Korn Ferry Revenue Falls Three Percent; Workforce Restructuring Underway

December 6, 2023 – Korn Ferry (NYSE:KFY) has posted 2024 fiscal first quarter revenues of $704 million, a decrease of three percent (five percent at constant currency) from the same period a year ago. The restructuring charges, which amounted to $63.5 million, were a significant factor in the quarter’s financial results, as Korn Ferry sought to align its workforce with the challenging economic landscape. Fee revenue decreased primarily due to decreases in the firm’s permanent placement talent acquisition offerings, which includes executive search, professional search permanent placement and RPO, due to a decline in demand driven by global economic and other factors. This was partially offset by increases in the interim portion of professional search & interim, resulting from the acquisition of Salo which was effective February 1, 2023, and increases in fee revenue in consulting and digital. The increase in fee revenue was mainly driven by additional fee revenue from the acquisition, partially offset by a decrease in permanent placement fee revenue.

Consulting fee revenue increased modestly to $177.8 million, while digital also saw a rise to $97.1 million. Executive search, however, faced a downturn with fee revenue dropping by seven percent to $203.0 million, reflecting the impact of economic uncertainty on executive search activities. Professional search & interim reported a three percent increase in fee revenue to $138.4 million, and RPO experienced an 18 percent decrease to $87.7 million due to reduced client demand.

Net loss attributable to the Los Angeles-headquartered executive recruiter and leadership consultant – the largest globally and in the Americas as ranked by Hunt Scanlon Media – was $1.7 million in Q2FY’24, which includes a $52.8 million charge, net of tax, primarily relating to restructuring actions taken to realign our workforce due to the current challenging macroeconomic business environment, while diluted loss per share and adjusted diluted earnings per share were $0.04 and $0.97 in Q2 FY’24, respectively.

“During the fiscal second quarter we generated $704 million in fee revenue, down three percent year-over-year,” said Gary D. Burnison, CEO of Korn Ferry. “Despite a persistent, uneven economic environment, earnings and profitability held steady sequentially as we delivered $99 million of adjusted EBITDA, at a 14 percent margin.”

“I’m very proud of our organization and how we continue to develop increasingly relevant solutions in a rapidly changing world. In particular, our consulting and digital businesses now generate almost 40 percent of our top line, with digital achieving all-time record revenue at constant currency during the quarter,” Mr. Burnison said. “Their best moves – and Korn Ferry is a great company.”

Korn Ferry is a Los Angeles-headquartered executive recruiter and leadership consultant and the largest globally and in the Americas. The firm’s 8,600 colleagues serve clients in more than 50 countries.

New Senior Leaders

In July, Korn Ferry named Jeanne MacDonald as chief executive officer, Recruitment Process Outsourcing (RPO) and Mathias Herzog will assume leadership of the firm’s digital solution. “Jeanne and Mathias are proven executives, and we are thrilled to have people of their caliber lead these offerings,” said Mr. Burnison. “Jeanne is the natural choice to lead RPO after years of overseeing global RPO solutions and playing a fundamental role in the business’s commercial and financial success. Mathias brings in-depth consulting and technology expertise that will help further the digitization of our offerings and intellectual property to drive superior client performance. With Jeanne and Mathias, we are confident that our RPO and digital solutions will continue to evolve and thrive.”

Related: Korn Ferry Launches AI-Enabled Talent Analytics Platform

Ms. MacDonald joined Korn Ferry in 1998 and most recently served as president, global RPO Solutions, where she was responsible for oversight of Korn Ferry’s RPO businesses. She has worked in a variety of roles at Korn Ferry including senior recruiter, business development director for North America prior to moving into various leadership positions within the firm.

Korn Ferry Announces Board Changes
Korn Ferry has elected Charles Harrington as a new member to its board of directors and appointed Jerry Leamon as a new non-executive chair. Christina Gold, who has served on the firm’s board since 2014, and most recently as the non-executive chair since 2019, has retired from the board. In addition, George Shaheen retired from the board after more than 12 years of total service, including as non-executive chair from 2012 to 2019.

“We are pleased to have Chuck join our board,” said Gary D. Burnison, CEO of Korn Ferry. “I believe his extensive business experience, technology credentials, and financial acumen will be a great fit for Korn Ferry as we continue our efforts to broaden the scope of our offerings and help companies synchronize their strategy, operations, and talent to drive superior performance.”

Mr. Herzog joined Korn Ferry in 2023 and currently serves as president of the global technology, communications, media, and professional services practice. Prior to joining Korn Ferry, he served in several executive-level roles focused on corporate strategy, business operations, and GTM / sales. Mr. Herzog has held executive positions at Salesforce and Automation Anywhere and was a partner at multiple consulting firms.

Previous Acquisition

Korn Ferry recently completed its previously disclosed acquisition of Salo LLC, a provider of finance, accounting, and HR interim talent. “Salo will be a great fit, with highly relevant interim professional offerings and expertise that speak to today’s world of work – a new workscape in which more than one-third of the U.S. workforce alone considers themselves to be independent,” said Mr. Burnison. “The Salo acquisition reflects our continued focus on high-demand areas emerging in this environment, as we scale our solutions at the intersection of talent and strategy.”

“Through the acquisition of Salo, Korn Ferry will further broaden its ability to deliver to organizations experienced professionals, who will take on impactful roles on an interim or project basis, particularly in the high-demand areas of finance, accounting, and HR,” Korn Ferry said. “Now, with Korn Ferry, we will be part of a global network of colleagues, with access to vast IP and more expansive client relationships and opportunities at every turn,” said Lisa Brezonik, CEO of Salo. “Our track record of success and deep interim professional solutions expertise, combined with Korn Ferry’s expansive credentials, will provide clients with greater opportunities to make an impact. We’re excited to be joining Korn Ferry and look forward to what the future holds.”

Outlook

Assuming no new major pandemic related lockdowns or further changes in worldwide geopolitical conditions, economic conditions, financial markets or foreign exchange rates, on a consolidated basis the firm anticipates fiscal-year 2024 fee revenue is expected to be in the range of $645 million and $665 million; and Q3 FY’24 diluted earnings per share is expected to range between to $0.87 to $0.95. On a consolidated adjusted basis: Q3 FY’24 adjusted diluted earnings per share is expected to be in the range from $0.96 to $1.02.

Related: With Job Cuts Underway, Korn Ferry to Acquire Third Interim Business

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media