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Korn Ferry(KFY) - 2025 Q2 - Earnings Call Transcript
KFYKorn Ferry(KFY)2024-12-06 08:41
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Financial Data and Key Metrics Changes - The company reported consolidated fee revenue of approximately 674millionforQ2FY2025,whichisdown4674 million for Q2 FY 2025, which is down 4% year-over-year but flat sequentially [18] - Adjusted EBITDA margin improved for the sixth consecutive quarter to 17.4%, up 340 basis points year-over-year [14][23] - Adjusted fully diluted earnings per share increased to 1.21, up 25% year-over-year [23] Business Line Data and Key Metrics Changes - Consulting fee revenue decreased by 6% year-over-year and remained flat sequentially at 167million[26]−Digitalfeerevenuewas167 million [26] - Digital fee revenue was 93 million, down 4% year-over-year but up 5% sequentially, with digital subscription and license fee revenue growing by 7% year-over-year [25] - Executive search fee revenue grew by 1% year-over-year to 206million,whileinterimfeerevenuedecreasedbyapproximately17206 million, while interim fee revenue decreased by approximately 17% year-over-year [19][30] Market Data and Key Metrics Changes - The interim market demand remained challenging, with interim fee revenue down approximately 17% year-over-year [21] - New business growth for Executive search and digital was strong, up 4% and 11% year-over-year respectively [15][22] - Recruitment process outsourcing (RPO) saw 101 million in new business, including 41millionfromrenewalsandextensions[23]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusingondiversifyingitsbusinessandinvestinginproprietarydataassets,includingthelaunchoftheKornFerryTalentSuite[9]−TheacquisitionofTrilogyInternationalaimstoexpandinterimprofessionalofferingsinEMEAandNorthAmerica[10]−Thecompanyiscommittedtomaintainingprofitabilitywhileinvestinginconsultantadditionsandcapitalinvestmentsforfuturegrowth[17]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinmaintainingcurrentprofitabilitylevelsdespiteuncertaintiesintheoperatingenvironment[13]−ThecompanyanticipatesfeerevenueforQ3FY2025torangefrom41 million from renewals and extensions [23] Company Strategy and Development Direction - The company is focusing on diversifying its business and investing in proprietary data assets, including the launch of the Korn Ferry Talent Suite [9] - The acquisition of Trilogy International aims to expand interim professional offerings in EMEA and North America [10] - The company is committed to maintaining profitability while investing in consultant additions and capital investments for future growth [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining current profitability levels despite uncertainties in the operating environment [13] - The company anticipates fee revenue for Q3 FY 2025 to range from 635 million to 665million,withadjustedEBITDAmarginexpectedtoremainbetween16.5665 million, with adjusted EBITDA margin expected to remain between 16.5% and 17.3% [34] - Management noted that the current labor market is unusual, with expectations of continued challenges in the interim market [76][84] Other Important Information - The company repurchased 33 million of stock and paid a quarterly dividend of 0.37pershareduringthesecondquarter[16]−TheinvestablecashpositionattheendofQ2was0.37 per share during the second quarter [16] - The investable cash position at the end of Q2 was 537 million, up 16% year-over-year [24] Q&A Session Summary Question: Expectations for revenue trends by segment in Q3 - Management indicated a seasonal decline in Q3 revenue, estimating a potential impact of 30millionto30 million to 40 million due to fewer working days [40][41] Question: Confidence in the Trilogy acquisition and interim business opportunities - Management expressed optimism about the Trilogy acquisition, highlighting its potential to tap into the large interim market in EMEA [46] Question: Stability of demand and revenue guidance - Management acknowledged stable demand but noted the impact of fewer working days on revenue expectations [51][53] Question: Trends in the digital business and year-over-year decline - Management attributed the decline in digital revenue to a shift towards subscription agreements, with confidence in future growth [61][62] Question: Impact of larger contracts on consulting revenue - Management noted that larger contracts are leading to longer implementation times, affecting revenue trends [66][70] Question: Labor turnover and its impact on services - Management indicated that the current labor market dynamics are unusual, with optimism for future demand despite challenges [76][78] Question: Sources of margin improvement amid revenue declines - Management highlighted cost management, strategic decisions made over a year ago, and a focus on profitable work as key drivers of margin improvement [89][91]