Korn Ferry(KFY) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated fee revenue for Q4 was $712 million, growing 4% year over year at constant currency [16] - Adjusted EBITDA grew 8% to $121 million, with an adjusted EBITDA margin increase of 70 basis points to 17% [16] - Adjusted diluted earnings per share increased 5% to $1.32 [16] - Estimated remaining fees under existing contracts totaled approximately $1.7 billion, up 12% year over year [17] Business Line Data and Key Metrics Changes - Executive Search grew 15% year over year at constant currency, marking the fourth consecutive quarter of growth [15] - Digital subscription and license new business accounted for 40% of total digital new business, up from 37% in the prior year [15] - RPO (Recruitment Process Outsourcing) secured $119 million in new business awards, with 77% attributed to new logos [15] - Average hourly bill rates in consulting and interim portions remained strong at $454 and $131, respectively [15] Market Data and Key Metrics Changes - Fee revenue in The Americas was flat year over year at constant currency, with growth in Executive Search and RPO [19] - EMEA fee revenue grew 9% year over year at constant currency, driven by growth in Executive Search and Professional Search [20] - APAC fee revenue increased 8% year over year at constant currency, primarily due to growth in Executive Search and RPO [20] Company Strategy and Development Direction - The company is focused on innovation, particularly in technology and AI, to enhance organizational performance for clients [9] - A balanced approach to capital allocation has been maintained, with $173 million returned to shareholders through share repurchases and dividends [20] - The company aims to leverage its extensive data and intellectual property to create knowledge transfer and drive client success [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing economic challenges but expressed confidence in the company's strategic direction and growth opportunities [5][21] - The leadership emphasized the importance of adapting to changing client needs and the evolving labor market, particularly in light of demographic shifts [56][72] - The company expects Q1 fiscal 2026 fee revenue to range from $675 million to $695 million, with adjusted EBITDA margins between 16.8% and 17.2% [21] Other Important Information - The company has raised its dividend six times in five years, indicating a commitment to returning value to shareholders [8] - The introduction of a new operating metric, estimated remaining fees under existing contracts, demonstrates the effectiveness of the company's diversification strategy [16] Q&A Session Summary Question: Insights on new business trends and revenue trends by month - Management noted that May was stronger than April, indicating a positive trend despite ongoing uncertainties in the market [25] Question: Executive Search growth specifics - Management indicated that while there are ebbs and flows, the long-term growth rate for Executive Search remains strong, driven by demographic factors and changing leadership demands [29][30] Question: Update on sales cycles and client spending behaviors - Management highlighted the cost of living crisis impacting client spending and noted that companies are cutting costs, which has been consistent for several quarters [36] Question: Performance of consulting and digital segments - Digital business grew 4% year over year, while consulting remained flat, with larger engagements taking longer to implement [45] Question: Changes in leadership expectations - Management emphasized the need for leaders to embrace ambiguity and adapt to profound changes in the market, particularly with the rise of AI [54][56] Question: International growth and consultant productivity - Management reported strong growth in international markets and increased consultant productivity, attributing it to both company strategy and market factors [59] Question: Impact of international news on business confidence - Management acknowledged the uncertainty created by international events but emphasized the ongoing cost of living crisis as a significant concern [63] Question: Bonus payout and investable cash - Management indicated that the bonus payout would be sufficient to reward top performers, with investable cash around $675 million [66][67]