Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced first quarter fee revenue of $699.2 million. In addition, first quarter diluted earnings per share was $0.89 and adjusted diluted earnings per share was $0.99.
“During the fiscal first quarter we generated $699 million in fee revenue, flat year-over-year. Despite a more challenging market, I’m very proud of our organization and what we have achieved, particularly as earnings and profitability held steady sequentially as we delivered $0.89 of diluted earning per share and $0.99 of adjusted diluted earnings per share and $96 million of Adjusted EBITDA, with a 13.7% margin,” said Gary D. Burnison, CEO, Korn Ferry.
“Our diversification strategy continues to positively influence our results,” added Burnison. “Our Consulting and Digital businesses have never been more meaningful—especially in tomorrow’s economy where there will be continued demographic and skill shifts across much of the world. We’re responding with expertise and solutions focused on interim talent, learning and professional development, engagement, retention, culture, assessments, and organizational design, as well as total rewards. We are creating more ways to deepen relationships with our clients.”
Selected Financial Results | |||||||
(dollars in millions, except per share amounts) (a) | |||||||
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Fee revenue | $ | 699.2 | $ | 695.9 | |||
Total revenue | $ | 706.3 | $ | 703.1 | |||
Operating income | $ | 56.8 | $ | 111.6 | |||
Operating margin | 8.1 | % | 16.0 | % | |||
Net income attributable to Korn Ferry | $ | 46.6 | $ | 77.2 | |||
Basic earnings per share | $ | 0.89 | $ | 1.46 | |||
Diluted earnings per share | $ | 0.89 | $ | 1.45 | |||
Adjusted Results (b): | First Quarter | ||||||
FY’24 | FY’23 | ||||||
Adjusted EBITDA | $ | 95.7 | $ | 132.2 | |||
Adjusted EBITDA margin | 13.7 | % | 19.0 | % | |||
Adjusted net income attributable to Korn Ferry | $ | 51.5 | $ | 80.0 | |||
Adjusted basic earnings per share | $ | 0.99 | $ | 1.51 | |||
Adjusted diluted earnings per share | $ | 0.99 | $ | 1.50 | |||
| ______________________ | ||
(a) | Numbers may not total due to rounding. | |
(b) | Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and restructuring charges, net when applicable. Adjusted results on a consolidated basis are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations): | |
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Integration/acquisition costs | $ | 4.1 | $ | 3.6 | |||
Impairment of fixed assets | $ | 0.1 | $ | — | |||
Impairment of right of use assets | $ | 1.6 | $ | — | |||
Restructuring charges, net | $ | 0.4 | $ | — | |||
The Company reported fee revenue in Q1 FY'24 of $699.2 million, essentially flat at actual and constant currency when compared to Q1 FY'23. Fee revenue remained constant primarily due to an increase in the Interim portion of Professional Search & Interim, resulting from the acquisitions of Infinity Consulting Solutions which was effective August 1, 2022 and Salo which was effective February 1, 2023 (collectively, the “acquisitions”). This was partially offset by decreases in our permanent placement talent acquisition offerings, which includes Executive Search, Permanent Placement and RPO, due to a decline in demand driven by global economic and other factors.
Operating margin was 8.1% in Q1 FY'24, compared to 16.0% in the year-ago quarter. Adjusted EBITDA margin was 13.7% in Q1 FY'24, compared to 19.0%, in the year-ago quarter. Net income attributable to Korn Ferry was $46.6 million in Q1 FY'24, compared to $77.2 million in Q1 FY'23 and Adjusted EBITDA was $95.7 million in Q1 FY'24 compared to $132.2 million in Q1 FY'23.
Operating income decreased primarily due to a higher cost of services expense associated with the recently acquired Interim businesses, and an increase in compensation and benefits expense. Net income attributable to Korn Ferry decreased due to the same factors discussed above and higher other income, net partially offset by lower income tax provision.
Adjusted EBITDA decreased due to the same factors discussed above (except other income, net and income tax provision).
Results by Line of Business
Selected Consulting Data | |||||||
(dollars in millions) (a) | |||||||
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Fee revenue | $ | 168.1 | $ | 166.5 | |||
Total revenue | $ | 170.8 | $ | 168.7 | |||
Ending number of consultants and execution staff (b) | 1,855 | 1,879 | |||||
Hours worked in thousands (c) | 427 | 459 | |||||
Average bill rate (d) | $ | 394 | $ | 363 | |||
Adjusted Results (e): | First Quarter | ||||||
FY’24 | FY’23 | ||||||
Adjusted EBITDA | $ | 25.2 | $ | 29.6 | |||
Adjusted EBITDA margin | 15.0 | % | 17.7 | % | |||
______________________ | ||
(a) | Numbers may not total due to rounding. | |
(b) | Represents number of employees originating, delivering and executing consulting services. | |
(c) | The number of hours worked by consultant and execution staff during the period. | |
(d) | The amount of fee revenue divided by the number of hours worked by consultants and execution staff. | |
(e) | Adjusted results exclude the following: | |
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Impairment of right of use assets | $ | 0.6 | $ | — | |||
Restructuring charges, net | $ | 0.2 | $ | — | |||
Fee revenue was $168.1 million in Q1 FY'24 compared to $166.5 million in Q1 FY'23, essentially flat at actual and constant currency. The slight increase in Consulting fee revenue was driven by growth in assessment & succession.
Adjusted EBITDA was $25.2 million in Q1 FY'24 with an Adjusted EBITDA margin of 15.0% compared to Adjusted EBITDA of $29.6 million with an associated margin of 17.7%, respectively, in the year-ago quarter. This decrease in Adjusted EBITDA resulted primarily from an increase in compensation and benefits expense, partially offset by a slight increase in Consulting fee revenue and a decrease in cost of services expense.
Selected Digital Data | |||||||
(dollars in millions) (a) | |||||||
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Fee revenue | $ | 88.0 | $ | 83.8 | |||
Total revenue | $ | 88.0 | $ | 83.8 | |||
Ending number of consultants | 336 | 331 | |||||
Subscription & License fee revenue | $ | 32.5 | $ | 29.6 | |||
Adjusted Results: | First Quarter | ||||||
FY’24 | FY’23 | ||||||
Adjusted EBITDA | $ | 24.3 | $ | 24.2 | |||
Adjusted EBITDA margin | 27.6 | % | 28.9 | % | |||
______________________ | ||
(a) | Numbers may not total due to rounding. | |
Fee revenue was $88.0 million in Q1 FY'24 compared to $83.8 million in Q1 FY'23, an increase of $4.2 million or 5% (up 5% on a constant currency basis). The increase was primarily due to growth in subscription-based fee revenue.
Adjusted EBITDA was $24.3 million in Q1 FY'24 with an Adjusted EBITDA margin of 27.6% compared to $24.2 million and 28.9%, respectively, in the year-ago quarter. Adjusted EBITDA remained relatively flat compared to the year-ago period.
Selected Executive Search Data(a) | |||||||
(dollars in millions) (b) | |||||||
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Fee revenue | $ | 205.2 | $ | 232.8 | |||
Total revenue | $ | 207.6 | $ | 234.5 | |||
Ending number of consultants | 612 | 619 | |||||
Average number of consultants | 607 | 603 | |||||
Engagements billed | 3,633 | 4,133 | |||||
New engagements (c) | 1,503 | 1,682 | |||||
Adjusted Results (d): | First Quarter | ||||||
FY’24 | FY’23 | ||||||
Adjusted EBITDA | $ | 42.5 | $ | 62.2 | |||
Adjusted EBITDA margin | 20.7 | % | 26.7 | % | |||
______________________ | ||
(a) | Executive Search is the sum of the individual Executive Search Reporting Segments described in our annual and quarterly reporting on Forms 10-K and 10-Q and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base. | |
(b) | Numbers may not total due to rounding. | |
(c) | Represents new engagements opened in the respective period. | |
(d) | Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that adjust for the following: | |
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Impairment of fixed assets | $ | 0.1 | $ | — | |||
Impairment of right of use assets | $ | 0.9 | $ | — | |||
Restructuring charges, net | $ | 0.2 | $ | — | |||
Fee revenue was $205.2 million and $232.8 million in Q1 FY'24 and Q1 FY'23, respectively, a year-over-year decrease of 12% at both actual and constant currency. The decrease in fee revenue was primarily driven by a decline in demand for executive searches as a result of clients being affected by the uncertain economic environment.
Adjusted EBITDA was $42.5 million in Q1 FY'24 with an Adjusted EBITDA margin of 20.7% compared to Adjusted EBITDA of $62.2 million and an Adjusted EBITDA margin of 26.7%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was primarily due to the decrease in fee revenue discussed above, partially offset by a lower performance-related bonus expense.
Selected Professional Search & Interim Data | |||||||
(dollars in millions) (a) | |||||||
First Quarter | |||||||
FY’24 | FY’23 | ||||||
Fee revenue | $ | 142.2 | $ | 98.9 | |||
Total revenue | $ | 143.1 | $ | 100.1 | |||
Permanent Placement: | |||||||
Fee revenue | $ | 58.3 | $ | 74.1 | |||
Engagements billed (b) | 2,209 | 2,739 | |||||
New engagements (c) | 1,235 | 1,846 | |||||
Ending number of consultants (d) | 405 | 497 | |||||
Interim: | |||||||
Fee revenue | $ | 83.9 | $ | 24.8 | |||
Average bill rate (e) | $ | 122 | $ | 122 | |||
Average weekly billable consultants (f) | 1,485 | 463 | |||||
Adjusted Results (g): | First Quarter | ||||||
FY’24 | FY’23 | ||||||
Adjusted EBITDA | $ | 24.3 | $ | 29.2 | |||
Adjusted EBITDA margin | 17.1 | % | 29.5 | % | |||
_____________________ | ||
(a) | Numbers may not total due to rounding. | |
(b) | Represents engagements billed for professional search. | |
(c) | Represents new engagements opened for professional search in the respective period. | |
(d) | Represents number of employees originating professional search. | |
(e) | Fee revenue from interim divided by the number of hours worked by consultants. | |
