Korn Ferry Q3 FY2026 earnings call

Company achieved fifth consecutive quarter of accelerating year-over-year fee revenue growth. Revenue up and costs down over last three years, revenue per headcount increased by almost a third. Transformed into one business with unified mindset, focusing on client centricity. Marketing accounts outperformed, new business referrals at near high. Subscription and licensed new business grew 30% y-o-y. Average hourly bill rates for consulting and interim grew by 2% and 15% respectively. Regions: Americas up 6%, EMEA up 13%, APEC down 2%.

Consolidated fee revenue grew 7% to $717 million. Marketing accounts contributed 40% of total revenue. New business referrals were 27.2% of consolidated fee revenue. Subscription and licensed new business grew 30% y-o-y, accounting for 43% of digital's total new business. Subscription and license fee revenue grew 8%. Americas fee revenue up 6%, EMEA up 13%, APEC down 2%.

Expect fee revenue in Q4 FY26 to range from $730 million to $750 million. Adjusted EBITDA margin to range from 17.1% to 17.3%. Consolidated adjusted diluted earnings per share to range from $1.34 to $1.40.

Risks include impact of AI, labor market imbalances, geopolitical conditions, economic and financial market uncertainties, and potential negative impact from Middle East conflict.

Q: How do you see AI impacting Korn Ferry?

A: AI will allow efficiency, focus on high-end labor, not disintermediate high-end talent, create more opportunity.

Q: Attribute to TalentSuite impact?

A: Talent suite had some impact, soft launch in Nov, harder in Jan, front-of-house colleagues to target clients.

Q: Tech spending outlook?

A: CapEx run rate around $80-$85 million, likely drop in FY27, may lean more on buybacks.

Q: Interim business demand?

A: Saw slight pickup, temp penetration rate low, investment in Europe interim solution outperformed.

Q: Sales cycles and client spending?

A: BLS numbers not great, new business hit all-time high in Oct and Dec, 44% of consulting new business over half a million.

Q: Digital side performance?

A: Flat y-o-y constant currency, need to continue enterprise-oriented sales, monitor win-loss rate and backlog.

Q: Consulting business strengths?

A: Around transformation, org strategy, assessment and succession for AI-ready talent.

Q: Margin expansion?

A: Depends on M&A, investment horizon 16-18%, headcount per colleague up 35% over 3 years.

Q: Long-term efficiency and AI?

A: Labor force expected to be smaller by 15% in 5-7 years, AI in first inning, behavioral change needed.

Q: TalentSuite pricing?

A: Based on size of company, number of seats, existing client status.

Q: Consulting margins down?

A: Fee revenues attracted more bonus dollars, putting downward pressure on margin.

Q: Client behavior change expectation?

A: Uncertain, elevated oil prices negative, 90 days needed for line of sight beyond oil.