KORN FERRY Q1 FY2027 earnings call

• Strategic Integration with AMS: The combination with AMS creates a global leader in talent and organizational consulting, nearly doubling the firm's scale with ~17,000 colleagues in 130+ offices. This acquisition significantly strengthens capabilities in RPO, interim staffing, contingent workforce solutions, early career recruiting, and technology consulting.
• Holistic Go-to-Market Strategy: The shift to regional reporting aligns with a client-centric approach that moves away from isolated solution selling. This strategy is driving deeper relationships, evidenced by internal business referrals increasing to 29.4% (up ~300 bps YoY) and marquee/diamond accounts representing ~40% of fee revenue.
• Technology and AI Impact: Korn Ferry leverages proprietary data on 30 million people and 30,000 companies. While AI impacts search processes, the firm remains cautious due to the sensitive nature of its data. AI increases demand for Korn Ferry’s IP because it makes candidate resumes appear uniformly 'perfect,' emphasizing the need for deep behavioral assessment.
• Operational Excellence: Fee earner productivity increased YoY in all regions. New business grew 12% YoY, with Workforce Solutions showing particularly strong performance. TalentSuite subscriptions are active in >90% of marquee and diamond accounts.
• Capital Allocation: Maintained a disciplined approach with $30 million in dividends and $15 million in capex. Future investable cash will prioritize debt reduction related to the AMS acquisition, though share repurchases remain an option if attractive.

The company has restructured its reporting into three geographic segments: Americas, EMEA, and APAC. Each segment includes three solution groups: Search (Executive/Professional), Talent & Organizational Solutions (Consulting/Digital), and Workforce Solutions (RPO/Interim).

• Americas: Fee revenue grew 9% year-over-year to $442 million. Growth was led by the Search and Workforce Solutions segments.
• EMEA: Fee revenue grew 4% year-over-year to $228 million. Growth was broad-based across all solution groups.
• APAC: Fee revenue inflected to growth, reaching $87 million, up 1% year-over-year. Growth was primarily driven by the Search segment.

Consolidated Performance: Total fee revenue grew 7% year-over-year to $756 million. Adjusted EBITDA grew 7% year-over-year to $128 million, maintaining a flat margin of 17%. Estimated remaining fees under existing contracts totaled $1.92 billion.

• Q2 FY2027 Fee Revenue: Expected to range from $860 million to $878 million.
• Q2 FY2027 Adjusted EBITDA Margin: Expected to range from 16.8% to 17.2%.
• Q2 FY2027 Adjusted Diluted EPS: Expected to range from $1.30 to $1.40 per share.
• Guidance Assumptions: Projections assume no further changes in geopolitical conditions, economic environments, financial markets, or FX rates. They include the impact of AMS for two months (September and October) and account for incremental intangible amortization, net interest expense, and new shares issued for the AMS transaction.

• Macroeconomic Uncertainty: Challenges persist due to rising interest rates and ongoing geopolitical conflicts, particularly in the Middle East, which have negatively impacted EMEA results.
• Labor Market Imbalance: A projected slowdown in job creation (5-6 million over the next decade vs. 25 million previously) combined with baby boomer retirements creates supply-demand imbalances that require sophisticated talent solutions.
• Integration Execution: Integrating AMS involves synchronizing cultures, platforms (targeting full integration by May 1, 2027), and sales forces. Failure to effectively cross-sell or retain key clients during this transition could impact synergies.
• Data Privacy and AI Sensitivity: The reliance on proprietary, sensitive personal data requires careful handling of AI tools to maintain trust and regulatory compliance.

Q: How does AI impact executive search timelines and margins, given competitors like LinkedIn? / A: AI has not materially changed search timelines, as delays often stem from client scheduling. However, AI makes candidates appear uniformly qualified ('perfect resumes'), increasing the value of Korn Ferry’s proprietary IP and behavioral data to determine 'who' a candidate is, not just what they’ve done. Unlike LinkedIn, which focused on finding people, AI amplifies the need for deep assessment, supporting pricing power rather than eroding it.

Q: What is the cadence and source of synergies from the AMS acquisition? / A: Management targets achieving $140 million in run-rate EBITDA within one year of closing, expecting to hit this faster than planned. The synergy driver is primarily revenue-focused, leveraging AMS’s sticky RPO relationships (avg. 14-year tenure) and expanding into contingent workforce and tech consulting. Cost synergies will emerge later post-platform integration (May 2027), but top-line cross-selling is immediate.

Q: Can you break down the composition of the 12% new business growth? / A: Growth was driven by Search and Workforce Solutions, with RPO new wins totaling ~$160 million, half from new logos. The AMS acquisition adds significant durability; while Korn Ferry’s backlog ($1.9B) sees 60% recognition in Year 1, AMS’s backlog ensures 60% is recognized over Years 2-4, enhancing visibility and resilience against lumpiness in outsourcing wins.

Q: How do you view the macro environment versus specific operational drivers? / A: While macro headwinds like rate hikes and Middle East conflict pose challenges, demographic shifts create structural opportunities. With labor force growth slowing and boomers retiring, the supply-demand imbalance favors firms with superior talent identification capabilities. Korn Ferry’s performance is attributed to strategic execution and cross-referral efficiencies rather than broad macro tailwinds.

Q: What are the key integration milestones and metrics for the first few quarters? / A: The primary focus is 'do no harm' and synchronizing go-to-market activities immediately. Full platform integration (SAP/CRM) is targeted for May 1, 2027. Early metrics will track cross-referral rates (already near 30%) and consultant productivity (~$2M per consultant). Top-line synergies are being pursued now via joint client meetings, while cost synergies will materialize more heavily after the technical integration is complete.