KFY

Korn Ferry Q1 2026 Financial Summary

Business Context and Reporting Period

This summary covers Korn Ferry's (KFY) Form 10-Q for the quarterly period ended July 31, 2025 (Q1 of Fiscal Year 2026). Korn Ferry is a global consulting firm specializing in talent and organizational performance, operating through five solution areas: Consulting, Digital, Executive Search, Professional Search & Interim, and Recruitment Process Outsourcing (RPO). The company reported 52,390,986 shares of common stock outstanding as of September 3, 2025.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Fee revenue increased 5% year-over-year (YoY), driven by growth in Executive Search (up 8%) and Professional Search & Interim (up 10%). Executive Search EMEA and APAC saw significant volume increases.
• Profitability: Net income attributable to Korn Ferry rose 6% YoY. Adjusted EBITDA increased 8% YoY, with margin expansion of 50 basis points.
• Expense Dynamics: Compensation and benefits expenses increased 2% YoY, primarily due to $12.5 million in severance-related costs from layoffs. This was partially offset by an $18.3 million decrease in performance-related bonus expenses.
• Cash Flow: Operating cash flow was negative $237.4 million, a seasonal outflow primarily attributed to the payment of annual bonuses earned in the prior fiscal year. Cash and cash equivalents decreased by approximately $322 million during the quarter.
• Debt Restructuring: On July 1, 2025, the company replaced its prior credit facility with a new $850 million senior secured revolving credit facility with Wells Fargo, maturing in 2030. No borrowings were outstanding under the new facility as of July 31, 2025.

Guidance, Outlook, and Risks

• Capital Allocation: The company continues to prioritize growth investments, followed by returning capital to shareholders. A quarterly dividend of $0.48 per share was declared on September 8, 2025. As of July 31, 2025, $83.9 million remained available for share repurchases under the current program.
• Tax Legislation: The "One Big Beautiful Bill Act" enacted on July 4, 2025, modified certain tax provisions. The company reflected the impact in its deferred tax balances, though it did not materially affect the effective tax rate for the quarter (27.2%).
• Risks: Key risks include global economic slowdowns, inflationary pressures, geopolitical tensions, and the ability to attract and retain qualified consultants. The company noted that a deterioration in economic conditions could negatively impact demand and operating cash flows.
• Unusual Items: Adjusted EBITDA excluded $1.5 million in integration/acquisition costs. The company also noted accelerated depreciation related to the planned sunset of its legacy Digital platform in favor of the new Korn Ferry Talent Suite.

Investor Verification Checklist

• Seasonal Cash Flow: Verify the impact of the $237 million operating cash outflow, which is largely attributed to seasonal bonus payments, against future cash generation capabilities.
• Severance Costs: Assess the sustainability of the $12.5 million increase in severance costs and whether this indicates a broader restructuring trend.
• Days Sales Outstanding (DSO): Monitor the increase in DSO from 58 days to 64 days, which contributed to higher receivables and working capital requirements.
• Debt Covenants: Confirm continued compliance with the new Credit Agreement's financial covenants, specifically the consolidated secured net leverage ratio (max 3.75:1).
• Digital Transition: Track the progress of the transition to the Korn Ferry Talent Suite and the associated accelerated depreciation expenses.