Why Korn Ferry (NYSE: KFY) stock is under pressure

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Korn Ferry (NYSE: KFY) stock fell over 1.9% on 7th July, 2020 (as of 9:38 am GMT-4 ; Source: Google finance) after the company reported the net loss attributable to Korn Ferry of $0.8 million in the fourth quarter of FY 20 as compared to net income attributable to Korn Ferry of $50.3 million in Q4 FY’19. However, the company posted better than expected results for the fourth quarter of FY 20. In the fourth quarter, fee revenue for Executive Search has fallen 10% globally, RPO and Pro Search was down 9%, Consulting down 14% and Digital grew 14%, and all of that’s at constant currency. Cash and marketable securities were of total $863 million, and that’s up about $95 million year-over-year. The investable cash balance at the end of the fourth quarter was approximately $532 million, which is up about $150 million year-over-year. At April 30, 2020, the company had undrawn capacity of $646 million on the revolver. So the company has about $1.2 billion in liquidity to manage COVID-19. Furthermore, the company due to COVID-19 took cost actions that were targeted at compensation as well as G&A spend. And the company had initially reduced the cost base by about $300 million on a run rate basis.

KFY in the fourth quarter of FY 20 has reported the adjusted earnings per share of 60 cents, beating the analysts’ estimates for the adjusted earnings per share of 32 cents, according to Zacks Investment Research. The company had reported 10 percent fall in the adjusted revenue to $440.5 million in the fourth quarter of FY 20, beating the analysts’ estimates for revenue of $436.1 million. The decrease in fee revenue was mainly driven by the impact of COVID-19 on economies around the world, which was partially offset by fee revenue generated by the acquired companies in the Digital segment. Operating margin contracted to 5.0% in in the fourth quarter compared to 12.7% in the year-ago quarter.  The decrease in operating margin was mainly on back of the restructuring charges, net associated with the impact of COVID-19 and the decline in fee revenue in Q4 FY’20. The company delivered the Adjusted EBITDA margin of 15.8%, compared to 16.7% in the year-ago quarter.

Additionally, the Company repurchased 0.8 million shares, using $24.4 million of cash during the quarter.  Further, the Company has declared a quarterly dividend of $0.10 per share on July 1, 2020, which will be payable on July 15, 2020 to stockholders of record on July 31, 2020.

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