In addition to the strong quarterly report, KFY also announced that it is re-branding the company, which involves marketing it under the single brand Korn Ferry.
Taking a closer look at the quarterly results and guidance, KFY reported EPS of $0.80, beating consensus by $0.10, and increasing by 29% year/year. This followed a $0.12 beat last quarter with EPS growing by 32%. Looking further back, KFY has now strung together five straight quarters in which it has exceeded analysts' top and bottom line expectations.
For this quarter, operating margin significantly improved, coming in at 13.3% compared to 8.1% in the year ago quarter. This was due to higher fee revenue, partially offset by increases in compensation and benefits expense as average headcount ramped up by nearly 5%.
On the topic of revenue, growth has also been picking up, accelerating from 0.6% in 4Q17, to 6.8% in 1Q18, then 17.2% last quarter, and 17.1% this quarter. KFY's business has been segmented into three brands: Executive Search, Futurestep, and Hay Group. Its growth has primarily been driven by its Executive Search (+17.5%) and Futurestep (+22%) names.
The company is now planning to use the single Korn Ferry brand to help accelerate its market positioning and to bring more client awareness to its range of talent management services. For instance, the Hay Group, which was a FY18 acquisition, focuses on integrated go-to-market activities, which KFY says was a key driver to the 13% growth in fee revenue for FY18. This led to the decision to further integrate its go-to-market activities under the single Korn Ferry name. In the meantime, KFY will discontinue the use of all sub-brands (Futurestep, Hay Group, Lominger).
Finally, turning to its guidance, KFY is forecasting EPS of $0.67-$0.75 vs. the $0.66 consensus on revenue of $450-$470 mln, well ahead of the $430.4 million consensus.
In sum, business is clearly robust for KFY and management is quite bullish on its prospects for the year ahead. Its initiative to re-brand the business under one banner should also help to streamline operations and to create better brand awareness as it will no longer be diluted under a few different names.