Korn Ferry Posts Flat Fiscal Q3 Revenues
March 9, 2023 – Korn Ferry (NYSE:KFY) has posted 2023 third quarter revenue of $680.8 million, essentially flat from the third quarter of last year. Revenue decreased in executive search and professional search mainly due to a decline in demand for the firm’s products and services driven by the global economic factors. This decline in fee revenue was fully offset by increases in RPO and interim fee revenue resulting from the acquisitions of Patina and Infinity Consulting Solutions. Executive search revenue fell nine percent on a constant currency basis, driven by a six percent decrease in the number of engagements billed and a three percent decrease in the weighted-average fee billed per engagement. Executive search fee revenue decreased in North America and Asia and was partially offset by higher revenue in EMEA.
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 attributable to Korn Ferry was $11.2 million during the quarter, compared to $84.1 million last year and adjusted EBITDA was $96.1 million during the quarter compared to $138.3 million during the same period a year ago.
“During the fiscal third quarter we generated $681 million in fee revenue, flat year-over-year and up four percent at constant currency,” said Gary D. Burnison, CEO of Korn Ferry. “Our fully diluted earnings per share and adjusted fully diluted earnings per share were $0.21 and $1.01, respectively, and our adjusted EBITDA was $96 million, a 14.1 percent margin.”
“Korn Ferry is incredibly well-positioned as clients continue to navigate an economy in transition,” Mr. Burnison said. “We will continue to prioritize faster growing, larger addressable, less cyclical markets that set up our firm and our clients for success. As an example, the recent addition of Salo now brings our interim services to be more than 10 percent of our firm’s revenue on a pro forma basis.”
Job Cuts
In January, Korn Ferry announced it will cut jobs and eliminate underutilized office space as part of a cost reduction plan. The firm said the job cuts will affect less than five percent of its workforce. The firm anticipates the plan to cut costs by about $45 million to $55 million a year. Charges resulting from the cuts, including severance, benefit payments, and lease termination costs, are expected to be $45 million to $50 million, the majority of which will be paid during the remainder of the firm’s 2023 fiscal year ending in April.
Korn Ferry’s stock, which was still inactive in premarket trading, has gained 4.5 percent over the past three months but lost 27.7 percent over the past 12 months, while the S&P 500 SPX, -1.11 percent has rallied 11 percent the past three months and declined 16 percent the past year.
“It’s clear that the global economy has been in transition for several months,” said Mr. Burnison. “We are seeing change on every front – from over a decade of high liquidity and historically low interest rates to changes in central bank policies, significant shifts in global trade lanes, and persistent inflationary pressures. In response, companies and our clients will undoubtedly have to continue adjusting their organizational and workforce strategies to tomorrow, which is opportunity for Korn Ferry.”
Boosting Interim Solutions Via Acquisition
In February, Korn Ferry 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.”
Related: Korn Ferry Launches AI-Enabled Talent Analytics Platform
Korn Ferry recently acquired Infinity Consulting Solutions (ICS). Terms of the deal were not disclosed. The acquisition is expected to be immediately accretive to Korn Ferry’s adjusted earnings. “Infinity Consulting Solutions will be a great fit, with interim professional placement offerings and expertise that are highly relevant for the new world of work,” said Mr. Burnison. “Today, Boomers are retiring and career nomads are looking for change – early and often. Our clients have entered a new reality where shortages of skilled labor are projected to persist, particularly in high-demand areas such as IT. Korn Ferry’s acquisition of ICS echoes our commitment to scale our solutions and further increase our focus at the intersection of talent and strategy – wherever and however the needs of organizations evolve.”
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.”
Headquartered in New York, with nine offices throughout the U.S., ICS offers interim professional solutions expertise which will further enhance Korn Ferry’s portfolio. ICS is a provider of senior-level IT interim professional solutions with additional expertise in the areas of compliance and legal, accounting and finance, and human resources.
Korn Ferry also recently acquired interim executive solutions provider Patina Solutions Group. “This combination presents real, tangible opportunity for Korn Ferry and our clients looking for the right talent, who are highly agile, with specialized skills and expertise, to help them drive superior performance, including on an interim basis,” said Mr. Burnison. “Patina offers ideal solutions for today’s nomadic labor market.”
Patina brings to Korn Ferry interim executive solutions expertise across multiple industry verticals. Patina’s network of C-suite, and professional interim talent spans functional areas of expertise including finance, operations, legal, human resources, and IT.
Looking Ahead
Korn Ferry forecast fourth-quarter revenue to range between $690 million and $710 million.
Share in Korn Ferry were up 6.20 percent to $58.54 upon release of the firm’s numbers. They were 15.18 percent below their 52-week high of 69.02, set last March, according to FT.com. The firm had a market cap of $2.91 billion.
Related: Korn Ferry Launches AI-Enabled Talent Analytics Platform
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
