• Consolidated Fee Revenue: $674 million, down 4% year-over-year, flat sequentially.
• Adjusted EBITDA Margin: 17.4%, improved for the sixth consecutive quarter.
• Adjusted EBITDA Growth: $18 million or 19% year-over-year.
• Adjusted Diluted Earnings Per Share: $1.21, up 25% year-over-year.
• GAAP Diluted Earnings Per Share: $1.14 in the second quarter.
• Investable Cash Position: $537 million, up 16% year-over-year.
• Stock Repurchase: $33 million or about 456,000 shares in the second quarter.
• Quarterly Dividend: $0.37 per share.
• Consulting Fee Revenue: $167 million, down 6% year-over-year, flat sequentially.
• Digital Fee Revenue: $93 million, down 4% year-over-year, up 5% sequentially.
• Executive Search Fee Revenue: $206 million, up 2% year-over-year.
• Professional Search and Interim Fee Revenue: $121 million, down 12% year-over-year, flat sequentially.
• RPO Fee Revenue: $88 million, flat year-over-year and sequentially.
• New Business for Digital: $105 million, up 11% year-over-year.
• Interim Bill Rate: $140 per hour, up 11% year-over-year.
• Consulting Average Bill Rate: $419 per hour, up 1% year-over-year.

• Warning! GuruFocus has detected 5 Warning Sign with KFY.

Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Korn Ferry (NYSE:KFY) reported a sixth consecutive quarter of increased EBITDA margin, reaching over 17%.
• The company has made significant investments in productizing its intellectual property and proprietary data assets, enhancing client offerings.
• Korn Ferry (NYSE:KFY) launched a new HR integrated software platform, the Korn Ferry Talent Suite, reflecting its commitment to expanding differentiated IP and products.
• The acquisition of Trilogy International expands Korn Ferry (NYSE:KFY)'s interim professional offerings in EMEA and North America, targeting a large addressable market.
• Korn Ferry (NYSE:KFY) has maintained strong bill rates and improved employee productivity, with fee revenue per employee now 35% higher than pre-pandemic levels.

Negative Points

• Consolidated fee revenue in the second quarter was down 4% year-over-year, indicating challenges in maintaining growth.
• Interim fee revenue decreased by approximately 17% year-over-year, reflecting broader industry trends and market challenges.
• Consulting fee revenue was down 6% year-over-year, with slower delivery of backlog assignments impacting results.
• The digital segment saw a 4% year-over-year decline in fee revenue, despite strong new business growth.
• The company anticipates a seasonal decline in the third quarter due to fewer working days, impacting revenue expectations.

Q & A Highlights

Q: Can you provide more color on your expectations for revenue trends by segment in the third quarter, and how much revenue are you assuming from the Trilogy acquisition? A: Gary Burnison, CEO: We expect a seasonal decline in the third quarter due to fewer working days, impacting revenue by $30 million to $40 million. Trilogy is expected to contribute around $14 million to $15 million in the quarter.

Q: What is the opportunity for the interim business in Europe with the Trilogy acquisition, given the current challenging revenue trend? A: Gary Burnison, CEO: Despite the current cycle, we believe there's no structural change in the interim market. Trilogy provides a foundation to tap into the large EMEA market, and we are confident in its long-term potential.

Q: How do you see the demand environment for your digital business, given the recent year-over-year revenue decline? A: Gary Burnison, CEO: The decline is due to a shift towards subscription agreements. We expect positive growth as we complete our integrated technology platform, the Korn Ferry Talent Suite, which will enhance client access to our products.

Q: Can you elaborate on the impact of larger consulting contracts on revenue and when you expect this to normalize? A: Gary Burnison, CEO: Larger contracts take longer to implement, impacting revenue. We expect normalization in a few quarters as we adjust to the new mix and improve our leverage model.

Q: How has the Korn Ferry brand impacted your interim business, and what are the sources of margin improvement? A: Gary Burnison, CEO: The Korn Ferry brand has significantly enhanced client engagement and cross-referrals. Margin improvements are driven by strategic decisions made over a year ago, focusing on profitability and resource allocation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.