Korn Ferry

Ladies and gentlemen, thank you for standing by and welcome to the Korn Ferry first quarter of fiscal year 2027 conference call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded for replay purposes. We have also made available in the investor relations section of our website at KornFerry.com a copy of the financial presentation that we'll be reviewing with you today. Before I turn the call over to your host, Mr. Gary Burnison, let me first read a cautionary statement to investors. Certain statements made in the call today, such as those relating to future performance, plans, and goals, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties which are beyond the company's control. Additional information concerning such risks and uncertainties can be found in the release relating to this presentation and in the periodic and other reports filed by the company with the SEC, including the company's annual report for fiscal year 2026 and in the company's soon to be filed quarterly report for the quarter ended July 31st, 2026. Also, some of the comments today may reference non-GAAP financial measures such as constant currency amounts, EBITDA, and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measures, is contained in the financial presentation and earnings release relating to this call, both of which are posted in the investor relations section of the company's website at www.cornferry.com. With that, I'll turn the call over to Mr. Burnison. Please go ahead, Mr. Burnison.

Thanks, Regina, and thank you, everybody, for joining us. I'm going to have the team walk through the numbers. But first, I'll just comment that our performance was absolutely outstanding. All regions are up, and it marks our sixth consecutive quarter of top-line growth, which underscores the strength of our strategy, and we remain focused on executing with discipline, investing in opportunities that will drive sustainable impact and create lasting value for our shareholders, all of which reflects the confidence we have in our strategic direction and long-term outlook. As I reflected during our previous quarterly call, I used to talk about opportunities measured in the hundreds of millions of dollars. Today, I think in terms of opportunities measured in the billions. And last week, we took another significant step in that direction with the completion of our combination with AMS. This brings together two iconic brands and creates a global leader in talent and organizational consulting. AMS is a world-class firm that propels our We Are Corn Ferry strategy. to be the world's conductor of talent and organizational orchestration. We now offer one of the most comprehensive organizational talent solution portfolios in the world. The combined firm has nearly 17,000 colleagues in more than 130 offices, complementary strengths and more expansive industry coverage, all united in a shared commitment to accelerate our client success. Together with AMS, we have profound operational capability delivering technology-enabled talent solutions at scale supported by long-term contracted client relationships. We've deeply deepened our client-centric approach as we expand the breadth of our solutions with every relationship. Just a couple examples. At a global energy company, we're supporting their strategic and talent transformation, impacting 60,000 roles across 200 business units. Or a global consumer products company with more than 100,000 employees turned to us for worldwide delivery of org design, analytics, and workforce planning. and at the heart of how we serve our largest clients is TalentSuite, powering our work and enabling better people decisions at scale. In fact, more than 90% of our marquee and diamond accounts have an active TalentSuite subscription today. I couldn't be more excited about the evolution and the trajectory of our firm. Today's Korn Ferry has a unique ability to serve our clients across the entire talent spectrum. Search is about identifying talent. Workforce solutions is scaling that talent. And talent and organizational solutions is unlocking their potential. There's no question that technology will continue to play a significant role in the future bridging the imbalance of supply and demand of labor. but it's not technology alone. People are the catalyst for organizational success. Human beings, not human doings. It's a belief that defines who we are and that's why Korn Ferry is in the people business. With that Bob, I'll turn it over to you.

Great, thanks Gary and good afternoon and good morning everyone. Our financial performance continues to steadily improve and outpace the broader industry. In the first quarter of FY27, our fee revenue grew for this sixth consecutive quarter with strong earnings growth and steady profitability. Our improving performance in this ever-changing business environment really continues to underscore both the effectiveness of our strategy, the hard work and talent of our colleagues, and our operational excellence. Before reviewing the quarter in detail and as we announced on our fourth quarter earnings call for fiscal year 26, we are now reporting our financial results of the company in three geographic segments, the Americas, EMEA and APAC. This new reporting structure aligns with our We Are Corn Ferry go-to-market initiatives and actually with how our clients engage with us. To assist with the transition from a global solution focus to regional geographies, the slides posted in our investor presentation include three new solution groupings within each geographic region. The three new solution groupings are search, which is the old executive search and professional search, talent and organizational solutions, which is comprised of consulting and digital, and then Workforce Solutions, which is comprised of RPO and Interim. Now turning to our first quarter performance highlights. Estimated remaining fees under existing contracts grew 14% year over year to 1.92 billion, led by global new business growth in Workforce Solutions. Our internal business referral rate increased to 29.4% of consolidated fee revenue. It's up by about 300 basis points year over year, and our marquee and diamond accounts remain steady at about 40% of consolidated fee revenue. Now, both of these metrics really demonstrate the fee revenue synergies we're creating with our We Are Korn Ferry go-to-market activities. Our consolidated new business grew 12% year over year, and fee revenue grew in all regions and all industry groups. Fee earner productivity, which we measure as new business per average fee earners annualized, grew year over year in all regions. Now I'll talk a little bit about the company results. Related fee revenue grew 7% year over year to $756 million, again, marking our sixth consecutive quarter of growth. Earnings and profitability also remained strong. Adjusted EBITDA grew 8 million or 7% year-over-year to $128 million. Adjusted EBITDA margin was flat year-over-year at 17%. And adjusted diluted earnings per share grew 12 cents or 9% year-over-year to $1.43. As previously mentioned, our estimated remaining fees under existing contracts were $1.92 billion at the end of the quarter. And we estimate about 56% or $1.1 billion will be recognized in the next four quarters. And the remaining 44% or $835 million will be recognized beyond the next year. Turning to our regional results, fee revenue in the Americas grew 9% year over year to $442 million. led by growth in search and workforce solutions. EMEA fee revenue continued to strengthen, growing 4% year-over-year to $228 million. Growth was broad-based with strength in all solution groups. And APAC fee revenue inflected to growth in the first quarter, reaching $87 million, up 1% year-over-year led by search. Finally, we continue to maintain a disciplined, balanced approach to capital allocation over the quarter. During the quarter, we paid $30 million of dividends and invested $15 million in capital expenditures. In the future, we will be inclined to use investable cash for the reduction of debt associated with the acquisition of AMS. However, we will also closely monitor our share price and use capital for that if we find that more attractive. Turning to our outlook for the second quarter of fiscal 27, assuming no further changes in worldwide geopolitical conditions, economic conditions, financial markets and foreign exchange rates, and including the addition of AMS, now it's only for two months, September and October, our second quarter fee revenue is expected to range from $860 million to $878 million. Our adjusted EBITDA margin is expected to range from 16.8% to 17.2%. And adjusted diluted earnings per share are expected to range from $1.30 to $1.40 per share. We have a page in the investor deck and provided some guidance assumptions and you'll find adjusted diluted earning per share includes the net after-tax impact of the two months of incremental intangible asset amortization, incremental net interest expense and incremental shares issued in connection with the acquisition of AMS. In closing, we remain focused on executing our We Are Corn Ferry go-to-market initiatives, which are driving deeper More durable client relationships. Additionally, with the recent addition of AMS to the Gorn Ferry family, we will strengthen our position in RPO and interim while broadening our capabilities into contingent workforce solutions and early career and campus recruiting. AMS has a substantial backlog of multi-year contracts and long tenured client relationships. Going forward, it is our goal to deepen the value of those client relationships, introducing clients to all that Corn Ferry offers. Together with AMS, we are a much stronger company with greater capabilities to drive client business performance through their most precious asset, which is their people. With that, we would be glad to answer any questions you may have.