Korn Ferry Posts 12 Percent Revenue Loss
November 23, 2020 – Korn Ferry (NYSE:KFY) has posted fiscal second quarter revenues of $435.4 million, a 12 percent decrease from the same period a year ago. The decrease across executive search, consulting, and RPO & professional search, was primarily due to a decline in demand for Korn Ferry’s products and services due to the impact of COVID-19. The decline in revenue was partially offset by an increase in digital fee revenue when compared to the second quarter of last year, which was primarily due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution in the third quarter of fiscal 2020.
For the quarter, professional search was down 21 percent (22 percent on a constant currency) and RPO was down three percent (four percent at constant currency), both compared to the year-ago quarter. The Los Angeles-headquartered executive recruiter and leadership consultant – the largest globally and in the Americas as ranked by Hunt Scanlon Media – recorded net income was $27.8 million, compared to net income of $42.8 million in the second quarter of last year.
“During the recently completed second quarter, I’m pleased that Korn Ferry’s revenue was up 27 percent sequentially to $435 million,” said Gary D. Burnison, CEO, of Korn Ferry. “We had a sharp improvement in earnings and profitability with net income attributable to Korn Ferry of $28 million with an operating margin of 11.1 percent and $66 million of adjusted EBITDA and a 15.2 percent adjusted EBITDA margin. I’m not only encouraged by the financial results, but extremely proud of all that has been accomplished by our Korn Ferry colleagues to help our business rebound so dramatically,” he said. “The actions, strategy, solutions and messages we’ve taken to the marketplace have resonated. Our clients have responded, and our colleagues have been resilient through a year that none of us have experienced in our lifetimes.”
“As we look to the calendar year ahead, almost every company on the planet is and will have to re-imagine their business. So, forget the new normal, this is normal,” said Mr. Burnison. “Companies are rethinking their organizational structure, roles and responsibilities. How they compensate, engage and develop their workforce, along with the type of agile talent they hire and how they hire talent in a virtual world. That’s real, tangible opportunity for Korn Ferry.”
New Practice Leader
During the quarter, Korn Ferry appointed Henrik Maartensson as a senior leader in the firm’s global private equity and industrial practices. Mr. Maartensson joins Korn Ferry from Spencer Stuart, where he co-led the EMEA region, bringing his leadership advisory experience to a range of board and C-level engagements for international companies. Previously, he led the firm’s global transformation program and prior to that he served as global practice leader for the firm’s industrial and supply chain practices.
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“Henrik brings rich experience leading complex engagements while working with a broad scope of private equity and industrial organizations,” said Pascal Gibert, co-president, EMEA, Korn Ferry. “He is a natural leader and trusted partner, whose regional and industry experience will be an invaluable asset to our clients. We’re thrilled to have Henrik joining the Korn Ferry team.”
Virtual Recruiting Solution
In response to the COVID-19 pandemic, Korn Ferry is entering new markets in a bid for enhanced sources of revenue. One area is outplacement – a field that would have been unheard of entering until COVID-19 struck. As it laid off and furloughed employees earlier this year, and cut pay for nearly every level of employee within its company, the talent leader was seen shifting gears. Instead of bringing people into corporate roles, it is now tapping into ways to help businesses remove them. Conflicts are expected, according to several well-placed sources within the staffing giant.
Korn Ferry also recently launched Korn Ferry Recruit, Nimble, a fully integrated, virtual technology solution for high-volume hiring. It is part of the firm’s line of Nimble solutions. Nimble uses best-in-class AI, along with the proven recruitment intellectual property of Korn Ferry. The firm said that the new solution “is designed to leverage a client’s brand, shifting to a candidate-driven experience by sourcing, attracting, assessing and selecting the right people for the job at an affordable cost-per-hire.”
“Nimble is an efficient and effective tool for organizations that need to quickly ramp up high-volume hiring,” said Jeanne MacDonald, president, Korn Ferry global RPO solutions. “Nimble not only helps widen the net of qualified candidates, it creates success profiles that ensure the people with the rights skills are short-listed. Nimble offers a positive candidate experience in a virtual environment that increases the chances the candidate will accept an offer and stay on the job.”
“Nimble starts at the beginning of the high-volume hiring journey by first creating success profiles that identify candidate attributes needed to be successful in a particular job,” Korn Ferry said. “This ensures the right fit for a role and increases chances of longer tenure once the candidate is on the job.”
It then creates a sourcing strategy using AI to find internal and external candidates. There is a “text to apply” feature, and an AI assistant (a chatbot named Juno) provides 24/7 candidate support. Candidates are guided through each phase of the process, having their questions answered and being updated as to where they stand in the process.
“Approximately three months have passed since our last earnings call and, while advances have been made in the science and societal and economic consequences of COVID-19, there remains significant uncertainty about the ultimate impact of COVID-19,” Korn Ferry said. “On the positive side, there have been several announcements around vaccines that have greater than 90 percent effectiveness. In addition, the world has adopted new ways of working and interacting with substantial acceptance of business being conducted in a virtual world. On the negative side, there are a number of unanswered questions regarding the capacity to manufacture the vaccines at scale as well as how they will be distributed and administered to the population at large,” the firm said. “In addition, we are seeing governments putting lockdowns back in place as the number of COVID-19 cases and hospitalizations reach all-time highs.”
“The constantly evolving and unprecedented nature of what we are currently experiencing, combined with all the unanswered questions and ever-changing datapoints, continues to cloud the near-term predictability of our business,” Korn Ferry said. “Consequently, and consistent with our approach to the fourth quarter of FY’20 and first and second quarters of FY’21, we will not issue any specific revenue or earnings guidance for the third quarter of FY’21. We plan to reassess the suspension of our guidance once we are comfortable that the coronavirus uncertainties have largely passed.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media