Korn Ferry Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Melissa McMahon - William Blair & Company, LLC - Analyst : Hi team. This is Melissa McMahon for Trevor Romeo today. Thanks so much for taking my questions. Now, I know that you typically see a seasonal decline in the third quarter, but it'd be great to get any more color on your expectations for revenue trends by segment that you're including in guidance for the third quarter. And additionally, just how much revenue you are assuming in guidance from the Trilogy acquisition. Thanks.

Question: Melissa McMahon - William Blair & Company, LLC - Analyst : Great. I really appreciate that color and then maybe just to piggyback off of that, it'd be great if you could talk about the Trilogy acquisition and the opportunity that you see for interim business in Europe and just kind of what gave you the confidence to invest more in interim when you're still seeing a bit of a challenging revenue trend in that area. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 5:00PM, KFY.N - Q2 2025 Korn Ferry Earnings Call

Question: Melissa McMahon - William Blair & Company, LLC - Analyst : Great. Thank you both so much.

Question: Jasper Bibb - Truist Securities - Analyst : Sorry, I think I was on mute here. This is Jasper Bibb on for Toby. Thanks for taking our question. Just wanted to clarify some of the earlier comments. It sounds like the message is that demand is generally stable. And if I adjust for the working day has, when you talked about the Trilogy contribution, it seems like revenue is going to be effectively sequentially flat or maybe down a few million sequentially on a comparable basis in the guide. Is that a fair representation of what you're seeing in the next couple of months?

Question: Jasper Bibb - Truist Securities - Analyst : Right. That makes sense. And then could you maybe refresh us on the correlation between M&A and some of your demand streams? And if, how do you think things picking up on that front and '25 would potentially benefit your business?

Question: Jasper Bibb - Truist Securities - Analyst : Got it. Thanks for taking the questions.

Question: George Tong - Goldman Sachs - Analyst : Hi, thanks. Good morning. I wanted to dive a little bit into the digital business. On a constant currency basis, revenues in the quarter fell 5% year-over-year. I believe this is the first quarter we saw a year-over-year decline in a while, like over a year or so. Can you talk a little bit about some of the trends you're seeing on the demand side? What could be driving that inflection to a year-over-year decline? And when you might expect that decline to inflect to a positive growth.

Question: George Tong - Goldman Sachs - Analyst : Got it. Yeah, that's very helpful color. And then on the consulting side, you mentioned you're seeing larger contracts and as a result, slightly longer implementation times and that perhaps contributed to the 7% decline you saw on a constant currency basis year over year. Can you elaborate a little bit more about that on that, when might you expect the sort of the larger contract impact to begin to taper away and similar to the digital side, how would you characterize the demand environment for consulting?

Question: George Tong - Goldman Sachs - Analyst : Got it. Very helpful color. Thank you.

Question: Joshua Chan - UBS - Analyst : Hi. Thank you for taking my questions. Thing for a minute here. Do you think that the business is impacted by kind of a less labor turnover? Meaning people are staying in their seats for longer and there's less perhaps need for some of the services that you're offering or do you think that it's not as related to this labor turnover slowdown? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 5:00PM, KFY.N - Q2 2025 Korn Ferry Earnings Call

Question: Joshua Chan - UBS - Analyst : Yeah, thanks for that. And it is definitely really unusual. I want to kind of follow up on the green shoot comment because, I guess what do you make of the green shoots happening in the RPO business first, because normally you would think that maybe interim will see it first, but that's actually the most challenged business now. So how do you -- what do you make of, kind of everything being turned upside down a little bit?

Question: Joshua Chan - UBS - Analyst : Great. Yeah, thank you both for the color and good luck in the third quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 5:00PM, KFY.N - Q2 2025 Korn Ferry Earnings Call

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : Hey, good morning and happy holidays. Wondering if you can talk a little bit more about a couple of different dynamics. One, Bob and the whole team, you've done a great job in terms of, keeping the profitability up. I'm wondering if you can talk a little bit about some of the sources of the margin improvement, particularly in the areas where you've seen revenue declines. So, if I take a look as an example at professional surgeon interim, I think it's really a neat trick that you've been able to improve the profitability on an absolute basis, while revenue is down. And I'm just wondering what are some of the sources that you're -- that's driving your ability to do that, and to what extent are you -- is it back office function relative to front office functions or is it efficiency in terms of travel and real estate and things of that nature?

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : I was just wondering if it's related to, primarily the things we talked about in terms of the -- shedding some costs, particularly in terms of the back office functions and to what extent, it may end up being producers that you decide to that aren't at the levels that you want them to be or they're basically targeting, areas that you don't -- you're not as interested in. (inaudible)

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : Yeah, I mean, it really stands out. I was also just wondering, and I'm not trying to -- I mean, there's no way anybody is going to criticize, the margin improvement that's been spectacular. But the one thing I was wondering about is, are you seeing the same lift that you would have expected in terms of on the interim side, in terms of clients being more responsive because now, whether it's Lucas or whichever, or Patina, they're under the Korn Fairy brand. And therefore they can command, a higher level of attention both in terms of clients as well as recruits. Or was that -- is that not as powerful?

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : In that really impressive. That part is really clear. And that's been, Gary and Bob, I think, it's like I cover all of these companies and I clearly see that and I've been living it, and this has clearly been a very different environment than during the last 30 years that I've covered the space. So, everything that you said (technical difficulty) so, okay. And then on the consulting side, can you just talk a little bit about the new business trends because I hear you when you talk about the larger engagements and those take longer to unfold. But if -- how does that impact the new business trends in terms of the decline being a little bit greater on a constant currency basis? And are there any particular practices that you're seeing some softness in? Like, for example, if we take a look at, the DEI practice, I would imagine that that's probably a little bit softer than it was previously. But just anything that you can pinpoint to there and when would you expect to start seeing an inflection the consulting side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 5:00PM, KFY.N - Q2 2025 Korn Ferry Earnings Call

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : Great. And then can you -- Gary, you started off by talking about the new talent suite and bringing together. Can you just add more color in terms of like from a client perspective, what they would see and then how you think that ends up impacting the business just in terms of revenue and margins.

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : And so would you be able to go to this solution and or to whatever the user interface is and then would you still be buying for the drink, for the individual solution or would you basically have an annual subscription for all of the solutions?

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : Okay, great. And then Gary, you've been through lots of different cycles and elections. How do you think the recent change in the US is going to end up impacting things? I think most people are assuming that it's going to be a positive in terms of animal spirits and unleashing of the regulatory burdens. But I'm wondering how you see it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 5:00PM, KFY.N - Q2 2025 Korn Ferry Earnings Call

Question: Mark S. Marcon - Robert W. Baird & Co., Inc. - Analyst : Okay. Great. Appreciate all the comments and congrats in terms of the margins. That's fantastic.