Earnings Call Transcript - KFY Q3 2025

Operator, Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry Third Quarter Fiscal Year 2025 Conference Call. At this time, all participants are in 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 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 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 2024 and the company's soon-to-be-filed quarterly report for the quarter ended January 31st, 2025. Also, some of the comments made 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. Please go ahead, Mr. Burnison.

Gary Burnison, CEO

Okay. Thanks, Rob, and good afternoon. Thanks for joining us. The team is going to get into our results in more detail. But overall, our execution has been outstanding. Korn Ferry drives our clients' organizational performance and we continue to see demand for organizational and workforce transformations that are larger in scale and scope. In the quarter, we won significant transformation engagements, including a global energy company spanning 60,000 employees and wide-reaching leadership programs covering thousands of employees at one of the world's largest employers as well as at a leading global insurer. These engagements are meant to drive strategic transformation and finally large post-merger integration solutions at a number of global household brands. These are just to name a few, but clearly illustrate the breadth and scale of today's Korn Ferry and demonstrate the power of our business and the strength of our diversification. We do enable people and organizations to be more than. Clearly, the macroeconomic environment for consulting services has been less than ideal for the last eight quarters. But when one examines the durability of our consolidated revenue, it is very clear that our strategy is definitely working. The broadness of our solutions counterbalance each other, providing a durable growth foundation for tomorrow, not to mention the higher levels of profitability and balanced approach to capital allocation. And we are again raising our dividend to shareholders. This diversification was evident once again during the quarter with total firm new business up 13% of the bookings driven by the Americas and EMEA. When one taps Google Earth, tomorrow's macro environment will be encircled by a less supply-demand imbalance, requiring companies to reimagine and reskill their workforce, employ, develop, promote and retain talent as well as embrace technologies that bridge that labor imbalance, all of which presents tremendous opportunity for Korn Ferry. Our strategy has indeed taken hold. We are purposefully aligning our capabilities in larger addressable markets. As a firm, we are now more versatile provider of wide-ranging organizational and talent solutions. This evolution has changed the fundamental composition and scale of our business as we drive more sustainable, large-scale client engagements. Proof positive, our marquee and diamond accounts now represent 39% of our portfolio and nearly all of our marquee clients are benefiting from at least three of our solution areas. The breadth, depth and scale of our firm's expertise and offerings puts us in a category of one, and we are well positioned for the future. We are a firm driving opportunity through a team-based client management approach, yielding substantial client engagements, an organization with an immense cache of IP and insights, a brand that has incredible license operating at the highest level of global organizations as we enable people and organizations to be more than in a business that has grown in current and adjacent verticals, further reducing our overall volatility and generating more predictable, visible and recurring revenue, validating the confidence we have in our business and our positive outlook for future earnings and cash flow. We will increase our quarterly dividend to 30%, which is the sixth increase in our dividend in the last five years. We are well on our way to becoming the undisputed leader in powering organizational performance for talent. By steering into the turn, we've aligned our business strategy, operations and talent to drive performance and deliver meaningful impact and measurable results for our clients. With that, I'll now turn it over to Bob.

Robert Rozek, CFO

Okay. Good morning, good afternoon, everybody. We are pleased with our results for the third quarter, which exceeded our expectations and really demonstrate the power of integrating our rich and unique IP data and content into solutions that drive organizational performance through talent. The unique value our firm provides is really realized when we align and collaborate when we show up as we are Korn Ferry. In the third quarter, we continue to see a positive inflection in executive search and RPO growth and our profitability remained strong with year-over-year growth in adjusted EBITDA margins in all solutions. Now turning to company-wide highlights. Fee revenue in the third quarter was $669 million. That's a 2% year-over-year increase at constant currency. Our earnings and profitability continue to grow. Adjusted EBITDA increased 13% year-over-year to $114 million. Adjusted EBITDA margin increased by an impressive 190 basis points year-over-year to 17.1%, and adjusted EPS increased 11% year-over-year to $1.19. As Gary discussed, total company new business grew 13% year-over-year at constant currency and that included $210 million of RPO new business, of which 65% was generated from new logos or new clients, which is really important to fuel future growth. Excluding RPO, new business in the third quarter was up 1% at constant currency with particular strength in EMEA. We continue to diligently execute our go-to-market activities. Marquee and diamond accounts remained strong, very strong at 39% of our total consolidated fee revenue. Our cross-solution referrals also held strong at 25% of total consolidated fee revenue. And we continue to see success with the integration of our recent interim acquisitions, achieving now close to 1,100 cross referrals into or from interim since our first acquisition in 2021. As we signaled in our Q2 earnings call, during Q3, we began to ramp up our investment hiring, bringing on almost 25 new fee earners in the quarter. Last, we continued our balanced approach to capital allocation. During the third quarter, we invested back into the business, spending approximately $45 million on the Trilogy acquisition. We also used about $18 million on share repurchases, and we paid $19 million in dividends. Year-to-date, we have repurchased slightly over 1 million shares or about 2% of our outstanding share count and returned $133 million to shareholders through both repurchases and dividends. And as Gary mentioned earlier, we are increasing our quarterly dividend by 30%. And as he said, the sixth dividend increase in the last five years. Now let me turn to some of the highlights by solution area. Starting with Consulting. Our new business was $187 million, up 3% at constant currency. Our engagements greater than $500,000, those are our larger engagements represented approximately 41% of new business in the third quarter and that's up from 32% last year third quarter. Our hourly bill rate climbed 5% year-over-year to $461 per hour and profitability remained strong with an adjusted EBITDA margin of 17.7% that's up 100 basis points year-over-year. Fee revenue for Digital was $91 million. That's up 3% in constant currency with 39% of total fee revenue generated from subscription and licenses and that compares to about 36% a year ago. Profitability remained strong there as well with an adjusted EBITDA margin of 31.3%, and that's up 100 basis points year-over-year. Executive Search fee revenue grew 4% at constant currency to $205 million, with growth in three of the four regions, most notably in North America. Our consultant productivity increased 7% year-over-year to approximately $1.5 million annualized per consultant and profitability was strong with an adjusted EBITDA margin of 25%, up 320 basis points year-over-year. Professional Search and Interim new business and fee revenue continued to stabilize and were flat year-over-year at constant currency. Our Interim average hourly bill rate and permanent placement consultant productivity remained strong at $129 per hour and $650,000 annualized per consultant, respectively. Profitability was also strong with an adjusted EBITDA margin of 21% and that's up 280 basis points year-over-year. Finally, RPO fee revenue grew 6% to $85 million in the third quarter. Fee revenue under contract accelerated sharply higher to $752 million and about 42% of that is estimated to be recognized in the next four quarters. RPO profitability was also strong with an adjusted EBITDA margin of 15% and that's up 360 basis points year-over-year. To summarize, we're encouraged by our third quarter results and expect this momentum to carry into the fourth quarter. Turning to our outlook for the fourth quarter of fiscal '25. Assuming no further changes in worldwide geopolitical conditions, economic conditions, financial markets and foreign exchange rates, we expect fee revenue in the fourth quarter of fiscal '25 will range from $680 million to $700 million. Our adjusted EBITDA margin to remain approximately 16.8% to 17%. Our consolidated adjusted diluted earnings per share range from $1.22 to $1.30, and our GAAP diluted earnings per share to range from $1.20 to $1.28. Now let me end the way we began. We have been and will continue to operate in an uncertain macroeconomic environment. As always, we'll continue to be focused on operating excellence and based on the results of our third quarter and our fourth quarter outlook, it is very clear that our strategy is working. As I've said in the past, I truly believe our best days lie ahead of us.

Operator, Operator

Thank you. We will now start the question-and-answer session. Your first question comes from Trevor Romeo from William Blair. Your line is open.

Trevor Romeo, Analyst

Hi. Thanks so much for taking the questions. Thanks for all the detail in the results and the commentary to the team. Just wanted to first touch on sort of margins and productivity. I think a lot of the productivity or revenue per consultant metrics across your segments are up quite nicely. I know you've been making some investments in technology tools and such and you recently started ramping up hiring again. But what are some of the areas where you've seen the most success driving productivity for a lot of your businesses? And how much room do you think you'd have to further increase productivity without seeing an uptick in near-term market or macro demand?

Gary Burnison, CEO

I believe there is definitely potential to enhance productivity. A couple of years ago, we made a deliberate choice to shift our focus. We recognized the economic landscape ahead and decided to transition to more profitable types of work, which is evident across the board. For instance, the hourly rate in our Consulting business and Interim solution has increased significantly. The hourly rate for our Consulting solution has risen to $461, up from $300 three years ago. In our Interim business, we maintain a strong position at $129 an hour this past quarter. Furthermore, in terms of productivity, we are generating approximately 35% to 40% more revenue than before the pandemic, maintaining the same employee count. We intentionally managed our talent, which is reflected in our PS&I solution, where the number of client-facing consultants has decreased by around 40% to 50% compared to three years ago. Therefore, we believe there is still room for improvement, even if the current environment remains unchanged.

Robert Rozek, CFO

Hey, Trevor. This is Bob. The other thing I would say is just in terms of looking forward, we continue to stay very close to where AI, Gen AI is going, the direction it's heading in. And so as that continues to evolve, become more reliable and so on. We do expect to get more productivity into the delivery of our services kind of how to quantify at this very moment, but we do believe that there's more there.

Trevor Romeo, Analyst

Thanks, Bob and Gary. For my follow-up, I wanted to discuss RPO. Could you explain the growth of the new business this quarter? Is it mainly due to competitive takeaways, new clients looking to outsource for the first time, or are we seeing increases in underlying hiring from your clients?

Gary Burnison, CEO

Well, it's a combination of all of that. Two-thirds of the new business was new logos. A lot of it was around marquee and diamond accounts that we purposely targeted and been working on for quite some time. A good part of it was from health care and to some extent, life sciences. And so it's all of those things combined. And I think the broader outlook here that is extremely positive for us is that there is a significant supply and demand imbalance that is coming over the next several years. And you look at it at major economies around the world. And the hard cold truth is there's going to be less people coming into the workforce. And take the US economy over the last five years, nonfarm payroll has only increased by about 7 million over five years. And so what that means is people, companies are going to have to make sure that they are reskilling their workforce, that they're retaining the workforce, that they're identifying the 20% that does the 80%, let alone the world in which we live today, which growth is elusive. So I think all of those things point to significant opportunity for us.

Trevor Romeo, Analyst

Great. Thanks so much.

Operator, Operator

Your next question comes from the line of George Tong from Goldman Sachs. Your line is open.

Keen Fai Tong, Analyst

Hi. Thanks. Good morning. Your digital new business trends inflected from 10% growth last quarter to an 8% decline in constant currency this quarter. Can you talk a little bit about what drove the decline in digital?

Gary Burnison, CEO

Yes. It's quarter-to-quarter you're going to see ebbs and flows. I mean a year ago in the quarter, we had some significant, it's a tough compare. We had some significant deals that companies were licensing our compensation database and they were picking up several countries at a time. And that led to a pretty robust compare to a year ago. But when you step back and look at it, it's been very, very stable in an environment that, again, has been less than ideal for a good eight quarters here. So that's the specific reason. It was on the licensing of the compensation database. But overall it's been pretty stable in a tough environment over the last eight quarters.

Keen Fai Tong, Analyst

Got it. That's helpful. And then we're seeing real-time changes in the macro outlook given potential headwinds from tariff policies. What are you hearing from clients during this elevated period of uncertainty? And do you expect hiring activity to pull back given economic uncertainty?

Gary Burnison, CEO

There's always uncertainty, often masked by the appearance of certainty. I don't believe this will diminish. If you consider Peak 65, over the next three years in the United States, there will likely be a loss of about 4 to 5 million executives reaching retirement age each year. Additionally, those in the C-suite navigated their organizations through the challenges of COVID, transitioning from dark times to more favorable conditions. The great resignation, coupled with pent-up demand, played a role as well. Companies raised prices, faced lower volumes, and reduced packaging sizes, resulting in a real cost of living crisis. Many leaders who managed through these tough times may be contemplating new directions in their lives, and we're witnessing this trend. Our Executive Search and RPO services have shown a noticeable increase over the last three months, highlighting these factors. Looking further ahead, there is a significant imbalance between labor supply and demand. As Bob mentioned, historically, this imbalance has been addressed through technology. That's certainly part of the solution. However, companies will need to adapt their workforce strategies due to the insufficient talent pipeline. I believe all these elements are interconnected. Although there has been recent uncertainty, which involves negotiation, I don’t foresee this trend reversing. I could be mistaken, but it seems unlikely to me.

Keen Fai Tong, Analyst

Got it. That's very helpful color. Thank you.

Operator, Operator

Your next question comes from the line of Mark Marcon from Baird. Your line is open.

Mark Marcon, Analyst

Hey, good morning or good afternoon depending on where you are physically. Congrats on the good results. Gary, you started out your discussion, which unfortunately was a little bit muffled. I don't know if you had a bad connection at the time or not, discussing some of the big engagements that you've been recently winning. And I was just wondering if you could elaborate a little bit further with regards to the size, scope of those big engagements? And how you were able to get those, who you ended up winning them from? Like if who else was part of the RFPs? Just to a little elaborate how you're moving up the food chain in terms of being a thought leader?

Gary Burnison, CEO

Yes, that has certainly happened, and I apologize for the connection issues earlier. It's a decision we made several years back to focus on more high-impact engagements. These engagements share commonalities, particularly in the current environment where growth is hard to achieve. Leaders are focusing on transformation and how to reshape their workforce in light of a new strategic direction. These are sizable engagements that impact thousands of employees at specific clients and typically involve either organizational design or comprehensive leadership development programs. These programs help companies adjust their mindsets and equip their employees with the necessary skills to align with new strategies. Currently, our consulting backlog is at an all-time high, with about 40% of it representing engagements over $500,000, some even exceeding $1 million. The positive aspect is that these represent predictable, sustainable revenue streams, though they require multiple quarters to implement. Consequently, in our results, new business in consulting is significantly outpacing revenue, indicating a transition to more meaningful projects that take longer to execute. Additionally, we are seeing fewer discretionary engagements compared to three or four years ago, mainly because companies have limited pricing power and have been actively cutting costs for the past seven or eight quarters. As a result, projects that were once considered somewhat discretionary are now being postponed.

Robert Rozek, CFO

And Mark, the only thing I would add to the discretionary engagement that Gary is referring to are generally the ones that are smaller, which convert to revenue much quicker. So you kind of get the dynamics of the larger engagements, which convert over a longer period of time, a little bit compounded by the smaller discretionary stuff not happening.

Mark Marcon, Analyst

Got it. Gary, I apologize; I couldn't hear much of your earlier comments. You mentioned a 60,000-employee global energy company. What types of projects are you working on for those companies? You also mentioned a global insurer and another large employer, but I didn't quite catch all of that. Can you clarify what exactly you're doing and who you competed against to secure those engagements?

Gary Burnison, CEO

Many times, it's the large strategy firms that we're winning work against. Sometimes, it's the Big Four. And for example, the energy company, it's really around success profiles. And given a strategic change in direction and transformation going in and saying, based on that strategy, what type of talent do you need, and how is that talent different from the talent that you have in-house. Part of it is licensing our IP. We have like 12,000 success profiles and that's really what it entails. And the other two that I mentioned were also around strategic transformation. And those are large, large far-reaching leadership programs on moving a workforce from what you were to what you want to be. And so it is, in an essence, reskilling our workforce, but it starts with the company's strategic direction for sure.

Mark Marcon, Analyst

And are the decision makers in terms of who they're going with when they're selecting you versus McKinsey or BCG or Bain or against one of the Big Four, who's the decision maker? Is that the CEO, the CRO or is it within the realm of the Chief of HR?

Gary Burnison, CEO

It's all of the above. And I can think of one as a different energy company that is, it's coming from the CEO. So it really depends, Mark, but it's starting with the leader of the business and a new strategy or a different strategy. Then where that gets purchased? Sometimes it is the CEO or CFO. And other times, it goes down to other parts of the organization, including HR.

Mark Marcon, Analyst

Great. Congrats on that. And then on interim and professional search, you've obviously made a lot of different acquisitions there with different profiles. Can you just discuss like within this quarter and even going back to last quarter, which ones are performing the best, which segments are performing the best? Which ones are perhaps being impacted a little bit more by the uncertainty that's out there? And how does that inform what your future strategy is going to be in that space?

Gary Burnison, CEO

It's a large market with visible, predictable, and durable revenue streams. We will continue to focus on the interim space, which is currently around $330 million to $340 million. Our best success with the PS&I solution has been with companies operating at the higher end and employing highly skilled talent, as that's where our competitive strength lies. Since entering this business, we've secured approximately 1,000 cross-referral engagements. However, we've faced more challenges with companies that have a significant portion of their business centered on contingent placements, as our model generally relies on retained services. Thus, businesses with a larger contingent hiring component in the PS&I solution are more difficult for us and not as strategically aligned. As we aim to grow this solution to $1 billion, we will prioritize the higher end of the interim business and likely avoid ventures with a substantial contingent aspect. Additionally, we're observing trends where individuals may prefer part-time work for better work-life balance while still wanting to be active in the workforce. This shift, combined with an expected supply-demand imbalance in the labor market, seems to support this trend as well.

Robert Rozek, CFO

Hey, Mark. This is Bob. I would also say that the when you think about the different verticals, the functional verticals that we have, they kind of, with the diversification and being at higher levels in the organization as well as Gary just talked about the C-suite, I think that gives that business a bit more durability when one of the particular verticals is up, another one might be down vice versa at a later point in time.

Mark Marcon, Analyst

I was just wondering if you could, Bob, you were beating me to the question in terms of just the functional verticals, which ones are you seeing the strongest performance in versus which ones may be challenged? And how are you thinking about the IT vertical given that there's more and more discussion about AI potentially having an impact with regards to the need for coding or the increasing efficiency as it relates to coding.

Robert Rozek, CFO

Yes. As we look at the current situation, the IT sector is experiencing some effects from the ongoing development of AI and Generative AI. However, I believe it is still in its early stages. Progress is being made and the pace is increasing, but it has not yet reached the level of effectiveness that is necessary. As IT teams work through these changes, we have felt some impacts. On the finance and accounting side, we've noted a slight recovery in that sector. Overall, these two areas tend to offset each other. The C-suite segment, bolstered by our Patina acquisition, is performing well due to the trends we are observing in Peak 65. Additionally, we have a presence in the HR sector, though it's relatively small. It's also worth mentioning that Gary is correct about the contingent aspect, although it doesn't represent a significant portion of our business at this moment.

Mark Marcon, Analyst

Great, and for Gary and Bob, considering the recent uncertainty, what indicators would suggest that things might not be progressing as anticipated? As we approach Peak 65, how might the short-term macro factors influence your outlook? What would prompt you to enhance your contingency planning, even though you already have those plans prepared?

Gary Burnison, CEO

Well, I think if the cost of living crisis is exaggerated, I think that's the big issue. And anything, companies do not have pricing power today. It's pricing in elasticity. And so I think anything that materially impacts the consumers' ability to live and affordability, that's a problem. Now on the other side of it, I think, you're going to see because we are a very global firm and you see it in our results. I mean the thing that I step back and look at this firm over the last eight quarters and look at the overall results and the profitability in just a very, very challenging environment, I mean, it gives me tremendous confidence and hope. The other side of that, though, is within EMEA. And the conversations around, for example, in Germany, that they are going to lift that debt ceiling and that some countries there are going to be increasing their defense spending is very, very good for us. And so that is definitely could be a positive for sure. But I think the most basic thing here is around the cost of living. And anything that makes things more expensive is not a good thing. And I view the last couple of weeks and I could be wrong, but I view the last couple of weeks as negotiation. And it's just hard for me to get my mind around that somebody would actually, you would do something that's very, very harmful that would make the cost of living even higher for, say, in America, the average American.

Robert Rozek, CFO

Hey, Mark. This is Bob. I'll look at it a bit more tactically. So when I look at our new business every day, I look at our unit counts, I look at volumes. And for me, that's the real driver of when you start to see trends. I'll give you an example of Exec Search, the unit count in the third quarter was up 3%. In the month of February, it was actually up low double-digits. But those are the things that I would pay attention to myself is, okay, we've got the macro environment that Gary just went through and you have to understand all that. But then how does that translate to what we're seeing on a day-by-day basis in terms of levels of new business volumes and so on. And that would be one of the main drivers as we think about the need to take action or not.

Mark Marcon, Analyst

Great. Thank you very much. Appreciate it.

Operator, Operator

Your next question comes from the line of Tobey Sommer from Truist Securities. Your line is open.

Tyler Barishaw, Analyst

Hi. This is Tyler Barishaw filling in for Tobey. You mentioned 25 new fee earners in the quarter. How should we view that as a run rate for fiscal year '26, or could you perhaps adjust expectations for that?

Gary Burnison, CEO

We believe that's a fair assessment. We are actively managing our talent within the organization, and you will continue to see us do so. For many quarters now, we have been promoting from within and creating opportunities that make us an attractive career destination. Just a couple of months ago, we promoted 1,000 employees across the organization and will continue to enhance that by also looking to external talent. While we don't set specific targets, you can expect us to focus on profitable work and increase productivity through technology and AI among other initiatives. Additionally, we plan to actively recruit new talent. Therefore, it would be reasonable to consider that figure for next quarter, but we will also manage our current workforce effectively.

Robert Rozek, CFO

That's an important point, Gary, because I think the number is that the 25 is a net number. So depending on which side of the equation you are leaning on, it's going to influence that outcome.

Tyler Barishaw, Analyst

Got it. And then just you mentioned on E-suite churn, a lot of execs over 65. How should we think about the swing factor like capital markets recovery? Should we expect that to have a meaningful impact on demand for Exec Search?

Gary Burnison, CEO

The recovery in the capital markets shows a lot of pent-up demand. Recently, there has been a slight dampening of the excitement that was felt a few weeks ago. However, I believe the more significant issue lies with the baby boomers, which will create a considerable imbalance along with decreasing birth rates in the longer term. Additionally, leaders have navigated through tough times—from COVID to the great resignation and the current cost of living crisis—which is also influencing executives. A shift in the capital markets could be beneficial, but the critical issue is the impending supply and demand imbalance. This situation is advantageous for Korn Ferry as it indicates that companies will need to adapt their workforce strategies, enhancing how they empower, inspire, develop, and reskill their employees. All of these discussions from years past are now becoming a reality, creating opportunities for us.

Tyler Barishaw, Analyst

Makes sense. And just one final one. It looks like '25 is going to be other year of margin or will be a year of large margin expansion. How should we think about margin expansion in '26?

Gary Burnison, CEO

Well, Bob can definitely correct me. We've targeted kind of 16% to 18% margins. And we want to make sure that we are simultaneously delivering increasing earnings, for sure, for shareholders, investing in the business and returning cash to shareholders. We're trying and I think if you look, we've been very, very balanced around that. And I think right now, as we sit here today, we're very comfortable with that 16% to 18%. We just have to make sure that we're not cutting our nose off that we are investing in the places we need to invest to take advantage of what we think will happen over the next several years vis-a-vis labor and what companies are going to have to do differently.

Operator, Operator

And your final question comes from the line of Josh Chan from UBS. Your line is open.

Karandeep Singhania, Analyst

Hi. Good morning. This is Karan Singhania on for Josh. Thanks for taking our questions. So we wanted to ask on the Q4 margin guide. Typically, Q4 margins are higher than Q3, but it looks like you're guiding margins down this time. So just wondering if you can maybe give a bit more color on what you're seeing across the businesses? And what is different than prior years in terms of that, just that sequential progress?

Gary Burnison, CEO

Yes. I mean I think you have to first, and Bob, you can take it. But first, you have to step back and say, okay, hold on guys. When you adjust for the change of mix in our business, pro forma, our margins are up like 350 basis points over the last several years. These margins are incredibly healthy. And whether it's 16.5% or 17.2%, those are incredible margins. But Bob, I'll let you and you can add.

Robert Rozek, CFO

I'm not sure, but if it's lower, it's about 10 basis points. So I don't really think there's a significant question here.

Karandeep Singhania, Analyst

Got it. That makes sense. And just like, as my follow-up, I just wanted to ask on the North America Executive Search business. So growth in that came in strong at like 6%. And I think you briefly touched on that in one of the previous questions. But can you just elaborate on what drove that growth? And can we expect a recovery in that business from here on?

Gary Burnison, CEO

We've observed significant strength in that business solution over the past several months. I believe this reflects the success of our strategy, as well as factors like Peak 65, the cost of living crisis, and work-life balance. All these elements are interconnected. The last eight quarters have been quite unusual compared to previous employment cycles, with temporary penetration rates declining for nearly three years. It seems to have stabilized now at 1.6%. Seeing our outsourcing solution decline while companies are cutting costs has been particularly strange. Therefore, it's important to assess the firm as a whole. We're influencing our clients' organizational performance, maintaining stable revenue streams, and our solutions seem to balance each other out as companies will need to adapt their workforce strategies moving forward. This perspective shapes how I view the firm today, and the search results are indicative of various factors we've discussed during this call.

Karandeep Singhania, Analyst

Got it. That's right. Yes. Thank you.

Operator, Operator

And that ends our question-and-answer session. I will now turn the call back over to Mr. Burnison.

Gary Burnison, CEO

Okay. Thank you, everybody. Again, I am enormously proud of our organization and how we have pivoted through a very, very difficult economic environment over the last eight quarters and have produced incredible results and more importantly really driving clients' organizational performance. That's what Korn Ferry is all about to enable people and organizations to do more than. So with that, thank you for your time. Rob, thank you for hosting this and we'll talk to you next time.

Operator, Operator

Ladies and gentlemen, this conference call will be available for replay for one week starting today running through the end March 18th, 2025 ending at midnight. You may access the Echo Replay Service by dialing (800) 770-2030 and entering the access code 1529021 followed by the pound key. Additionally, the replay will be available for playback at the company's website, www.kornferry.com in the Investor Relations section. This concludes today's conference call. You may now disconnect.