KFY
#<UNK>, this is <UNK>.
The RPO is growing a little bit faster than the search.
One of the things we saw in the quarter was the projects component of search dropped a little bit than what we have been experiencing.
But the RPO is growing upwards of probably 15%, 20%, single search is probably in 10% to 15% range.
I think regardless of whether the economy, we would be investing.
We absolutely have to create an organization that looks to scale, that looks to have impact in the world, that looks to be $1 billion, $2 billion bigger.
We have to have an organization that can grow from within, where we are developing people along the way.
In the meantime, we are also ---+ we're not only laying the plans and the groundwork for that kind of core mobility in talent development, we have to go to the outside.
And so we have been very aggressive in bringing in talent across the entire business, that can help us broaden the conversation, that can help us elevate the conversation with clients.
That is something we would be doing, really regardless of the economic climate right now, given where we are with our business.
Look, we've been stepping on the accelerator.
You can see that we're paying as you go.
We're not going to bring the plane down to 18,000 feet.
So, I don't really ---+ I don't see that.
Obviously, we're doing this within a band of reason, right, and we'll continue to run that game plan.
I think, <UNK>, if you look at our guidance for the fourth quarter, in order to get to those numbers, you won't see any significant deterioration in the margins.
Animal spirits ---+ (laughter) are more evident.
That's a great line.
Well, look, you've got certainly, with an equity market that's at an all-time high, you have CEO confidence that probably goes hand-in-hand with that.
But, I think there has been more intent, but less action.
So I can't say that the CEO confidence has really translated into something we can put our fingers on.
With multinational companies, it continues to be ---+ what we've seen for example, in China, is there's a big desire on the part of that economy to go to privately owned and locally-based companies.
I think multinationals are struggling with that.
I think that people are wondering about the vote in France and what that means.
And we still haven't seen, really, anything with regard to Brexit.
And so those are the three or four things that are on CEOs' minds.
And Toby, this is <UNK>.
I would say if you look at the new business activity in North America search, in the quarter, November was down year-over-year, December was down year-over-year, and January came on back for us, to the point where we ended the quarter flat year-over-year.
So we saw a really strong January, and February is strong for us for as well.
No, look, when you really look at our Hay Group business, it's essentially flat.
So that's the reality.
But the other reality is we're only 14 months into this and we had to go through and we've combined 100 offices, we've combined systems and I could go on and on.
We ask a lot of talented people to leave the Company.
So there's a phase of this that's really tough stuff.
But when I speak to 2 times, that's certainly not next quarter, but that kind of opportunity is certainly there.
And that's how we're trying to orient this firm and develop talent and bring in talent and go to market and all that.
So, no, we're not at all on that kind of pace, but that's where we have to be headed.
Yes, we are.
We are bringing in consultants in a pretty broad fashion across the three business lines.
We certainly have a greater interest in financial services and technology on the search side, given our footprint.
As you know, our industrial is spectacular, it's 30% of the firm.
In the Hay Group business, we are bringing people in in essentially three to five big areas.
One would be people that can do org design and strategy execution.
That would be number one.
Number two would be people who can do leadership development.
Number three would be people that can do rewards and benefits.
So, those three areas in our Hay Group consulting business are certainly areas of focus for us.
And again, we have to over time, shift the orientation of this Company so that we're not in the emergency room business, but we're in the business outcome business.
So we have to move the focus from geographies and lines of business to solutions in business outcomes, and so we have to bring in people that have that solution capability.
We have to bring in people that have account management kinds of skills.
We have to bring in people that have solution architect.
We have to bring in people that can compete in the boardroom and not just compete in the sense of Futurestep or search, but in the sense of enterprise-wide solutions.
Sure.
Let me take the first question on the cash flow.
It will normalize, Toby, as we exit this year.
We've got all of the integration, structuring type activities will essentially be behind us.
We have three more offices to deal with in terms of the co-location.
Those will happen ---+ two will happen in Q1 next year, one will happen in Q2.
And so that will be it.
But the one will be more of a non-cash charge.
So we would expect our conversion ratio to be somewhere in the 70% to 75% of EBITDA.
The tax rate, right now we're looking at an effective rate for this year of about 28%.
We're starting to see ---+ as we talked when we first did the Hay Group transaction, bringing so much more of our operations outside of the US where the rates are lower that we would see some downward pressure on our rate, and I think you're seeing that in the rate that we have in place today.
I'm sorry, <UNK> remind me of CapEx.
CapEx, I would think that that would normalize down to a number that's in the $21 million to $23 million range.
Yes, I would think about the investment exactly as we have operated the business, <UNK>, over the last several years.
There is nothing that is, oh wow, these guys are committing to things.
That is not ---+ we are staying within the operating principles and the commitments that we've made to shareholders.
So we're not going outside the operating boundaries.
I think we're being pretty smart.
Those businesses have more leverage than, say, a search business does.
Which is one of the interesting things about getting into these other markets.
So, there are two kinds of people ---+ let me just step back, <UNK>.
One thing that is interesting, since you when I first met many years ago, today about 55% of the Company is millennials, which wasn't the case when we met.
So that's changed dramatically and it looks like the workforce looks like the demographic of say a big four, consulting firm look.
So you've got, in terms of the profile of the people it will be two camps.
There will be those that are younger in their career, that you would classically think of, whether it was investment banking or consulting, that are more professionals, that are early stage in their career.
We're bringing those types of people on and as importantly, we are bringing on what would be more senior partner types of profiles that have probably been in business for 20 years.
They probably are coming out of some global consulting firm generally, they probably have advanced degrees.
That would be the profile.
Well, I would certainly think that ---+ look, we only guide out a quarter.
So the fourth quarter should definitely be better than the third quarter.
There's no question about that, and that growth rate should look pretty good.
What's happening here is that for some of these, they're big, big massive projects, sometimes companies delay, they don't get their act together in terms of how fast they want to implement things.
The growth rate in that business, excluding say the last quarter or two, that was an 18% to 20% number for like 12 quarters.
I don't think that's reasonable, <UNK>, to think about, I just think that was pretty special.
But I would think that what you'll see sequentially in the fourth quarter should be much better than what you saw sequentially between the second quarter and third quarter, which actually went down.
No, no, no.
I would say it's still primarily new logos and companies that have not done RPO before, <UNK>.
There's some where they're taking it out to bid, but I think those are the exception.
Yes, that expires in December of 2018.
Okay David, was that it.
Okay.
Well listen, I want to thank everybody for joining us.
I am confident that we are establishing a new category for people and organizational advisory and redefining Korn Ferry as the preeminent global leader in that white space.
So, thanks for your time and we will talk to you next time.
Bye-bye.
