Korn Ferry(KFY) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated fee revenue grew 7% to $717 million, marking the fifth consecutive quarter of accelerating year-over-year growth [12] - Adjusted EBITDA increased by $9 million or 7.5% to $123 million, with an adjusted EBITDA margin of 17.2%, up 10 basis points [12] - Adjusted diluted earnings per share rose by $0.09 or 8% to $1.28 [12] - Total company new business, excluding RPO, grew 11%, with consulting and digital reaching all-time quarterly highs [12] Business Line Data and Key Metrics Changes - The interim portion of the PS&I solution grew 4%, benefiting from new business referrals [14] - Subscription and licensed new business grew 30% year-over-year, accounting for 43% of Digital's total new business [15] - Average hourly bill rates for consulting and interim grew by 2% and 15% respectively, indicating high client value [15] Market Data and Key Metrics Changes - Fee revenue in the Americas increased by 6%, led by growth in executive search and RPO [16] - EMEA fee revenue grew 13%, with double-digit growth in executive search, consulting, digital, and PS&I [16] - APAC fee revenue declined slightly by 2%, with growth in executive search offset by weakness in other solutions [16] Company Strategy and Development Direction - The company is focused on deepening relationships with existing clients, aiming to increase penetration of solutions among the top 4,500 clients that represent 90% of revenue [8][17] - The "We Are Korn Ferry" initiative aims to unify the company's approach and enhance client-centricity [7][17] - The company is leveraging its Talent Suite to provide data-driven insights for talent management, positioning itself as a leader in the evolving labor market [10][35] Management's Comments on Operating Environment and Future Outlook - Management highlighted the ongoing labor supply imbalance and the critical role of technology and AI in addressing workforce challenges [5][6] - The company expects fee revenue in Q4 FY 2026 to range from $730 million to $750 million, with adjusted EBITDA margins between 17.1% and 17.3% [16] - Management expressed confidence in the company's ability to grow despite economic uncertainties, citing a diversified business model [25][26] Other Important Information - The board approved a 15% increase in the quarterly cash dividend to $0.55 per share, marking the seventh increase in six years [13] - The company returned approximately $113 million to shareholders through share repurchases and dividends [13] Q&A Session Summary Question: How do you see AI impacting Korn Ferry? - Management believes AI will drive efficiency and create more opportunities, particularly in high-end labor markets [20][21] Question: Can the company grow in an environment of higher unemployment? - Management noted the diversified business model allows for growth even in challenging labor market conditions [25][26] Question: Is Talent Suite more likely to deepen existing relationships or expand into new ones? - Management indicated that Talent Suite is primarily aimed at deepening existing client relationships [28] Question: What drove the recent strengths in consulting new business? - The focus on transformation and AI readiness among clients has driven demand for consulting services [56][57] Question: What is the outlook for technology spending? - Management anticipates a balanced approach to capital deployment, with a potential shift towards stock buybacks [37][39] Question: What are the demand trends in the interim business? - Management noted a slight uptick in demand and emphasized the importance of high-end talent solutions [40][41] Question: How are sales cycles and client spending behavior changing? - Management reported no significant changes in sales cycles or client spending behavior despite macroeconomic conditions [46][49]