Korn Ferry posts Q2 loss with fee revenue decline

LOS ANGELES – Korn Ferry (NYSE:), a global organizational consulting firm, has reported a challenging second quarter for fiscal year 2024, with fee revenues falling by 3% year-over-year (YOY) to $704 million. Net loss attributable to Korn Ferry was $1.7 million, which includes restructuring costs of $63.5 million attributed to workforce realignment in response to economic conditions.

The firm’s operating margin sharply decreased to 3%, a significant drop from the previous year’s robust 16.4%. This decline was largely due to reduced demand for permanent placements, with Executive Search fees dropping by 7% to $203 million and Recruitment Process Outsourcing (RPO) witnessing a steep decline of 18% to $87 million. Despite these setbacks, Korn Ferry’s Consulting and Digital segments showed resilience, both growing nearly by 3%, generating fee revenues of around $178 million and $97 million respectively. Professional Search & Interim services also saw an increase by the same margin, bringing in fee revenues of about $138 million.

In what appears to be a confident gesture towards investors, Korn Ferry has increased its dividend payout by a significant 83%, raising it to $.33 per share. This move comes despite the stark contrast to last year’s substantial net income of $73 million.

Looking ahead, Korn Ferry has set its fee revenue expectations for the third quarter of fiscal year 2024 in the range of $645 million to $665 million. Additionally, the company projects an adjusted diluted earnings per share (EPS) between $0.96 and $1.02, signaling confidence in navigating through the current fiscal challenges as indicated by this quarter’s loss.

InvestingPro Insights

Korn Ferry’s recent financial performance reflects the challenges faced by the firm amidst economic headwinds. Despite a reported net loss and a dip in certain segments, the company’s strategic moves and underlying financial health offer a more nuanced picture as per InvestingPro data and insights.

InvestingPro Data indicates a solid market capitalization of $2.72 billion and a relatively moderate price-to-earnings (P/E) ratio of 27.56, hinting at investor confidence in the company’s value proposition. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at a more attractive 15.02, which may appeal to value-oriented investors. Furthermore, the company’s dividend yield as of the end of 2023 is 1.39%, showcasing Korn Ferry’s commitment to returning value to shareholders even in tough times.

Two InvestingPro Tips highlight the company’s financial prudence and potential for sustained performance. Firstly, Korn Ferry’s free cash flow has been exceeding its net income, indicating high earnings quality—a reassuring sign for investors concerned about the firm’s profitability. Secondly, with more cash than debt on its balance sheet, the firm is well-positioned to weather economic uncertainties and invest in growth opportunities.

For readers looking to delve deeper into Korn Ferry’s financial health and future prospects, InvestingPro offers additional insights. There are 6 more InvestingPro Tips available, which could provide valuable context to the firm’s strategic decisions and market positioning. Subscribers to InvestingPro can access these tips to gain a more comprehensive understanding of Korn Ferry’s investment potential.

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