Korn Ferry(US:KFY)2025-03-11 19:20Financial Performance - Q3 FY'25 fee revenue was $668.7 million, flat year over year [106] - Net income attributable to Korn Ferry was $58.4 million, with a net income margin of 8.7%, a 10bps decrease compared to the year-ago quarter [106] - Adjusted EBITDA for Q3 FY'25 was $114.5 million, with an Adjusted EBITDA margin of 17.1%, a 190bps increase compared to the year-ago quarter [106] - Diluted earnings per share for Q3 FY'25 was $1.10 [106] - Total fee revenue for the three months ended January 31, 2025, was $668.729 million, a slight increase from $668.679 million in the same period of 2024 [109] - Net income attributable to Korn Ferry for the three months ended January 31, 2025, was $58.414 million, representing a net income margin of 8.7%, compared to $59.071 million and 8.8% in the prior year [109] - Adjusted EBITDA for the three months ended January 31, 2025, was $114.489 million, with an adjusted EBITDA margin of 17.1%, up from $101.704 million and 15.2% in the same period of 2024 [110] - Consolidated net income for the nine months ended January 31, 2025, was $181.8 million, representing a margin of 9.0%, compared to $104.0 million and a margin of 5.0% for the same period in 2024 [1] - Net income attributable to Korn Ferry increased by $77.8 million, or 75%, to $181.8 million in the nine months ended January 31, 2025 [186] Revenue Breakdown - RPO fee revenue increased by 4% year over year, with new business in Q3 FY'25 totaling $210 million, of which 64% was from new client wins and 36% from renewals/extensions [106] - Consulting fee revenue for the three months ended January 31, 2025, was $158.704 million, accounting for 23.7% of total fee revenue, down from $166.947 million and 25.0% in the same period of 2024 [109] - Digital fee revenue for the three months ended January 31, 2025, was $90.823 million, representing 13.6% of total fee revenue, compared to $90.317 million and 13.5% in the prior year [109] - Executive Search revenue for North America increased to $128.264 million, representing 19.2% of total fee revenue for the three months ended January 31, 2025, compared to $121.449 million and 18.2% in the same period of 2024 [109] - Professional Search & Interim reported fee revenue of $372.8 million, a decrease of $38.7 million, or 9%, in the nine months ended January 31, 2025 compared to $411.5 million in the year-ago period [161] - RPO reported fee revenue of $260.8 million, a decrease of $3.9 million, or 1%, in the nine months ended January 31, 2025 compared to $264.7 million in the year-ago period [162] - Digital reported fee revenue of $271.9 million, a decrease of $3.5 million, or 1%, in the nine months ended January 31, 2025 compared to $275.4 million in the year-ago period [156] Expenses and Costs - Compensation and benefits expense decreased by $30.9 million, or 7%, to $425.3 million in the three months ended January 31, 2025, primarily due to a decrease in deferred compensation expense [7] - General and administrative expenses increased by $2.6 million, or 4%, to $65.3 million in the three months ended January 31, 2025, primarily due to impairment charges associated with the reduction of the company's real estate footprint [8] - Cost of services expense increased by $2.2 million, or 3%, to $78.0 million in the three months ended January 31, 2025 compared to $75.8 million in the year-ago quarter, with Professional Search & Interim accounting for $2.5 million of the increase [137] - General and administrative expenses decreased by $4.4 million, or 2%, to $189.9 million in the nine months ended January 31, 2025 [173] - Depreciation and amortization expenses increased by $1.7 million, or 3%, to $59.8 million in the nine months ended January 31, 2025 [184] Acquisitions and Strategic Initiatives - The acquisition of Trilogy was completed on November 1, 2024, for $44.4 million, expected to enhance Korn Ferry's Professional Search & Interim business [103] - The company completed the acquisition of Trilogy for $44.4 million on November 1, 2024, enhancing its Interim business segment [201] - Korn Ferry's integrated go-to-market strategy focuses on approximately 350 marquee and regional accounts, driving top-line synergies and double-digit fee revenue growth rates over the past twenty years [100] Market and Technology Outlook - Korn Ferry anticipates that advancements in technologies like generative AI will create opportunities for growth and relevance in the market [99] - The company is leveraging unique data sets and intellectual property to differentiate its service offerings from competitors [98] Cash and Investments - Cash and cash equivalents and marketable securities totaled $1,061.0 million as of January 31, 2025, down from $1,195.4 million as of April 30, 2024 [207] - Cash used in investing activities increased to $112.7 million for the nine months ended January 31, 2025, primarily due to the acquisition of Trilogy [210] - Cash used in financing activities was $146.4 million for the nine months ended January 31, 2025, compared to $75.3 million in the prior year, driven by higher stock repurchases and dividends paid [211] Tax and Interest - Income tax provision was $22.8 million in the three months ended January 31, 2025, with an effective tax rate of 27.8% compared to $9.0 million and an effective rate of 13.1% in the year-ago quarter [152] - The provision for income tax was $70.0 million with an effective tax rate of 27.4% for the nine months ended January 31, 2025, compared to $29.8 million and 21.8% in the prior year [198] - Interest expense, net decreased to $15.0 million for the nine months ended January 31, 2025, from $16.3 million in the prior year, due to increased interest income [197] Foreign Exchange and Risk Management - During the nine months ended January 31, 2025, foreign currency losses amounted to $1.9 million, a decrease from $2.2 million in the same period of 2024, showing an improvement of approximately 13.6% [218] - A 10% fluctuation in the value of major global currencies could result in a foreign exchange gain or loss of $15.9 million based on the ten largest exposure balances as of January 31, 2025 [219] - As of January 31, 2025, there were no amounts outstanding under the Credit Facilities, indicating effective management of credit risk [220] - The interest rate applicable to loans under the Amended Credit Agreement may fluctuate between Term SOFR plus 1.125% to 2.00% per annum, depending on the consolidated net leverage ratio [220] - The company has sought to minimize interest rate risk by adjusting the borrowed funds crediting rate, which increases the cash surrender value on COLI contracts [221] Accounting and Reporting - There have been no material changes in critical accounting policies since the end of fiscal 2024, ensuring consistency in financial reporting [215] - The company has no off-balance sheet arrangements or material changes in contractual obligations as of January 31, 2025, maintaining a stable financial position [214]