KFY - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen thank you for standing by and welcome to the Korn/Ferry Second Quarter Fiscal Year 2018 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 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 will be reviewing with you today.

call your the Mr. turn I over host to Before cautionary first investors. Gary me a statement Burnison, let read to Certain statements constitute made Litigation those the relating in of Reform the call future meaning plans today Act performance, of and Private goals the forward-looking XXXX. within to statements Securities such as

differ forward-looking future such are risks from the to cautioned a materially Although such place believes periods statements. on or based undue of control. are expectations the are company on Actual and beyond not in results reasonable may in reliance expected because currently reflected statements assumptions, which those company’s uncertainties investors the desired of number

quarterly reports concerning relating company to with fee filed in Additional and risks may XXst. the some company’s soon of can be uncertainties company adjusted the the measures the as SEC, for such financial including to fled October ending amounts, be the EBITDA report Also constant currency And and release presentation non-GAAP XXXX. the for such fiscal today found periodic quarter comments by information EBITDA. this report annual reference the revenue, and the adjusted in

turn the in concerning sir. website earnings Both financial to Burnison. comparable Please reconciliations Additional measure conference are company’s With ahead, measures, posted to presentation the which I’ll release go of over Relations financial the directly of is at Investor most these information relating section including to call. our contained the host and GAAP this the that, Mr. in www.kornferry.com.

Gary Burnison

this profits XXX million. just that’s XX%, revenue in say fee is I’m colleagues solid, at history. tell I you generated $X.XX, in adjusted about best the thank million in to is first, $XX to adjusted Okay, you -- was we quarter our that EBITDA up say was To top-line the absolutely will quarter, understatement. about everybody. company’s results just want is and which was the were But proud EPS thank a in firm roll, on The an why. Because I Korn/Ferry you

the Europe XX% in Since Korn/Ferry up Asia was X%. quarter. about a industry day XX% actually, it’s an three financial business cover a that almost XX%, grew so still Asia America two tell organizational It’s spectacular, was been got an has And although and do, the perspective, about from into absolutely not of consulting or up will service up I of this to about two years doubt and years has work to was up the and ball, was North Hay involved completed days. Group you acquisition we is that again firm. changing. lot no it. been there we to

a superior that’s that elements strategy talent, performance unique. without comes does Well and client did, and clients helpless strategy, our we Korn/Ferry make but their firm our is with is and what makes for that’s we it’s that’s success client strategy And essential it combined they strategy what to where can sound talent without struggle hopeless. mean? a often stick. what most And to Combining in. talent So, develop drive

so, And business. to two there our really aspects are

talent a hire company both a outcomes strategically we've growth years repositioned made design First, strategy. help I their the the The as relentless over ahead. as organization, execute platform and aligned The the our well but as think I shape have need client our people. And to the their made investments have develop our to accelerate we think structure, that and in roles, companies impact. our internally we're bringing providing year forever notable select that performance they secondly, not how only help responsibilities compensate, as making developing onboard organizations well towards on motivate the and acquisitions solutions focus enhanced they and business they talent we've the we that the

I'd So, firm people leave we're that going lives calendar enter and that changes we to organizations commitment peoples' potential. as to XXXX consultancy my continue enables the this there. only to exceed say comments and organizational building right their preeminent I'll our strategic

So, I'm Greg Rozek joined Kvochak. with that, Bob here with and

I'll So, you Bob. to over it turn

Bob Rozek

afternoon thanks Great Gary good and everyone.

As usual, to few a I'm start key going with highlights.

acquisition the First strongest year-over-year growth revenue reached is $XXX three approximately actual year-over-year high XX% of second rates step of execute the at million growth. and second X% revenue XX% currency. business the grew and search over strong talent businesses, and as Globally foreign fee currency all-time Gary mentioned, future achieving the approximately quarter respectively. segments that's in all was lines XX% nearly which in an major constant Growth our year-over-year fee with at by in quarter

Hay For XX% talent larger the which new not executive was as Group, the of in the activities broad growth only in our with growth We're and Asia-Pac we search, XX% go-to-market X% the of in X%, and Europe fee second focus but America, that regions based also pleased reflects addition our North with growth revenue and well. year-over-year quarter respectively. on solutions saw

executive over we positive Second, impact. at Group. are sequential Hay currently several Many consultants new to a and invest in growth. for basis, On a we the of new another XX earners hired quarters onboarded XX of have those additional last quarter X the the continue fee search making net the we in an quarter real

fiscal three We in contributed revenue which of to in the have record positions all for our quarter business not us record overall half very business well quarter only but the new lines of of 'XX. second

with XX% an compared our million our quarters contribute as productivity few Gary quarterly new the to ramps. next to $XX.X third hires these in dividend payment finally, stock. the adjusted then We to improvement second of quarter quarter. And mentioned, repurchase return of year's the reached A their last EBITDA and as growth further to shareholders continue second capital over to the we our of expect

million base and $XX now share diluted about outstanding last use million authorization. of quarters of $XXX our we we've the shares, X our five about million Over fully repurchased X.X% approximately have that’s

balance was in up search business a approximately awards new XXX second in the and wins achieved finally, business growth in second new quarter segment quarter search million that’s in consolidated And in million. Now, first turning record business some about approximately Similarly, second $XXX arrangements XX% And end second by about driven securities compared of Asia. and marketable about to quarter, amounts to $XXX up cash year-over-year. was high trends, America, quarter Again, side executive executive the year-over-year. This includes the reserved Group deferred existing reached and continue and for $XXX Hay new the our to comp in second $XXX in the that’s Futurestep million business of of with a In for high. and about will XX $XX fiscal the is majority was million, and over million, Europe second for RPO coming the that of client up new measured of that’s million to an then single and record new excluding quarter total total RPO cash the up globally improve then about all-time when and search wins. strength in is relationship about realized million double-digit bonuses, client expansion business new four XX about strong X.X North that $XX accrued you relates investable on an then five relationship At ‘XX. years. be million, million were an quarter for year-over-year. exciting an XX.X and And million revenue is customer XXX extension to that is of

of outstanding. on diluted As the quarter of per per our second of had $X.XX. fully adjusted And $X.XX share earnings debt share And about year-over-year. were then coupled GAAP XX.X% basis was finally, million end a the quarter, diluted $XXX off earnings we in

Now detail. segments I’m review who it going to over little with to that, in operating Greg, more a will the turn

Gregg Kvochak

thanks Okay, Bob.

financial XX firm’s executive dedicated the of second X.XX X which Europe in The up quarter and pace search a executive part to was practice the $XX.X technology and second resulting the in million was of deferred fee North end respectively. in search second the practice in of XX%, by growth $XX.X results due a the strong and assets or up the of recent which life consultant approximately and quarter measured up the This goods currency. marginally ago, second when to year-over-year quarter. practice offset achieving double-digit service a quarter executive second a of X,XXX, per million science at driven the actual growth fiscal for and in our in XX% specialty year-over-year worldwide in revenue in EBITDA search practice worldwide was XXX, was consumer million the year-over-year number segment and and healthcare year-over-year. the and was up rates growth which in of global opened hiring at quarter strength XX% Our year X% executive by practice. which at quarter measured of value second consultants year-over-year Annualized mixed X% was from XX% ’XX. expense sequentially. revenue, XX% up plan. fiscal new and practice, Regionally compared quarter adjusted search the flat second ‘XX new were XX%, in in assignments in the America, was compensation second up exchange to both By was the second up industrial the fee was which in in our growth record XX% was up of Consolidated fee production higher part broad-based revenue growth the number [$XXX.X] change million, consultants quarter due back of compensation continued and X% up quarter constant total down Compared Asia-Pacific, up was is to the recruitment

adjusted fiscal these compared quarter As North market in expense quarter as second or executive search. consolidated search in recorded in ‘XX and XX.X% second executive affect fiscal for ‘XX. assets was primarily decreases or XX% to losses compensation in the are driven of EBITDA past America margin of in the The quarterly increases gains the

driven Group, the activity broad-based primarily Latin $XXX to up seasonally revenue revenue quarter record improving turning and second In achieved new fee -- was double-digit measures America. a fee which in currency. X% by and is fee and the of Hay quarter. growth Europe, Asia constant million drove Hay X% business year-over-year growth at in strong Pacific Now Improvement where Group

year-over-year. EBITDA in Group for the second quarter. quarter mentioned, strong EBITDA business improved consultant for previously adjusted Hay was new margin business the second improvement the each last awards the of over have measured several new million improve quarter in in the remained As Despite solid. quarters, and sequentially approximately sharp and adjusted of increase for Group month staff saw XX% Hay Further we hiring were with the an profitability XX.X%. the earnings X% In year-over-year Group an the Hay $XX.X awards

the which second turning which investments of million earnings with quarter $XX.X generated Futurestep delivery in to fee also were to of achieved $XX.X both nearly to up the Futurestep Finally, Futurestep was XX% million, strong and growth. another year-over-year, second XX.X% which balance capacity, future double-digit In continues EBITDA up support of quarter achieved EBITDA revenue of quarter margin year-over-year.

back the to Now, third our outlook fiscal call to over I quarter discuss the for ‘XX. will Bob turn

Bob Rozek

Good. Thanks, Gregg.

and quarter. November just of previously year-over-year strength the executive second slower business October quarter new operating which in new respectively month of search all month XX% segments, third seasonally up for business the September year-over-year. of also were the activity monthly our in by ahead and of and ramped in up we discussed, was As awards our XX% for Globally

As rebound prior low we awards business business in seasonally new search in trough new years, expect then January. with to consistent monthly to patterns sequentially a peak remain quarter through December a executive

For results weaker holidays the the clients and quarter Hay during time backlog in a both Group, typically is new revenue also as new as with the less win quarter for to time execute third off business assignments. seasonally well as year-end

over ramp up hires. business as business potential during awards both search quarter do business the drive consultant as month remain new third regards the up to the we Also, expect in many well Futurestep, secured the the and new year-over-year. second should previously new both month the third mentioned, in from business continued pipeline XX% recent our strong awards the contract the With productivity quarter each Group Group and of of quarter quarter. the However, as second in Hay to under and Hay continued opportunities strong in of improved of and growth was November benefit

the of a our are in As the all XX second of up at search mentioned, we the to operating quarter -- quarter select end the staff year-to-date in earners support basis. continued previously consultant Group hire in on counts second we and At executive segments. XX net fee and our

the will hire bill pressure usually short third term As earnings quarter. capacity immediately many term full create will slower is the new at in case, downward near especially and not margins of these consultants in on our and therefore seasonally

$XXX million these foreign and quarter earnings and Now in in consolidated we'll million you million $X.XX to and we tax earnings financial have. $X.XX. estimate include from worldwide factors from by likely 'XX range with per per of in And consistent diluted glad bonus exchange And third lines considering questions amortization to third consolidated then remarks that fiscal our third adjusted fully to results share of quarter we acquisition. for all assuming to $X.X any be conditions our the rates range $X.XX expect quarters, U.S. Hay under quarter $X.XX. the U.S. prepared our our GAAP answer in costs, the as include the and retention growth $XXX steady When we revenue to conclude law, the markets with will Group approximately our remain economic business acquisition you diluted range and costs measured finally, related share prior that, be that we'll of of of as these the to the expect financial to existing integration with fee

Operator

SunTrust. Tobey [Operator sir. Please And to Alright, go Sommer thank Instructions]. line you. ahead, go we from of

Tobey Sommer

us. growth the light the in of to longer-term goals with have nice Gary, of -- and for ROIC kind share question wanted you that Thank kind improved with a results of do start on trajectory. you. returns you finding off can

those have back quarters You view don't bunch and improving stock a or returns? is curious of on view should are your buying what how just you we

Gary Burnison

in And maybe be Well on you have we gate XX%, where least goals mean, of that's kind ROIC. the for at to around would put we But I we expect are do depends the clearly XX%. that cycle. XX% obviously that it.

Tobey Sommer

us color us and the think you you can overtime? a product on in that And how could give maybe product business quarter grew update licensing how on Okay. that be what the in

Gary Burnison

reality that us. at could that opportunity is to at grow But people be I there didn't on is to It all. one companies changes some hard to offering business. taking And people, The will the scalable been is of other the work pay pretty of really develop be. that And really things actually we've second a experience we've have making the the look still frankly, really And promise. dream certainly think terms I that couple it. substantial we’re believe as quite there. work. or a people really very, opportunity double the use platform there, in do interface, to started people, struck some a strongly has have Number one. is is and very But business to the number got what that create to making opportunity to to in IP we it and customer absolutely And how hire assess that the deliver to they going able reality. overtime. that we’re That's triple a to

the we but the some we from well locked of continue talent But there, as develop the for as absolutely that business, We’re are saw than And talent in more looking opportunity some also in is pricing do. to pricing work outside. that at of a to augment to year. the business they that have

Tobey Sommer

Okay.

you have this year plans, calendar pretty aggressive fiscal]. in Your been the hiring [into

generating rate quarters. staff see look growth internal kind the of a you moderating your out bit? the over you of several Do As fee next

Gary Burnison

broad people certainly are it’s would been We very we that not brought We brought been experience. -- and have management aggressive we have Well, based. account it’s what in that solution architects. call professional we people in

to I it two been quarters. level aggressive. next one So, for anticipate has not of would same the that aggressiveness

product We’ve is grown to kind reality the expense lot substantially. capacity. believe I still have And base frankly, work capacity, so re-collaborate quite got to think of we’ve this there. a a business. do we of that I got is our

So, in going I nine reasons, be was say of not as as growth months. it’s those back think to it for going

Tobey Sommer

then and the questions I’ll back other Two get in queue.

the offset sequentially seasonal for, we that will change? just quarter, you look bit October? Hay Or next a after period mission kind be into guided recent one a revenue As September, kind or perhaps little seasonal strong you were would down of headcount traditional of in

Gary Burnison

Yes.

this you X, a what in hours mean pretty I don’t without impossible the in business number. it’s it’s reduction the impossible, product billable a I in big it's now. X think of in lose know, to time. I quarter, days, It’s lift substantial almost X, because if

So, really sequentially. for make-up there is just no way that to

Bob Rozek

would to our Bob. And still ramped sequential fully say, all going you’re QX. to are up, folks see of when I this a is Even QX drop

For that the that quarter that a revenue, of during of for seasonally effect quarter. because activity well is products as happens lot reason Gary just renewal a QX high there articulated is

Tobey Sommer

for any cash thoughts for Okay. law preliminary taxes? mean your Last question do me. what tax the Bob changes could working have on

Bob Rozek

Yes.

we’ve think, see will but wait come settles I we view. point done out point, of and Tobey, to at where internal with until would some analysis, we formalized more prefer a everything down that I

Operator

Tim And Blair. you. of from go Please line now Thank McHugh William to ahead.

Stephen Sheldon

we more are getting talent there? the with improving mostly generally attribute the comfortable you you clients provide value it for or on spend Group, Would towards Hi, Hay Yes. my on you the think to guess, guess, the more and hiring that? strategy Thanks driving factors generally about first, the and questions, saw you it’s should I great for Tim. Sheldon Stephen underlying I taking acceleration results. how rolling seeing

Gary Burnison

new no an for that doubt that really, -- is have But, the don’t really look, in leader team has we about we impact the have I sure, business it. have a good. -- Look, we had

And impactful, quarters so, assignments. last over orient tried more have we the to towards to several push larger ourselves

push to try a the solution towards organization mentality. we Secondly,

actually that’s things. I a on the put big So, can that would or Obviously, develop outside, you really been plus. -- attribute the augment from within don’t points to to talent board. I those it But, there’s enough time to the would extent I think from

attribute would se. talent So, I three things other the kind per than new to of those

Stephen Sheldon

And then, Futurestep. the jump revenue absolute in sequential in

of the this about think search? trends the we you going view also, revenue RPO kind kind was quarter what itself, I As contribution during then, absolute breakdown kind of between professional guess, XQ would sustainable? and forward, as And quarter the versus in being of

Bob Rozek

Yes.

So, I expect you would generally at patterns a year. historical that this in say, flatter, to even quarter pattern little and we third if year-end back again because look would and down you from second quarter, go the holidays, is exist of same Futurestep, the the

you the at If business RPO. is single XX% the and XX% look business, go search, roughly

Operator

Baird. from Thank And line you. Mendez of to go ahead. Please now Greg

Greg Mendez

for well, still is and look This I Hi. Thanks productivity, consultant Greg adding nice ramping. pickup you results. Mark question. really my guess, on for still in at first, they search, are Nice taking are even executive performed Marcon. additions, we with if

thoughts -- just are quarters, So, thinking get next any couple like goes? X.X X.X thinking that to -- in million, I think ramping just mean, you of around productivity how how million, that’s here where about you back over

Gary Burnison

say rising at where million, Well, you good a thing look hope I $X.X like out Wages that I things rising. X.X that would wages are mean, Maybe we be I million, everybody. not. would look, why appears the But, think, is a that I if point maybe -- it at for even right more way at could play will now,

think something we would tend million $X.X $X.X Yes, this like like So, that. yes, quarter I to million. were

not -- we $X.X think -- too reality. like ourselves becomes more X And if would a as we rather think, yourself to could it or see I or think as possibly X million. for I that just X, sure, possibilities, one So, firm, being one you ourselves that I those integrate the are than I integrate

Greg Mendez

of quarters, really Thanks. couple Great. How look early the stages, strong. we robust, being opportunity quarter of still is the still lot it were we as the nationally awards with does should next pipeline look how Also, new this think that Futurestep, over that? about the

Bob Rozek

Yes.

the the new pipeline remains we've Byrne pipeline seen a little when of the has it bit. wins, sort that Futurestep a it of has I changes maturity or think, I say, pretty new business the and advanced in the past strong, business, stage would

high remains completion maturity daughter of So, value the a level the or at is of probably but earlier. bit stage the little a proposal

Greg Mendez

new Okay, you're things trends are business seeing that is got it. into American improvement strong, How there? about that, like we that, the is And then, when North in within continued and think business, October. Group, trending Hay

Gary Burnison

We have.

to In certainly development. we’ve terms of nice particularly around wins, the and M&A seven-figure some got new high six-figure, wins, We've business, seen. talent

move the overall as towards the that's that -- the continue proposition, changes well. everything, hopefully portfolio, changes that So, I think it we as bigger value obviously to economics assignments,

Greg Mendez

was last the question. it continue like Great. quarter well with holding And noted last that up what then, Europe Brexit. was just mean, quicker that strength quarter despite sounds you too? a this Did Does well. out I UK -- was doing really going pretty still

Gary Burnison

The did. the is flagship business again We incredibly The got in performed the That of people outstanding. business well XXX the is quarter. Company. It UK there.

Operator

Riddick ahead. to Marc go Thank now Sidoti. Please you. And line from of

Marc Riddick

was seems wondering in could growth services the touch sequentially the a little comments financial about into deeper high was a and in financial the double of across it delve the that, pretty speaking wanted areas the Clearly, was bit that. on a And back bit I the little digits. evening, service. wanted if driving on just Good board the But touch a low to single but to to wanted financial much little certainly, the part UK. you of as what that everyone. services the was and to strength the maybe almost -- from We strength though UK space? all on your I But Hi. bit there touch

Gary Burnison

wealth you consumer probably, commercial well that insurance, would activity as part good in we those clearly of It only was. UK. seen not would management, expect, all as banking, as been equity. it, banking, I have say private was have the good Europe

from you within growth. across geographic going you’re to So, the it sectors. when at see sectors the And balanced in a also you’re find financial services, going to of look terms perspective, pretty strong relatively

Marc Riddick

just the talent touch are any could that there bit of looking if differences, acquisition. maybe then, little sources the maybe, you pipeline And acquisition the if on you’re a talent at, Maybe there, ago does it look six are are continuing nine you any to phases? to from months maybe folks different or gravitating all you Thank you. if than toward see just that

Gary Burnison

It really hasn’t changed no since the last changed call, but that. several over it about certainly quarters, has doubt

And HR firm. an continue the some are around organizational so, integrate firm, consulting people And the activity uptick certainly as ourselves strategy go have sources. big to of one in from an to we branded from we seeing seen providers, those four, we background,

Marc Riddick

last one then, thing. And

numbers was on new -- and give bit bit things account early of would little program I a the And Thank little as if of call of you. bit you touched wondering on wondering sort could into you that give could those was of the if the I on some past to the in being indicate update You were But maybe detail things. an -- touched stages a of of sort or two certainly there. progress? that well going

Gary Burnison

companies world look professional to the XX% XX% class about it’s firm, it you services would the from be XX% of portfolio. anywhere find, at Today, XX%. of you When

the portfolio. it would terms see we So see percent we at would of of the But, in in certainly, XX%. overall low-XXs we not it

of business the of I’m progress not contributors -- to we satisfied, kind but the I was a a versus amazing in have new impact Futurestep decade quarter. good can contemplate much ago. quarter say some really I’ll large these orders -- And from one in we that new for business just made to marquee the clients me think, how it’s account. with just of

Operator

continue. appears you. further there are Burnison, Thank please Mr. no questions. It

Gary Burnison

greetings Thanks, Okay. we our you on pass I as to you in you and thank say And of our obviously, shareholders colleagues, so everybody. Board. season look well the time want to calendar to forward our new the year, to Again, to and year. Special I to thank speaking everybody. to

Operator

gentlemen, this and one will the ladies at at Time midnight. today And be p.m. X.XX of running you. starting for ending day through for week, Standard available XXth, replay December Thank Eastern conference

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Korn Ferry (KFY) 6 Dec 172018 Q2 Earnings call transcript