KFY

Korn Ferry (KFY) Q2 FY2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended October 31, 2025 (Q2 of Fiscal Year 2026). Korn Ferry is a global consulting firm providing talent and organizational performance solutions across five solution areas: Consulting, Digital, Executive Search, Professional Search & Interim, and Recruitment Process Outsourcing (RPO). The company operates eight reportable segments and serves clients globally, with 350 Marquee and Diamond accounts representing approximately 39% of consolidated fee revenue.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Fee revenue increased 7% year-over-year (YoY) in Q2 and 6% YoY for the six-month period. Growth was driven by Professional Search & Interim (+17% in Q2), Executive Search (+10% in Q2), and Consulting (+4% in Q2).
• Profitability: Net income attributable to Korn Ferry rose 19% YoY in Q2. Net income margin improved to 10.0% from 9.0% in the prior year quarter.
• Unusual Items: Results were significantly impacted by a $13.9 million gain from the modification of an office lease, recorded in General and Administrative expenses. This non-recurring item boosted operating income and net income.
• Expense Trends: Compensation and benefits expenses increased 6% YoY in Q2, primarily due to higher performance-related bonuses. Depreciation and amortization increased 60% YoY due to accelerated depreciation associated with sunsetting the legacy Digital platform.
• Acquisition Impact: The acquisition of Trilogy International (effective Nov 1, 2024) contributed approximately $16.6 million to interim fee revenue in Q2.

Guidance, Outlook, and Risks

• Capital Allocation: The company maintains a balanced approach, prioritizing growth investments, followed by dividends and opportunistic share repurchases. On September 18, 2025, the Board approved an additional $250 million for share repurchases, leaving $325.8 million available as of October 31, 2025.
• Dividends: A quarterly dividend of $0.48 per share was declared on December 8, 2025, payable January 15, 2026.
• Debt Facilities: On July 1, 2025, the company entered a new $850 million senior secured revolving credit facility, replacing the prior $650 million facility. No borrowings were outstanding under the new facility as of October 31, 2025.
• Tax Legislation: The "One Big Beautiful Bill Act" enacted on July 4, 2025, was reflected in the tax provision but did not materially impact the effective tax rate (26.6% in Q2).
• Risks: Key risks include global economic slowdowns, inflationary pressures, competition, reliance on key consultants, and foreign currency fluctuations. The company notes that a 10% fluctuation in major currencies could result in a $16.4 million gain or loss.

Investor Verification Checklist

• Lease Gain Sustainability: Verify the impact of the $13.9 million one-time lease modification gain on operating margins and future comparability.
• Digital Platform Transition: Monitor the impact of accelerated depreciation on the Digital segment's profitability as the legacy platform is sunset and replaced.
• Days Sales Outstanding (DSO): Note the increase in DSO from 58 to 63 days; verify if this trend persists in future collections.
• Trilogy Integration: Assess the ongoing revenue contribution and integration costs associated with the Trilogy International acquisition.
• Share Repurchase Capacity: Confirm the remaining $325.8 million repurchase authorization and the company's commitment to returning capital amidst potential economic headwinds.