Korn Ferry Posts Near 12 Percent Q2 Revenue Increase

December 6, 2018 – Korn Ferry (NYSE:KFY) has posted second quarter fiscal revenues of $495.2 million, an 11.8 percent increase from $443 million a year ago.

The increase was driven by organic growth in all segments.

The Los Angeles-headquartered executive recruiter and leadership consultant – the largest in the Americas as ranked by Hunt Scanlon Media – recorded diluted earnings per share was $0.81 and Adjusted diluted earnings per share was $0.85.  Adjusted diluted earnings per share for the second quarter excludes $2.8 million related to retention awards from a prior acquisition, or $0.04 per share.

“For Korn Ferry’s recently completed second quarter, we achieved the highest top line and bottom line results in our history, with fee revenue of approximately $495 million and adjusted EBITDA margin of approximately $80 million and 16.2 percent, respectively,” said CEO Gary D. Burnison. “Our fee revenue grew approximately 12 percent year-over-year in the second quarter, 14.6 percent at constant currency, with strong growth across all of our geographies and solutions.”

“Additionally, during the quarter we continued to effectively deploy capital, repurchasing over $22 million of our shares,” he noted. “Our return on invested capital continues to accelerate. From the end of FY’18 to the end of Q2 FY’19, our return on invested capital has now increased by over 200 basis points.”

Hedge Fund and Other 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.

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A number of institutional investors have recently added to or reduced their stakes in Korn Ferry’s stock: Chartwell Investment Partners recently lessened its stake in the firm by 4.8 percent. The investment company owned 351,332 shares of the business services provider’s stock after selling 17,668 shares. Korn Ferry comprises about 0.6 percent of Chartwell Investment Partners’ holdings, making the stock its 20th largest holding. Chartwell owned approximately 0.62 percent of the search firm worth $21,758,000 as of its most recent filing with the Securities and Exchange Commission. Arizona State Retirement System lessened its stake in shares of Korn Ferry by 7.7 percent; its holdings of 82,238 shares are now worth $5,093,000.

Baskin Financial Services recently lifted its stake in shares of Korn Ferry by 0.7 percent. It now owns 127,557 shares of the firm’s stock valued at $7,900,000 after acquiring an additional 850 shares during the last quarter. Cambria Investment Management also lifted its stake by 11.5 percent. It now owns 8,355 shares of the firm’s stock valued at $517,000 after acquiring an additional 864 shares during the last quarter. In addition, Advisors Preferred raised its stake in shares of the firm by 102.6 percent. It now owns 1,732 shares of Korn Ferry’s stock valued at $107,000 after acquiring an additional 877 shares during the last quarter. Crossmark Global Holdings also recently increased its stake in shares of Korn Ferry by 6.8 percent. It now owns 13,853 shares of the stock, valued at $858,000, after acquiring an additional 880 shares during the last quarter. Lastly, Mason Street Advisors lifted its stake in shares of Korn Ferry by 6.7 percent in the last quarter. It now owns 15,672 shares of the firm’s stock valued at $809,000 after acquiring an additional 979 shares during the last quarter. Currently, 89.66 percent of the stock is owned by institutional investors.

Analysts Weigh In

Several equity analysts have recently weighed in on the search firm: Zacks Investment Research downgraded Korn Ferry from a “buy” rating to a “hold” rating. Credit Suisse Group assumed coverage on the company in another recent report. They set an “underperform” rating and a $55 price target on the stock. ValuEngine downgraded Korn Ferry from a “strong-buy” rating to a “buy” rating in another report. One research analyst has rated the stock with a sell rating, two have given a hold rating and three have assigned a buy rating to the stock. The company currently has a consensus rating of “hold” and a consensus price target of $64.80.

Outlook

Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis Korn Ferry expects revenues to be in the range of $470 million and $490 million, with diluted earnings per share likely to range between $0.76 to $0.84. Like other public companies in its sector, Korn Ferry stock is trading well below its 52-week high of nearly $69. As of yesterday, shares in the company were trading at $45 and not far from its 52-week low of $39. Korn Ferry has a current market cap of $2.55 billion. The company reported that it now places someone in a new job every three minutes.

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media