Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry Second 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 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 October 31, 2020. Also, some of the comments today may reference non-GAAP financial measures, such as constant currency amounts, EBITDA and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measure is contained in the financial presentation and earnings release relating to this call, both of which are posted in the Investor Relations section of the company's website at www.kornferry.com. With that, I'll turn the call over to Mr. Burnison. Please, go ahead, sir.

Okay. Thank you, Gregg, and good afternoon or good morning and thanks for joining us. This is the 11th hour of the 11th month of the year like no other. And the good news is that our business has rebounded dramatically. Revenue was up 27% sequentially to $435 million. Our earnings and profitability, they were both very good, with $66 million of adjusted EBITDA and a 15.2% adjusted EBITDA margin. I'm also pleased with the work we did to ensure a strong balance sheet and position of liquidity. This has served us well. Not only weathering the pandemic storm, but being able to invest back into the recovery that we've seen. And I'd attribute these results to what I'm calling the three Rs. First, the action strategy solutions and messages we've taken have resonated in the marketplace. Secondly, our clients have responded. And third, our colleagues have been resilient through a year that none of us have experienced in our lifetimes. Yes, it's a testament to our strategy, but it's really about the resiliency of our colleagues across the globe. I couldn't be more proud. And while I'm pleased with the progress and the path we see ahead, there's no question that the magnitude of the humanitarian and economic impact brought on by this pandemic will continue to permeate and shape the global landscape for quite some time. And as we've said since early March, I do believe there will be more change in the next two years than in the last 10 years. And that brings tremendous opportunity, real tangible opportunity for Korn Ferry. Almost every company on the planet is and will have to reimagine their business. Quite simply, different work needs to get done and work needs to get done differently. And to get work done differently, companies will need to rethink their organizational structure roles and responsibilities, how they compensate, engage and develop their workforce, let alone the type of agile talent they hire and how they hire talent in a virtual world, which will depend to a greater extent on assessment. And these are Korn Ferry's businesses and that's real opportunity for our company. As an organizational consulting firm, we enable people and organizations to exceed their potential. And to exceed potential, people need an abundance of opportunity, development and sponsorship, which is foundational to our service offerings. We're also a firm that changes people's lives. As previously mentioned, I'm very proud to say, we're launching Leadership U for Humanity, a nonprofit venture of the Korn Ferry Charitable Foundation, focused on developing the total mosaic inside communities and within corporations. One of our partners will include the Executive Leadership Council, a preeminent organization. His mission is to develop and increase the number of successful block executives across the globe. Our goal is to take our expertise in IP and develop 1 million new leaders from diverse backgrounds, using our Korn Ferry Advance and Leadership U platforms. We'll also be offering this to all of our colleagues. We're also using this time of change as an opportunity to reimagine our business. For example, we're moving from analog to digital delivery of our assessment and learning business, which represents about 23% of the firm's revenue in FY 2020 in a way that makes our IP more relevant and scalable. To give you some perspective on how far we come, at the start of the pandemic we flipped the switch almost overnight, with nearly all of our assessment capability converting to a digital environment. And on the recruiting side, we're further refining our platform processes such as AI video and technology. More and more search will not simply about discovering or validating what someone has done, but finding out who they own. We have this capability to differentiate our strategy. And our strategy is absolutely taking hold. And we see that pay off with our approach to clients as we create loyal repeatable sustaining relationship with clients at scale. And that's where we're moving our business. That's our true north. We have about 300 marquee and regional accounts, representing about 34% of global revenue which we'd like to increase to 40% or so. As such we'll continue to develop account leaders from within as well as hire from the outside. So forget the new normal, this is normal. It's nearly nine months since the pandemic was declared. And as I've said before, it's not just a marathon, but an Ironman Triathlon of endurance, agility and change. And embracing this change we absolutely can make tomorrow better than today. I truly feel we have the right strategy with the right people at the right time to accelerate through the turn. And as we enter 2021, we will continue our strategic commitment to build the preeminent global organizational consultancy. I look forward to what the new calendar year brings us. And before we take your questions, I'm joined by Bob Rozek and Gregg Kvochak. And Bob, I'll turn it over to you.

Great. Thanks, Gary and good morning and good afternoon. As Gary said, the rebound in our business has been tremendous. The sharp improvement in fee revenue in our fiscal second quarter is more than a result of improved global market conditions. In fact, it really attributed to the resilience of our diverse mix of product and service offerings, our disciplined client management activities and the growing relevance our solutions have in today's business environment. Coming through the last nine months of economic upheaval, we now have a number of proof points that our strategy is succeeding. The business we have today is less economically cyclical with the time to recovery shorter and the trajectory of our recovery even steeper. Our operating experience through the COVID-19 recession thus far demonstrates a number of important points; first, our more diversified business is clearly demonstrating greater resilience than in the Great Recession where fee revenue in the quarter immediately following the trough quarter was approximately 43% less than the prior peak quarter. For the current COVID-19 recession, the decline in fee revenue from the peak quarter to the quarter immediately filing the trough was only 16%. So you can see a very dramatic improvement. You heard Gary mention our marquee and regional account programs. These are client relationships that continue to deliver a less cyclical more resilient revenue than the rest of our portfolio. And we achieved this result by actively managing the accounts with global account leaders who use a disciplined account management strategy. Through the first six months of fiscal 2021, we saw our marquee and regional account fee revenue decline approximately 14% year-over-year, which compares favorably to the decline in the rest of our portfolio, which was down 23%. And in our Digital business, we continue to see meaningful progress selling subscription-based solutions. Our FY 2021 Q2 subscription-based fee revenue was $22.7 million, which was up 43% year-over-year and up 7% quarter sequential. Subscription-based new business also improved in the second quarter reaching $29 million, which was up 39% year-over-year and 25% quarter sequential. While the shift to more subscription-based fee revenue will have a short-term negative impact on fee revenue growth, it clearly positions us with more durable fee revenue for the long-term. In our Consulting business, we continue to see success with our effort to capture larger engagements. And that's -- as we've said in the past those that are valued at $500,000 or more. These engagements provide us with incrementally better visibility and a more durable stream of revenue. In FY 2021, our Q2 Consulting new business was pretty steady with the prior year despite last year's number being in all-time high, which included a single non-recurring engagement of $12 million. And these large engagements are also driving rapidly growing consulting backlog which again enhances our revenue visibility and durability. And last, our RPO business continues to enjoy great success, especially, as companies increasingly look to outsource and variabilize their cost base. RPO new business in the second quarter was $120 million, which is just shy of an all-time high. So as I said when I started we now have real proof points that our strategy is working. Now I'll turn to our quarterly results. In the second quarter, all of our business segments were up sharply from the trough of the first quarter with a significant improvement from the rate decline that we saw in the first quarter. For the second quarter of FY 2021, our fee revenue was $435 million, which was up $91 million or 27% sequentially and down only 12% measured year-over-year. Fee revenue declines improved consecutively year-over-year each month of the quarter. On a quarter sequential basis, fee revenue in the second quarter for Exec Search was up 23% and RPO and Pro Search was up 25% with Pro Search being up 20% and RPO up 27% consulting was up 28% and digital was up 34%. More importantly, as fee revenue has improved, we've been able to drive higher earnings and profitability by leveraging the cost-saving actions we recently put in place as well as the productivity and cost efficiencies resulting from our emerging digital and virtual delivery processes. Adjusted EBITDA in the second quarter was up $56 million sequentially to slightly over $66 million with an adjusted EBITDA margin of 15.2%. Our adjusted fully diluted earnings per share were also up in the second quarter reaching $0.54, which was up $0.73 sequentially. Our balance sheet and liquidity remained very strong. At the end of the second quarter, cash and marketable securities totaled $774 million. When you exclude amounts reserved for deferred comp arrangements and for accrued bonuses, our investable cash balance at the end of the second quarter was approximately $458 million. Finally, during the last couple of quarters, we have discussed a number of restructuring and cost-saving initiatives designed to help to firm through the trough of the COVID-19 crisis. Some of these cost saving actions like salary cuts were highlighted as being temporary in nature. It is important to note that based on our Q2 performance, we have in the second quarter made an accrual to pay all of our employees 100% of their salaries for the second quarter and therefore, our cost structure in this quarter is fully loaded as it relates to current compensation expense. I will now turn the call over to Gregg to review our operating segments in more detail.

Thanks Bob. Starting with our digital segment, global fee revenue for KF Digital was $75 million in the second quarter and up 34% sequentially and up approximately $9.3 million or 14% year-over-year. The subscription and licensing component of KF Digital fee revenue in the second quarter was approximately $23 million which was up 7% sequentially and up $7 million or 43% year-over-year. Mobile new business in the second quarter for the digital segment was up approximately 17% year-over-year. Adjusted EBITDA in the second quarter for KF Digital was up $15.1 million sequentially to $23.1 million with a 30.8% adjusted EBITDA margin. Now, turning to consulting. In the second quarter, consulting generated $126.7 million of fee revenue, which was up approximately 28% sequentially and down approximately 12% year-over-year. Demand for our consulting services continues to strengthen enhanced by our growing virtual delivery capabilities. In particular growth was strong in some of our virtually delivered solutions in leadership and professional development and assessment and succession which were up sequentially 53% and 38% respectively. New business in the second quarter for our consulting services was also up sharply. In the second quarter, consulting new business was up approximately 17% sequentially with growth in North America, Europe, and APAC. Adjusted EBITDA for consulting in the second quarter was up $13.5 million sequentially to $20.1 million with an adjusted EBITDA margin of 15.9%. RPO and professional search generated global fee revenue of $85.6 million in the second quarter which was up 25% sequentially and down 10% year-over-year. RPO fee revenue was up approximately 27% sequentially and professional search fee revenue was up approximately 20% sequentially. With regards to new business in the second quarter, professional search was up 9% sequentially and RPO was awarded a near record $120 million of new business consisting of $59 million of renewals and extensions and $61 million of new logo work. Adjusted EBITDA for RPO professional search in the second quarter was up approximately $7.8 million sequentially to $13.8 million with an adjusted EBITDA margin of 16.1%. Finally, for Executive Search global fee revenue in the second quarter of fiscal 2021 was approximately $148 million, which was up approximately 23% sequentially with growth in every region. Sequentially, North America was up approximately 32%, while EMEA and APAC were up approximately 5% and 21% respectively. The total number of dedicated Executive Search consultants worldwide in the second quarter was 512, down 73 year-over-year and up two sequentially. Annualized fee revenue production per consultant in the second quarter was $1.16 million and in a number of new search assignments opened worldwide in the second quarter was 1,331, which was down approximately 15% year-over-year, but up 19% sequentially. Executive Search also benefited from cost reductions, productivity enhancements and streamlined virtual delivery processes in the second quarter as adjusted EBITDA grew approximately $20 million sequentially to $28.2 million with an adjusted EBITDA margin of 19.1%. Now, we'll turn the call back over to Bob to discuss some of our recent monthly new business trends.

Great. Thanks, Gregg. Globally, our monthly new business trends continue to improve throughout the second quarter. Excluding new business awards for RPO, global new business in the second quarter measured year-over-year was down only approximately 7% and that was from record new business in the second quarter of fiscal 2020. With the year-end holidays approaching, both November and December are typically seasonally slower months for new business. However, on a month-to-date basis, what we're seeing in November is that, it is in line with last month and last year. If our typical seasonal patterns hold this year, we would expect January to be our high month new business in the quarter. Now approximately three months have passed since our last earnings call and while advances have been made in the science, societal and economic impacts of COVID-19 there remains significant uncertainty about the ultimate consequences. Now on the positive side, there have been several announcements regarding vaccines that have greater than 90% effectiveness. In addition, the world has adopted new ways of working and interacting with substantial acceptance of business being conducted virtually. On the negative side, there are a number of unanswered questions regarding the capacity to manufacture the vaccines at scale as well as how they will be distributed and administered to the population at large. In addition, we're seeing governments reinstating lockdowns of the number of COVID-19 cases and hospitalizations reach all-time highs. The volatile and unprecedented nature of what we're currently experiencing combined with so many unanswered questions and ever-changing data points does continue to cloud near-term predictability of our business. So consistent with our approach for the prior three quarters, we will not issue any specific revenue or earnings guidance for the third quarter of FY 2021. Now despite November new business, again, that is as of today in line with prior month and year ago levels, we would remind you that our third quarter is our seasonally low quarter due to time off around the year-end holidays. Typically, what you would see is a sequential decline from our second to our third quarter has ranged sort of 3% to 5%. Ignoring any incremental impact from COVID, we would expect that pattern to be the same in the current year. However, what we're not able to determine however is if the -- if and to what extent there will be any incremental impact from COVID-19, which potentially could have the effect of exacerbating our typical sequential decline. That concludes our prepared remarks. We would be glad to answer any questions you may have.

[Operator Instructions] Your first question comes from the line of George Tong from Goldman Sachs. Please go ahead.

Hi. Thanks. Good morning. Your digital business had a significant rebound in terms of new business, up 17% in fiscal 2Q. Could you elaborate on some of the trends operationally that you're seeing? Which specific areas within digital were strong? And what types of customers took on most of the business within the quarter?

Well the customers were pretty broad-based. As you know that the digital business encompasses several different service offerings. Training and development is a big piece of it. The other piece is compensation. And the third piece is around assessment and succession. There's a fourth piece around org strategy, but that's a much smaller piece of the business. So for several quarters, we've made a move. That said, we've got all this great IP and how can we monetize that IP. And so I think this is a continuation of the strategy to really change thousands of people's lives through our IP. So that's what we've seen. The customer base was pretty broad-based. Certainly, the professional development piece of it has been driving a fair share. And that's a big market. We look at the market opportunity for us at about $250 billion. And when you look at that market, you start to break it apart. Training and development is an enormous piece of that. And so we've certainly made a move over many, many quarters, but particularly since the pandemic started, to move that business to virtual delivery. And so when you look at the virtual instructor-led delivery days, they're up 21% sequentially in the second quarter. So we did 1,651 delivery days versus kind of 2,200 in Q4. So we've shifted almost all of our training now is virtual. It's like 97%. Bob's got the exact numbers. Now we're still off. We're still down in terms of delivery days about 27% from Q4. And I think you'll continue to see us eat into that. Now the third quarter will be a very tough compare because in the – a year ago we had the impact of the Aspen acquisitions that we made and those gave us tremendous capabilities around training and development, particularly around sales effectiveness. So you'll definitely see in the third quarter a decline but we had anticipated that. So I think it's all of those factors coming together.

Got it. That's very helpful. And then just as a follow-up your EBITDA margins in the quarter were not too far off from the levels seen last year just down a little bit. As you begin to take on some of the costs – as the costs come back with improving revenue trends, how do you expect incremental margins to perform in fiscal 3Q and beyond? Should we see something similar to 2Q, or would you expect some of the permanent cost savings that you talked about to have more of an impact if some of your variable costs start to come back? How do you think about the margin profile going forward?

Well, I do think that over time here, we could be easily at a situation where our margins are actually better. And we've – look, we've reimagined our own business. And I think part of that is reflective in the results here. So when you look at our 15% margin and as Bob talked about in the Great Recession one quarter out, our business was down – one quarter out from the trough our business was down 43%. I think now it's down like 16%. So clearly the strategy has absolutely played out. And with respect to profitability you could say the same thing. And so we definitely have plans around real estate. That takes a much longer time to actualize but we're going to continue to move forward with a different real estate footprint. And I think people – the way people get work done as we've talked about is changing. And I think half of that's going to be permanent. I really do. So in terms of the flow-through I mean Bob can comment on what we're targeting but I kind of think that as we used to look at flow through I don't know it was 25% or kind of flow through to EBITDA I think that's probably going to hold true and there could be some upside to that. Bob do you want to comment further on that?

Yes. I would say that in the foreseeable future that our flow through, which is really what we experienced in the second quarter was much higher than the 25%, as we continue to see some of the efficiencies as well as people not traveling and so on. We'll continue to see our flow through at an accelerated rate. I would say George, over the long haul, we're right now combing through – we have well over 100 leases. So we're combing through each of our office locations with a point of view in terms of the reduction of our footprint. We're looking at all the business development travel that we used to do and coming up with new policies and approaches to that. So I would say from a long-term perspective, you should expect a minimum sort of a two percentage point increase in our long-term profitability. We'll have more to say on that in the future as we conclude our analysis.

Very helpful. Thank you.

Your next question comes from the line of Sam Kusswurm from William Blair. Please go ahead.

Hey, guys. How are you doing?

Great.

Excellent. I was hoping you could help characterize how much of the sequential increase in revenue was due to pent-up demand versus general strength in the market? Trying to understand how we should be thinking about the strength in this quarter as we model out the rest of the year here? Thanks.

Well, pent-up demand is always this phrase and I don't know how – what it really means. I look at the results and say number one, years ago we went down the strategy of how can we have greater impact with clients. How can we have reasons to broaden the conversation. How can we take our IP and change thousands of people's lives. And what you're seeing in the results is exactly the strategy playing out. And what you see is that parts of the business are substantially less cyclical than other parts. And so, when I look at the just trailing four months of new business, overall, it's down 4% as a company platform-wide. But when you look at that, you'd find that the Pro Search business has been probably the most cyclical. It was down 21%, in terms of new business. Executive Search less cyclical than Pro Search down 17%. RPO is actually up. It's up 1%. Consulting is up 5%, and Digital is up 11%. So I think, first you're seeing the strategy play out. And as we've indicated to see one quarter out of the trough, the business reacting completely differently than the Great Recession is very encouraging. And I think that's more than pent-up demand. I think it really has to do with number one, the resiliency of our colleagues. I can't say enough about what our colleagues have done. I think the messages, the solutions, the actions we've taken, have resonated in the marketplace. I would point to, for example, our D&I Consulting business. I mean that's now almost -- on an annual run rate basis, it's almost a nine-digit business. And I attribute that to the quality of the people we have, the solutions and the very strong stance we've taken with respect to D&I. I think the other piece is that, whenever you go through transformation, there's always a period of pause. There's a period of reflection. There's a period of neutrality. And I think what you're seeing is that companies are, some faster than others have moved from defense to offense. And I think that's also played a pretty big part in the business. I think our marquee and regional accounts, the fact that they've outperformed the portfolio, is again a testament to the strategy. And so, I think all of those things working together explain the results. So, I'm incredibly encouraged by what we've seen.

That's helpful. And kind of unrelated, I guess, you've spoken about the desire to increase the number of margin engagements as a percentage of revenue mix. I'm wondering, what type of projects tend to form those larger engagements? And then, can you share what the margin profile and project length they tend to have?

Could you repeat the first part of the question? I'm sorry, I missed the first words.

Yeah. You've spoken about the desire to increase the number of large engagements as a percentage of your revenue?

Yeah. Thanks for the question. It's a couple-fold. I mean one is around organizational transformation. And again, it's a theme around companies moving towards offense, and different work needs to get done and work needs to get done differently. So how an organization gets things done, which is really the definition of culture. That's certainly been a driver. The other piece is helping companies go from analog to digital. That's probably the second driver. And the third driver is around career transition services, where some time ago, we started a B2C business called Korn Ferry Advance, and we've put 100,000 people through that, using our IP, trying to be the world's gymnasium for people to exercise their careers. And we've really taken that platform, and we've been able to have a bigger impact with companies. One is around clear transition. So, as companies look to reconfigure their workforce, how they do that going from analog to digital as well as how they take care of their employees, and even if they have to make tough decisions that's played a role as well. And so those large engagements fall along those lines as well as D&I.

Thanks. We call the next.

Your next question comes from the line of Tobey Sommer from Truist Securities. Please go ahead.

Thank you. It sounds like you have made good progress in Digital and moving towards virtual delivery. How would you characterize progress in moving towards more recurring business models? And any kind of update on what your goals maybe over the longer-term would be helpful. Thanks.

Well, the RPO business has turned out to be -- you could say, a recurring business model, but the contracts are long. The multi-year contracts, we -- this last quarter, Bob could certainly provide the detail, but we had a combination of renewals, which is just a great sign as well as new logos. And so, we've seen that business, as Bob said, I mean this last quarter, in terms of new business, was I think -- it was the second highest quarter almost tied our highest quarter ever. So you could look at that, and say, wow, that's really good. And even on the Consulting side, and in Digital, Digital clearly has a recurring business model. There's no question. And Bob talked about the percentage of subscription-based revenue there. That clearly has been working. And consulting that -- I'm just -- I'm very, very pleased with what we've done with our consulting business and to see new business being up in this difficult time just take trailing four months seeing it up 5%. So I think it's those as well as the focus that we've had for now quite some time around what we would say house account marquee and regional accounts. There's about 300 accounts. And we have dedicated account leaders on those accounts. Typically, an account leader only has two or three maybe accounts that they lead. And I think that the intimacy that we're creating with clients creates that platform for recurring revenue. And when I look at some of the big engagements that we've won many of those are coming from our marquee and regional accounts. So when you look at any world-class professional services organization, you'd find that about 40% or so it's going to vary a little bit, but 40% would be from proactive, loyal repeatable clients of scale. And that along with our IP is really the bedrock the foundation to the strategy. And I think it's all of those pieces.

Shifted are those take-or-pay contracts, or do those modulate down as customers demand declines?

Or the -- yes go ahead yes. No go ahead I'm sorry.

Yes. I think most of them tell we have some modulation depending on what customers see with our RPO contracts. And we kind of -- as we've talked about this sort of time if you look at like in Executive Search, we often refer to that as a light switch it's either on or off versus RPO is more like demos versus somebody could sign up to do, 10000 hires a year and then you go through a challenging time and they may dial that back to 6000 or 7000 or 8000 hires that you're, but they're still going to be doing some hiring. And I would say most of our consulting business is of that nature. One of the things I took a look at as we were preparing for the call looked at the new business by client last year versus this year because as I said on the consulting side, it was an extremely challenging compare, but we were essentially flat year-over-year which in this environment is really good. And yes I looked at the clients and it was -- last year versus this year it was kind of mirror image of each other. So I would say that the recurring nature of what we had as Gary was indicating by client we're doing business with the same clients year in and year out. So I think it's actually pretty high.

Okay. Just last one follow-up on this line. Then go to different question. Within digital, how much is genuinely recurring as defined by accounting norms, so that you could kind of count a hard backlog as opposed to a soft backlog which we'd characterize most of the other business?

Yes. That would be the subscriptions and licenses. So we had almost $23 million of revenue in the quarter for that business. And again that was if you remember from the remarks we made we had a $29 million of new business which was up 30%, 40% year-over-year and quarter sequential. So we're seeing that the subscription and licensed new business really getting traction.

Perfect. Switching gears, if I could ask a question about the acquisition strategy because in the context of what seemed to be prospects for higher margins over the longer term, does this inform and kind of shape your future acquisition strategy? Because if the company is really able to get to a high teens EBITDA margin then acquiring inefficient businesses with mid-or high single-digit EBITDA margin even with cost cutting could end up being dilutive. So I was wondering if your kind of target profile needs to change as a result?

Well you certainly raise a very interesting point, Tobey. I think that, I would tend to look at it from a client perspective and without regardless necessarily to the margin. Obviously the margin clearly plays a role. There's no question about it. What's going to be also meaningful is the return on capital. And that's certainly going to be a measure that we're going to look at which does go hand-in-hand obviously with the margin than the purchase price. But I think we are at the very beginning. I really believe, we're creating here a multibillion-dollar organizational consultancy that's unique that is – I think, we're the only ones pursuing this endeavor not only strategy, but how do you synchronize a strategy with your talent in an organization. So I think what we've seen here over the last several months is that, if you can have loyal repeatable clients, and you can put a focus on those, and you have quality solutions, we will create a firm that has bigger impact. And that's really, what we're trying to do. At the end of the day, the why for us is to change people's lives is to enable people and organizations to exceed their potential. And so regardless of margin, if we see that there are solutions and capabilities that give us the ability to change more people's lives, we're going to be extremely interested in that. Now the other thing I would say is the – I don't use this word really, the cross sales but the amount of the top line that comes from introductions across business lines is really impressive. I mean, when you look at the – this last quarter, and you look at the total revenue you'd find that about 25% of the top line is driven by cross referrals. And for some parts of the business, it's substantially higher than that. And for other parts, it's lower. So I think that, the theory and the strategy is very much playing out that, if you can anchor yourself around proactive, loyal sustaining clients of scale, you can bring quality solutions. I think we've demonstrated that, we can actually have bigger impact. In other words, we can cross sell, which I don't particularly like that word, but we can have a big – bigger impact with clients.

And Gary, just to elaborate on that point, if you go back to fiscal 2018 that number was 14.5%. So we've taken it over the past two or three years from 14.5%, up to the 25% that you just referenced.

Speaking numerical question, and then ask another else – two more and I'll get back in the queue. When you said, margins could be higher potentially over the long term. Should we think of a comparable improvement in free cash flow? So should the sort of EBITDA conversion rules stay intact? And then, how do you think about the company's real strong sequential improvement in the third quarter and parse out what is sort of an undoubtedly very rapid economic rebound in the quarter after the nadir of a recession, which differs from the 2009 period, which was kind of a longer slog. How do you parse out sort of the economic macro impact and then the diversification that you cited in your prepared remarks?

Bob, do you want to take that?

Yeah. So on the – I would say, Tobey, on the free cash flow, we would expect, I think historically, we've been in the 70% to 75% range, and we would expect to continue right around that level. I think one of the things that we're doing now is we've tamped down our capital spending through – as we're going through the downturn. And that will have to ramp back up, again, so we can continue to drive the digital business and the investments that we've made into that business over time. But I would expect the – I would – the free cash flow to be in the 70% to 75% range of our EBITDA. I would expect that to continue. And then in the third quarter, I guess, what we're seeing right now as we said in the remarks is the new business is essential in line with October in last year, which obviously was strong. And we would expect absent any real negative impact from the lockdown activity that we would go back to our sort of a typical pattern being down 3% to 5%. What we don't know is, what the impact of that is – the potential lockdowns, what that could have on us. And then we would – over quarters that, we'd expect over time to get back to once businesses, we have the vaccines in place and business expect to usual then we would expect it to be probably a more rapid recovery than what we saw in Great Recession back to normal levels.

Right. I was really referring to the third quarter comments about, how quickly the business bounced back as the sort of evidence of the diversification working. But the economic backdrop as a whole rebounded very quickly. So, how do you tease out the company, specific the business model attributes of the firm as being more resilient versus the economy just improving a lot?

Yes. When we were making those comments, Tobey, they were more relative to the second quarter. That's why I got confused on your question.

Sorry my bad. I was confused in the calendar in fiscal. I was referring to 2Q. I apologize for that.

Yes. Well, listen, I mean it's hard to pinpoint exactly what's driving it. I guess as we step back and each recession obviously is different. As we step back and look at our performance coming through this recession and you look at the five or six proof points that we have we believe that that demonstrates the resilience, the durability and the impact of us diversifying this business as we've talked in the past. One of the things when we've chatted, you've heard us talk to investors, everybody that we talked to would indicate what you're saying makes sense. But until we see you come through the next downturn it's really hard to give you credit for what you're suggesting. And coming through this, I think, again, I think we've demonstrated that those proof points are now in place. And it is really hard to pull apart and say exactly what contributes to what we're seeing. But our performance in the quarter we think substantially those proof points.

Thank you.

Your next question comes from the line of Kevin McVeigh from Credit Suisse. Please go ahead.

Great. Thanks. [Technical Difficulty] Gary or Bob or Gregg, any sense of kind of the type of engagements that from overall perspective where people are so focused. It tends to be more kind of revenue generated expense management or just IT? Just any thoughts as you think about just the scope of talent that people are looking for?

Yes, part of it is clearly -- I don't know, if I would say expense-driven, but it's certainly of a humanitarian nature where companies -- you asked five people the definition of culture and you'll get 10 different answers. For us, it's the way an organization gets things done. And I -- and there's certainly a piece of this that has been driven by companies looking at the way they are getting work done. And then what they do with their employees. So part of it could be around what we call career transition services. That would be a piece where they're looking, where they're having to make adjustments to their workforce and they want to be compassionate around how they do that. And we offer our KF Advance, essentially our KF Advance platform. That's a piece of it. Another is around organizational transformation. That is -- that certainly has been driving it. And what goes with that is what I've said for a couple of calls now that at some point, companies would be moving from defense to offense and that has certainly played out. The analog to digital is clearly another thing that's driven the business. We haven't seen much yet on M&A. But we do have world-class M&A services. We'll see if that picks up here in 2021. That could be a huge opportunity for us. But it's really those types of engagements. So then the final piece is around D&I. And it was about eight years ago, we made an investment and what I believe could be at that time the absolute preeminent D&I consulting business in the world. And we've taken that business which at that time was a really very low eight-digit business. And over a series of years, we've continued to build on that. Then after the pandemic and with the recognition of changes, societal changes that needed to be made and then the positions that we have taken in the marketplace and the resiliency of our colleagues that certainly has played a role as well. And I think when you look at the -- when you look at -- if I turn now to the recruitment side there was a period of time where the world paused. I do believe that there's going to be probably as much C-suite change happening over the next few quarters than we've seen in many, many years. And that could be because executives said well, as they've reflected and paused maybe they want to do something else. Maybe it's because that as a Board looks at a company's strategy, they want to take it in a different direction. But I would expect that to actually increase over the next few months and quarters.

That's super helpful. And then just -- any thoughts as to just what will take to restore the guidance? Is there anything you're looking more particularly Gary or Bob, or is it just a little word just to give a kind of an overall sense?

Well look yes -- no, I think we tend to be rather conservative in our thinking. And what gives us pause is what we're seeing. Look, we said this was going to be an Ironman. At the very beginning, we said this was going to be 18 to 24 months. I had publicly said, I thought a vaccine would be widely available in the U.S. kind of in October of next year. I'm not a scientist. But it certainly seems like that is the way things are headed, maybe it could be sooner. But clearly, the lockdowns that we've seen in Europe and in different cities in the U.S. has given us pause. And we want to be prudent about it. I do think though that -- and you see it unfortunately the level of cases is staggering. It's absolutely staggering. 200,000 cases a day. It's amazing how you hear that number and your psychological reaction is so different than it was eight months ago, when we were talking about 30,000, 40,000, 50,000 cases. I mean, I think the psyche has changed. And I think that same psyche holds true for business. This will not be our first rodeo through this pandemic. And so, I do believe that, as hard as it is people are incorporating this bizarre reality into their psyche which is reality, right? So, I would not expect the world to pause. I just -- I really don't see that. But at the same time, we're just trying to be prudent with all of our constituencies, not only our shareholders, but also our colleagues and our clients. And so, it's these kind of incremental lockdowns that give us a little bit of pause.

Super helpful. Thanks so much Gary.

Your next question comes from the line of Mark Marcon from Baird. Please go ahead.

Good morning, I was wondering, if you could talk a little bit about Gary, how you're approaching just investing in the business, when we think about your consultant headcount and the types of people that you're -- just currently there's a time to play, but also to play offense and upscale the talent. Just wondering, if you could just give us a little bit of a feel in terms of how you're approaching the next six to nine months?

We had a handful -- when this thing broke out we had a contingency playbook that we pulled out a year ago. And when it broke out, we -- there are a handful of things that we said, we wanted to accomplish. One of it was to continue to grow from within and use our own IP on our colleagues for sponsorship and mentorship and development. The other was to look to the outside. And you don't see it in the numbers yet because of garden leaves and the like, but we've been very aggressive in the marketplace with looking at talent and that would encompass the entire platform. And we've been out looking at account leaders. We've been out looking and hiring consulting talent, digital talent and recruiters. And so, you don't see that fully in the numbers, but we've been very aggressive, Mark.

Okay. Great. And then, with regards to what are your clients telling you now? I mean, I'm sure you've had high-level conversations with regards to how they're approaching this product line. How -- what sort of pace would you expect to see in terms of the business coming back? And once we have a vaccine, how quickly do you think things rebound at that point?

I think that, as I talk to CEOs and it was in my prepared remarks, there was this thing around the new normal. Well, forget it. This kind of is normal. And I think that sentiment more than any has started to really hold true in people's minds. As tough as it is, I think that there is a growing acceptance and an incorporation that this is reality. For us, we've seen a pretty big increase sequentially when I look at the industries kind of across the board. Actually, even consumer was the highest performing. But I think, when you look at the portfolio today the industrial piece and the consumer piece are still behind where they were if you will. And, we need to see those come back. And undoubtedly, they will come back. So, barring any kind of national or country-wide lockdowns and assuming continued government stimulus. I'm pretty optimistic. And even with the political changes in the U.S., I stand pretty optimistically that companies are making the pivot to offense. And they're saying, while the world has really changed, different work needs to get done, it needs to get done differently. And how do we do that? And that's essentially the business that we're in. So Mark I'm probably, as I sit here today, I'm certainly more optimistic than I was six months ago.

Great to hear, Gary, are you seeing any clients that are pulling back just with the recent spike, in terms of the...

No, no, no. Now again, this is whatever November 23rd, okay? So -- but as of this moment, for November what we've seen in new business and what we've seen in existing mandates, is very much a continuation. Now, November and December, I'm not expecting great things. I think that a lot of people are going to really unplug, particularly in December. So I just think by the seasonal nature of where we are I do believe, you're going to find the delivery days, the consulting days are going to be actually down maybe even more than what we've experienced historically. And as I indicated on the digital side, there will be a tough compare in the third quarter even with the increase that we've seen in the new business. The reality is that, the virtual instructor-led delivery days, it's still off about 27%. So we've made this enormous improvement, converting essentially almost 100% of our training to virtual delivery to this quarter doing 1,651 delivery days. I mean, we're still off. And so I think, you will see that in the third quarter for sure. But again, I'm optimistic.

Great.

Your next question comes from the line of Marc Riddick from Sidoti. Please go ahead.

Hi. Good afternoon.

Hi Marc.

Hi Marc. [Indiscernible]

First of all, I want to thank you for all the commentary and color that you've provided. I wanted to ask specifically about, those who have made that switch from defense to offense. I was wondering if you could talk a little bit about, what that means for you in dealing with them and working with them going forward. Because I wanted to get a sense of, does that then provide maybe greater insights as to, maybe their short and longer term plans, future visibility things like that? I was wondering if you could talk about that a little bit.

Well, I think overall, I don't want to -- don't want to sound like a broken record. But there certainly is a couple of broad themes around an organization and what it looks like. And that is playing out. How do you onboard people virtually? How do you train people virtually? How do you move your business from analog to digital? Those types of engagements clearly have been playing out as well as the D&I side. So I think that, again, people have pivoted. And they're looking at what their organization is going to look like in 2022 not only 2021. And what does that mean? What type of talent, do they need? I -- a year ago, if you would have asked me would somebody hire an Executive, a CEO or even a Board member without physically meeting them, I would have said you're crazy. And -- but the reality is that's actually what's happening. And the good news for all of us is that, unfortunately its human beings we're very biased. And we sometimes make wrong decisions within the first seven seconds of meeting somebody. So the IP that we have around who somebody is as opposed to what they've done, I think is really playing out in the marketplace. And we're seeing that today. Well, I just wouldn't have guessed it. I wouldn't have guessed it a year ago. And I think there's just so many examples about playing out through the corporate world, where somebody took a trip and man, did you really have to take that trip. And so, although, the Microsoft teams and the Zoom is, not the most intimate for sure and it can be quite isolating for all of us. I think there is a recognition that when we get into 2022 later part of 2021, I think that half of the stuff that we used to do, just won't be done. I just – I don't see it. I think there's going to be a real change and so we definitely – we've certainly seen that over the last several weeks.

That's really helpful. And then, I guess, the last one for me. For those who have moved into the offensive campus is there any differences that you're seeing from a regional standpoint? I mean, obviously different parts of the world experienced COVID in different ways and different – slightly different timing, but I was wondering, if you're seeing any difference in that pace of shifting from defense to offense? Thank you.

Well, I think in North America, look North America has outperformed. There's no question about it. When you look at the trailing four months new business, across the entire Korn Ferry platform, it's up 7% in North America. Whereas, if you look at EMEA and Asia-Pacific, those are going to be down 12%, 13%, 10% in that ballpark trailing four months just new business. So that – there's no question that – at least for Korn Ferry. And I think Korn Ferry is a good reflective of the economy that North America has been very, very agile. Part of that has to do with I think the – the laws and the ability to make changes. But that piece of the business has certainly been heartening to see. And I'm not – by that, I'm not suggesting that companies in EMEA and Asia, haven't made those moves, because they certainly have. But the North American business for us has been a shining star. And when you look at the company overall, the last two quarters before COVID, we were doing about $560 million of new business. This last quarter, we did $560 million in new business. So what we've seen, I hate to use alphabets. I think, it's so ridiculous, but we have seen a V. I mean, you just – you can't deny it. And when you look at that V certainly the entire platform has benefited but North America has certainly outperformed by far.

Thank you for that. And then the last thing for me, I was sort of thinking about – going back to in 2008, what are we going – living through that. One of the things, I recall is that a lot of the C-suite leaders, who maybe had thought about retiring or making changes and things like that, really kind of hung in there until they had gotten to the other side of the greatest of difficulties. And then, you saw a pickup of C-suite moves. Are you getting a sense that there might be -- going back to the pent-up term, I'm not sure, if that's the best way to put it. But are you getting a sense that, there are those who may be ready to move on once we get to the other side of the challenges of this pandemic? Thank you.

Yeah. Yes. Yeah. I was talking to a CEO not a long ago and this person had said that, they thought they would hang in for -- but before COVID it was several years. And then even as recently, as a few weeks ago they thought, they'd hang in for a year and then that has changed. So I think what this has done is people have -- again there's been a period of pause, a pause towards purpose, a pause towards a reflection, a pause towards your real why as a human being. And I believe that to be the case. Yes. We have certainly -- we've seen that. The other thing we've seen is -- and again, it may be rather intuitive, but just the amount of people that have moved, like just have relocated, and because they can kind of do their job anywhere. So yeah, we've certainly seen those beginning signs. And I would expect that, that kind of C-suite turnover is going to stay pretty high over the next several months and quarters I do.

It's certainly helpful. Thank you very much.

And at this time there are no further questions. I'd like to turn the call back to Gary Burnison for any closing remarks.

Okay Gregg. I think about a week ago somebody said to me, Happy Thanksgiving and I was a little jarred. I was jarred by the comment because, every -- it's kind of blurs day. The months and the days have run together. But certainly this is a special time of the year. I wish everybody a wonderful Thanksgiving, in the United States. Thank you for joining us. And we look forward to talking to you next time. Thank you. Bye-bye.

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