Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Korn Ferry (KFY, Financial) reported a sixth consecutive quarter of increased EBITDA margin, reaching over 17%.
- The company has made significant investments in productizing its intellectual property and proprietary data assets, enhancing client offerings.
- Korn Ferry (KFY) launched a new HR integrated software platform, the Korn Ferry Talent Suite, reflecting its commitment to expanding differentiated IP and products.
- The acquisition of Trilogy International expands Korn Ferry (KFY)'s interim professional offerings in EMEA and North America, targeting a large addressable market.
- Korn Ferry (KFY) has maintained strong bill rates and improved employee productivity, with fee revenue per employee now 35% higher than pre-pandemic levels.
Negative Points
- Consolidated fee revenue in the second quarter was down 4% year-over-year, indicating challenges in maintaining growth.
- Interim fee revenue decreased by approximately 17% year-over-year, reflecting broader industry trends and market challenges.
- Consulting fee revenue was down 6% year-over-year, with slower delivery of backlog assignments impacting results.
- The digital segment saw a 4% year-over-year decline in fee revenue, despite strong new business growth.
- The company anticipates a seasonal decline in the third quarter due to fewer working days, impacting revenue expectations.
Q & A Highlights
Q: Can you provide more color on your expectations for revenue trends by segment in the third quarter, and how much revenue are you assuming from the Trilogy acquisition?
A: Gary Burnison, CEO: We expect a seasonal decline in the third quarter due to fewer working days, impacting revenue by $30 million to $40 million. Trilogy is expected to contribute around $14 million to $15 million in the quarter.
Q: What is the opportunity for the interim business in Europe with the Trilogy acquisition, given the current challenging revenue trend?
A: Gary Burnison, CEO: Despite the current cycle, we believe there's no structural change in the interim market. Trilogy provides a foundation to tap into the large EMEA market, and we are confident in its long-term potential.
Q: How do you see the demand environment for your digital business, given the recent year-over-year revenue decline?
A: Gary Burnison, CEO: The decline is due to a shift towards subscription agreements. We expect positive growth as we complete our integrated technology platform, the Korn Ferry Talent Suite, which will enhance client access to our products.
Q: Can you elaborate on the impact of larger consulting contracts on revenue and when you expect this to normalize?
A: Gary Burnison, CEO: Larger contracts take longer to implement, impacting revenue. We expect normalization in a few quarters as we adjust to the new mix and improve our leverage model.
Q: How has the Korn Ferry brand impacted your interim business, and what are the sources of margin improvement?
A: Gary Burnison, CEO: The Korn Ferry brand has significantly enhanced client engagement and cross-referrals. Margin improvements are driven by strategic decisions made over a year ago, focusing on profitability and resource allocation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
