made in the 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 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 2021, and in the company's soon-to-be-filed quarterly report for the quarter ended, October 31, 2021. 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. With that, I'll turn the conference over to Mr. Burnison. Please go ahead, sir.

Thank you, Tom. Good morning. And I'm pleased to report that Korn Ferry once again achieved all-time financial performance highs. Revenue was up 47%, and our diluted and adjusted diluted EPS were $1.38 and $1.53 respectively. And our adjusted EBITDA margin was 21.1%. I think our performance over recent quarters has reached a new level of scale, which speaks to the resiliency and agility of our colleagues, as well as our operational excellence amid a time of enormous transition and secular change. This aligns with our businesses. Today, wherever and whenever strategy meets talent, Korn Ferry is at that cross-section, enabling agility in a world that will undoubtedly be in transition for the next several years. Our strategy in the New Year will be to continue to innovate, replicate, and scale, allowing people and organizations to exceed their potential in this rapidly changing world. Elements of our strategy will include driving a top-down go-to-market strategy through our marquee and regional accounts, which represent about 36% of our portfolio. This not only facilitates growth and enduring partnerships but is also key to more scalable and durable revenues. For example, in the quarter, about 30% of our revenue was driven by cross-referrals within our firm, demonstrating the effectiveness of our go-to-market strategy. Although our Search businesses, both Pro Search and Executive Search, combined, represent about 45% of our revenue, we believe there is still substantial market opportunity ahead given the acceleration of an increasingly nomadic labor market. It's one of the reasons we acquired the Lucas Group during the quarter, a move that adds breadth and depth to Korn Ferry's Search portfolio. Looking at our Digital and Consulting businesses, we will continue to innovate, marrying Korn Ferry's capabilities with tomorrow's opportunities, from ESG to DE&I to M&A services. We will also push the monetization of our IP and move more of our digital business to a subscription offering. We will continue to scale our learning development outsourcing or LDO capabilities, leveraging our Korn Ferry Advance platform, in which we have completed 50,000 development and coaching sessions. Finally, we will deploy a balanced capital allocation strategy, including a disciplined approach to M&A. Looking ahead, I truly feel we have the strategy, the people, the diversity of solutions and expertise to help our clients drive performance in this new world. Our results clearly reflect this reality. We look forward to maintaining the momentum in the New Year ahead. And with that, I'm joined by Bob Rozek and Gregg Kvochak. Bob, I'll turn it over to you.

Great, thanks, Gary, and good morning and good afternoon, depending on where you are in the world. Let me start with a few comments before I jump into the second quarter results. I have always felt that the best way to measure success is through performance. If you look at our performance coming out of the COVID recession, it has really been and continues to be exceptional, as reflected in our Q2 results. There's no doubt that the world we live in has changed for good. Today, more than ever, our clients are facing unprecedented organizational and human capital challenges as workforces are transformed and digitized, as corporations are called upon to have significant environmental, social, and governance responsibilities, and as organizations strive to create work environments that are inclusive and free from bias. Companies are also challenged to grow in a post-COVID environment. These are real secular changes creating real and challenging business issues for companies across the globe. It is a fact that no business issue has ever been solved without the involvement of people. This is where Korn Ferry comes in; that is our sweet spot. Our core and integrated solutions align perfectly with the secular changes that companies across the globe are wrestling with today, whether it's finding the right talent in a dislocated labor market, accelerating top-line growth, or keeping employees engaged, motivated, appropriately rewarded, and retained in this new and evolving work and social environment. As these forces continue to shape the workplace, our clients, in growing numbers, recognize the role that our people and solutions play in helping them solve their most pressing business issues through their most precious asset, their people. I also want to emphasize that this is not just our 15 minutes of fame. These secular changes are real, and they are here to stay. I genuinely believe we are in the first inning of a long game. As market demand has been strong, our execution has been even stronger, driving our fee revenue, earnings, and profitability to new all-time highs. Now, let me turn to the Q2 results. As Gary mentioned, fee revenue in the second quarter grew $204 million, or 47% year-over-year, and $54 million, or 9% sequentially, reaching an all-time high of $639 million. Fee revenue growth in the quarter from our consolidated executive search business was up 59% year-over-year, and up 9% sequentially, while our RPO and professional search business was up 76% year-over-year, and 8% sequentially. Growth in our consulting and digital businesses was also very strong. Consulting grew 30% year-over-year and 11% sequentially, while digital was up 18% year-over-year, and 10% sequentially. Turning to earnings and profitability, they also reached new highs in the quarter. Our adjusted EBITDA grew $69 million year-over-year and $13.5 million, or 11% sequentially, to $135 million, with an adjusted EBITDA margin of 21.1%, both are new quarterly highs. Our earnings and profitability continue to benefit from both higher consultant and execution staff productivity and lower G&A spend. Adjusted fully diluted earnings per share also advanced to a new high in the quarter, improving to $1.53, which was up $0.99 compared to adjusted fully diluted earnings per share in the second quarter of fiscal '21 and actually up $0.16 or 12% sequentially. Interestingly, when you compare our business today through the first six months to the same period in fiscal year '20, the pre-pandemic period just two years ago, both our scale and profitability are up dramatically. Our firm's fee revenue for the fiscal year '22 Q2 year-to-date period is up 25% with double-digit growth in every line of business. Our adjusted EBITDA over the same comparison period is up 67%. That's nearly three times greater than fee revenue growth, and our adjusted EBITDA margin is up 530 basis points to nearly 21%, reflecting that our earnings power has never been higher. As I look at new business, it also accelerated in the quarter, reaching new highs for each of our lines of business. On a consolidated basis, New Business Awards excluding RPO were up 40% year-over-year, and up approximately 8% sequentially. RPO new business was also extremely strong, with a record $136 million of total contract awards. This consolidated record level of new business across all of our business lines in the second quarter provides us with a solid backlog entering the fiscal third quarter. Our investable cash position also remained strong. As of October 31, the end of the second quarter, cash and marketable securities totaled $997 million. Excluding amounts reserved for deferred compensation arrangements and accrued bonuses, our global investable cash balance at the end of the second quarter was approximately $591 million, up about $133 million or 29% year-over-year. It should be noted that this investable cash position includes approximately $90 million that was used to acquire the Lucas Group on November 1. We continue to take a balanced approach to the allocation of capital; in addition to the Lucas Group, we have invested in hiring additional fee earners and execution staff. Year-to-date, we've repurchased approximately $14 million of our stock and have paid cash dividends of approximately $14 million. With that, I'll turn the call over to Gregg to review our operating segments in more detail.

Thanks, Bob. I'm going to start with KF Digital. Global fee revenue for KF Digital was $88.6 million in the second quarter, which was up 18% year-over-year and up 10% sequentially. The subscription licensing component of KF Digital fee revenue grew to $26 million in the second quarter, which was up 16% year-over-year and up 7% sequentially. Additionally, global new business for KF Digital in the second quarter grew 29% year-over-year to a new high of $114 million, with $44 million or 39% related to subscription and licensed services. Earnings and profitability also continued to grow for KF Digital in the second quarter with adjusted EBITDA of $28.6 million and a 32.2% adjusted EBITDA margin. Now, turning to Consulting; in the second quarter, consulting generated $164.9 million of fee revenue, which was up approximately $38 million or 30% year-over-year, and $16 million or 11% sequentially. Fee revenue growth continued to be broad-based across all solution areas and strongest regionally in North America, which was up over 43% year-over-year. Consulting new business also reached a record high in the second quarter, growing approximately 17% year-over-year and 2% sequentially. Regionally, new business growth was broad-based in the second quarter, with continued strength in North America and improving trends in EMEA and APAC. Adjusted EBITDA for consulting in the second quarter improved to $30.1 million with an adjusted EBITDA margin of 18.2%. Growth for RPO and professional search continued to improve in the second quarter. Globally, fee revenue grew to $150.4 million, which was up 76% year-over-year, and up approximately $11 million, or 8% sequentially. Both RPO and professional search continued to take advantage of post-recession dislocations in the labor market for skilled professionals. RPO fee revenue grew approximately 69% year-over-year, and 10% sequentially, while professional search fee revenue was up approximately 88% year-over-year, and 5% sequentially. Sequentially, both the number of new search assignments and the average fee per assignment were up double digits for professional search. New business wins for both RPO and professional search were also extremely strong in the second quarter, reaching new all-time highs. Professional search new business was up 13% sequentially, and RPO was awarded a record $136 million of new contracts consisting of $28 million of renewals and extensions and $108 million of new logo work. Adjusted EBITDA for RPO and professional search continues to scale with revenue improving to $36.3 million with an adjusted EBITDA margin of 24.1%. Finally, in the second quarter, global fee revenue for executive search reached another new all-time high of $235 million, which was up 59% year-over-year and up 9% sequentially. Growth was also broad-based and led by North America, which grew 74% year-over-year and over 14% sequentially. Fee revenue in our international regions remained steady in the second quarter EMEA and APAC were up approximately 34% and 36% respectively, measured year-over-year, and essentially flat sequentially. We continue to invest in expanding our team of consultants in the second quarter. The total number of dedicated executive search consultants worldwide at the end of the second quarter was 570, up 58 year-over-year and up five sequentially. Annualized fee revenue production per consultant in the second quarter improved to a record $1.66 million, and the number of new search assignments open worldwide in the second quarter was up 37% year-over-year and 5% sequentially to a new all-time high of 1,830. In the second quarter, global executive search adjusted EBITDA grew to approximately $66 million, which was up $38 million year-over-year, and up $4.5 million or 7% sequentially. Adjusted EBITDA margin in the second quarter was 28.1%. Now, I'm going to turn the call back over to Bob to discuss our outlook for the third quarter.

Great, thanks, Greg. As I mentioned earlier, new business in the second quarter grew to a new all-time high and actually accelerated each consecutive month in the quarter. This positions us with a very strong backlog entering our third fiscal quarter. In fact, as we ended the quarter, October and September were our first and second highest new business months ever. While our third quarter is typically our most seasonal quarter as both our clients and colleagues take time off during the year-end holiday seasons, November was also excellent for new business, actually eclipsing September as the second highest month ever, with a 37% year-over-year increase. If monthly trends in each of our lines of business are consistent with our historical patterns and market conditions remain strong, we would expect December to be seasonally slower than November, with demand accelerating and peaking at a quarter high in January. Additionally, we will continue to make investments in consultants and execution staff to fuel future growth, and we expect employee productivity to remain strong with G&A spend to remain at current levels in the third quarter, keeping both earnings and profitability strong. Assuming no new major pandemic-related lockdowns or changes in worldwide economic conditions, financial markets, or foreign exchange rates and including fees from the Lucas Group, we expect our consolidated fee revenue in the third quarter of fiscal '22 to range from $640 million to $660 million, with our consolidated adjusted diluted earnings per share ranging from $1.42 to $1.58, while our GAAP diluted earnings per share should range from $1.38 to $1.56. Looking ahead to the New Year, we see a great opportunity to continue to build on our strong financial performance. Based on the strength, or I should say the continuing strength of our new business trends, it is evident that our portfolio of solutions will have continuing relevance as companies address the secular changes I previously discussed. We will continue to execute at a high level, and there is no doubt we are well positioned to take more than our fair share of the growing market. Korn Ferry has never been better positioned to serve all of its constituencies: colleagues, clients, candidates, and shareholders for years to come. With that, we would be glad to answer any questions you may have.

Our first question will come from Tobey Sommer from Truist Securities. Please proceed.

Thank you very much. I was wondering if you could comment on the benefits of building out your professional search capability, and if you could continue to add to it. Is there anything in the marketplace that in terms of having a bigger established brand could help, because I think that's a relatively fragmented market? Thank you.

It is indeed a very fragmented market, and it's sizable. Against a backdrop of a nomadic labor market, where people work at a company for a year or two and then move on to up-skill and seek better salaries and benefits, we see an incredible opportunity. The brand of Korn Ferry is very powerful, and we believe that combination along with our IP and our people creates a sizable opportunity for Korn Ferry. Today, on a run-rate basis, that professional search piece of our RPO and PS business is probably running about $350 million, and we easily see that as a $1 billion business for us. So, we're going to continue to invest in all of our search businesses, particularly in Professional Search, which may also include interim work and possibly even high-level staffing as well.

And the other thing I would add to that is the access that our Search folks provide to us. We've seen it in each of the acquisitions that we've done, which elevates our ability to perform, because the companies that we're acquiring simply do not have the access that our folks do.

Yes, that's right. Bob makes a very good point. When you look at the cross-referrals in the quarter, on a dollar basis, it was an all-time high. Out of the $640 million or so of revenue, about $173 million represented cross-referrals. Those are real dollars that our colleagues get paid off of for cross-referring business. In our RPO and PS business, typically 40-50% of the revenue in any given quarter comes from referrals inside the networks. That's an excellent point, Bob.

Could you talk a bit about inflation, both in terms of how it helps your top line across your different businesses as well as what you're seeing internally regarding your needs to stay competitive on internal compensation?

Yes, it's certainly unlike anything I've ever seen. The transient nature of today's workforces and the outlook for younger people entering the workforce is night and day compared to when I started years ago, a completely different perspective. For example, our average fees for Professional Services have increased by 18%-19% over the last four or five quarters. On the Executive Search side, it's also up approximately 12%, 13%, 14%. I think that reflects market conditions today around inflation and wage pressure. We've raised prices across the board in our consulting and digital businesses and had to increase our price points. Internally, for our colleagues, the raises we have given over the past 12 months are three times more than we have ever done. We are taking a balanced approach to ensure that we are rewarded for the value we deliver to clients and sharing that with not only our shareholders but, as importantly, our colleagues.

Last one for me, if you could comment on what the continued acquisition pipeline looks like, so that you're able to deploy your ample balance sheet to boost returns?

Yes, that's a good question. We certainly have our eyes on the professional search market. It is an opportunity in a fragmented market, and Korn Ferry's brand is phenomenal. We are continuously looking for ways to grow that business. The Lucas Group is a company I first met around 15 or 16 years ago, and one we have periodically stayed in contact with. We are thrilled to make that investment and have those colleagues now join Korn Ferry. Given our legacy Professional Search business, along with the powerful platform of the Lucas Group, it forms a solid foundation to grow that business. There is also an opportunity to create an LDO business here, much like we did with RPO years ago. When looking at megatrends and increasing turnover levels at companies, that can be partially addressed through compensation, but it's really not the answer. People want to grow, feel developed, and know that their work matters. Development, whether through coaching, can significantly reduce turnover, impacting a company’s P&L. We see the opportunity to replicate what we did with RPO, but do so in the learning space. Those areas certainly stand out.

Thank you.

Next, we'll go to the line of Tim Mulrooney representing William Blair. Please go ahead, sir.

Yes, good morning, everybody. Thanks for taking my questions. You were helpful in sharing with us the percentage of your Professional Search clients or what percentage of your Professional Search business is referred from the Executive Search business. I was wondering if you could also comment on how many Executive Search clients don't currently use Professional Search services but could benefit from them.

A huge amount, but I don't have the exact data in front of me. It's enormous.

Is it not saturated?

No, not even close. The opportunities are there. How do you go about that? The first answer is through our marquee and regional accounts, driving loyal and sustainable clients of scale. Today, we have about 350 marquee and regional accounts that represent about 36% of the portfolio, and that is the first lever we will pull. It is far from saturated in terms of penetration.

Did Lucas Group include some temp staffing, as well as professional staffing? Is that something you guys could further get involved in?

Absolutely, yes. We see an opportunity here, especially against this nomadic labor market. Coming out of this pandemic, digitizing everything and work anywhere, anytime will play well into that trend. We did pick up a strong base of interim staffing business, and we will continue to drive that, which is new for Korn Ferry.

Just one more for me. Within your Executive Search business, both Pro and Executive, can you provide a bit more detail on how the volumes trended through your fiscal second quarter? Did they continue to accelerate month over month throughout the quarter, or was there more choppiness in those numbers?

Yes, I'll take that. The volumes are in line with our overall new business, which did accelerate throughout the quarter and continued in November. November set a record for us with the highest volume in terms of units that we've ever had. So, we are seeing great volumes and great levels of searches being won by our team.

That's very helpful. Thanks for taking my questions, guys.

We will go to the line of George Tong with Goldman Sachs. Please go ahead, sir.

You touched on continued traction with your marquee and regional accounts this quarter. Can you elaborate on broader cross-selling activity among these larger accounts and how much opportunity remains as well as what that means for potential market share performance?

The marquee and regional accounts represented about 36% of the portfolio. In world-class professional services firms like ours, that number on 'house accounts' is typically 40% to 45%. We continue to have strong performance from those accounts compared to the overall portfolio. In terms of cross-referrals, this was the highest dollar amount of cross referrals we've had in a quarter. As I mentioned before, our colleagues are rewarded for these referrals both immediately and during year-end performance evaluations.

I would also add, as we think about the opportunity there, achieving 35% to 40% cross-line business referrals is excellent. Reflecting on our progress, in FY'18, we were at 14%. Year-to-date we're a little above 28%. There is significant opportunity for us to grow in cross-line business referrals. Importantly, referral activity historically flowed from executive search to other lines of business. Now, referrals into executive search have increased from 3.6% to closer to 10%. This indicates we are making great progress in terms of cross-fertilization across all lines of business.

You've continued to deliver significant EBITDA margin expansion. How are you thinking about the long-term structural margin opportunity at Korn Ferry, and how has the pandemic changed your overall underlying cost profile?

As we discussed in the past, we believe there have been structural changes that contribute to a 200 basis point improvement. Historically, we talked about a 15% to 16% long-term range but increased that to 17% to 18%. After three quarters, we believe we have the potential for 18% to 19%. We reduced our overall footprint by about 20% and expect it to settle at around 25%. Projects for meetings and travel, which were running about $11 million a quarter, have come down to about $1 to $2 million. We believe these structural changes are permanent, and the ability to work virtually will also lead to additional structural enhancements.

Got it. Thank you.

Hey, guys. Good afternoon, and congratulations on the great quarter. I'm wondering, Gary, if you could start on a big topic. If you get more into temporary staffing, it has a certain market perception, and Korn Ferry has an elevated market perception related to executive search and consulting. How are you thinking about the types of temporary staffing to potentially get into and how you would protect the franchise and brand name?

You're absolutely right. It starts with the quality of delivery. We would focus on the higher end of that marketplace. We would not go 'down market' as you put it. We would certainly focus on skilled positions, particularly in three or four functional areas such as legal, finance and accounting, and technology, and maintain our focus on higher-end services.

Can you talk a little bit about the Lucas Group? It was just completed on November 1st, but what's the initial reaction and what's embedded in terms of the guidance regarding their contribution?

About $100 million a year without gross synergies, so call it approximately $25 million a quarter. I had indicated it's a company I met with about 16 years ago, and I was always impressed with the brand they have in the marketplace. They have evolved from starting more on the military side to more technology, finance and accounting, legal, and supply chain. It's a very balanced portfolio that aligns well with Korn Ferry's interests. A portion of their business is also around interim placement, which we were attracted to. We are off to a strong start with some significant wins in the marketplace.

That's great. How are you thinking about this? This is multiple cycles we've seen. How are you thinking about capital deployment given current market conditions?

We're certainly not going to reach blindly. I know someone who graduated college and has seen multiple raises before starting. It's a market unlike any I've seen. Inflation is the biggest wildcard; it's widespread and certainly not transitory. That creates risk. The younger generation has a different outlook on careers than we did, presenting opportunities for Korn Ferry. However, inflation could be the biggest question moving forward.

Are you able to pass all of that along?

Yes, we are. If you look at our Professional Search and Executive Search businesses, we see that reflected in average fee increases. It's indicative of the market dynamics and inflationary pressures.

Can you talk about your capacity? You mentioned business is booming. How stretched do you feel? How should we think about hiring and recruiting efforts?

We are going to continue to invest in recruiting across all aspects of our business. We are more aggressive in our recruiting efforts than ever. Our current colleague count is higher than it was pre-pandemic. We have the right balance in terms of capability to execute on engagements. Our turnover rates are notably lower than those of other world-class professional services firms.

Could you talk about consulting and digital? Any new wins you're excited about?

We have incredible IP, and the key is configuring it to improve an organization's retention of their people. Recently, we had a major technology company engagement worth eight figures mainly focused on digital, where they licensed our IP to improve their effectiveness. This was achieved thanks to our marquee accounts strategy and an earlier acquisition. Additionally, through our KF Advance platform, the LDO capabilities allow us to develop individuals effectively and cost-efficiently.

Do you see the potential for similar engagements coming in the near future?

Yes, we have a strong pipeline, and our IP is unparalleled. We develop a million professionals a year, conduct 70 million assessments and offer impressive learning journeys around DE&I and ESG subjects. CEOs recognize that retaining talent requires more than just financial compensation, and that using our IP—through coaching, for example—can help improve turnover.

The engagement Gary was referring to will be a subscription. The eight-figure figure will be realized over three years. Additionally, the LDO engagements can also be eight-figure contracts realized over two to four years.

Were those new logos former RPO users or new to RPO?

I don't have the exact split, but I estimate it's about a 50:50 range. Some former users are returning to us, but we are seeing increased acceptance of outsourcing talent acquisition activities across the board.

There are no further questions at this time.

Thank you, everyone. I sincerely wish you a Merry Christmas, Happy Hanukkah, and Happy Holidays. We look forward to speaking with you in the New Year. Thank you very much. Goodbye.

This conference will be available for replay starting at 4 PM Eastern and running through December 14 at midnight. Access the AT&T Executive Playback Service at any time by dialing 866-207-1041 and entering the access code of 4258773. Those numbers again are 866-207-1041. Please enter the access code of 4258773. International participants may dial 402-970-0847 and use the same access code of 4258773. The replay will also be available at the company's website in the Investor Relations section. That concludes our conference for today. Thank you for your participation, and you may now disconnect.