Earnings Call Transcript - KFY Q3 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry Third 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'll be reviewing with you today. Before I turn the call over to your host Mr. Gary Burnison, please 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 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 the company's soon to be filed quarterly report for the quarter ended January 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 at www.kornferry.com. With that, I'll turn the call over to Mr. Burnison. Sir, the floor is yours.

Gary Burnison, CEO

Well thank you Steve and hello everybody. Welcome to our third quarter earnings call. This is the first call of the calendar year and before we talk about where we’re going, I want to step back for a moment and discuss how far we’ve come. It's almost a year ago, the great uncertainty filled the world, and I predicted that we would see more change in the ensuing few years than in the past ten. As a leading global consulting firm, Korn Ferry is now at the center of that stage. During this time, our colleagues have shown incredible resilience, purpose, and hope in serving our clients. The success is deeply rooted in our vision and values, how we see the world, how the world sees us and how we’ve been translating all of this into executing our strategy. To fulfill our vision and position our company for accelerated growth and long-term success, we’ve focused on a few key strategic pillars. We’ve driven integrated solutions-focused go-to-market approach that facilitates growth and enduring partnerships with our marquee and regional accounts that are central to achieving more scalable and durable levels. We continue to advance Korn Ferry as the premier career destination to attract and retain top talent. In the last two quarters, we've brought on about 70 senior commercial colleagues to strengthen our bench of talent across the globe. And as we look forward, we're focused on opportunities that will strengthen our solutions and create shareholder value. The focused execution of our strategy has transformed our business into a more efficient, profitable, growth-oriented organization. We are far less economically cyclical today than at any point in our history. The time to recovery is much shorter, the trajectory of the recovery is much steeper, our revenues more visible and scalable, our client solutions more impactful, and our people are the absolute best in the industry. Our data and IT capabilities are deep, rich, and absolutely best in class. An important part of what differentiates us is that we're the only consulting firm to combine organizational strategy, leadership and professional development, assessment and succession, rewards, and talent acquisition. We take an integrated approach across these categories to help clients execute on their strategy in an increasingly digitally enabled world. Underpinning all of our offerings and solutions is our world-class IP, putting us in an unparalleled position of strength. As I think about it, we've got more than seven decades of experience, data, and innovation. At the end of the third quarter, we hold rewards data for over 20 million people. Over 70 million assessments have been taken. We've got organizational benchmark data on 12,000 entities and we have 3,900 individual success profiles covering almost 30,000 job titles. Our proprietary recruiting AI tool has compiled more than 550 million profiles of potential candidates across the globe. Every year, we train and develop nearly a million professionals. And certainly last but not least, each business hour, we place a candidate in a new job every three minutes. The best way to demonstrate all this is through our performance. During this last quarter, or third fiscal quarter, we delivered results that were substantially higher than in prior cycles. Our business rebounded dramatically, revenue was up 9% sequentially to $475 million and our earnings and profitability reached record highs with about $97 million of adjusted EBITDA and a little over 20% adjusted EBITDA margin. The sharp improvement that we saw in fee revenue in our fiscal second quarter continued in the third. And this doesn't just reflect improved global market conditions. These results are directly attributable to our strategy. I'd like to share a few proof points from the quarter that highlight how far our long-term strategies are taking hold. Our diversified business exhibited more resilience now than during the Great Recession. Back then, our fee revenue in the quarter immediately following the peak quarter was down approximately 43%. Two quarters out, it was still down 32%. Now, if we fast forward a few years and look at the COVID-19 recession, the decline in fee revenue from the peak quarter was only 16%. In two quarters out, we were only down 8%. That's a substantial improvement from the Great Recession. When looking more closely at our go-to-market strategy, we're seeing measurable progress in selling subscription-based solutions in our digital business. Year-to-date, subscription-based fee revenue grew 27%. While our third quarter new business that was subscription-based was up 123% year-over-year and almost 48% sequentially. We are continuing to see success in capturing larger consulting engagements, which we classify as those that have a value of $500,000 or more. These engagements are absolutely driven by an integrated solution strategy that provides us with more enduring client relationships of scale. Year-to-date, large new business consulting engagements were up 23% and these large engagements are also driving a growing backlog of 24% year-over-year, which enhances revenue visibility and durability. As I mentioned earlier, our marquee and regional account programs continue to deliver less cyclical, more resilient new business and revenue than the rest of the portfolio. In the third quarter, our marquee and regional account fee revenue declined only 2% year-over-year, while the rest of the portfolio was down about 11%. On a year-to-date basis, our marquee and regional accounts have been relatively impressive. They're up 1% year-over-year, while the rest of the portfolio declined 13%. Our cross-line referrals further validate our strategy. About three years ago, our cross-referrals were about 15% of our portfolio. Today, that number stands at 26%. We're proud of what we've accomplished and how we've continued to extend, elevate, and recast the Korn Ferry brand, both externally and for our colleagues. Our brand embodies the way the world sees us, understands us, and wants to be a part of what we're doing. We've never been more committed to helping people exceed their potential with an abundance of opportunity. We're changing people's lives. The work of our Diversity & Inclusion practice is absolutely breaking barriers. This is one of the top areas of focus for our clients and we're the leader in that area. I'm also very proud of the launch of Leadership U for Humanity, a non-profit venture of the Korn Ferry Charitable Foundation, focused on developing the total mosaic inside communities and within corporations. Our long-term goal is to take our expertise in IP and develop 1 million new leaders from diverse backgrounds using our Korn Ferry advance and leadership view platforms. I’ve always said it's our people first, clients next, and everything else will follow. That's why we're also offering the leadership view for Korn Ferry, to develop our own colleagues from all backgrounds, providing them with opportunities to grow and advance. It's this commitment and focus that make Korn Ferry a career destination, accelerating the development of colleagues across the firm. No doubt the pandemic has caused seismic changes in society and in business. Different work is absolutely getting done, and that work is being done differently. Korn Ferry is at the center of that transformation. We know problems are never solved in the absence of people. Solutions will only emerge by cultivating a workforce that is diverse, collaborative, and motivated. Looking ahead, it's about leveraging our data and IP, delivering larger, more impactful consulting engagements, addressing the mega trends that are reshaping the corporate landscape, and driving accelerated revenue growth for the firm. I truly feel we have the right focus with the right people at the right time to accelerate through the turn. In calendar 2021, we’ll continue our commitment to build the preeminent global organizational consultancy. I look forward to what the year brings us and I'm going to turn the call over to Bob Rozek, who's joining us as well as Gregg Kvochak. Bob?

Bob Rozek, CFO

Great, thanks, Gary. And good afternoon. Good morning, everybody. As Gary said, we're very proud of our third quarter results. We view them as a testament to the efforts of our Korn Ferry colleagues. They also represent validation that we have successfully transformed into a less cyclical firm with a more resilient and durable base of fee revenue that will generate more sustainable, scalable earnings. Gary made reference to mega trends that are changing the corporate landscape. Items like accelerating digital transformation driven by the pandemic, calls for long-overdue social change, and increased corporate emphasis on ESG issues. Our comprehensive set of solutions, informed by our deep and rich collection of data and intellectual property are highly relevant and aligned to help our clients’ needs in each of these areas. Importantly, they serve as a real point of differentiation for Korn Ferry. Now let me turn to some of our third quarter results. As Gary mentioned, fee revenue in the third quarter was $475 million. Now that growth was broad-based with fee revenue improving sequentially for the second consecutive quarter in each of our business units. Additionally, fee revenue growth in the third quarter, measured year-over-year, was up 7% for RPO, was flat for North American executive search, which is actually seeing business activity back up to pre-pandemic levels. We also saw substantial improvement in consulting, which was only down 3% year-over-year, and in professional search, which was only down 2% year-over-year. More importantly, earnings and profitability surged to record highs in the quarter. Our adjusted EBITDA grew $31 million or 46% sequentially to $97 million and our adjusted EBITDA margin improved 510 basis points to 20.3%. Adjusted fully diluted earnings per share also reached record levels in the third quarter, improving to $0.95, which was up $0.41, or 76% sequentially, and up $0.20, or 27% year-over-year. Now, it's important to note that full employee salaries have been reinstated, effective January 01, 2021. In addition, we booked accruals for November and December to pay all employees their full salaries for both of these months. So, similar to the second quarter, our cost structure in the third quarter reflects 100% of all employees' compensation costs. Now, let me turn to new business, which continued to improve in the third quarter. On a consolidated basis, our new business awards excluding RPO were down only 1% year-over-year. On a sequential basis, the new business growth in the third quarter also showed broad-based improvement. Consulting was up 8%, Digital was up 14%, Executive search was up 8%, and professional search was up 31%. Our balance sheet and liquidity remained very strong. At the end of the third quarter, our cash and marketable securities totaled $897 million. If you exclude amounts reserved for deferred compensation and accrued bonuses, our investable cash balance at the end of the third quarter was approximately $534 million, which is up $73 million sequentially and up $112 million year-over-year. Our balance sheet strength is due in large part to the steps we took in late 2019 to refinance our debt with long-tenured public debt securities. We also restructured our credit facility in anticipation of a potential downturn, positioning ourselves to weather a storm and invest in the recovery. Today, we've successfully managed and adapted our business to the changing environment, and we are now investing back into the recovery, as Gary mentioned, by hiring 70 Senior commercial colleagues over the past two quarters. So with that, I'm going to turn the call over to Greg who will review our operating segments in more detail.

Gregg Kvochak, COO

Thanks, Bob. Starting with our digital segment, global fee revenue for KF Digital was $76 million in the third quarter. Consistent with the second quarter, the subscription licensing component of KF Digital fee revenue in the third quarter was $23 million. Global new business in the third quarter for the Digital segment grew 14% sequentially to $100 million, the best quarter of new business since the beginning of the COVID recession. Additionally, 43% of new business in the third quarter was subscriptions and licenses, which is the highest portion of any quarter to date. Adjusted EBITDA in the third quarter for KF Digital was up $4 million sequentially to $27.1 million with a 35.8% Adjusted EBITDA margin. Now turning to consulting. In the third quarter, consulting generated $136.3 million of fee revenue, which is up approximately $9.5 million or 8% sequentially, and down only 3% year-over-year. Growth in each of our solution areas improved in the third quarter, enhanced by our virtual delivery capabilities. Consulting new business also improved in the third quarter. Sequentially global new business was up 8% with growth in every region. Adjusted EBITDA for consulting in the third quarter was up $7.3 million sequentially to $27.5 million with an adjusted EBITDA margin of 20.2%. RPO and professional search global fee revenue improved to $95.2 million in the third quarter, which is up 11% sequentially and 4% year-over-year. RPO fee revenue grew approximately 4% sequentially, and professional search fee revenue was up approximately 24% sequentially. As previously mentioned, RPO fee revenue was up 7% in the third quarter year-over-year. With regards to new business in the third quarter, professional search was up 31% sequentially, and RPO was awarded another $44 million of new contracts consisting of $12 million of renewals and extensions, and $32 million on new logo work. Adjusted EBITDA for RPM professional search in the third quarter was up approximately $5.8 million sequentially to $19.6 million, with an adjusted EBITDA margin of 20.6%. Finally, for executive search, global fee revenue in the third quarter was $168 million, up $20 million or 14% sequentially, with growth in every region. Sequentially, North America was up approximately 16% while EMEA and APAC were up approximately 14% and 4% respectively. The total number of dedicated executive search consultants worldwide at the end of the third quarter was 522, which was up 10 sequentially. Annualized fee revenue production per consultant in the third quarter improved to $1.3 million, and the number of new search assignments open worldwide in the third quarter rose to 1,300. In the third quarter, adjusted EBITDA grew approximately $13.4 million sequentially to $41.7 million with an adjusted EBITDA margin of 24.8%. Now I'm going to turn the call back over to Bob to discuss our outlook for the fiscal fourth quarter.

Bob Rozek, CFO

Great, thanks, Greg. Over the past two quarters, the volatility challenged our visibility into monthly new business activity has subsided. Additionally, the global business environment appears to be becoming more stable. We're now in a position to identify trends and how they will impact our business. As a result of that, we've decided to reinstate guidance. Historically, the fourth quarter has been our strongest quarter in any fiscal year. Current new business activity continues and normal seasonal patterns hold. We expect that new business in our fourth quarter will remain pretty strong. Considering this and assuming no new major pandemic-related lockdowns, changes in worldwide economic conditions, financial markets, and foreign exchange rates, we expect our consolidated fee revenue in the fourth quarter of fiscal 2021 to range from $475 million to $500 million and our consolidated diluted earnings per share to range from $0.95 to $1.05. Our third quarter reported and our fourth quarter expected adjusted EBITDA margins are benefiting from elevated levels of profitability flow through due to our top line recovering faster with a trajectory that is much steeper. However, our current execution capacity is pretty stretched. Our current levels of utilization are not sustainable to support new business growth. To that end, we are in the process of adding additional resources. Further, we want to take advantage of the opportunity in front of us. As previously discussed, we've recently begun to aggressively invest back into our business making a number of key consultant hires, and we plan to continue hiring going forward. With that, as you think about our near-term operating boundary for our adjusted EBITDA margin, consider it along the following lines. If you go back prior to the pandemic, we were essentially a $2 billion business with an adjusted EBITDA margin of around 15% to 16%. As we return to pre-pandemic levels of fee revenue, our business will benefit from previously mentioned structural changes, and we're expecting to add around 200 basis points to our adjusted EBITDA margin. As a result, we expect near-term consolidated margins beyond the fourth quarter to range from 17% to 18%. Now before I open up the call to your questions, I want to reiterate how proud Gary, the entire management team and I are of this strong third quarter performance we announced today. We've taken significant steps in recent years to strengthen our business model, enhance our financial profile, and really position Korn Ferry for success. The sharp acceleration in our financial performance in the second and third quarters gives us tremendous confidence that our strategy is working and that we have the right initiatives in place to continue to increase our market share and deliver sustainable value to all of our stakeholders. With that, I conclude my remarks and we'd be glad to answer any questions you may have.

Operator, Operator

Our first question will come from George Tong of Goldman Sachs. Please go ahead.

George Tong, Analyst

Hi, thanks, good afternoon. You indicated that new business ex-RPO was down 1% year-over-year in fiscal 3Q. Can you elaborate on the trends by month in the quarter and also talk about how the trends have evolved through the month of February and perhaps also touch on digital? I noticed that it was down 12% year-over-year in the quarter. Just what was happening there?

Gary Burnison, CEO

Bob, why don't you handle them?

Bob Rozek, CFO

Sure. Okay. Hey, George. If you look at the new business trends in the third quarter, there was no real discernible pattern. Each month from a year-over-year perspective was essentially flat with where we were last year. We saw that this is from an overall perspective. In executive search, the patterns were the same. In Pro Search, we actually saw a large spike in new business in December. November and January were down a little bit year-over-year, but the new business growth in Pro Search showed a big spike in the month of December. In the consulting side, we had really strong new business every month in the quarter, particularly in North America. The North America consulting business has just done a fantastic job. On the digital side, what we're seeing is we actually had the highest new business since the pandemic started, although it was down 12% year-over-year. The decline that we saw in the digital new business was primarily focused in two areas. One was pay data coming through the pandemic, the desire for pay data for pay raises was dampened on a year-over-year basis. But the larger impact comes from the training and classroom training. When the pandemic first hit, in-classroom training virtually stopped. There was a shift from in-classroom to virtual training. Our in-classroom training was about 97% or 98% of what we delivered. Today, it's about 3% of what we deliver. Despite that, we haven't seen the volume in the number of trainings delivered bounce back quite yet. That is on the horizon for us and should stimulate good growth once that comes back to pre-pandemic levels.

George Tong, Analyst

Got it, that's helpful. And how have those new business trends evolved through the month of February and what's contemplated currently in your quarterly guidance?

Bob Rozek, CFO

Yes, so I would say, George, if you look at the month of February, it’s a little bit challenging because we do get a lot of new business at the end of the month. But right now we're about 75% of the way through the business days in the month. From a geographical perspective, North America is firing on all cylinders year-over-year, and sequentially. The rest of the geographies still have not quite caught up to where they were last year. But from a sequential perspective, they continue to make very good progress. From a line of business perspective, executive search and Pro Search are starting to gain momentum, consulting is performing very well, both sequentially and year-over-year. Additionally, RPO continues to have a strong backlog of opportunities. So we expect that new business to remain very strong in February. I already touched on digital.

George Tong, Analyst

Yep, very helpful. And just a quick follow-up. You mentioned that longer term, EBITDA margins beyond 4Q should range in the 17% to 18% area. When do you expect to fall within that range? Is it going to be a fiscal 2022 event or some other timeframe beyond that?

Bob Rozek, CFO

No, it'll be fiscal 2022.

Operator, Operator

Our next question will come from the line of Tim Mulrooney of William Blair. Please go ahead.

Tim Mulrooney, Analyst

Good afternoon.

Gary Burnison, CEO

Hey, Tim.

Tim Mulrooney, Analyst

Hey, so a couple of questions first, just on your verticals. You guys give a breakout for fee revenue by industry. I'm wondering if you could discuss which of these verticals stood out as pockets of strength in the quarter for those that are currently strongly recovering, versus those that have either decelerated or have yet to recover.

Gary Burnison, CEO

Yes, we've seen a sequential increase across the board in all of the industries and markets that we operate in. When you look sequentially, technology was clearly a big driver of that, it was up about 16%. Life sciences and healthcare, which is a bellwether practice of ours, I think we've got the best practice in the business. That was up 11%. Even industrial, which is the largest piece of Korn Ferry today, it's about 28% of the overall portfolio and it was as high as 30%, 31%. That was up too. It was really good to see, and even energy as counterintuitive as it may sound, that was up about 8% as well.

Tim Mulrooney, Analyst

Okay, thank you. Yes, surprising to hear about the energy but that's good news. Moving to your digital business, just on the profitability, the revenue was down 25%, right, but I think EBITDA margins expanded nearly 10 percentage points year-over-year. I know there's been some cost takeouts, but were there other contributing factors as well like maybe a sales mix issue or were there any guess one-time or seasonal factors you'd point to here? Or is 35% profitability a good run rate to think about for this business?

Gary Burnison, CEO

Yes, it's probably not sustainable at 35%. As Bob talked about, there's a major transformation that's happening within that business. Many quarters ago, we transitioned our IP and tried to change thousands of people's lives into altering the destination of our clients, giving them IP that they could license and use to improve their performance. We're pleased to see that. The margin of 35%, I forget, Bob can tell you what a year and a half ago we first broke out the digital segment, but that was definitely at the upper end of the target that we laid out. I think something more like 30% could be more realistic, given the investments we want to make to capture the market opportunity.

Bob Rozek, CFO

Yes. The only thing I would add is that the digital revenue being down 25%. In just what the drivers are for that, probably about 20% to 25% of that relates to this shift from point-sale solutions to subscriptions. Now, that 20% relates to the temporary decline in demand for pay data, and the rest of it relates to the issues I talked about on training delivery.

Tim Mulrooney, Analyst

Yes, okay. That's helpful. I appreciate that color. Thank you. And congrats on a nice quarter.

Bob Rozek, CFO

Thank you.

Operator, Operator

Our next question will come from the line of Mark Marcon of Baird. Please go ahead.

Mark Marcon, Analyst

Hey, good morning, or good afternoon, depending on where you are. Congrats on a great quarter. More importantly, just the overall trajectory of the business and the long-term progress. Gary, I was wondering if you could talk about where you're making the investments. You mentioned that you brought on 70 tenured, highly qualified professionals. Just wondering, what areas are they in? It also sounds like you're making more additions. So where should we think about the internal investments going? Where are you seeing the highest level of incremental demand relative to your current capacity?

Gary Burnison, CEO

Thank you, Mark, for the kind words. The place that I'm very excited about, and we're not going to see that in a quarter or a few months; but the professional search market is massive, and it's probably $25 billion, could be as high as $50 billion, and our business today is probably about $160 million annually. So it represents a real opportunity. That's something that we're going to expand into going forward. We've been investing heavily into not only the digital platform but our consulting capabilities across the board. Whether that's in consulting or the executive search business, we've definitely been bringing in people to add talent to our bench. Those would be the areas. The RPO business is doing very well; we continue to add talent and new logos there. It's been split pretty evenly between our businesses, but the one that you haven't seen that is Pro Search.

Mark Marcon, Analyst

And within Pro Search, can you talk about the areas where you're seeing the highest level of incremental demand? It sounds like December was a blowout month. Were there any common characteristics in terms of where that surge came from?

Gary Burnison, CEO

Digital and technology, for sure, and even finance and accounting. It's probably what you would expect; we're seeing an incredible appetite in the world to get people that are digitally savvy, technology-enabled. We've seen very good drivers there, but the business is just woefully undersized to the market opportunity. That's a blanket statement. We’ve got substantial runway ahead of us. That runway is not in a few months; it’s not a quarter out, but in the near term, I think you'll see us seizing on that market.

Mark Marcon, Analyst

Are you sourcing those clients through existing Executive Search or RPO relationships? Obviously, there are other competitors within that space. None with the type of reputation Korn Ferry has, but there are competitors out there, and I’m just wondering who you're gaining the business from?

Gary Burnison, CEO

When I look at our cross-referrals, they've been going up every quarter, this last quarter was 26%. When you look at Pro Search, this last quarter is actually 53%. RPO was 49%. That's really coming from the executive search channel. Even though the market size of executive search is a fraction of the market opportunity for us, it’s incredibly strategically important because people return our calls. I think we can take that access to that brand permission and do other things with it. Yes, Mark, it's coming from the executive search channel in a big way.

Mark Marcon, Analyst

And then can you talk on the consulting side? Which areas are you seeing the strongest growth in within your consulting at this point?

Gary Burnison, CEO

It's been pretty broad-based. It ranges from our executive pay business, where we've won a number of Fortune 100 mandates to do compensation advisory services, to organizational transformation. We can think of two Fortune 100 companies that are trying to get into a new business and they're turning to us around the organizational structure, around the people they need, assessment, and development. The D&I business continues to flourish and has for a few months. Overall, it’s been pretty broad-based in terms of what we’re accomplishing and the results are strong.

Mark Marcon, Analyst

That's great. Can you just one last one on the D&I? Can you give us an update in terms of the size and just to be clear, to what extent does D&I also include potential engagements either on the executive search or the professional search side in terms of broadening out the candidates or talent that your clients have?

Gary Burnison, CEO

When we talk about D&I in this context, we're just discussing pure advisory or digital services. There's a much broader theme within the C-suite that’s happening in the world. Executives have decided it's time to move on; there's a lot of C-suite changes. The pandemic has caused many people to reset and reconsider what is important. We're seeing a lot of C-suite change, as well as companies needing to reposition their business. We're benefiting from this in our search businesses. We've made significant investments and plan to continue to do so in our executive search and professional search recruiting platforms. Yes, the D&I consulting business is nearly nine digits; it’s a substantial part of today’s Korn Ferry.

Marc Riddick, Analyst

Hey, good afternoon. First of all, I just wanted to address so much of the planning and the work that's been done over the years, and sort of put yourself in the position to succeed here was certainly evident in a lot of the numbers that were reported in your commentary, and that we really do appreciate the color and detail of that. I was wondering if you could talk a little bit about D&I and ESG, and what you're seeing there in terms of your customers?

Gary Burnison, CEO

Purpose is not a slogan. Purpose is why a company is in business. Every CEO knows a business is started for a reason. That's the purpose. And over the last several years, that purpose has expanded to take on different lenses. We clearly have been positioning the company to take that on. When it comes to ESG, we are marketing capabilities there. We'll see where the world goes in terms of what the environment is going to look like. The starting point for us was our Diversity, Equity & Inclusion business, an investment we made about eight years ago. We weren't necessarily predicting the future, but these are consistent decisions made over many days, months, and years. Bob alluded to it back in 2019, where we got concerned about a recession and took actions to position the company to accelerate through that turn.

Marc Riddick, Analyst

Great. Can you talk a little bit about the benefits and progress that you've made with marquee accounts? If these are global players, they can provide greater visibility and insight as to what plans may be outside of North America. What are you seeing there?

Gary Burnison, CEO

The biggest factor for sure is culture, which is the way an organization gets things done. That's been a mega trend across the world: how organizations engage with customers and what the customer experience looks like. North America has clearly been more agile for many reasons, in terms of responding to the environment, and there's no reason to believe that will not happen in Europe and Asia. We are seeing a lot of positives now with vaccines and signs of recovery.

Tobey Sommer, Analyst

Thanks. Could you elaborate on the transformational opportunities referenced in the slides that accompany the call? Thanks.

Gary Burnison, CEO

Yes, we think the market opportunity is about $250 billion. Beyond the digital business we have and taking our IP to change many people's lives, the biggest opportunity is around learning and professional development. That's a massive market. I really believe we can create a business like we did with RPO around Learning and Development outsourcing. Part of that may require an investment or acquisition. The other opportunity is around the professional search market, which includes finance and accounting professionals, technologists, and healthcare. It is a big market. We're clearly moving into a mobile world, digital career nomads where it works for everybody. Korn Ferry can capture a much larger share of that mega trend that's happening.

Tobey Sommer, Analyst

Appreciate that. I had a follow-up question about profitability. If next year EBITDA margins are expected to be in the 17% to 18% range, is it fair to assume that this is not a terminal end state but that growth from revenue will generate some operating leverage?

Gary Burnison, CEO

Yes, that's how we thought about it. We want to target 17% to 18% and feel comfortable with that now. There absolutely could be upside. It could come from the digital business, but that may not be in this next fiscal year, but the year after. The other place it could come from is in professional search businesses outside the U.S.; that’s a clear pathway as well. Yes, it’s possible, but we're trying to balance our clients, colleagues, and shareholders. That's what we're targeting for the EBITDA margin for the next few quarters.

Operator, Operator

There are no further questions in queue. I'd like to turn the call back over to Mr. Burnison for any closing remarks.

Gary Burnison, CEO

I just thank you for listening. As paradoxical as it may sound, when nothing seems to be progressing, one can actually make the most progress. When everything appears unchanged externally, we experienced tremendous growth internally. When things seem far away, they're much closer than they appear. We clearly see how far we've come and appreciate how capable we've become. I'm very, very proud of Korn Ferry and what the future holds. Thank you very much for listening, and we look forward to speaking to you next time. Thanks, everybody.

Operator, Operator

Ladies and gentlemen, today's conference call will be available for replay for one week starting today at 3pm Eastern time, running through March 01, ending at midnight of that day. You may access the AT&T Executive playback service by dialing 866-207-1041 and entering access code 8533730. That access code once again is 8533730. For our participants that may be dialing in from an international location, please dial 402-970-0847 and the access code of 8533730. Additionally, a playback will be available on the company's website at www.kornferry.com in the investor relations section. Once again, ladies and gentlemen, we would like to thank you for your participation in today's conference call. Thanks for using our service. Have a wonderful day. You may now disconnect.