June 24, 2019 – Korn Ferry (NYSE:KFY) has posted 2019 fiscal year-end revenues of $1.92 billion, a nine percent increase from $1.767 billion a year ago. The Los Angeles-headquartered executive recruiter and leadership consultant – the largest globally and in the Americas as ranked by Hunt Scanlon Media – also reported fourth quarter revenue of $490.8 million, an increase of three percent. All three of its business lines were up.
The results fell short of Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for revenues of $495.2 million for the quarter. Korn Ferry also reported fiscal fourth-quarter profit of $50.3 million. On a per-share basis, the firm said it had net income of $0.89. This also missed analysts’ forecasts was for earnings of $0.89 per share.
“I am pleased to report fee revenue of $491 million and strong profitability, with diluted earnings per share and adjusted diluted earnings per share of $0.89 and $0.88 during our recently completed fourth quarter,” said Gary D. Burnison, CEO of Korn Ferry. “Net income attributable to Korn Ferry was $50.3 million and operating margin was 12.7 percent. Adjusted EBITDA was $82.2 million and EBITDA margin was 16.7 percent – both all-time highs. We achieved the highest fiscal year fee revenue in our firm’s history – up nice percent on a US GAAP basis year-over-year and 12 percent at constant currency.”
“We have made tremendous progress in the recently completed fiscal year,” Mr. Burnison said. “Korn Ferry is now the organizational consultancy that helps companies look at talent and strategy together. We help companies make sure they have the right people, in the right places and for the right rewards.”
In the fiscal year ahead, he added, “we will continue to bridge our clients’ talent and organizational strategies, unlocking their potential and driving superior performance.”
Robert Rozek, CFO of Korn Ferry said that the results for the fourth quarter and the full fiscal year continue to demonstrate the power of the firm’s business model and the growing impact of its integrated solutions. “As the global geopolitical and economic uncertainty continues to escalate, demand for our leading organizational advisory solutions has remained steady and our financial results continue to improve,” he said.
Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis Q1 fiscal fee revenue is expected to be in the range of $466 million and $486 million and diluted earnings per share is likely to range between $0.73 to $0.81.
Recruiting Sector Jumps 13.9 Percent, Driven by Tightening Talent Markets
A constricting labor market with low unemployment means companies are struggling to find qualified talent. When the right people are found, the costs associated with hiring them are rising, making a lengthy onboarding process now the rule, not the exception. All of it is translating into big business for the nation’s Top 50 executive search firms.
Korn Ferry shares were down 16.92 percent to $40.31 upon release of its numbers, the firm had a market cap of $2.66 billion. Korn Ferry shares have added about 20.1 percent since the beginning of the year versus the S&P 500’s gain of 16.7 percent.
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.
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