Korn Ferry's Q2 FY'25: A Mixed Bag of Performance

Korn Ferry, a global organizational consulting firm, announced its second quarter fiscal 2025 results, revealing a mixed performance compared to previous quarters and analyst expectations. The company reported fee revenue of $166.8 million, down 6% year-over-year, and adjusted EBITDA of $117.0 million, up 340bps from the year-ago quarter. Net income attributable to Korn Ferry was $60.8 million, compared to a net loss of $1.7 million in the year-ago quarter.

Korn Ferry's Consulting and Digital businesses generated almost 40% of its top line, with Digital achieving all-time record revenue at constant currency during the quarter. This strong performance contributed to Korn Ferry's overall fee revenue, which was essentially flat on a sequential quarter basis. However, the Consulting business saw a year-over-year decrease in fee revenue, primarily driven by a decline in its organizational strategy and leadership and professional development offerings.

The acquisition of Salo positively impacted Korn Ferry's Q2 FY'25 performance, particularly in the Interim portion of Professional Search & Interim, resulting in increases in fee revenue. However, the company's overall fee revenue fell short of analyst expectations by approximately $11.0 million or 6%, primarily due to a decline in Consulting fee revenue.

Korn Ferry's operating margin of 13.0% exceeded analyst expectations, driven by disciplined cost management and lower cost of services expense compared to the year-ago quarter. The company's Adjusted EBITDA margin of 17.4% also represented a significant increase from the year-ago quarter, thanks to strong demand for organizational strategy and leadership, as well as professional development offerings in the Consulting segment and record revenue in the Digital segment.

Despite the mixed performance, Korn Ferry remains optimistic about its future growth prospects, focusing on its strong new business wins and the resilience of its fee revenue in both Consulting and Digital. The company's diversified business model and effective cost management strategies have enabled it to navigate economic challenges and maintain profitability.