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Korn/Ferry International  (NYSE:KFY)
Q3 2019 Earnings Conference Call
March 07, 2019, 4:30 p.m. ET

Contents:

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Korn/Ferry's Third Quarter Fiscal Year 2019 Conference Call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. We have also made available in the Investor Relations section of our website at kornferry.com a copy of the financial presentation that we will be reviewing with you today.

Before I turn the call over to our host, Mr. Gary Burnison, let me first call -- read a cautionary statement to investors. Certain statements made in today's call, 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 risks and uncertainties can be found in the release relating to this presentations and in the periodic reports filed by the Company with the SEC, including the Company's annual report for fiscal year 2018. Also, some of the comments today may reference non-GAAP financial measures such as adjusted fee revenue, 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 related 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 conference over to Mr. Burnison. Please go ahead.

Gary Burnison -- Chief Executive Officer

Okay. Thank you, Anna. Good afternoon, everybody and thank you for joining us. I would say that the quarter was very good for Korn Ferry. We grew the top line 10% at constant currency and the profitability was outstanding. This is my 67th earnings call it kind of feels like number six, but today Korn Ferry is a much, much different Company. We are an organizational consultancy that helps companies look at their talent and strategy together. Most clients can come up with a sound strategy, but many struggle to make it stick because their talent strategy -- they're not in sync and that's exactly where we come in. We help companies make sure that they have the right people in the right places, for the right rewards that bring their strategy to life.

How do we do that? Well, we do it by redesigning their org structure, by helping them hire and hold onto the best people with the right skills and mind set for the future and also most importantly by motivating the people to not just fulfilled, but to exceed their potential. And as I've said before, strategy without talent is hopeless, but talent without strategy is helpless and we connect those dots, that's what Korn Ferry does. And so on the 67th earnings call, I see a substantially different Company today than even two or three years ago with a completely different profile.

Number one, we're 50% bigger, more than half of our revenues now generated from outside the US, 61% of our colleagues are women, 53% are millennial and only 14% of us are baby boomers. Our advisory business is over $800 million in revenue, which alone is bigger than any other search firm. And in fact, it's about the size of our entire firm 10 years ago. And most importantly, I think we've got a much more balanced and less cyclical Company, an evolution that's taken place all while our flagship search business has thrived. It operates at the highest level and you would look to that, not by hyperbole, but you'd actually look at your average fee and our average fee is $125,000 and we're generating more revenue by far than any industry competitor.

This Company today is not a cyclic binge or bust company, we're now a firm for all seasons whether the challenge is globalization, cost synergies, M&A, digital transformation, we can help organizations make an impact in any kind of economic environment. And the breadth and depth of our Company is substantial. Our organizational strategy capabilities, it's about 11% of the Company today. With that we help companies align their strategy with their people to their organizational structure. Our succession and assessment offerings, we help clients close the gap between the talent they have and the talent they need, nearly 50 million people have been assessed by Korn Ferry. The assessment and succession offerings represent about 12% of our firm.

Every year, we develop 1.2 million executives. We have almost 1,000 colleagues every single day, the only thing they're doing is leadership development, that accounts for about 10% of the Company's footing. We have reward data on 25 million people. We know what it takes to keep your best talent. Our rewards business is about 10% of the Company. So we absolutely have the foundation for a multi-billion revenue opportunity. So the real question is, well, what do you do to get there? And it has to start outside and it has to start with pursuing, enduring, scalable, meaningful client relationships, engagements that deliver measurable results for our clients. Today about 18% of our clients utilize more than one line of business, so we got a lot of runway, with the remaining 80%. But specifically, we got to relentlessly focus on five areas.

One, the centerpiece has to be the approach to client development and it starts with our marquee accounts. Those companies where we have a strong opportunity for impact today, those clients represent about 20% of the Company. The growth rate for those marquee accounts have been twice the rate of the remaining portfolio. And as part of our one KF strategy that we announced last summer. We are now in the process of expanding this account program to another 200 regional accounts, which is approximately about another $200 million of revenue. We're going to continue to develop and add account leaders to ensure that we bring the full weight of the firm to these clients and gain more wallet share.

Secondly, we've guided take those single the smaller clients, so we got to make them doubles and triples. We're doing that practically right now through solution training. And again as part of the one KF initiative last month we kicked-off a firm wide program to educate every single colleague in the Company at every level about all of our solutions. We have over 100 trainers with about 330 sessions already scheduled across the globe today.

The third piece of the growth strategy is the product business. When you look at advisory that $820 million, $840 million business today on a run rate basis, two-thirds of it is consulting and one-third of it is product. So it's about a $250 million product business today. Those products are much less cyclical, they are substantially profitable and we've got the opportunity to scale that. Fourth, as you know, M&A has been a pretty consistent pillar. We're continuing to explore opportunities at the intersection of talent in strategy.

And then the final piece is about our own people. I spent a full two days with Colleague Advisory Council, almost 50 people from around the world at all levels. And we have to have a commitment to developing our own talent and providing growth opportunities for everybody. And at the same time, we have to continue to bring in world-class consultants. And then finally, in addition to the M&A, we continue to execute a balanced approach to capital. Year-to-date, we've allocated about $18 million to dividends and $37 million to share repurchases representing a payout of about 25% of EBITDA.

Our return on invested capital has continued to improve, it's up about 200 basis points from the end of fiscal 2018 and as -- I'll let Bob get into this, but the Board of Directors approved an additional stock repurchase program that would take us up to $250 million.

So with that, I'm going to turn it over. I'm joined here by Gregg Kvochak and Bob Rozek and so Bob, I'll turn it over to you.

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Great. Thanks, Gary and good afternoon, everyone. As Gary said, we're pleased with what we delivered this quarter and as usual, I must start with a couple of highlights. So demand for our industry leading solution remained solid in the third quarter and what is our seasonally slowest quarter, we ended calendar year 2018 with new business growth in both November and December, and transitioned into the beginning of 2019 within the acceleration in new business activity for January, giving us a great start toward achieving what should be record revenue in our fourth quarter.

In the third quarter, our global fee revenue reached $475 million, which was up 10% year-over-year at constant currency. This marks the sixth consecutive quarter in which we achieved double-digit revenue growth measured at constant currency. Growth continued to be broad-based with each of our operating segments, benefiting from synergies, realized by tying our solutions together. In constant currency, RPO and Professional Search grew 19%, Executive Search grew 10%, and revenue growth for advisory was 6%.

More importantly, our results in the third quarter continue to demonstrate the earnings power of our business with adjusted EBITDA growing at a pace faster than revenue and adjusted EBITDA margin reaching a record high of 16.4%. Adjusted EBITDA in the third quarter is approximately $78 million, which is an improvement of $6.3 million or 9% measured year-over-year. And finally, consistent with our policy to maintain balanced approach to capital allocation. In the third quarter, we repurchased approximately 353,000 shares of our stock spending about $14.6 million and our Board approved a declaration of a quarterly dividend of $0.10 per share. In addition, as Gary mentioned, our Board of Directors approved an increase to our share repurchase program, bringing the amount available to repurchase under the program up to approximately $250 million.

Now, turning to new business trends, globally in the third quarter, Executive Search new business totaled approximately $191 million, that's up 6% year-over-year driven by strength in North America and EMEA. For Advisory, global new business in the third quarter was $221 million and that's up 5% year-over-year and we saw growth in North America, Europe and Asia-Pacific. And finally, in the third quarter RPO and Professional Search secured $104 million of total new business, that's the best quarter of new business so far in fiscal 2019. Total new business consists of $78 million of long-term RPO awards and $26 million of Professional Search. The $78 million of RPO awards consist of approximately $59 million of contract expansions and renewals with existing clients and approximately $19 million of new client contracts.

At the end of the third quarter, total cash and marketable securities were $623 million, that's up approximately $94 million compared to the third quarter of fiscal '18. Excluding amounts reserved for deferred comp and for accrued bonuses, our investable cash balance at the end of the third quarter was approximately $296 million, that's up approximately $54 million year-over-year and $52 million quarter sequential. The firm had outstanding debt at the end of the third quarter of approximately $223 million.

Last, adjusted fully diluted earnings per share in the third quarter were $0.81, that's up $0.11 or 16% compared to the third quarter of fiscal '18. On a GAAP basis, which includes the final month of the amortization of retention bonuses related to our acquisition of Hay Group, our fully diluted earnings per share for the quarter were $0.80.

I'm going to turn it over to Greg now to review the operating segments in more detail.

Gregg Kvochak -- Investor Relations

Thanks, Bob. Despite calendar year and holiday seasonality fee revenue for Executive Search continue to grow in the third quarter, improving to over $193 million globally. Compared year-over-year and measure at actual exchange rates global Executive Search fee revenue grew $13 million, or 7.2% in third quarter and 10% measured at constant currency. Growth for our Executive Search segment remained broad-based. At constant currency, North America was up 12%, Europe was up 3%, Asia-Pacific was up 10% and Latin America was up 34%. By specialty market growth was mixed in the third quarter, compared to the third quarter a year ago at actual exchange rates, our financial services and technology practices were each up 25%. Our industrial practice was up 7% while our life sciences and healthcare and consumer goods practices were down 13% and 3% respectively.

The total number of dedicated Executive Search consultants worldwide at the end of the third quarter was 552, up 16 year-over-year. Annualized fee revenue production per consultant in the third quarter improved year-over-year to $1.4 million and the number of new assignments opened worldwide in the third quarter was 1,608, which was up approximately 3% year-over-year. EBITDA for the Executive Search in the third quarter was $48.2 million, which was up $10.9 million or 29% year-over-year. The consolidated EBITDA margin for Executive Search in the third quarter of fiscal '19 was 24.9%, compared to 20.7% in the third quarter of fiscal '18.

Now turning to Advisory, in the third quarter, global fee revenue for Advisory reached $201.5 million, which was up 6% year-over-year measured at constant currency. By geographic region, growth in the third quarter was strongest in both the Europe and Asia-Pacific regions. Similar to Executive Search, the Advisory segment was impacted by year end holiday seasonality were fewer working days resulted in fewer billable hours with clients. As previously mentioned to start calendar year 2019, global new business awards accelerated for Advisory. January new business was up nearly 11% year-over-year, providing a solid backlog to begin the fourth quarter. Advisory earnings and profitability trends also remained strong in the third quarter. Adjusted EBITDA for Advisory was $38.2 million with an adjusted EBITDA margin of 18.9%.

Finally, turning to RPO and Professional Search, we're in the third quarter growth continued at double-digit pace. The RPO and Professional Search segment generated $79.6 million of fee revenue in the third quarter, which was up 19.4% year-over-year at constant currency. All geographic regions continued to grow double-digits in the third quarter led by North America and Asia-Pacific, which were up 23% and 20% respectively at constant currency. As previously mentioned, in the third quarter, the RPO and Professional Search segment secured a total of $104 million of new business consisting of $78 million of larger long-term RPO assignments and $26 million of smaller shorter-term Professional Search assignments. Earnings also improved sharply in the third quarter for the RPO and Professional Search segment. EBITDA in the third quarter was $13.1 million with an EBITDA margin of 16.4%, which were both up sharply year-over-year.

Now I'll turn the call back over to Bob to discuss our outlook for the fourth quarter fiscal '19.

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Great. Thanks, Greg. Following the seasonally slower month of December, new business activity to begin calendar year 2019 has ramp back up. January and February new business across all our operating segments has been strong, providing us with a solid backlog to start the fourth quarter, which in a typically year is our seasonally strongest quarter. For Executive Search global new business awards in the month of January and February combined were up 6% year-over-year with growth in every region. If monthly new business patterns are consistent with prior years, we expect March to be one of the best months for new business this fiscal year and that we will finish the year with a solid April.

For Advisory, the fiscal fourth quarter is also typically a seasonally stronger quarter where both backlog and new business awards combined with more hours with clients to execute assignments drives a quarter of strong revenue. To start the fourth quarter, Advisory global new business awards for the month of January, February combined were up 6% year-over-year. With regards to RPO and Professional Search, a number of large RPO contracts early the backlog are ramping up in the fourth quarter and the pipeline of potential new business opportunities remained strong. We expect both of those facts to combine -- on a combined basis will drive a stronger quarter of revenue growth.

Considering these factors and assuming worldwide economic conditions financial markets, foreign exchange rates remained steady and assuming a 25%, 26% effective tax rate for the quarter. We expect our consolidated fee revenue in the fourth quarter of fiscal '19 to range from $485 million to $505 million. And we expect our consolidated diluted earnings per share to range from $0.85 to $0.93. When comparing to the fourth quarter of last fiscal year, it should be noted that our fourth quarter revenue guidance reflects a significantly stronger US dollar relative to a number of currencies including the British pound and the Euro.

Finally, the amortization of retention bonuses associated with a Hay Group acquisition over three years ago ended in December of 2018. Therefore, in the fourth quarter, there will no longer be adjustments to earnings per share presented under US GAAP for this item.

That concludes our prepared remarks and we're glad to take any questions that you may have.

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from Tobey Sommer with SunTrust. Please go ahead.

Joseph Charles -- SunTrust -- Analyst

Hi. This is Joseph Charles (ph) on for Tobey Sommer this evening. I have one quick question about consultant productivity. Last quarter, I think you referenced that consultant productivity is lot higher in the US than it is in a lot of the other countries in which you operate. Are there any particular regions or industries that you'd like to highlight that you think you still have runway for growth? Thank you.

Gary Burnison -- Chief Executive Officer

Well, I think first, overall, when you say consultant productivity, I don't know if you're talking about our consulting business.

Joseph Charles -- SunTrust -- Analyst

Executive Search consultants.

Gary Burnison -- Chief Executive Officer

The Executive Search consultants today, it's about the overall global average is about $1.4 million or so. Average fee per assignments $125,000. Obviously, we have a much a far-reaching footprint probably more level than any other search firm. So when you look at regions around the world, you're going to find a great disparity in the level of executive pay. So our fee and our productivity is going to vary substantially from Mexico to China to Ecuador to Belgium to the United States. And I would just say that when you look at it, the overall average of $1.4 million there is clearly room for productivity. Now whether that is 15%, whether that's 20%, I'm not going to put an exact number, but clearly there's still headroom there.

Joseph Charles -- SunTrust -- Analyst

Got it. And do you see that headroom more so in the developing markets you're in or the developed markets you're in? Thank you.

Gary Burnison -- Chief Executive Officer

Sorry, no, it's -- look it's in both, I mean just look at, when I started at this place the -- I think the average search fee was like, I don't know $55,000 or $60,000. Today, we're at $125,000, a part of that has been wage growth, part of it has been our strategy. But if you just look at the underlying dynamics, what are you seeing, well, you're seeing career nomads. So new people coming out of college are going to work for 30 different employers. So there is going to be more and more churn. So I think that both bodes very well for this company over the long term. In the United States, there is 7 million unfilled jobs, I mean there is a ton of jobs out there, high skilled good paying jobs. We're seeing that in our RPO and Professional Search business, where the demand for talent is robust and people are finding, they are having to pay much more for talented people than what they thought.

Joseph Charles -- SunTrust -- Analyst

Got you.

Operator

Our next question is from Kevin McVeigh with Credit Suisse. Please go ahead.

Kevin McVeigh -- Credit Suisse AG -- Analyst

Great. Thanks. Hi, Gary or Bob, kind of heading into the last kind of inflection point in the cycle, you folks did a real nice job of kind of acquiring assets that really prove to really differentiate the firm through this up cycle. Any thoughts on that, just within the context of boosting the buyback, because it seems like a pretty sizable step up in the buyback. Just any thoughts on that relative to the acquisition strategy? Is that just a function of, you got the footprint you need, just any thoughts on that would be super helpful.

Gary Burnison -- Chief Executive Officer

We're going to continue to -- we've followed a pretty consistent playbook. We've made 10 acquisitions over a 10 year period of time and we are continuing to follow that playbook. And so we have to have a balanced approach to capital. We have to think of stakeholders. We have to think of our clients. We have to think of our colleagues and we have to think of our shareholders. And we've got to make sure we've got the right balance. So we did think that the buyback, we only had about $50 million left. And so we thought it prudent to raise that, so I think you're going to see us have a very balanced approach to capital deployment. But now we very much have an appetite to make investments that would increase our breadth and depth.

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

And Kevin, this is Bob.

Kevin McVeigh -- Credit Suisse AG -- Analyst

Hi, Bob.

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Just put a little bit more -- Hi, how are you doing? -- A little more color on it. When we first put the buyback authorization in place back in 2014, it was roughly somewhere between 10%, 12% of our market cap. And so, the number that we're at today is roughly the same, obviously we're a bigger Company today and hence you get the larger authorization amount.

Kevin McVeigh -- Credit Suisse AG -- Analyst

And then maybe Bob just any thoughts on within the context of the Q4 guidance, what gets you to the upper end of the range versus the low end and conversely on the EPS just any kind of factors that would kind of swing it toward the upper end or the lower end?

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Yeah, I think the -- as we sit here today what's going to push us toward the upper end of the range is our ability to convert our advisory backlog into revenue is one factor. They've had strong new business in Q2, strong new business in this past quarter, Q3 and what we're seeing is as they sell larger engagements, the conversion to revenue takes a little bit longer. We've also seen a bit of a change in mix in that business where the leadership development is a higher proportion of the mix and that takes a little bit longer. So our ability to actively manage, proactively manage that and convert it to revenue is one area. And I think the other area that's going to get us to the higher end of the range is in the RPO business. They've sold a number of large engagements that were standing up now so our ability to execute against those successfully will help us get there as well.

Kevin McVeigh -- Credit Suisse AG -- Analyst

Got it. And then any sense of -- any color on kind of upticks across any segments or any thoughts around that?

Gary Burnison -- Chief Executive Officer

Yeah. We haven't seen much change in Executive Search in upticks, it's been pretty consistent. I mean, over the past couple of years they've drifted up but not remarkably. We're seeing a little bit more uptick activity on the positive side is in the Professional Search area. Again, that it's not remarkably different, but we're starting to see a little bit of upward advancement in Professional Search.

Kevin McVeigh -- Credit Suisse AG -- Analyst

You bet. Thank you.

Operator

Our next question comes from George Tong with Goldman Sachs. Please go ahead.

George Tong -- Goldman Sachs -- Analyst

Hi. Thanks. Good afternoon. You indicated that your marquee accounts are growing at twice the rate of the overall business and that you're expanding the program to another 200 regional accounts, which would yield another $200 million in revenues. Can you elaborate on the rollout of this expanded program and the timing of when this $200 million in incremental revenues will be achieved?

Gary Burnison -- Chief Executive Officer

Well, the $200 million in revenue is from those existing, it's the run rate. So it's from the existing portfolio of regional accounts today. So today we've got 100 marquee accounts and that represents about 20% of the company's overall footings. We're now expanding that to include another couple hundred accounts where we would have dedicated account leaders, people that we are either recruiting from outside the firm that have account management responsibility, experience or promoting from within.

And so today, the run rate on those 200 accounts without real dedicated account ownership would be $200 million. So you could look at the whole piece of the dedicated account program and say today, OK that's something like $600 million or 30% of the overall company. So you would think about the growth from that kind of starting point and definitely the marquee accounts, the performance of those accounts the growth of those accounts has outperformed the rest of the portfolio.

George Tong -- Goldman Sachs -- Analyst

Got it. That's helpful. In the Advisory business, the growth there decelerated from 11.8% constant currency in fiscal 2Q to 6% this quarter. Can you help unpack the quarter specifically if there were certain onetime items that weighed on growth and if not what strategies you have to accelerate the growth?

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Yeah. I think, George, this is Bob. How you are doing? I think the -- if you go back to how we responded to Kevin's question, the conversion of backlog into revenue as we move our solutions to larger scalable solutions does take a bit longer, so that had some impact. And as the change in mix of leadership development again takes a bit longer to convert, so that had some impact. And then the only other piece is, If you look at the number of days in way that the holidays fell this year, we had one less business day. So they had obviously if you're not working you can't judge your time and generate revenue.

George Tong -- Goldman Sachs -- Analyst

Got it. Any other active strategies you have to improve the growth performance there, because it sounds like the exit rate for January, February sounds relatively comparable at 6% in terms of new business trends?

Gary Burnison -- Chief Executive Officer

Yeah. No, it's I would say, it's OK. I mean, am I satisfied with the growth? No, but when you look at it, today you've got an $820 million Advisory business that 10 years ago was a 10th of the size. But I think when you look at it at a moment in time and you say OK, well what do you have to believe? How did you get there? Well, you look at the components we've got an organizational strategy component that's 10% of the Company. That has to be a much bigger percentage being able to link business strategy with organizational strategy. So that has absolute runway.

The assessment and succession is about 12%. We've got a lot of different instruments and we've assessed 50 million people. We can do anything from simulations to onsite. I mean we've got it, we've got great IP there. If we were to pick something up that's fine, but we're not out purposefully looking for that. The leadership development area, if you look at the market opportunity that's the biggest area. I mean when you look at HR services, that is a substantial market. And so, for us today that's call it a couple hundred million dollar business, I mean that's got a lot of headroom.

Then the other piece is rewards, which again is about 10%. And so, when you look at the business, one of the things that we have to solve for is to moving to bigger more impactful engagements. And so today you'll find a lot of the volume is actually sub six digit engagements and a lot of that comes from the heritage of assessments. And so, we're doing thousands of assessments. And so, you have to believe that you can move that portfolio toward bigger more impactful assignments. And so when you look this last quarter at the dollar volume 50% of the new business was for engagements that were over $500,000. So that's something you have to believe.

The whole reason for the account strategy, I mean is for this very reason, is we have incredible relationships. We're dealing with 10,000 clients a year, but the reality is only 18% of those are using us for one thing. So you've got to have a purposeful strategy with dedicated leaders that are working those clients all the time, that are walking the halls. That has to be something that you really have to believe in and you've got to execute.

And then finally, when I come to the North American market, we've got fabulous people. We don't have enough people. I mean just plain and simple. So the market opportunity is absolutely there and we've demonstrated that we can cross introduce people from different parts of the organization. The solution training that we're doing is the whole reason for that solution training, is to get at the very question that you ask.

George Tong -- Goldman Sachs -- Analyst

Very helpful. Thank you.

Operator

Our next question is from Tim McHugh from William Blair. Please go ahead.

Trevor Romeo -- William Blair -- Analyst

Hi. Thanks. It's actually Trevor Romeo in for Tim. Thanks for taking the question. So first just wanted to clarify, are those new business growth rates you provided for January and February in constant currency or is that reported growth and how much of an impact are you expecting from currency in the fourth quarter?

Gary Burnison -- Chief Executive Officer

Yeah. So the first question it is an actual dollars, the rates that we quoted. If you go back and you look at sort of Q4 of last year, the rates that were in place at that point in time and you kind of compare that to what we did for January, we did it for February rate and it's about a 4 percentage point impact.

Trevor Romeo -- William Blair -- Analyst

Okay. Got it. Thank you. And then it seems like your revenue in Europe has held up fairly well despite kind of some of the softer economic data lately. So what is your assessment of the demand environment there, given some of that recent economic weakness?

Gary Burnison -- Chief Executive Officer

I think that's one of the strengths of the Company today is that when people say the brand Korn Ferry you kind of think of one thing, but the reality is the portfolio is way more balanced today than it was say a decade ago. So you've got a products business that is definitely going to be less cyclical, for sure. So you've got a different profile and even when you look at it, you know you look at it on a regional basis, you would draw that same conclusion. And so even like look at new business in China in February, yes, search was down a little bit, but guess what we were up overall because we had a couple other parts of the business that made up for it.

The European business I think is probably what I'm most proud of. It's an incredible business. And the UK believe it or not, I mean the UK in the quarter grew. This is again constant currency, but I think it's the most comparable way to do it. It was up 14% in the quarter. So -- which you would find very, very hard to believe. So I think it's the balanced nature of the portfolio between the consulting business, the products business, the RPO and the search business. In Europe, there was weakness in France that you would probably guess even on a total portfolio basis, but the UK has held up better than you would have thought.

Trevor Romeo -- William Blair -- Analyst

Okay. Great. Thanks. And then maybe if I could just sneak in one more, have you seen any meaningful change in turnover in the Advisory segment since the Hay Group retention program ended?

Gary Burnison -- Chief Executive Officer

No, that the business there is going to looks like the firm does today. It's completely different. So you've got an employee base that today is now 53% millennial. And so for the company overall, that's why we're on college campuses now recruiting them. And then we just had our winter start class, we put them through eight weeks of training, consistent training around the entire solution footprint of the organization. They just graduated a couple days ago. That's why we're ramping that up in a very big way because I really think that for young people coming out of graduate or undergrad they're going to be career nomads. And the challenge for any company is to identify the high potentials to develop them and that's a business opportunity actually for us.

Trevor Romeo -- William Blair -- Analyst

Okay. Thank you. That's all. Very helpful.

Operator

Our next question comes from Greg Mendez with Baird. Please go ahead.

Gregory Mendez -- Robert W. Baird & Co. -- Analyst

Hi. Thanks. This is a Greg on for Mark Marcon. Thanks for taking the question. I guess first just going back to the talent piece that you've been discussing Gary. With what you guys are accomplishing and building, how are you thinking about just the mix of the talent that you need to add? You mentioned folks coming from college, but the balance between experienced versus new, new and then given the labor environment, how tough is it to find right now you know those experienced folks?

Gary Burnison -- Chief Executive Officer

Yeah. It's definitely -- look it's tough. I mean there's no doubt about that. I think that the -- one of the things that we're very, very focused on is bringing people that have account management experience. So that has -- we've got a big focus on that today. And that's something we're going have to do. I think secondly, we have an eye on consulting talent that can sell and deliver bigger more impactful engagements. In other words, they can sell the integrated solution. So that the crossover between org strategy assessment, succession, leadership, development and more integrative business outcome solutions.

Then the final piece that we have to get right is promoting from within, because this does need to look like a professional services firm where, where you do hire lots of people off graduate or undergraduate campuses and give them the right kind of development and the right kind of opportunity to grow. And so that's not only for the consultants, it's for the entire organization, but we have to have a real orientation on that. That's why we've got all these solution training sessions, scheduled. To this day, we've got 330 of them scheduled. It's to give everybody -- to try to give everybody a lens into pivot points around clients how to broaden the conversation and all that.

Gregory Mendez -- Robert W. Baird & Co. -- Analyst

That's great. And on the profitability side, you've done a really good job of continuing to expand the margins. With a focus on marquee with the focus on product as we see that subscription model build over the coming quarters, I mean how -- assuming the economy stays where it's at? How do you think about profitability then over the next two, three years or maybe just the aspiration if we can guess product goes to 40% or 50% of Advisory for example and we see the continued strength in the -- from marquee accounts?

Gary Burnison -- Chief Executive Officer

Yeah, the way that we -- it is about the way we kind of manage our activities is we have this concept we call flow-through and we look at things on an incremental basis. And so, as an overall Company, if our margins in this quarter were 16.4%, so on the incremental revenues that we generate if we're not driving margins on those dollars at the 20%, 25% then we're not growing our profitability. So we set targets for the whole Company as well as for each individual line of business because they're all they have different profit profiles, but we manage to the flow-through and generally, rule of thumb, I would set it somewhere between 20% and 25% overall for the Company.

Gregory Mendez -- Robert W. Baird & Co. -- Analyst

Okay. Great. And then just my last question. I know you did the rebranding in a few other countries in January that continues to go on. Just any update there on that initiative?

Gary Burnison -- Chief Executive Officer

Now listen, I think it continues to and we've got a playbook that, it's like when we did the, Hay acquisition put a playbook in place in the integration. I mean, it was a lot of hard work but it went without a hitch and that's what we're seeing on the One Korn Ferry initiatives that we've got under way. I mean the legal entity rationalization which is what you just referred to. We did six countries. We're in the process of doing another seven or eight countries now and we've got it down to a science and so there's no, I'll say just continuing and again a lot of hard work, but we're not encountering any real issues that are sticking points.

Gregory Mendez -- Robert W. Baird & Co. -- Analyst

Great. Thanks a lot.

Operator

And our next question comes from Marc Riddick with Sidoti. Please go ahead.

Marc Riddick -- Sidoti -- Analyst

Hi. Good afternoon.

Gary Burnison -- Chief Executive Officer

Hi, Marc.

Marc Riddick -- Sidoti -- Analyst

Quick question, I guess maybe a pivot toward some of the things that we saw with financial services, I was wondering if you could share some thoughts there because it certainly seemed as though at least from year-over-year perspective that those were very strong words there? And then maybe if you could sort of touch a little bit on what that the -- that sort of continued as far as, I mean growth that outpaced the rest of the Company? And then I had a couple of follow-ups there?

Gary Burnison -- Chief Executive Officer

Well, when you look at the quarter, I mean clearly that too from an industry perspective year-over-year you would look to financial services and technology and both of those were actually, they were good and the Advisory, the financial service was pretty good then the Advisory, but actually both of them were driven in North America and were driven by search. So, in particular financial services, we've got an incredible commercial banking business, investment banking business, asset management, and so there's not any single large engagement. So I wouldn't point anything that was wow, this is kind of one-off or anything, but it was good growth in North American search.

Marc Riddick -- Sidoti -- Analyst

Is it fair to think about the pace of part of the business being as strong as it is to think that back of continued into the beginning of this quarter?

Gary Burnison -- Chief Executive Officer

I don't have the confirms broken down by February. I'll tell you overall for the search business it was kind of up 10%, I want to say right, in February it is right, so we don't -- I don't have it broken down by industry. Again, I think it's kind of the -- and hopefully we're building a company that is not binge or bust and that one part can kind of compensate for another, that kind of growth. I would not at all quarter-on-quarter I wouldn't kind of factor that in by any means.

Marc Riddick -- Sidoti -- Analyst

Okay. That's fair. And then I was wondering if you could touch a little bit going back to the ambition of expanding to another 200 accounts under another marquee program. I was wondering if there's sort of a similarity or differences that you would call out as to the mix of that customers and maybe what it might look like whether it's be it industry vertical or geographic or is there any type of mix differential for that next 200 accounts that we should be thinking about?

Gary Burnison -- Chief Executive Officer

Well, there is definitely a series of screens that were run against the 10,000 clients that we have and so there was a very systematic process. And so, out of the 10,000 we picked another couple hundred more where we really believe we have the opportunity for impact. There wasn't any, and it would follow, a pretty much follow the geographic distribution of the Company. There wasn't any, there wasn't something that was over weighted in terms of geography. We hope to see more out of Asia. So, I would, I have a personal bias there, but I wouldn't say there was anything over weighted from an industry perspective. No I mean there are some practicalities. I mean our life sciences business is unbelievable. I mean we're -- it's almost 17%, 18% of the company, something like that. It's got incredible penetration. I mean, we have to be mindful just how far that can go, so maybe there was going to be a little bit less in life science, but that would really be about it at a very, very high level.

Marc Riddick -- Sidoti -- Analyst

Okay. Great. And then last one from me, I was wondering if you could just sort of give us a bit of an update on CapEx, year-to-date and what you might be looking at for full year? Thanks.

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Marc, it's Bob. Our CapEx year-to-date and that includes stuff we're doing on the IT platform. What we're doing lease holds as well as some of the investors who make it into the products area, to date it's somewhere around $35 million, that I would expect on a run rate basis to continue through the course of the rest of this year. We're just kicking off our annual operating plan process for fiscal '20 right now and so we'll set our thinking around capital for next year as we go through that process. But I wouldn't expect there to be a dramatic change up or down at this point in time assuming the economy everything holds as we see it today.

Marc Riddick -- Sidoti -- Analyst

Okay. Great, I appreciate. Thank you very much.

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Yeah.

Operator

That appears, there are no further questions. Mr. Burnison, please go ahead for any closing comments.

Gary Burnison -- Chief Executive Officer

Okay. Thank you, Anna for moderating this. And for everybody on the line, look we're redefining an industry, creating a firm that possesses the right knowhow, the science, the data, and the offerings to help global organizations deliver superior performance. So we're very, very proud of what we have here and what we're building and thank you for taking the time to listen to this call and we'll talk to you next time.

Operator

Ladies and gentlemen, this conference will be available for replay for one week starting today at 5:30 P.M. Eastern Time running through the date March 14, ending at midnight. You may access the AT&T executive playback service by dialing 800-475-6701 and entering the access code of 464633. International participants may dial 320-365-3844. Additionally the replay will be available for playback at the Company's website www.kornferry.com in the Investor Relations section. That does conclude our conference for today. Thank you for your participation and you may now disconnect.

Gary Burnison -- Chief Executive Officer

Thank you, Anna.

Duration: 51 minutes

Call participants:

Gary Burnison -- Chief Executive Officer

Robert Rozek -- Chief Financial Officer, Executive Vice President and Chief Corporate Officer

Gregg Kvochak -- Investor Relations

Joseph Charles -- SunTrust -- Analyst

Kevin McVeigh -- Credit Suisse AG -- Analyst

George Tong -- Goldman Sachs -- Analyst

Trevor Romeo -- William Blair -- Analyst

Gregory Mendez -- Robert W. Baird & Co. -- Analyst

Marc Riddick -- Sidoti -- Analyst

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