Korn Ferry(KFY) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2022, Korn Ferry generated $721 million in fee revenue, a new high, representing a 33% increase at constant currency compared to the previous year [6][20] - Adjusted EBITDA grew over $31 million or 28% year-over-year to $144 million, with an adjusted EBITDA margin of 20% [23] - Adjusted fully diluted earnings per share reached $1.75, improving $0.54 or 45% year-over-year [24] Business Line Data and Key Metrics Changes - RPO and professional search fee revenue grew to $213.5 million, up 77% year-over-year, with professional search revenue increasing approximately 142% [36][39] - Consulting fee revenue reached approximately $174 million, up 13% year-over-year, with adjusted EBITDA for consulting growing to $30.7 million [33][35] - Digital fee revenue was $89.5 million, up 11% year-over-year, with adjusted EBITDA of $27.7 million and a 31% adjusted EBITDA margin [30][32] Market Data and Key Metrics Changes - The company’s marquee and regional accounts generated over $950 million in revenue last year, demonstrating the strength of these relationships [12] - New business in RPO remained exceptionally strong with $213 million of new contract awards in Q4 [22] Company Strategy and Development Direction - Korn Ferry aims to become the premier organizational consultancy, focusing on an integrated go-to-market strategy and expanding digital capabilities [5][11] - The company is investing heavily in expanding its suite of technological and digital capabilities to help clients succeed in a changing environment [10][11] - Recent acquisitions, including Patina Solutions Group, are expected to enhance the professional search segment and provide new growth opportunities [48] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing labor shortages and the need for organizations to rethink their talent strategies in the post-COVID economy [15][16] - The company expects consolidated fee revenue in Q1 FY '23 to range from $680 million to $710 million, with adjusted diluted earnings per share between $1.42 and $1.58 [47] - Management remains optimistic about future growth, citing strong demand for their services despite potential economic headwinds [50] Other Important Information - The company repurchased approximately 1.47 million shares for about $99 million in FY '22 and announced a 25% increase in its quarterly dividend [27][28] - Korn Ferry's investable cash position at the end of Q4 was approximately $605 million, indicating strong financial health [25] Q&A Session Summary Question: Monthly new business trends and consulting performance - Management indicated that the consulting business is well-positioned and that historical patterns suggest a deceleration in new business is expected [53][54] Question: Digital growth factors - Management noted that the October quarter is typically the strongest for digital growth and that new sales professionals are being added to enhance performance [56][57] Question: Cross-selling initiatives and revenue from referrals - Cross referrals accounted for nearly 30% of revenue, indicating successful integration across business lines [58][59] Question: Impact of tech industry trends on professional search - The tech business saw sequential growth, and management remains optimistic about the professional search market despite industry fluctuations [62] Question: Durability of margins in a recession - Management discussed the potential for maintaining a minimum 5% EBITDA margin and the possibility of further real estate reductions based on office usage [66][67] Question: Revenue impact from new logo wins in RPO - Management indicated that significant revenue from new RPO contracts would not be realized until Q2 and beyond due to the nature of large engagements [70][71] Question: Demographic trends affecting searches - Management acknowledged that the labor force is aging, with a notable percentage of searches driven by retirements [81] Question: Hiring plans and wage inflation - The company continues to seek talent aggressively across various segments, with wage inflation observed in both professional and executive search [85][86]