Korn Ferry (NYSE:KFY) Q1 2021 Earnings Conference Call - Final Transcript
Sep 03, 2020 • 12:00 pm ET
Toby, after our last earnings call, we actually put a slide into the earnings call presentation that's posted that shows the new business by each line of business. That's on Page 7.
Great. No, that's helpful. And as a follow-up, could you provide some perspectives around how you expect the trends that you're seeing in new business to translate into revenue or fee performance? It sounds like clients aren't canceling, so retention rates aren't changing. So it's really the pace of new business that's ultimately going to drive fee revenue performance. It sounds like it's ultimately delays rather than cancellations. So could you provide some perspectives on how you expect the translation of new business into fee revenue?
Gary D. Burnison
Yeah. We've seen on the -- the search businesses are rather straightforward. That's going to be -- that translates to revenue generally over 90 days. And when you look at the Consulting and Digital business, you'd find that essentially, 50% of it gets recognized in, say, within 12 months, and then the balance is going to be over the next 13 to 35 months. And the RPO business is not materially different than that. And what I would say, there's been a couple of other trends too. We've certainly shift -- seen a shift towards bigger engagements. That was a strategic pillar of ours going back a couple of years. We're now really starting to see it more impactful engagements. That's something that is coming through.
And I think the other thing that Bob can maybe allude on is when you look at the Digital business, we've all -- we've talked for a while about moving that business to a subscription-based model. And that Digital business, we obviously made a push towards digitizing that. But the reality is when this pandemic hit -- still a lot of the business was delivered in classroom. And we have gone -- we are all over that, moving that to a digital offering. And one of the things is to increase the amount of subscription-based business from Digital. So Bob, do you want to comment on that?
Yeah. So George, just so you know, the subscription business, I'll give it to you over the last three quarters, including Q1, was right around $21 million. So that demonstrates the durability of that revenue in the current environment that we're operating in. The piece of that, I think, is better news is if you look at the new business for our subscription offerings, it was about $23.5 million in Q1. That's up 42% kind of year-over-year and even quarter sequential, it's up about 16%. So again, as Gary indicated, part of the strategy in the diversification is also creating more durable revenue streams, and we're starting to see that take shape. Even when we talked about the larger engagements, when you stratify the -- whether it's Digital or Consulting into the large engagements, for Digital, we consider that over $250, for Consulting, we consider that over $500. We're