Korn Ferry (KFY) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial metrics, with notable growth in consulting and executive search, as well as a successful launch of the Talent Suite platform. The company's strategic shift towards higher-value engagements and increased referrals are positive indicators. Despite some challenges, like a decline in the digital side, the overall sentiment is optimistic. The market cap suggests moderate volatility, leading to a positive stock price movement prediction.
Key Financial Performance
Business referrals as a percentage of consolidated fee revenue 27.6%, up approximately 250 basis points year-over-year and quarter sequentially. This increase demonstrates early signs of progress driven by the 'We Are Korn Ferry' go-to-market evolution.
Estimated remaining fees under existing contracts $1.84 billion, up 20% year-over-year. This growth was led by strong new business in RPO.
Executive Search fee revenue 10% year-over-year growth. This marks the sixth consecutive quarter of year-over-year growth.
Professional Search and Interim fee revenue 17% year-over-year growth, with Professional Search growing 7% and Interim (including the Trilogy acquisition) growing 24%.
Subscription and licensed new business in Digital 43% of Digital's new business for the quarter, continuing on a positive trajectory.
Hourly bill rates in Consulting and Interim $460 and $142 an hour, respectively, with rates remaining strong.
Consolidated fee revenue $722 million, a 7% year-over-year growth.
Adjusted EBITDA $125 million, a 7% year-over-year growth, with an adjusted EBITDA margin of 17.3%.
Adjusted diluted earnings per share $1.33, a 10% year-over-year growth, representing an increase of $0.12.
Total company new business (excluding RPO) 4% year-over-year growth, led by strength in EMEA.
RPO new business $253 million for the quarter, with 16% coming from new logos and 84% from renewals.
Fee revenue in the Americas 3% year-over-year growth, led by Executive Search and RPO.
Fee revenue in EMEA 20% year-over-year growth, with growth in Executive Search, Professional Search and Interim, Consulting, and Digital.
Fee revenue in APAC Flat, with moderate growth in Executive Search and Professional Search and Interim, offset by slight declines in RPO, Consulting, and Digital.
Capital allocation $70 million returned to shareholders through combined repurchases and dividends, and $43 million invested in capital expenditures focused on talent suite, productivity tools, and other solution and product enhancements.
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Operating Highlights
New Talent Suite Technology Platform: Launched in November, enhancing foundational assets and positioning the company as a holistic talent partner.
Regional Fee Revenue Growth: Americas up 3% year-over-year, EMEA up 20% year-over-year, APAC flat with moderate growth in some areas.
RPO New Business: $253 million in new business, with 16% from new logos and 84% from renewals.
Business Referrals: Grew to 27.6% of consolidated fee revenue, up 250 basis points year-over-year and quarter sequential.
Estimated Remaining Fees: Increased to $1.84 billion, up 20% year-over-year, with $1 billion expected to be recognized within the next year.
Adjusted EBITDA: Grew 7% year-over-year to $125 million, with a margin of 17.3%.
We Are Korn Ferry Strategy: Focused on integrating solutions into one business model, driving resilience and durability.
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Risk or Challenges
Economic Fluctuations: The company operates in an environment defined by economic fluctuations, which could impact client demand and overall business performance.
Uncertain Business Environment: The company acknowledges operating in a low visibility and uncertain business environment, which poses challenges to strategic execution and financial forecasting.
Geopolitical Conditions: Future performance is contingent on no further changes in worldwide geopolitical conditions, which could adversely impact operations and financial results.
Dependence on Recurring Relationships: The company's strategy heavily relies on building larger, recurring client relationships. Any disruption in these relationships could impact revenue stability.
Regional Performance Variability: Fee revenue growth varies significantly by region, with flat performance in APAC and slight declines in certain segments, indicating potential regional market challenges.
Technological Integration Risks: The company is integrating a new talent suite technology platform, which, if not successfully implemented, could disrupt operations and client service delivery.
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Guidance & Outlook
Revenue Expectations: Fee revenue for the third quarter of fiscal '26 is expected to range from $680 million to $694 million.
Profitability Projections: Adjusted EBITDA margin is projected to range from approximately 17.2% to 17.4% for the third quarter of fiscal '26.
Earnings Per Share (EPS) Guidance: Consolidated adjusted diluted earnings per share is expected to range from $1.19 to $1.25 for the third quarter of fiscal '26. GAAP diluted earnings per share is projected to range from $1.15 to $1.21.
Market Trends and Business Strategy: The company is focusing on becoming a holistic talent partner for clients through its 'We Are Korn Ferry' strategy, emphasizing integrated solutions and leveraging foundational assets to drive long-term growth.
Contract Revenue Projections: Estimated remaining fees under existing contracts are $1.84 billion, with approximately 57% ($1 billion) expected to be recognized within the next year and 43% ($800 million) beyond the next four quarters.
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Shareholder Return Plan
Dividends: Through the end of the second quarter, we returned almost $70 million to shareholders through combined repurchases and dividends.
Share Repurchase: Through the end of the second quarter, we returned almost $70 million to shareholders through combined repurchases and dividends.
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Key Q&A
Q:Could you talk about where you're seeing the sources of strength within North America and how you think about the business in light of slower job market velocity?
A:The company views itself as one business rather than five segments, which aligns with the 'We Are Korn Ferry' strategy. Executive Search is experiencing significant growth worldwide due to factors like the need for new leadership skills, baby boomer retirements, and changing work-life balances. Business referrals within the firm reached an all-time high of 28%, showcasing the strength of combining intellectual property with a global reach.
Q:Could you give us a sense on where referrals have been historically and where they could go as you focus more on this strategy?
A:Historically, referrals have been around 25-26% and have generally trended upward. The company aims to increase this to 35%. Recent efforts include engaging 1,800 partners and principals, with half already meeting in person, to pivot the organization from segments to a unified business model.
Q:Are you starting to see any turn in the willingness among the client base to hire more or spend more, or is it mostly cross-sell efforts driving improvement?
A:The strategy is working, as evidenced by 7-8% sequential growth in Pro Search and interim solutions. The interim solution, particularly in EMEA, has been highly successful. The RPO solution also had a strong quarter with significant new business wins and renewals. However, the overall market has not significantly changed.
Q:What would you say about the mix of services within consulting and the mix of senior versus junior consultants boosting bill rate growth?
A:The growth in consulting is driven by organizational strategy and a holistic approach to workforce and technology. Bill rates have increased from the high $200s to nearly $500 per hour over the years. Larger engagements over $500,000 now constitute 40% of new business, up from 37% last quarter. The company sees substantial opportunities in North America and is bringing in new talent to capitalize on this.
Q:Should we expect this year's seasonality in Executive Search to look different due to current strength in new business?
A:The guidance does not imply a deviation from usual seasonality. The holiday season is expected to impact business, and this has been factored into the forecast.
Q:Could you talk about the runway left in the mix shift towards higher-value consulting engagements and the impact on margins?
A:There is substantial opportunity in consulting, with a shift from small transactions to larger, transformational engagements. The current environment of uncertainty benefits the company as clients seek guidance on operating in a new world. Organizational strategy is a strong area, driving larger engagements.
Q:Have AI tools shortened the time to fulfill a search in the Search business?
A:AI has made the process more efficient, particularly in the RPO business, where it aids in candidate identification and sourcing. However, Executive Search remains a high-touch solution, with limited impact from AI.
Q:Could you elaborate on the sunsetting of a system and the launch of Talent Suite?
A:The Talent Suite consolidates all foundational assets into a single repository, improving efficiency and user experience. The old system was sunset, and its undepreciated costs were accelerated. Talent Suite enables seamless access to data and analytics, enhancing the ability to provide insights and solutions.
Q:What are your expectations for the financial impact of the release of Talent Suite?
A:The Talent Suite is expected to be highly beneficial, allowing clients to access a comprehensive range of IP and analytics. It supports initiatives like pay transparency, which has a significant market opportunity. The company is optimistic about its long-term impact.
Q:What drove the decline in the digital side, and what are the expectations for new sales?
A:The decline was due to a strategic reduction in sellers by 35% to focus on enterprise solutions. The company is pivoting to more enterprise-oriented sales and licensing arrangements. Some large deals were postponed to the current quarter, and the focus is on monetizing IP.
Q:Could you talk about the new RPO contracts and their sources?
A:The majority of new RPO contracts were renewals from marquee and diamond clients, particularly in industrial and healthcare sectors. About 25% were new clients. Business referrals account for roughly 50% of RPO fee revenues.
Q:Have you seen any change in competitive behavior since Heidrick agreed to go private?
A:No changes in competitive behavior have been observed.
Q:Review of Unclear Management Responses
A:Management avoided directly answering the question about the financial impact of the Talent Suite release, providing optimistic but vague statements about its potential benefits and long-term impact.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI center
AI transformation
Ferry Conference
Ferry market
Gary statement
Korn Ferry
Mr Gary
RPO reward
Regina firm
States hospital
Talent need
Today organization
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act firm
align act
brand million
calendar Korn
center tech
centricity example
change heart
client calendar
client centricity
colleague purpose
company contract
consumer employee
contract AI
digitization fluctuation
durability employee
effort marketing
employee leader
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estate service
example today
firm intersection
fluctuation Today
fuel legacy
gentleman Korn
hundred
people organization
KFY Transcript
Korn Ferry (KFY) Q4 2026 Earnings Call Transcript
Neutral6-23
Korn Ferry (KFY) Q3 2026 Earnings Call Transcript
Unknown3-9
The earnings call summary presents a mixed picture. While the company shows resilience and strategic focus, recent launches like Talent Suite have had minimal impact so far. The Q&A reveals concerns over technology spending and margin pressures, with management avoiding direct answers on global event impacts. Despite a slight uptick in demand, the lack of significant changes in sales cycles and client spending suggests a stable but unexciting outlook. Given the market cap, the stock is likely to remain neutral, with minimal movement expected over the next two weeks.
Korn Ferry (KFY) Q2 2026 Earnings Call Transcript
Positive12-9
The earnings call highlights strong financial metrics, with notable growth in consulting and executive search, as well as a successful launch of the Talent Suite platform. The company's strategic shift towards higher-value engagements and increased referrals are positive indicators. Despite some challenges, like a decline in the digital side, the overall sentiment is optimistic. The market cap suggests moderate volatility, leading to a positive stock price movement prediction.
Korn Ferry (KFY) Q1 2026 Earnings Call Transcript
Positive9-9
The earnings call reflects a positive sentiment with strong financial performance in EMEA and APAC, a significant shareholder return, and strategic investments in AI and talent. Despite conservative guidance and economic challenges in the Americas, optimism in Europe and Asia, along with transformational projects and capacity for demand upticks, contribute positively. The focus on integrated solutions and AI's potential adds to the positive outlook, outweighing minor uncertainties and guidance conservatism. The market cap suggests moderate volatility, supporting a positive stock price movement prediction.
KFY Slides
KFY Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
