Korn Ferry 2Q15 Earnings Call Notes

Korn Ferry

Compared to the first quarter year ago, growth in our Executive Recruitment specialty practices was mixed in the first quarter of fiscal ’16. Worldwide growth was strongest in our financial services practice up 19%, life sciences and healthcare practice up 17% and our technology practice up 4%, while our industrial and consumer goods practices were down 11% and 7% respectively.

Professional staff utilization fell to 68% in the first quarter from a seasonally high of 74% in the fourth quarter fiscal ’15 and 70% in the first quarter fiscal ’15.

Thanks, Gregg. After a softer May, new business awards across all of our major service lines improved in June and July. An executive search global new business in both June and July rose to new highs. This trend was especially true in North America where market conditions have remained favorable and newly hired consultants have begun their ramp up towards full capacity.

August, which is typically one of the seasonally slower months for new business due to vacations, [indiscernible] was down compared to July. And if normal seasonal patterns hold, we would expect to rebound in executive search new awards in both September and October.

we remain fairly confident and bullish in our guidance but there is noise in China. We’re seeing are they going to raise rates in the U.S. We’re seeing problems down in Latin America and so we bear all that in mind when we come back to our guidance for the quarter.

on a constant currency basis, the average fees in search are essentially flatish. So they haven’t really grown. I think when you look at where we are in the cycle and so on. I wouldn’t expect there to be enormous uplift coming from average fees at this point, especially with currency over the next quarter.

The China business is about 2.5% of the firm. So it’s relatively small percentage but you know we do have pretty good line of sight. I think it’s really too soon to tell. In terms of my channel checks, there is nothing that would kind of ring an alarm bell here per se. We haven’t seen deterioration in their appetite for talent.

But I think that this is a business that is, it’s very, very fragmented. And quite frankly, there needs to be somebody who defines a category here. And just like when CEOs turn to McKinsey or Bain for strategic advice, they don’t have a firm to turn to when it comes to people advisory. And I think that that is the opportunity to define the category to be that firm and that is a multibillion dollar opportunity for us.

Again, it’s a little bit hard because we’re only eight days into September right and people are literally just back from holiday, so it’s hard to give a clean read on that. But I would say that, no, it doesn’t. Obviously, the next 30 to 60 days, we’ll have much better visibility on that question. But no, I don’t think that the feeling is significantly different.