December 7, 2017 – Korn Ferry (NYSE:KFY) has posted 2018 fiscal second quarter revenues of $443 million, a 10 percent increase compared to $401.9 million a year ago. The results exceeded Wall Street expectations. Three analysts surveyed by Zacks had expected $421.1 million. Growth was achieved in all thee major lines of business: Futurestep (16.7 percent) executive search (13.2 percent) and Hay Group (5.9 percent).
The Los Angeles-headquartered executive recruiter and leadership consultant —the largest in the Americas as ranked by Hunt Scanlon Media — recorded net income of $36.3 million, or 64 cents per share, compared with earnings of $30.2 million, or 52 cents per share, last year.
“I am pleased to report fee revenue of $443 million, an all-time high, up 10 percent year over year for our recently completed second quarter,” said Gary D. Burnison, CEO of Korn Ferry. “Profits were solid, with diluted earnings per share and adjusted diluted earnings per share of 64 cents and 67 cents and adjusted EBITDA of approximately $70 million.” Korn Ferry, he said, has evolved into a full-fledged consulting firm, with offerings that span search, organizational advisory services, strategy execution, leadership development, and compensation & rewards, among others.
“The acquisitions we have made over the years, the talent we have brought on board and our relentless focus on solutions aligned toward our clients’ business outcomes are making a notable impact,” he said. “I look forward to what the future holds as we enter calendar year 2018.”
During the quarter, Korn Ferry continued to return capital to stockholders, paying $5.7 million in dividends and repurchasing $25.2 million worth of its outstanding shares. The firm declared a quarterly dividend of 10 cents per share on Thursday, payable on January 12 to stockholders of record on December 20.
The company said it expects revenue in the range of $406 million to $426 million for the fiscal third quarter. Analysts surveyed by Zacks are expecting revenue of $400.2 million.
Growth & Expansion
Korn Ferry named Carlos Martins as president of Hay Group, South America. Mr. Martins joined the firm from global consulting firm Ernst & Young, where he led its people advisory services practice for South America and was also a member of the Brazil executive committee.
Korn Ferry also expanded with the addition of Mark Broer as senior client partner in its global life sciences practice and managing director of pharmaceuticals. He works in both the firm’s Zurich and London offices. He recently joined the firm after previously being with Spencer Stuart.
Korn Ferry also announced several key leadership changes in multiple areas. As the integration of Hay Group is substantially complete, the firm has appointed Mark Arian as this business segment’s new CEO. Mr. Arian was recently recruited from EY, where he served as a managing principal.
May Knight became country managing director for Hay Group. She is based in the company’s Hong Kong office. Ms. Knight brings 25 years of experience from operational and consulting roles in Asia and Europe. She was previously managing director, financial services, Asia Pacific at Accenture.
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Hedge Fund Investing Activity
Publicly held search firms, namely Korn Ferry and rival Heidrick & Struggles, have recently seen a flurry of investor activity. Hedge funds, in particular, have been acquiring new stakes in both companies, while others have been reducing positions and moving on to other investments throughout the talent management sector.
A number of institutional investors have recently added to or reduced their stakes in Korn Ferry’s stock: State of Alaska Department of Revenue increased its stake in shares of the company by 78.8 percent recently, according to its most recent 13F filing with the Securities and Exchange Commission (SEC). The fund owned 11,334 shares of the business services provider’s stock after buying an additional 4,994 shares during the period. Alaska’s Department of Revenue holdings in Korn Ferry were worth $391,000 at the end of the most recent reporting period.
Other hedge funds and institutional investors also recently added to or reduced their stakes in Korn Ferry. Bank of Montreal raised its position by 1.7 percent in the most recent quarter. It now owns 3,166 shares of the search company’s stock, valued at $110,000, after buying an additional 52 shares. Louisiana State Employees Retirement System recently raised its position in Korn Ferry by .4 percent. It now owns 23,400 shares of the stock, valued at $737,000, after buying an additional 100 shares during the period. Envestnet Asset Management raised its position in Korn Ferry by 17.6 percent and now owns 4,979 shares of the company’s stock, valued at $147,000, after buying 744 more shares. Mason Street Advisors recently raised its position in Korn Ferry by 6.1 percent and now owns 13,427 shares of the company’s stock, valued at $423,000, after buying an additional 774 shares. Finally, UBS Asset Management Americas raised its position in Korn Ferry by 4 percent. It now owns 22,877 shares, valued at $673,000, after purchasing an additional 879 shares. Currently, 90 percent of Korn Ferry’s stock is owned by institutional investors.
Analysts Weigh In
Several equity analysts have recently weighed in on the company: BidaskClub lowered Korn Ferry from a “hold” to a “sell” rating in a recent research report. Sidoti & Company began coverage on the company in a report in June. The research provider set a “buy” rating and a $43 target price on the stock. In addition, Zacks Investment Research recently lowered Korn Ferry from a “hold” to a “sell” rating in a research report. Two analysts have rated the stock with a sell rating, three have assigned a hold rating and three have assigned a buy rating to the company. The company currently has an average rating of “hold” and a consensus target price of $32.
Mr. Burnison, the company’s chief executive, sold 58,837 shares of the company’s stock in July. His shares were sold at an average price of $34.41, for a total transaction of $2,024,581. He now directly owns 251,485 shares of the company’s stock, valued at $8,653,598. The sale was disclosed in a legal filing with the SEC. Also, CFO Robert P. Rozek sold 11,000 shares of stock in June. The stock was sold at an average price of $34.48, for a total transaction of $379,280. Mr. Rozek now directly owns 111,782 shares, valued at $3,854,243. Insiders sold 183,837 shares of company stock valued at $6,336,501. Company insiders own 1.19 million of the company’s stock.
Korn/Ferry shares have risen 43 percent since the beginning of the year. In the final minutes of trading yesterday afternoon, shares hit $42.16, a rise of 55 percent in the last 12 months.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Will Schatz, Managing Editor – Hunt Scanlon Media