Korn Ferry’s Earnings Call: Strong Growth Amid Challenges

Korn Ferry ((KFY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Korn Ferry’s recent earnings call painted a picture of robust financial performance amid challenging economic conditions. The company reported growth in fee revenue, executive search, and digital business, underscoring its strategic focus on large-scale client engagements and digital solutions. However, challenges persist in consulting growth and the broader economic climate.

Record Fee Revenue Growth

Korn Ferry achieved a 4% year-over-year increase in fee revenue at constant currency, showcasing the resilience of its business strategy in a tough economic environment. This growth highlights the company’s ability to adapt and thrive despite external pressures.

Executive Search Growth

The executive search segment saw a 15% increase year over year at constant currency, marking the fourth consecutive quarter of growth. This trend indicates a strong demand for leadership talent, driven by demographic shifts and evolving leadership needs.

Significant Digital Business Growth

Digital subscription and license new business grew to 40% of the total digital new business, up from 37% in the previous year. This growth adds stability and predictability to Korn Ferry’s fee revenue base, reflecting the company’s successful digital transformation efforts.

Strong Adjusted EBITDA and Margin Increase

Korn Ferry reported an 8% growth in adjusted EBITDA, reaching $121 million, with a margin increase of 70 basis points to 17%. This improvement underscores the company’s operational efficiency and strategic focus on profitability.

Robust Marquee and Diamond Accounts

Marquee and Diamond accounts contributed 39% to consolidated fee revenue, highlighting Korn Ferry’s success with large, repeatable clients. This segment remains a critical component of the company’s revenue strategy.

Continued Dividend Increases

Reflecting its strong commitment to shareholder value, Korn Ferry has increased its dividend six times over the past five years. This consistent dividend growth signals confidence in the company’s financial health and future prospects.

New Operating Metric for Future Revenue

The introduction of the ‘Estimated Remaining Fees Under Existing Contracts’ metric, totaling approximately $1.7 billion, up 12% year over year, demonstrates Korn Ferry’s effective diversification strategy and provides a clearer picture of future revenue streams.

Flat Growth in Consulting

Despite overall positive performance, consulting new business remained flat year over year. This stagnation reflects the challenges of generating new engagements in a cost-cutting environment, posing a potential hurdle for future growth.

Cost of Living Crisis Impact

The cost of living crisis in the U.S. poses a significant challenge, affecting consumer purchasing power and pressuring companies’ pricing strategies. Korn Ferry is navigating these challenges while maintaining its growth trajectory.

Labor Market Challenges

A tight labor market and low employee turnover are creating growth challenges for Korn Ferry. The company noted an all-time low turnover, which, while positive, also constrains economic growth opportunities.

Forward-Looking Guidance

Looking ahead, Korn Ferry expects first-quarter fiscal 2026 fee revenue to range between $675 million and $695 million, with an adjusted EBITDA margin of 16.8% to 17.2%, and adjusted diluted EPS of $1.18 to $1.26. The company plans to leverage its extensive IP and data analytics to drive client performance and sustain its growth trajectory.

In summary, Korn Ferry’s earnings call highlighted a strong financial performance with strategic growth in key areas, despite facing economic challenges. The company’s focus on digital solutions and large-scale client engagements continues to pay off, positioning it well for future success.