10-Q: Korn Ferry Reports Strong Q2 FY26 Growth, Net Income Up 19%

Korn Ferry announced a 7% year-over-year increase in Q2 FY26 fee revenue to $721.7 million, with net income attributable to Korn Ferry rising 19% to $72.4 million.

Summary

• Fee revenue for Q2 FY26 was $721.7 million, marking a 7% increase year-over-year.
• Net income attributable to Korn Ferry reached $72.4 million, an increase of 19.0% compared to the prior year's quarter.
• Diluted earnings per share for Q2 FY26 was $1.36, up 19% from the year-ago quarter.
• Adjusted EBITDA grew by 7.0% year-over-year to $124.8 million, with a margin of 17.3%.
• Professional Search & Interim fee revenue increased by 17% year-over-year, primarily due to the acquisition of Trilogy International.
• Executive Search fee revenue grew by 10% year-over-year, driven by increases in North America and EMEA.
• The company recorded a $13.9 million gain from the modification of an office lease.
• Depreciation and amortization expenses increased significantly due to accelerated depreciation associated with the sunsetting of the Digital platform and replacement with the Korn Ferry Talent Suite.

Sentiment

Score: 7

Explanation: The company reported strong growth in fee revenue, net income, and EPS, indicating solid operational performance. Strategic initiatives like the new Credit Agreement and increased share repurchase program are positive. However, some segments experienced declines, and increased operating expenses (compensation, cost of services, depreciation) partially offset revenue gains. The decrease in cash and cash equivalents and increased cash used in operating activities are areas to monitor.

Positives

• Fee revenue increased by 7% year-over-year to $721.7 million in Q2 FY26.
• Net income attributable to Korn Ferry rose 19.0% year-over-year to $72.4 million.
• Diluted earnings per share increased by 19% to $1.36 in Q2 FY26.
• Adjusted EBITDA grew by 7.0% year-over-year to $124.8 million.
• Professional Search & Interim segment showed strong growth with fee revenue up 17% year-over-year.
• Executive Search segments collectively grew fee revenue by 10% year-over-year.
• A $13.9 million gain was recognized from the modification of an office lease, contributing to lower general and administrative expenses.
• The Board of Directors approved an increase in the quarterly dividend to $0.48 per share.
• The share repurchase program was increased by $250.0 million, with $325.8 million remaining available for repurchases.

Negatives

• Digital segment fee revenue decreased by 2% year-over-year in Q2 FY26.
• Executive Search Latin America Adjusted EBITDA decreased by 35% year-over-year in Q2 FY26.
• Compensation and benefits expense increased by $24.6 million, or 6%, in Q2 FY26.
• Cost of services expense increased by $14.4 million, or 22%, in Q2 FY26.
• Depreciation and amortization expenses increased by $11.9 million, or 60%, in Q2 FY26, primarily due to accelerated depreciation of the Digital platform.
• Cash and cash equivalents decreased by $245.385 million during the six months ended October 31, 2025.
• Net cash used in operating activities increased to $115.952 million for the six months ended October 31, 2025, compared to $105.187 million in the prior year period.

Risks

• Global and local political and economic developments, including inflation, trade wars, global slowdowns, or recessions.
• Competition in the consulting and talent acquisition markets.
• Geopolitical tensions and shifts in global trade patterns.
• Changes in demand for services due to automation.
• Dependence on and costs of attracting and retaining qualified and experienced consultants.
• Impact of inflationary pressures on profitability.
• Maintaining relationships with customers and suppliers and retaining key employees.
• Maintaining brand name and professional reputation.
• Potential legal liability and regulatory developments.
• Portability of client relationships.
• Consolidation of or within the industries served.
• Changes and developments in governmental laws and regulations.
• Evolving investor and customer expectations with regard to corporate responsibility matters.
• Currency fluctuations in international operations.
• Risks related to growth.
• Alignment of cost structure, including as a result of workforce, real estate, and other restructuring initiatives.
• Restrictions imposed by off-limits agreements.
• Reliance on information processing systems.
• Cyber security vulnerabilities or events.
• Changes to data security, data privacy, and data protection laws.
• Dependence on third parties for the execution of critical functions.
• Limited protection of intellectual property (IP).
• Ability to enhance and develop new technology, including artificial intelligence (AI).
• Ability to successfully recover from a disaster or other business continuity problems.
• Employment liability risk.
• An impairment in the carrying value of goodwill and other intangible assets.
• The impact of treaties or regulations on the business.
• Deferred tax assets that may not be able to be used.
• Ability to develop new products and services.
• Changes in accounting estimates and assumptions.
• The utilization and billing rates of consultants.
• Seasonality of business operations.
• The expansion of social media platforms.
• The ability to effect acquisitions and integrate acquired businesses, and resulting organizational changes.
• Indebtedness.
• The ultimate magnitude and duration of any future pandemics or similar outbreaks, and related restrictions and operational requirements that apply to the business and clients, and any related negative impacts on the business, employees, customers and ability to provide services in affected regions.

Future Outlook

The company expects to recognize approximately $333.8 million of remaining performance obligations in the remainder of fiscal 2026, $496.1 million in fiscal 2027, $269.6 million in fiscal 2028, and the remaining $191.5 million in fiscal 2029 and thereafter. The new Korn Ferry Talent Suite is scheduled for introduction in the third quarter of fiscal 2026. The company believes its cash on hand, funds from operations, and the new Credit Agreement will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, debt repayments, share repurchases, and dividend payments for the foreseeable future, assuming current economic conditions persist.

Management Comments

• Korn Ferry is a global consulting firm that powers performance, helping unlock the potential in people and unleash transformation across organizations—synchronizing strategy, operations, and talent to accelerate performance, fuel growth, and inspire a legacy of change.
• The world's most admired companies across every major industry turn to us—for a shared commitment to lasting impact and the bold ambition to Be More Than.

Industry Context

Korn Ferry operates as a global consulting firm specializing in talent and organizational performance. The company has expanded its capabilities to offer a broad range of services across the talent lifecycle, leveraging proprietary data, intellectual property, behavioral science, and talent intelligence. Its RPO services utilize advanced technology and AI-driven tools, reflecting broader industry trends in automation and data-driven solutions in human capital management. The company's Marquee and Diamond Accounts Program, which accounts for 39% of consolidated fee revenue, indicates a strategy focused on deep, long-term relationships with major clients. The filing acknowledges macroeconomic uncertainties, including inflation and potential recession, as factors that could impact demand for services and operating cash flows, aligning with broader economic concerns affecting the consulting and recruitment sectors.

Corporate Governance

Legal Proceedings

• Not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or results of operations.

Stakeholder Impact

• Shareholders: Benefit from increased dividends ($0.48/share) and an expanded share repurchase program ($325.8 million remaining), reflecting a commitment to returning capital and enhancing shareholder value. Strong financial performance (increased net income, EPS) generally benefits shareholders.
• Employees: Deferred compensation plans and stock-based compensation awards are part of employee benefits. The company's focus on talent and organizational performance suggests investment in its workforce. Past restructuring initiatives indicate potential for workforce adjustments in response to economic conditions.
• Customers: Continued expansion of capabilities and integrated solutions, along with the upcoming Korn Ferry Talent Suite, aim to enhance service delivery and meet complex client needs, potentially leading to improved client outcomes and satisfaction.
• Creditors: The company entered into a new $850.0 million senior secured revolving credit facility and was in compliance with its debt covenants, indicating stable creditworthiness and access to financing.

Next Steps

• Introduction of the Korn Ferry Talent Suite in the third quarter of fiscal 2026.
• Recognition of remaining performance obligations: approximately $333.8 million in the remainder of fiscal 2026, $496.1 million in fiscal 2027, $269.6 million in fiscal 2028, and $191.5 million in fiscal 2029 and thereafter.
• Adoption of new income tax disclosure guidance beginning in fiscal 2026 for the annual report.
• Adoption of new accounting update for costs and expenses in fiscal 2028 (annual) and fiscal 2029 (interim periods).
• Evaluation of the impact of the accounting guidance for measurement of credit losses for account receivable and contract assets (effective for annual reporting periods beginning after December 15, 2025).
• Evaluation of the impact of the accounting guidance for internal-use software (effective for annual reporting periods beginning after December 15, 2027).
• Payment of the declared quarterly cash dividend of $0.48 per share on January 15, 2026.
• Potential future common stock repurchases under the remaining $325.8 million share repurchase program.

Key Dates

Recommendation

Korn Ferry demonstrated robust financial performance in Q2 FY26 with significant year-over-year increases in fee revenue, net income, and diluted EPS. The company's strategic focus on integrated solutions and its Marquee and Diamond Accounts Program are driving growth. The increase in the quarterly dividend and the substantial remaining capacity in the share repurchase program signal confidence in future cash flows and a commitment to returning capital to shareholders. While there are some areas of increased operating expenses and a slight decline in the Digital segment, the overall positive momentum, strong balance sheet, and proactive capital allocation strategy make it an attractive investment.

Keywords

Korn Ferry, consulting, executive search, professional search, RPO, recruitment, talent acquisition, human capital, financial results, Q2 FY26, 10-Q, Adjusted EBITDA, dividends, share repurchase, Digital platform, Trilogy International acquisition, organizational strategy, leadership development, talent management, AI, corporate governance