Bob Rozek: Yes. And then in terms of the guidance, we executed the plan that we talked about on the last earnings call. We spent between taking out positions and reducing our real estate footprint. We spent approximately $51 million we’re going to get somewhere in the $50 million to $55 million range for saves. But what we’re also forecasting for the fourth quarter is continued moderation in what I would call the exec search in the professional search perm placement business. And that, as you know, is high yielding in terms of the EBITDA margin for us. And so as that continues to decline, that will consume some of the savings. And we’re also reinvesting back into the business in terms of fee earners and delivery capacity to meet our client demand as well as we’re going to continue to accelerate the investments that we made in — that we’re making into Digital.
And so those will net out. And then as the perm placement portion of the business troughs out and then starts to recover, we’ll see the margins start to come pop up and come back again.
Jasper Bibb: That makes sense. And then on the search consultant productivity, down to $1.4 million this quarter, pretty much in line with pre-COVID levels. If demand continues to soften in that segment, how should we think about managing to a productivity threshold versus keeping capacity for an eventual cyclical rebound?
Gary Burnison: Well, right now, we’re positioned to maintain capacity. And when you look at our consulting business, our digital business and in the search businesses where our view is to hold capacity. And so it really depends on what happens here with the economy. But the $1.4 million, obviously, if demand falls, that will likely decline. But my orientation right now is to maintain capacity.
Jasper Bibb: Got it. Last one for me. I was hoping you could speak to your long-term EBITDA margin targets. I still think those are feasible and how should we think about the increased interim exposure via your recent acquisitions, maybe changing the long-term gross margin profile of the business as part of that.
Gary Burnison: Yes, it’s a great question. I think it — number one, look, this was a business that didn’t exist. And so during the pandemic, we looked around and said, how is the world going to change and professionals wanting more flexibility in their life. And with an aging baby boomer population, maybe people that didn’t want to work full time but still want to contribute in meaningful ways to society. And so we very purposefully said let’s go into this market. And we’ve taken that now from basically 0 to a run rate now of about $320 million, $330 million in the span of 18 months. This will be, for sure, a $1 billion business for us. There’s no question about it. Now as we do that and we address these bigger markets that I think have proven over time to be less cyclical than, say, the legacy business of Executive Search, the margin profile is going to change.
There’s no doubt about it. And I can have Bob — Bob, you can describe the quantitative impact of that. But if we get this business to $1 billion which we think we can and everything else were the same which is not going to stay the same. But if it did, you’re probably talking 200 to 300 basis points I would think of a margin shift. But we just — we really are excited about this. We are seeing incredible levels of cross referrals of ways to create deeper meaning, deeper impact with clients. And so I do think that overall, much like the strategy, when I started, I mean, this is my 84th earnings call. And I’m going back to day 1, the entire business was essentially executive search and now executive search today is 31% of the company. And I think what we’ve demonstrated now is we’ve — we’re building a platform that has more client impact that changes more people’s lives that enables people and organizations to be more of that.
And it also provides a much more stable company for shareholders. And you can just see it in the numbers. And you can see it in the new business over the last several months in terms of what’s happening, barring some sort of economic disaster. But Bob, maybe you could comment on the quantitative aspect of the margin.
Bob Rozek: Sure. So Jasper, when we buy these businesses, they generally come with about, I would say, around 8% EBITDA margin. And our goal as we go through the integration, as you know, we’ve got — have built a company that’s kind of plug and play. So we’re able to get cost synergies fairly easily just by plugging the acquired companies into our network. And our goal is to take those margins up to the 12% to 15% range over time. And as Gary alluded to, the trade-off in — for margin for us is the opportunity for growth and the stability that those revenue streams bring to the organization.
Operator: Your next question comes from the line of Marc Riddick from Sidoti.
Marc Riddick: So I was wondering if you could talk a little bit about some of the — if there were any changes in particular demand drivers and I’m specifically talking about particular trends that you’ve noticed maybe over the last few months that have sort of changed or shifted, whether it’s from a standpoint of some of the things that were driving demand over the last couple of years. Are there any particular areas that have sort of picked up that maybe we haven’t been talking about or thinking about or maybe some things that have waned a bit beyond recessionary impact?
Gary Burnison: Well, industrial has certainly been a bright spot and that’s been a change. When I look year-over-year, industrial is up about 10%. So that’s certainly — that’s good, considering it’s almost 30% of the company’s portfolio. Clearly, going back to August of last summer, at the end of last summer, with the move by central banks and particularly the Fed to become more hawkish, companies are clearly looking at their cost. And so there was this massive upswing after the pandemic in terms of hiring. And as you would expect, that is moderated and that’s exactly what we’ve seen. So we’ve seen moderation in the perm parts of our recruiting business. Wage growth is — it’s still at elevated levels. It’s probably 6%, 7%.
People that are jumping jobs are not getting what they were getting coming out of the pandemic. It’s more like a 15% uptick in wages. And so that clearly has moderated. And I would expect that, that moderation is going to continue on the perm side, particularly given the comments yesterday or the day before by the Fed. The RPO business is like it always has, I mean, it’s held up incredibly well. And yes, we’ve seen some degradation of the base business, the kind of a nominal amount. Going back to last fall, it was around the technology sector. But we’ve also picked up some just enormous wins, both in the industrial area and health care. And then you look at the consulting and digital business in the quarter, on a constant currency basis, Consulting was up 9%, new business and digital was up 6%.
So it’s basically — I mean, it’s kind of — it’s really playing out as the strategy was designed. I mean the strategy is absolutely working.
Marc Riddick: That’s really helpful. And then I was sort of curious about — it seems as though we were starting to see a bit of a pickup in business travel and then maybe starting to see a little bit more face-to-face activity and being in front of clients again. But I would say it seems as though it’s kind of — now that might be the recessionary impact but that’s kind of been back and forth a little bit. I was wondering if you maybe have any thoughts as to maybe what you’re seeing? If clients are doing the face-to-face with you a little bit more? Do you see more of a pickup in travel entertainment going forward? Or how should we be thinking about that?
