Ladies and gentlemen, thank you for standing by and welcome to the Korn Ferry third quarter fiscal year 2020 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've 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 reports filed by the company with the SEC, including the company's annual report for fiscal year 2019 and in the company's soon to be filed quarterly report for the quarter ended January 31st, 2020. 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, Mr. Burnison.
Okay. Thank you, David. Good afternoon, everybody. Thank you for joining us. I'm sure that you, like everybody around the world, has been captivated by this humanitarian crisis that we have with COVID-19. I'm certainly going to comment about that. I do think it's important to set the stage for our company today and the ability to navigate through uncertain times. Clearly, there's no doubt about it, this is an uncertain time. Let me first comment on the quarter that finished at the end of January. We delivered 9% constant currency growth, $515 million in fee revenue, solid profitability. I would say the quarter was very good. Our most recent acquisitions that we did have really added tremendous capability to us around learning and development.
I think we've got the opportunity to take those acquisitions, combine with our own IP, and really tap a multi-billion dollar long-term market opportunity. The digital business, as we indicated a quarter ago, we thought it would be $100 million for the quarter. It was. That's up 61% at constant currency, again, that's benefited by the recent acquisitions. Organically, it was up almost 4% at constant currency. The foundation for this company's strategy has been knowledge. It has been IP. Whether that has been organically developed or whether it's been through M&A, I think we are the bellwether mark around being the experts on human and organizational performance. Every year, we develop and train nearly 1 million professionals. We have rewards data on 20 million people. We've done 69 million assessments. We've got thousands of organizational benchmark data.
Every three minutes each business hour, we put somebody in a new job. I think we definitely know what's the difference between great and good when it comes to organizational performance and the difference between good and great when it comes to individual roles. With that richness of our IP and our global capabilities, we believe there's an opportunity to create a $10 billion firm focused on the execution of a client's strategy by optimizing its most powerful lever, which is its people and the organization that surrounds the people. Today, we've got a much more diversified and balanced firm. That would include almost $1 billion in revenue coming from consulting and digital solutions. That alone is substantially bigger than our next executive search competitor. When you look at the consulting and digital solutions, it really breaks down into four areas.
One's organizational strategy, two, assessment and succession, three, learning and development, and finally, rewards and benefits. I think this diversification strategy, it's going to ultimately provide the most important benefit of tapping larger addressable markets that I think are going to have more potential, more durable and visible revenue streams. For us, the ultimate goal is to have a bigger impact on clients. What really drives their performance. When you look at the data, the strategy is working. I would just point out that when you look at the results of our inside sales, or in other words, the percentage of revenue that's driven from referrals between lines of business, it's 24%. We certainly want to see it higher.
I think that's a demonstration that we're going to market as one, which we set as a goal now a couple years ago when we sunsetted a lot of the legacy brands that we have. I believe we're redefining an industry. I think we've got the right know-how of science data solutions to help companies deliver superior performance. With that context, let me make a few comments about the coronavirus. Obviously, at this point, the magnitude of the threat and the threat that it poses to both human health, which is the most important, and secondly, the global economy, it's unknown. It's uncertain when there's going to be meaningful control of this outbreak. The situation demands continued vigilance and preparation. Let me first comment on what we've done. The number 1 priority continues to be the health and safety of our colleagues.
We've put protocols in place, whether that's social distancing. We've established a corporate emergency team. We've limited travel. We've limited internal meetings, office visitors. We've closed a selected number of offices. We have some employees working from home, and we are in daily communication with our colleagues. That is by far my biggest priority. As a CEO, I think that it's not just a question of shareholders, it's a question of stakeholders. Stakeholders are comprised of your employees, your customers, and your shareholders. I think as a CEO, you have to look at all three. Our first priority has been our colleagues, and we're doing everything within our power to keep them safe.
When we look at our business, I'd also point out that many months ago, as I told you we would, we were going to take actions to position the company for the future. Those actions included the creation of a regional account program, the continuation of the marquee account program that we have, the one Korn Ferry activity that I referenced earlier. That we were going to moderate our execution and support headcount. That we were going to rebrand the KF Digital platform and start to create something that we could actually monetize our IP through a technology platform. That we were going to orient our professional search towards knowledge-based assignments. That we were going to strengthen our balance sheet. All of those things we've done, and we've continued with the aggressive recruiting of account leaders.
In spite of these actions, the uncertainty that the coronavirus has presented to all of us has clouded the near-term predictability of our business. Even though February new business was solid, it was up 6% year-over-year, and we can certainly get into it in the call. In recent weeks and days, we've seen selected governments and companies, they've implemented social distancing actions that are similar to ours. Either limiting travel, group face-to-face interaction, we've all seen that. These actions are unlike what you'd expect in a normal economic contraction. In other words, you haven't seen across the board cost-cutting along with job eliminations. These actions are different. As we sit here today, the extent to which further incremental social distancing actions are put in place or additional authoritative bodies adopt such measures and for what time, those are substantial unknowns.
The measures taken to date, they almost certainly will impact our business for the fiscal fourth quarter and potentially beyond. Due to the rapidly changing situation's fluid, right? Given that and combined with what that creates a lack of visibility with respect to further actions to be taken, it's just too difficult for us to accurately assess and quantify the impact at this point. That's just the truth. Consequently, we're not going to issue any specific revenue and earnings guidance for our fourth quarter, and we're going to reassess the suspension of our guidance once we're comfortable that this humanitarian crisis has passed. I just point out one other thing, and that is. We always do contingency planning. As part of that, we look back at what happened during the SARS outbreak in late 2002 through the midpoint of 2003.
I had just started with the company. When we look back at that time, and I'm not suggesting it's analogous, but I think it's helpful to look back in history, our global fee revenue was down about 9% over two quarters. Once the crisis was contained, and that was about the middle of 2003, fee revenue rebounded sharply. It was a V. In fact, what happened was the revenue surpassed the peak, the immediately preceding pre-epidemic quarter. It was higher. It's difficult, if you want for us to predict if our business today is going to react in a similar way to the current crisis because, hey, the world looks different. The Chinese economy is four times the size it was. There's no question if you look how interdependent the world is today, just by looking at the news.
More importantly, Korn Ferry is substantially different. Back then, we were $300 million, and today we're $2 billion. Back then, we kind of did just one thing. Now we do many things. We've increased the scale. We've increased our financial position. We've enhanced our liquidity. There's absolutely no comparison of today's Korn Ferry to the 2002 Korn Ferry. I think that significantly increased scale and the stronger financial position will allow us to withstand a near-term revenue decline that's similar to what we experienced back in SARS and maintain a 10%-11% adjusted EBITDA margin on a trailing 12 basis without taking any restructuring actions, by the way. Again, I think that coming back full circle, our overall priority is for our colleagues. We are taking what I think is a balanced approach to this crisis, which is really anchored around three things.
One, safety, two, caution, and three, agility. That last part will be incredibly important, and I think we've positioned this company to be very agile. I think we've taken the steps. We've got a business that is in the people business, people-drive organizations, and I'm probably more bullish today than I've been about the opportunity for Korn Ferry in the future. I'm joined here by Bob and Gregg, and I'll turn it over to Bob.
Great. Thanks, Gary, good afternoon, everyone. I'm going to start with a few highlights. In the third quarter, we reached another milestone as our quarterly fee revenue eclipsed the $500 million mark for the first time in our history. As Gary indicated earlier, our fee revenue in the third quarter was $515 million. That's up about 9.4% year-over-year constant currency. Growth in the quarter was driven primarily by our new KF Digital segment, which at $99 million, was up $37 million or 61% year-over-year at constant currency and RPO and professional search, which was up $12 million or 17% year-over-year at constant currency. I'll talk a little bit about the integration of the recent acquisitions. That activity is on plan, as are the cost savings associated with the rationalization of the combined cost base.
In the third quarter, we recorded charges of about $21 million for the elimination of redundant positions in facility rationalization. Our third quarter cost base reflected savings of about $6 million. Because those actions took place over the course of the quarter, some, in fact, happened in late January, we expect an additional savings of about $3 million in the fourth quarter. As previously disclosed, and Gary talked about, we've now divided our legacy advisory segment into two components, KF Consulting and KF Digital. The results of the recent acquisitions are reported within the new KF Digital segment, and Gregg will provide some more details about that in his prepared remarks. We continue to execute on our policy of maintaining a balanced approach to capital allocation.
For all of our fiscal year 2020 through today, we have now repurchased about 2.1 million shares using total cash of about $80 million. Currently, we have about $171 million remaining on our authorization for share repurchases. Additionally, today our board declared a 10% per share dividend payable on April 15th, 2020 to shareholders of record on March 26th, 2020. Finally, I'll just comment that our balance sheet remains very strong. We have approximately $420 million of investable cash at the end of the third quarter. I'm now going to comment a little bit on new business trends. Globally, new business in the third quarter was up about $25 million, or about 5% at constant currency. We're also continuing to see differences in the trends of new business within our lines of business.
You look at what executive search did in the third quarter, that business was down 6% year-over-year. Our professional search business on a global basis, their new business was up about 20%. Again, we continue to see data points, as we've talked in the past, that the diversification in the business is really starting to take hold. In the third quarter, our RPO was awarded $58 million of new business, consisting of $32 million of new clients, we call new logos, and $26 million of extensions and renewals with existing clients. Our consulting new business in the third quarter was up 2% year-over-year, led by North America, which was at a very strong quarter, up 9% year-over-year.
Finally, excluding recent acquisitions, the digital new business was up 9% year-over-year constant currency, and that was also driven by North America, which saw a 21% increase year-over-year. Finally, our adjusted diluted earnings per share in the third quarter was $0.75, down about $0.06 or 7% year-over-year, driven in part by the change in our revenue mix. A little bit higher net interest expense and a higher effective tax rate, which was about 26.5% in the quarter, compared to 25% in the third quarter of fiscal 2019. I'm now going to turn the call over to Gregg to review our operating segments in a little bit more detail.
Okay. Thanks, Bob. Starting with our new Digital segment. Global fee revenue for KF Digital was $99 million in the third quarter and up approximately $37 million year-over-year, driven primarily by our recent acquisition. The subscription licensing component of KF Digital revenue in the third quarter was approximately $21 million, which was up $7 million year-over-year. Adjusted EBITDA in the third quarter for the Digital segment was $25.9 million, with a 26% adjusted EBITDA margin. Turning to Consulting. In the third quarter, Consulting generated $141 million of fee revenue, which was up approximately 2% year-over-year at constant currency. Consulting fee revenue growth was strongest in North America, which is up approximately 6% year-over-year. Adjusted EBITDA for Consulting in the third quarter was $18.7 million, which was up $1.7 million or 10% year-over-year.
Adjusted EBITDA margin was 13.3% in the third quarter, which was up 110 basis points year-over-year. RPO and professional search generated global fee revenue of $92 million in the third quarter, which was up approximately 17% year-over-year at constant currency. All geographic regions grew in the third quarter. By component, professional search was up approximately 9% year-over-year, and RPO was up approximately 20%. Earnings and profitability for RPO and professional search continued to scale in the third quarter. EBITDA in the third quarter was $15.2 million, up $2.1 million or 16% year-over-year, and EBITDA margin improved to 16.6%. Finally, for executive search, global fee revenue in the third quarter of fiscal 2020 was approximately $183 million, which compared year-over-year and measured at constant currency was down approximately 4.6%.
The total number of dedicated executive search consultants worldwide at the end of the third quarter was 582, up 30 year-over-year and essentially flat sequentially. Annualized fee revenue production per consultant in the third quarter was $1.26 million, and the number of new search assignments opened worldwide in the third quarter was 1,565, which is down approximately 3% year-over-year. Adjusted EBITDA for executive search in the third quarter was approximately $41 million, with an adjusted EBITDA margin of 22.1%. That concludes our prepared remarks, and we'd be glad to take your questions.
Okay, David, we'll open it up for questions.
Ladies and gentlemen, if you'd like to ask a question, please press one zero on your phone. You'll hear a tone to indicate you've been placed in queue. You may remove yourself from the queue at any time by once again pressing one, then zero. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, to ask a question, please press one zero at this time. The first question comes from the line of George Tong with Goldman Sachs. Please go ahead.
Hi, thanks. Good afternoon. You indicated that your February new business is up 6% year-over-year. Can you break that down by business line and talk a little bit about the trends that you're seeing leading into early March?
Daily life has come to a halt. It certainly appears, if you are a human being on this planet. I would say that February new business was up constant currency 6%. That's benefited by.
Our most recent acquisitions, when you look at it on a same-store sales basis, it'd probably be up about 2% or so. Regionally, including the most recent acquisition, I'll just do it by region. North America was up 7%. Asia was up 7%. Ironically, in February, China was up 17%. EMEA was down 3%. Latin America was up 6%. Search in North America was very good in February. Look, it is just way too early to call March, and you can't take one data point. In the first few days, and actual mileage may vary, but in the first few days in North America, executive search, it's the best start we've had in months. I think that is just one data point out of many, when you consider what the world is captivated by right now.
Right. That makes sense. Just to follow up on that, as it relates to the potential impact from the coronavirus, I know it is too early to tell, but can you talk about how conversations with clients are progressing? Is it more of a push out? Is it an elongation of the sales cycle? Is it more of a contractionary tone where people are looking to reduce headcount? What's the tone that you're sensing?
Too early to tell.
Got it. Okay. Thank you.
Our next question comes line of Tobey Sommer with SunTrust. Please go ahead.
Thanks. If we could ask a few questions about the Digital segment. How much of that segment is recurring? If I heard you correctly, I think you mentioned new business in North America was up, and if I'm right about that geographic comment, but does that imply international was down, and if so, by how much?
I think, Tobey, that related to consulting. You asked about digital, right?
Yeah. Maybe I'll stick with that. How much of it is recurring, and do you have any kind of wallet share kind of metrics you can share with us?
Yeah. If you look at the deck we posted, Tobey, we now started to present separately the license and subscription revenue, and that in the quarter was $21 million. Roughly out of the $100 million or so, it's about 20%. Those represent engagements where people sign up to have access to either what we call our Talent Hub, which is where the assessments reside, the assessment science resides, and then the Pay Hub, which is where our pay data resides. They're generally at a minimum one-year contracts with could be to or three years. Associated with those contracts, there's different service levels. I can't remember exactly if it's just bronze, silver, gold or something like that. Those have different levels of interaction that we would have with the clients and different fee levels associated with them.
Tobey, when you look at the business, it's $400 million. That's what it was in the third quarter annualized, right? Let me point out a couple things. The recent acquisitions that we did, they have a little bit heavier weighting in that quarter as we've come to understand that business. That's number one. When you look at that annualized number of $400 million, there's $100 million of it that essentially comes from Pay. Companies, we've got Pay data on 20,000 companies, over 20 million people. Companies around the world license our IP around that. A substantial part of that is repeat, they're coming in year in, year out. They may come in for different things, but very high percentage of repeat. The next biggest piece that we really want to grow is learning and development.
That would probably be, call it, I'm just rounding numbers here, but $150 million, $175 million. That also has a relatively high return percentage, not quite as high as pay, but pretty high. The remaining pieces are where people license our IP, could be around organizational strategy. How do you set up an organization, spans and layers, roles, responsibilities, job profiling, and then assessment succession. What Bob is, we want to move that business as a whole so that it is much more looks like a SaaS business. Today, when you look, if you were to take a snapshot of that business, I think our estimate would be for that quarter, for example, about 20%- 21% would fit that. We obviously want that to be higher, and that's where we're trying to take that business.
Great. How much higher and in what timeframe?
Well, look, you at least want to double it. We'd love to make that 50% of the business. We've been investing money now over several quarters to make sure we've got the platform. The real opportunity there, when you look for Korn Ferry, it's really around learning and development. That is a massive market. With the recent capabilities that we've added, we want to add to that. The timeframe, that's going to be hard for me to pin down, particularly when people are worried about their own survival.
Okay. I'll ask the question again, hopefully when Corona isn't front and center.
Yeah.
How much does the Miller Heiman acquisition expand your addressable market?
It expands it quite considerably. When you look at it, there's two or three pieces we pick up. One is around sales professionals, the second is around project management training capabilities, and the third is technical. Number one, our leadership development business that we had before we did this acquisition. Before we did it, we probably had about $175 million. I'm just rounding, okay? $175 million or so of leadership development. This adds what we said when we announced the deal, it'll add $120 million of revenue in the quarter. It definitely contributed a little bit more than the $30 million pro rata. It's a $300 million business. Before we did these recent acquisitions, our leadership development was at the high end. It was teams, it was individuals.
What this does is open us up to where the substantial part of the market opportunity is. That's around professionals. Let me just take one of the three that we just picked up as an example, sales professionals. Just in the U.S., there's probably 15 million sales professionals. We place thousands of sales professionals every year. We have profiles of what great looks like for sales professionals. We can combine the assessment of sales professionals, what you're trying to achieve organizationally, to the development. That does expand the addressable market.
Yeah, Tobey, this is Bob. The other thing I would add to that is as you think about the bringing all of our assets together, Gary mentioned a couple of times the various amounts of data that we have, which we then bring back into whatever solution it is we're delivering to a client. That data cuts across geographies, companies, industries, and so on, and really provides us with a very unique opportunity to have an informed point of view that others just can't have.
Thanks. I'll ask one more question then I'll get back in the queue. When you look at your different segments now, which ones of them do you think are gaining share, and which ones are losing market share?
Sizing a market, in my whole career, it's a bit of an art and not science. I'm not so much worried about share. I'm worried that we capture the market opportunity is big. The executive search business is critical strategically for the company, no question about it, because it provides tremendous access. We have demonstrated now that it's not talk. We can actually do something with that access. Let's face it, the executive search market is a small market. The much bigger markets are around recruiting for professionals, knowledge workers. That is a market that is several times the size of the executive search market. When you look at the market opportunity around org strategy, assessment and succession, learning and development, and rewards and benefits, depending on how you want to do the artwork, that could be a $100 billion , $200 billion market. That could be really substantial.
When you cut through that, the biggest piece by far you're going to focus on is training, is learning and development. Part of that is compliance, part of that is technical. I really am not so caught up in the market share gain. I'm caught up in creating a new company that goes after a much bigger market. David, anything else?
Yes. Our next question comes from the line of Mark Marcon with Baird. Please go ahead.
Hey, good afternoon, Gary and Gregg and Bob. One thing, just with regards to Miller Heiman, did you say it had contributed more than $30 million this quarter?
The acquisition, so when we did it, when we announced it, and we're actually now we've integrated the businesses, so I'm not going to be able to give you line of sight in the future. When we announced the deal, we said that it would contribute $120 million. The three would contribute $120 million of fee revenue to the company. Although we've integrated the businesses, when we look at it appears like it contributed somewhat north of $30 million in the quarter. For all three, Marc, for the three companies.
Got it. That all fell into Digital, correct?
Yes.
Correct.
Yeah. Yeah, that's exactly right.
When we take a look at the adjusted EBITDA margins with regards to Digital, it went from a year ago where Miller Heiman wasn't included. It was at 33.8%, went to 26%. How should we think about the trajectory with regards to the adjusted EBITDA margin on that part of the business?
Yeah, I think, Mark, I think you'll see that going by the time we get done with all of the integration activities, and some are gonna go into the Q1 of next year, solely because we have to pick them up and put them into our systems, and that's not going to happen until May 1. There'll be further position eliminations occurring after that happens. We'll eventually ramp this up to 28%, 29%, 30% as we go forward. Obviously as the business grows and we get more leverage, we could pretty easily be north of 30%.
Great. How should we think about the consulting business now that some portion of that has been stripped out? It looked like it had some good progress going from $12.2 - $13.3. How should we think about that going forward?
Yeah, I think the consulting business, as we look at it from a long-term perspective, Mark, the EBITDA margins would be sort of in the 12%-15% range. I think we probably have another 200 basis points of areas that we can continue to improve.
Great. With regards to just from a geographic perspective, just drilling down a little bit more. Gary, you mentioned China is actually up. Can you talk about the rest of what you're seeing in terms of Asia, whether it's Singapore, Hong Kong, Japan? What are you seeing there? I know it's just going day to day, and then I have another follow-up.
Well, I think that overall, when you look at Asia, it's actually been very surprising. The trends in many of the countries that you cited are positive. Just again, just to pick Japan, because you commented on it's up 10% in February over the prior year. If you were going to go to Singapore as an example, it's up 60%. Overall, I think, when we look at trailing four months new business, you're going to find that it looks pretty good in Asia, which seems very counterintuitive to all the commentary that I've made, right?
Yeah. If you take a look at Q4 Japanese GDP, which this was recently released, that was down like 7%. Being up 10% is pretty darn good. Is that because you're gaining share there, or do you think that some of the things that we hear are just kind of exaggerated?
I think Japan is, we have an extremely good leader who came on board, maybe it was 18 months ago or so. I think he's having real impact on the business over there. In fact, Gary talked about some of the actions that we've taken in terms of moderating headcounts, and that's one area because I have the unenviable task of approving hires in the company, and that's one area that we continue to invest in off the back of this individual.
I think Bob's comments are spot on. What I'd add, though, is that you've got aftershock. In L.A., we're very accustomed here to earthquakes and then the aftershocks. I really think with this crisis, you will see aftershocks. That would be my own view. If you just take China, for example, it's really taken eight weeks, essentially, and there was a new year in there, too. Eight weeks for things to get back to kind of a new normal, and the new normal is not the old normal. Whether it is a V or a U or any other alphabet letter you want to pick, I think what you're seeing is the concept of aftershock. What you may be seeing as new business actually reflects discussions that were going on for a long time.
I appreciate.
I don't think the initial earthquake for new business is that meaningful.
Got it. Gary, you've been through these before in terms of whether it's a shock or something that's more protracted. From a capital allocation and discretionary spending perspective, how should we think about things and thinking about share buybacks, where margins could say it's a range of outcomes, what's a bad situation relative to a moderate situation, just in terms of based on the limited information we currently have?
Well, I think without regard to this is my 72nd earning call, I remember exactly 20 years ago when dot-com, it was March, that bubble popped, I remember in October of 1987. This isn't our first rodeo. Regardless of what's happening today, we're going to commit to the operating boundaries that we have talked to our investors about. As an example, if you were to take SARS, that happened to the old Korn Ferry, back in 2002, 2003. Today's Korn Ferry, if that were to happen, we would run the company without taking any action at about a 10%, maybe 11% trailing 12 EBITDA margin. In any kind of environment, what we have told our investors is that we would operate the business with mid-single digit EBITDA margins, obviously after taking, if there's some restructuring to be on an adjusted basis.
We're absolutely committed to that, and I'm confident in that.
Terrific. Thank you.
The next question will be from the line of Marc Riddick with Sidoti. Please go ahead.
Hi, good afternoon.
Hey, Marc.
I wanted to touch a little bit on there were some investment spending and planning that's been worked on for some time, whether it was branding initiatives and investing in personnel and what have you. I wanted to get a sense of sort of where you are, maybe what inning we're in as far as some of those projects as well as the idea of whether or not what we've seen over the last few weeks has altered your near-term plans on that, or maybe sort of give a little bit of color around that. Thank you.
The first thing is what we're concerned about is the health and well-being. I know all of us, as citizens of the world, are first and primarily concerned about that. It's very hard to think about anything else, quite candidly. We have a track record. The track record speaks for itself. As we indicated, many months ago, that we were taking certain actions to position the company for the future, which we've done. We do have different types of contingency plans. That's been part of our playbook, and we're going to continue to execute those. I would say that when we are looking at the business, there is a market opportunity for us that is billions of dollars. We have to look to that market opportunity. Whether that means organically or inorganically, we're going to continue to do that.
We have a stated goal of driving our marquee and regional account plans that we have. We're going to continue to look for people that can build that out. Our consulting business now. Our consulting business, when you look at it, is globally, if you probably took last quarter annualized, it's probably $600 million. The U.S. business is only $200 million. $200 million. Think about the market opportunity. We're going to continue to operate. We've got a strategy that we think has grown the company. It's a completely different company today. Some of the business that we've won over the last week is just substantial. It's breathtaking when I think about the Korn Ferry in 2002. Multimillion-dollar consulting engagements around organizational strategy competing against the four big strategy firms. Just a different Korn Ferry today.
Again, right now, I think all of us are concerned about what we can do to protect human life. That's absolutely what we're thinking every day about. So we've got some places around the world where our colleagues can't come to work. China has been through a very difficult time, and the news is changing by the hour. That's what we're focused on right now.
From an offensive standpoint, I suppose, are there areas where you can sort of point to or be they anecdotal or what have you, where the uncertainty is actually something that may lead to greater engagement, particularly with some marquee customers that may find themselves in a position where working with you is actually maybe more beneficial than some smaller peers or anything like that? Thanks.
There's an area of the world that went through this very early, and they're now, this institution is talking to us about how they restructure their company. Yes, absolutely. Those situations will develop here over time.
Okay. Thank you very much.
The next question will be for the line of Tim Mulrooney with William Blair. Please go ahead.
Good afternoon. Thank you for taking my questions.
Back to digital. Within the $400 million digital business, it sounds like about 20% of that revenue stream is subscription-based right now. What do you think the digital business is capable of generating long term? Could this get up to 30% or even 50%, and what would be the implications to your margins?
Well, yes. We do think that's what we're trying to capture. Could it be double where it is today in terms of the subscription offering? Today it's 20%. Could it be 40%? Sure. The long-term margin in that business can be very high. It could be 33%- 34%. Now, obviously, that's not necessarily in the next quarter or two. There's no question. That is one of the linchpins of our strategy, is that we've got tremendous IP and insight around what makes an organization great, what separates good from great in terms of people, how do you compensate those people, and how do you develop them. We started this business, KF Advance 18 months ago, and the real goal was to capture a B2C revenue stream for the company.
That was the initial vision, and what's turned out, the business is still relatively small on its own, but the technology platform that we've developed is powerful, and so now we're using it. We just, a few days ago, got a $5 million assignment from a major life sciences company where they want to do training for 4,000 first-time managers. Well, guess what platform? That platform is going to sit on KF Advance. There's definitely that kind of opportunity for us.
Yeah, Tim, this is Bob. The other thing I would say is, if you think about our RPO business, they built a platform that they use to deliver the RPO services, which makes that business extremely sticky. As you think about the platform that we have for digital, one of the things that we're working on now is how to integrate that platform into the delivery of our consulting services on the same theory being that, once you do that, then it becomes very, very sticky.
This is early innings. It's still evolving, and where we might be a year from now could look a lot different from where we are today.
Yeah, I would say it's very early innings.
Yeah, we're just taking the field.
Yeah.
We're just taking the field.
Yep.
We've hit some balls, and now we're going to go take the field.
Okay. All right. That's really helpful. Thanks, guys. Staying within digital, if I look at your customer bases within your executive search and your KF, now what's called KF Consulting businesses, what % of those customers also use your digital products? I'm trying to understand the attachment rate.
It's very, very high. That's the opportunity, right? If you look, number one, what I would say is inside sales. When you look at the enterprise as a whole, 24% of the revenue is actually coming from referrals from other lines of business. The referral into consulting is 27%. It's actually going up, and that's the great thing, is that it's moving up with time. We're going to find that with digital, too. That's an anchor. That's a foundation to our strategy.
Tim, I think there's multiple ways that we look at that and try to measure it. You should be thinking today, the attachment rate or kind of pull-through is probably in the 35%-40% range. As Gary indicated, that's where, as part of the early innings, we're doing a lot of work with the folks in KF Digital and the folks in KF Consulting, just in terms of educating everybody on the new platform, what it does, what it has, and all that. The emphasis going forward will be on pulling the digital assets into and delivering them as part of a consulting arrangement.
Vice versa.
Yeah.
Right. Okay. Yep, that makes sense. Along those same lines, if I think about after a consulting engagement ends within the KF Consulting business, how often does a customer continue to use those digital products even though you may not be working with them in a formal consulting engagement?
They would absolutely continue to use them on an ongoing basis. If you think about, we might do an engagement with the board, the comp committee, or management around pay. If they're using our database, they're going to use that on a continuous basis. That's the whole theory with the leave behind, is that that's something that then becomes embedded into whatever HR process the company has engaged us for. It just becomes an integral part of their process, whether it's pay assessments to acquire talent, assessments for succession planning, assessments for development purposes, and so on. The real beauty of, if you think about what we do, we operate along every aspect of an employee's engagement with his or her employee. We have a common language across everything we do. It's common science, common language.
As you as a consumer of our services, if you don't use Korn Ferry, you're using company A for pay, company B for assessment, somebody else for talent acquisition, it's up to you to cobble it all together and make sense of it. Where if you're doing that with Korn Ferry, everything is common. It's common nomenclature, science, and all that. We actually do the knitting together for you.
Okay. Got it. Thank you. I know we're butting up against the hour mark here, but I do have to try to fit in one coronavirus question as it relates to our models. As I look, I guess, at your four different segments now, are there some segments that you would view as being more susceptible or perhaps more resilient to this type of macro uncertainty? Thank you.
My humble answer and honest answer is I just can't predict that. Who would have predicted a week ago that the Indian Wells tennis tournament would be canceled? Who would have predicted that you couldn't travel on a subway, or you were advised not to travel on a subway to Manhattan? I think we have to see what happens with this health crisis. That's why we're not providing guidance.
Understood. Thank you.
There is a question from the line of Tobey Sommer with SunTrust. Please go ahead.
Thank you. What's your posture towards hiring revenue generators at this point in across your businesses?
Go for it. We're going to continue. Without talent, there is no show. We're going to continue to bring in talent and more importantly, promote talent. This last year, we promoted over 1,000 colleagues. We're on campuses recruiting. We're going to continue to do that.
In your business that's a little bit longer lead time, like some of the consulting engagements that may be delivered over months and quarters and RPOs that can be multi-year, what's the responsiveness been of customers where they have to open a req or actually onboard someone in the case of an RPO or move a consulting engagement forward and actually schedule it in terms of a longer-term consulting assignment?
Yeah. I'll have Bob. He can comment on the revenue recognition by solution, by line of business. I would just at a very high level, what I would say is the RPO business has the longest tail. Generally speaking, median of the bell curve for the RPO engagements, it would have the longest tail. What we're winning today, which I think is good long term for the company, we're winning complex, large, global or multi-region deals. For the long term, I think that is incredibly healthy for the company. Obviously, an environment like this, that may make that a little bit more challenging. I would say that our backlog in that business has been as strong as it's ever been. That would be first. Second is the next thing I would look to is learning and development.
Those tend to be, again, not quite as long as the RPO engagements, but definitely have a longer tail for sure. The third piece would probably be assessment and succession, where some of those, somebody may sign up to do 5,000 assessments for a particular company, and that could be over multiple months. Bob, you want to just comment on the-
Yeah. I think there's actually, Mark, a couple of things happening.
Tobey.
Tobey, I'm sorry. Going back to the RPO Gary commented on, the large global complex. Those engagements by definition are going to take longer to stand up, right? When we have smaller regional ones, we stand them up quickly and you start recognizing more revenue earlier in the contract. What we're finding is, as Gary indicated, it's great success to win those engagements, but it is impacting the early quarter or quarters revenue recognition. Now we'll still get it as it gets pushed out, but it does have some impact. On the consulting side of the business, we're selling larger integrated deals.
If you were to go in and stratify our new business last year or this year into below $100,000, say $100-$250, $250-$500, and then engagements above that, you'll see a real shift in the number of engagements awarded that are of higher value. Again, you should think about, because we talk about new business being up, and it's not necessarily translating to the very next quarter's revenue because of the nature of the engagements that we're selling. They're larger integrated solutions and it just takes longer to convert those into revenue. It's all the right stuff for us to do as a business, because we're layering in, to use the term backlog, we're layering in engagements into that backlog that will provide us with a nice platform over time.
I guess that gets to it, though. Are you experiencing a change in the cadence of the customers kind of drawing on those projects? Are they slowing them down, either the throughput in RPOs or the consulting engagements themselves?
You're talking about because of the coronavirus, Tobey?
I'm not going to ascribe a causational relationship, but I'm asking you about, are you seeing slowness, and we can think about whether it's corona or something else afterwards.
Well, certainly in the last week, obviously parts of the world have lived with this for quite some time. For the United States, for different parts of Europe, it has been relatively recently. It is very hard to comment on a week's worth of activity, right? It's almost impossible, and that's why we're not, for the first time in 72 quarters, I haven't provided guidance. You've got a real humanitarian crisis, and it is tough for us to predict what happens with that.
That makes sense. Last question from me. What's the proportion of revenue that the company has with oil, airlines, travel and leisure, restaurants, those kind of things that may be impacted most directly by the phenomenon?
Yeah. Relatively small. Energy, strictly energy, upstream, downstream's probably about 4% or 5% of the company. Airlines have been relatively small for sure, less than that.
Thank you very much.
Next question will be from the line of Mark Marcon with Baird. Please go ahead.
Thanks for taking some additional follow-ups. Just on the verticals, financial services, where do we stand now in terms of percentage of business?
Gregg, you have that handy? It's probably 17% or 18%.
Sure.
You can give him the specific.
Yeah, Marc, if you look at the slides that we posted, you'll see that financial services is 17% of the business.
Great. With regards to the digital solutions, there's lots of different sub-segments that you're in. When we take a look at organizational strategy versus assessment and succession and leadership development, which area are you the most excited about long-term, Gary?
Well, the idea is to have an integrated platform. That would be our concept. Whether customers are actually going to buy that way, that's yet to be proven. We definitely would love for that to be the case. I think just when you look at the size of the market, the learning and development has to be, just given the market size, where the biggest prize is. Where we have the most capability is on assessment and succession. What we've got the unique ability to do is to be able to marry that. We have done 69 million assessments. We can identify a salesperson in this vertical needs to look like that. We can have them take an assessment. We can look at their traits, their drivers, their competencies, we can package development to Help them along the journey.
Clearly, the assessment and the learning and development are like peanut butter and jelly. The organizational strategy and the rewards and benefits are a little bit like Pringles. I love to have them with a PB&J, but it's like, I don't know if a customer is going to buy all of them. We'd love them to, but I think when you look at the meat and the bell curve, the anchor has got to be the assessment, succession, learning, and development.
Got it. Can you give a little bit of granularity with regards to that contract that you mentioned, just in terms of how it's structured, how it's priced, how we should think about those things?
Well, this is a life sciences-
Right.
It's a life sciences company, thousands of first-time managers. I certainly do not want to get into how it's priced. It would be delivered over a couple of year period of time. What, again, I think the underlying competitive difference that we have as an organization is IP. The fact that we've built and acquired a database around what separates great from good is an incredible differentiator, and if you can combine that with a development, practical learning and development steps, which was the foundation for this KF Advance business, that's a winner for sure.
Great. Then I hate to ask another virus question, but just in terms of organizationally, what percentage of your consultants are not traveling now?
Well-
What is the guidance or how should we think about that?
Yeah. Well, yeah, there's about 8,600 colleagues in the company. We have indicated at this point that we shouldn't be traveling, essentially. It has to be mission critical. Non-essential travel has been curtailed for quite some time. That's the guidepost. We are trying to communicate daily with our workforce, and in different parts of the world, we've gone through obviously in China, it's many weeks into this. In Italy, it's a few days. It kind of varies by country, by office.
Yeah, I would say, Mark, that with what our folks are doing in order to conduct business, we're seeing the same thing that's coming back from our clients. To the extent that we're not traveling, they're not traveling. We're working with our clients now to find alternative ways to deliver those services that they need.
At the same time, I will say a couple things, and Bob's spot on, he's absolutely right. We have clients that are visiting us all over the world every day. In New York or San Francisco, people are coming into our offices. We're trying to take the right precautions. The other thing that we're doing is we're trying to do as much pivoting as we can to a more virtual setup. I'm sure every company in the world is doing that. We're making a hard, a real full-court press to try to do that.
That's terrific. Thank you.
There is a question from the line of Kevin McVeigh with Credit Suisse. Please go ahead.
Great, thanks. Thanks for allowing me to ask. Obviously our thoughts are with all you folks from a safety perspective. Wanted to talk, Gary, you've been 72nd call. You framed out, you're good enough to frame out the SARS. Do you think this sits somewhere between SARS and after global financial crisis in terms of level of uncertainty or just from a client positioning perspective? One thing that's always been helpful is how you folks have reacted internally. Will you be back in the market buying stock? Are you thinking about any type of contingencies from a expense perspective internally? Given the uncertainty, how are you folks approaching that?
This is different than October of 1987. It's different than March of 2000. In 2006, we got very concerned before the turn. We took actions. Several months ago, we also took actions, and nobody could have foreseen this. This is a humanitarian crisis, let's be honest. I think when people are worried, look, I'm doing the same thing that everybody else does, right. You go to the grocery store, and there's no toilet paper. Panic buying begets panic buying. Panic selling begets panic selling. Our primary goal has been around the safety of our colleagues. Strategy doesn't go left to right to left to right.
You've got to have true north, and that's got to be anchored around purpose, and we're going to be very consistent as we've been in the past. We are going to have a balanced approach to capital allocation. We've obviously, months ago, we put in place, we've got $1 billion but we've got $400 million debt issuances. We got $600 million in revolver capacity. We've got net cash of $420 million. It's certainly, again, nothing is more important than the preciousness of life. It's hard to compare these two because there's absolutely no comparison. The company is an incredibly different company today. There's no question about it. I think we've done everything humanly possible to position us for our colleagues, our clients, and our shareholders.
No, agreed. Just real quick, any impact from kind of Aon, Tom Warner , how we should think about that across the business, I guess, directly or even just from a competitive perspective?
No, that's Aon Towers that no.
Towers, rather, yeah.
Yeah. No, not really. I think it's early days. I don't think there's not an impact to our business. If anything, it would be positive.
Thank you.
It appears there are no further questions, Mr. Burnison.
Okay. Well, thank you for the time. It's uncertainty. It's unprecedented times. Like I said, we've tried to have a playbook here of safety, caution, and agility, and most importantly, common purpose, and that's to enable people and organizations to exceed their potential. Clearly, we're now more than the world leader in executive search. It's all about how we can synchronize a client's talent strategy so that individuals, teams, and entire organizations can be more than. That's our purpose. We are the preeminent organizational consulting firm. I thank you very much for your time, and we'll look forward to speaking next time. Thank you very much.
Ladies and gentlemen, this conference call will be made available for replay for one week, starting at 8:30 P.M. Eastern Time today, running through the day March 17th, ending at midnight. You may access the AT&T Executive Playback service by calling 866-207-1041 and entering the access code 2934463. International participants may dial 402-970-0847. Additionally, the replay will be made available for playback at the company's website, www.kornferry.com, in the investor relations section. Thank you. You may now disconnect.