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Korn Ferry Announces First Quarter Fiscal 2023 Results of Operations

Highlights

  • Korn Ferry reports fee revenue of $695.9 million in Q1 FY’23, an increase of 19% (24% on a constant currency) from Q1 FY’22.
  • Net income attributable to Korn Ferry was $77.2 million in Q1 FY’23, while diluted and adjusted diluted earnings per share were $1.45 and $1.50 in Q1 FY’23, respectively.
  • Operating income and Adjusted EBITDA were $111.6 million (operating margin of 16.0%) and $132.2 million (Adjusted EBITDA margin of 19.0%), respectively, in Q1 FY’23.
  • The Company repurchased 370,000 shares of stock during the quarter for $22.4 million.
  • On August 1st, 2022, Korn Ferry completed the acquisition of Infinity Consulting Solutions, which will be included in the Professional Search & Interim segment in Q2 FY’23.
  • Declared a quarterly dividend of $0.15 per share on September 6, 2022, which is payable on October 14, 2022 to stockholders of record on September 23, 2022.
  • On May 1, 2022, Korn Ferry separated the RPO & Professional Search segment into two segments, Professional Search & Interim segment and the RPO segment.

Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced first quarter fee revenue of $695.9 million. In addition, first quarter diluted earnings per share was $1.45 and adjusted diluted earnings per share was $1.50.

“I am pleased with our financial results during the fiscal first quarter. We generated $696 million in fee revenue, up 19% (24% at constant currency) year over year. Our diluted earnings per share and adjusted diluted earnings per share were $1.45 and $1.50, respectively, and our Adjusted EBITDA was $132 million, representing a 19% margin,” said Gary D. Burnison, CEO, Korn Ferry.

“We are in a new paradigm as global organizations fight for growth and relevancy while facing economic ambiguity. Today’s workscape has never been more complex – an imbalanced labor market, skills shortage and a major shift in how and where people work. While cycles will continually change, the long-term premium on people endures. Strategy without talent is helpless and talent without strategy is hopeless. Korn Ferry is the firm that helps clients drive performance through synchronizing their organization, their strategy and their people.”

Selected Financial Results

(dollars in millions, except per share amounts) (a)

 

 

First Quarter

 

 

FY’23

 

FY’22

Fee revenue

 

$

695.9

 

 

$

585.4

 

Total revenue

 

$

703.1

 

 

$

588.1

 

Operating income

 

$

111.6

 

 

$

101.3

 

Operating margin

 

 

16.0

%

 

 

17.3

%

Net income attributable to Korn Ferry

 

$

77.2

 

 

$

74.8

 

Basic earnings per share

 

$

1.46

 

 

$

1.38

 

Diluted earnings per share

 

$

1.45

 

 

$

1.37

 

Adjusted Results (b):

 

First Quarter

 

 

FY’23

 

FY’22

Adjusted EBITDA

 

$

132.2

 

 

$

121.3

 

Adjusted EBITDA margin

 

 

19.0

%

 

 

20.7

%

Adjusted net income attributable to Korn Ferry

 

$

80.0

 

 

$

74.8

 

Adjusted basic earnings per share

 

$

1.51

 

 

$

1.38

 

Adjusted diluted earnings per share

 

$

1.50

 

 

$

1.37

 

___________

(a)

 

Numbers may not total due to rounding.

(b)

 

Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs when applicable. Adjusted results on a consolidated basis are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations):

 

 

First Quarter

 

 

FY’23

 

FY’22

Integration/acquisition costs

 

$

3.6

 

 

$

 

The Company reported fee revenue in Q1 FY’23 of $695.9 million, an increase of 19% (up 24% on a constant currency basis) compared to Q1 FY’22. Fee revenue increased in all lines of business. The increase in fee revenue when compared to Q1 FY’22 was primarily due to the continuing demand for the Company’s integrated service offerings and the acquisitions of Lucas Group and Patina (the “acquisitions”) in Q3 FY’22 and Q4 FY’22, respectively, which are included in the new Professional Search & Interim segment.

Operating margin was 16.0% in Q1 FY’23 compared to 17.3% in the year-ago quarter. Adjusted EBITDA margin was 19.0% in Q1 FY’23 compared to 20.7%, in the year-ago quarter. Net income attributable to Korn Ferry was $77.2 million in Q1 FY’23 compared to $74.8 million in Q1 FY’22 and Adjusted EBITDA reached $132.2 million in Q1 FY’23 compared to $121.3 million in Q1 FY’22.

Operating income increased due to an increase in fee revenue as discussed above. Partially offsetting this increase were increases in 1) compensation and benefits expense primarily due to increased headcount and performance-based incentives, 2) general and administrative expenses and 3) cost of services expense associated with the recently acquired interim business.

Adjusted EBITDA increased due to the same factors discussed above with the exception of integration and acquisition costs primarily included in general and administrative expenses.

Results by Line of Business

Selected Consulting Data

(dollars in millions) (a)

 

 

First Quarter

 

 

FY’23

 

FY’22

Fee revenue

 

$

166.5

 

 

$

148.5

 

Total revenue

 

$

168.7

 

 

$

149.0

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (b)

 

 

1,879

 

 

 

1,651

 

Hours worked in thousands (c)

 

 

459

 

 

 

426

 

Average bill rate (d)

 

$

363

 

 

$

349

 

Adjusted Results:

 

First Quarter

 

 

FY’23

 

FY’22

Adjusted EBITDA

 

$

29.6

 

 

$

26.8

 

Adjusted EBITDA margin

 

 

17.7

%

 

 

18.1

%

___________

(a)

 

Numbers may not total due to rounding.

(b)

 

Represents number of employees originating, delivering and executing consulting services.

(c)

 

The number of hours worked by consultant and execution staff during the period.

(d)

 

The amount of fee revenue divided by the number of hours worked by consultants and execution staff.

Fee revenue was $166.5 million in Q1 FY’23 compared to $148.5 million in Q1 FY’22, an increase of $18.0 million or 12% (up 18% on a constant currency basis). Growth in Consulting fee revenue continues to be driven by large workforce transformation initiatives delivered through our Organization Strategy, Assessment and Succession, and Leadership Development solutions. We also saw significant growth in Organization Design, Change Management, and Workforce Sales Compensation as clients aligned their structures to new market opportunities and addressed compensation and retention issues associated with labor market dislocation.

Adjusted EBITDA was $29.6 million in Q1 FY’23 with an Adjusted EBITDA margin of 17.7% compared to Adjusted EBITDA of $26.8 million with an associated margin of 18.1%, respectively, in the year-ago quarter. This increase in Adjusted EBITDA resulted from the increase in fee revenue outlined above, partially offset by an increase in compensation and benefits expense and cost of services expense, driven by higher salaries and related payroll taxes and performance-related bonus expense due to an increase in fee revenue and headcount.

Selected Digital Data

(dollars in millions) (a)

Digital leverages an artificial intelligence powered, machine-learning platform to help identify the best structures, roles, capabilities, and behaviors needed to drive business forward. This end-to-end platform combines Korn Ferry proprietary data, client data, and external market data to help make better, faster decisions about organizations, leadership, and people.

 

 

First Quarter

 

 

FY’23

 

FY’22

Fee revenue

 

$

83.8

 

 

$

80.7

 

Total revenue

 

$

83.8

 

 

$

80.7

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

331

 

 

 

297

 

Subscription & License fee revenue

 

$

29.6

 

 

$

24.4

 

Adjusted Results:

 

First Quarter

 

 

FY’23

 

FY’22

Adjusted EBITDA

 

$

24.2

 

 

$

25.6

 

Adjusted EBITDA margin

 

 

28.9

%

 

 

31.8

%

___________

(a)

 

Numbers may not total due to rounding.

Fee revenue was $83.8 million in Q1 FY’23 compared to $80.7 million in Q1 FY’22, an increase of $3.1 million or 4% (up 10% on a constant currency basis). The increase in fee revenue was primarily due to growth in Total Rewards and Leadership Development offerings as companies try to reward and retain employees in a changing labor market and invest in sales effectiveness tools to enable their commercial teams to maximize revenue growth.

Adjusted EBITDA was $24.2 million in Q1 FY’23 with an Adjusted EBITDA margin of 28.9% compared to $25.6 million and 31.8%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was due to 1) an increase in compensation and benefits expense, driven by higher salaries and related payroll taxes associated with the increased investment made on product development initiatives and an increase in the commercial salesforce and 2) general and administrative expenses. This was partially offset by higher fee revenue.

Selected Executive Search Data(a)

(dollars in millions) (b) 

 

 

First Quarter

 

 

FY’23

 

FY’22

Fee revenue

 

$

232.8

 

 

$

216.9

 

Total revenue

 

$

234.5

 

 

$

217.7

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

619

 

 

 

565

 

Average number of consultants

 

 

603

 

 

 

544

 

Engagements billed

 

 

4,133

 

 

 

4,175

 

New engagements (c)

 

 

1,682

 

 

 

1,745

 

Adjusted Results:

 

First Quarter

 

 

FY’23

 

FY’22

Adjusted EBITDA

 

$

62.2

 

 

$

61.6

 

Adjusted EBITDA margin

 

 

26.7

%

 

 

28.4

%

___________

(a)

 

Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.

(b)

 

Numbers may not total due to rounding.

(c)

 

Represents new engagements opened in the respective period.

Fee revenue was $232.8 million and $216.9 million in Q1 FY’23 and Q1 FY’22, respectively, a year-over-year increase of $15.9 million or 7% (up 11% on a constant currency basis). The increase in fee revenue was driven by an increase in the weighted-average fees billed per engagement. Fee revenue increased in North America, EMEA and Latin America with the largest increase in North America.

Adjusted EBITDA was $62.2 million in Q1 FY’23 with an Adjusted EBITDA margin of 26.7% compared to Adjusted EBITDA of $61.6 million and Adjusted EBITDA margin of 28.4%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the increase in fee revenue discussed above, partially offset by increases in compensation and benefits expense due to an increase in performance-related bonus expense and salaries and related payroll taxes due to an increase in fee revenue and headcount. General and administrative expense also increased in Q1 FY’23 compared to the year-ago quarter.

Selected Professional Search & Interim Data(a)

(dollars in millions) (b) 

 

 

First Quarter

 

 

FY’23

 

FY’22

Fee revenue

 

$

98.9

 

 

$

51.8

 

Total revenue

 

$

100.1

 

 

$

51.9

 

 

 

 

 

 

 

 

Permanent Placement:

 

 

 

 

 

 

Fee revenue

 

$

74.1

 

 

$

51.8

 

Engagements billed (c)

 

 

2,739

 

 

 

1,824

 

New engagements (d)

 

 

1,846

 

 

 

988

 

Ending number of consultants (e)

 

 

497

 

 

 

190

 

Interim (started in Q3 FY'22):

 

 

 

 

 

 

Fee revenue

 

$

24.8

 

 

$

-

 

Average bill rate (f)

 

$

122

 

 

$

-

 

Average weekly billable consultants (g)

 

 

463

 

 

 

-

 

Adjusted Results (h):

 

First Quarter

 

 

FY’23

 

FY’22

Adjusted EBITDA

 

$

29.2

 

 

$

19.4

 

Adjusted EBITDA margin

 

 

29.5

%

 

 

37.5

%

___________

(a)

 

In the first quarter of fiscal 2023, the Company changed the composition of its global segments. Professional Search & Interim segment represents the single hire to multi hire permanent placement and interim business that was previously included in the RPO & Professional Search segment. Segment data for Q1 FY’22 has been recast to reflect the division of the RPO & Professional Search segment into the RPO segment and Professional Search & Interim segment.

(b)

 

Numbers may not total due to rounding.

(c)

 

Represents engagements billed for professional search.

(d)

 

Represents new engagements opened for professional search in the respective period.

(e)

 

Represents number of employees originating professional search.

(f)

 

Fee revenue from interim divided by the number of hours worked by consultants.

(g)

 

The number of billable consultants based on a weekly average in the respective period.

(h)

 

Adjusted results exclude the following:

 

 

First Quarter

 

 

FY’23

 

FY’22

Integration/acquisition costs

 

$

2.5

 

 

$

 

Fee revenue was $98.9 million in Q1 FY’23, an increase of $47.1 million or 91% (up 98% on a constant currency basis), compared to the year-ago quarter. Interim fee revenue and permanent placement fee revenue increased by $24.8 million and $22.3 million, respectively, due to the acquisitions.

Adjusted EBITDA was $29.2 million in Q1 FY’23 with an Adjusted EBITDA margin of 29.5% compared to $19.4 million and 37.5%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the higher fee revenue discussed above. Partially offsetting this increase were increases in compensation and benefits expense driven by higher salaries and related payroll taxes and commission expense driven by increases in fee revenue and headcount associated with the acquisitions. Also partially offsetting the increase in Adjusted EBITDA was an increase in cost of services expense due to the recently acquired interim businesses.

Selected RPO Data(a)

(dollars in millions) (b)

 

 

First Quarter

 

 

FY’23

 

FY’22

Fee revenue

 

$

113.9

 

 

$

87.5

 

Total revenue

 

$

116.1

 

 

$

88.8

 

 

 

 

 

 

 

 

Remaining revenue under contract(c)

 

$

821.3

 

 

$

576.1

 

RPO new business(d)

 

$

148.4

 

 

$

113.0

 

Adjusted Results:

 

First Quarter

 

 

FY’23

 

FY’22

Adjusted EBITDA

 

$

17.7

 

 

$

14.5

 

Adjusted EBITDA margin

 

 

15.5

%

 

 

16.6

%

___________

(a)

 

In the first quarter of fiscal 2023, the Company changed the composition of its global segments. RPO segment represents the recruitment outsourcing business that was previously included in the RPO & Professional Search segment. Segment data for Q1 FY’22 has been recast to reflect the division of the RPO & Professional Search segment into a RPO segment and Professional Search & Interim segment.

(b)

 

Numbers may not total due to rounding.

(c)

 

Estimated fee revenue associated with signed contracts for which revenue has not yet been recognized.

(d)

 

Estimated total value of a contract at the point of execution of the contract.

Fee revenue was $113.9 million in Q1 FY’23, an increase of $26.4 million or 30% (up 37% on a constant currency basis), compared to the year-ago quarter. RPO fee revenue increased due to the wider adoption of RPO services in the market in combination with our differentiated solutions.

Adjusted EBITDA was $17.7 million in Q1 FY’23 with an Adjusted EBITDA margin of 15.5% compared to $14.5 million and 16.6%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the higher fee revenue discussed above. Partially offsetting this were increases in compensation and benefits expense driven by higher salaries and related payroll taxes driven by increases in headcount associated with increased levels of fee revenue.

Outlook

Despite the continuing strength in new business trends coming out of Q1 FY’23, economic factors like global inflation, rising interest rates, and escalating geo-political tensions present a level of risk and uncertainty that is difficult to quantify. With this in mind and assuming no new major pandemic related lockdowns or further changes in worldwide geopolitical conditions, economic conditions, financial markets or foreign exchange rates, on a consolidated basis:

  • Q2 FY’23 fee revenue is expected to be in the range of $678 million and $708 million; and
  • Q2 FY’23 diluted earnings per share is expected to range between $1.28 to $1.45.

On a consolidated adjusted basis:

  • Q2 FY’23 adjusted diluted earnings per share is expected to be in the range from $1.34 to $1.50.

 

 

Q2 FY’23

Earnings Per Share Outlook

 

 

Low

 

High

 

 

 

 

 

 

 

Consolidated diluted earnings per share

 

$

1.28

 

$

1.45

Integration/acquisition costs

 

 

0.06

 

 

0.05

Consolidated adjusted diluted earnings per share(1)

 

$

1.34

 

$

1.50

________

(1)

 

Consolidated adjusted diluted earnings per share is a non-GAAP financial measure that excludes the items listed in the table.

Earnings Conference Call Webcast

The earnings conference call will be held today at 12:00 PM (EDT) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak. The conference call will be webcast and available online at ir.kornferry.com. We will also post to this section of our website earnings slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.

About Korn Ferry

Korn Ferry is a global organizational consulting firm. We help clients synchronize strategy and talent to drive superior performance. We work with organizations to design their structures, roles, and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop, and motivate their people. Visit kornferry.com for more information.

Forward-Looking Statements

Statements in this press release and our conference call that relate to our outlook, projections, goals, strategies, future plans and expectations, and other statements of future events or conditions are forward-looking statements that involve a number of risks and uncertainties. Words such as “believes,” “expects,” “anticipates,” “goals,” “estimates,” “guidance,” “may,” “should,” “could,” “will” or “likely,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to expected demand for our products and services. Readers are cautioned not to place undue reliance on such statements. Such statements are based on current expectations; actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn Ferry. The potential risks and uncertainties include those relating to the ultimate magnitude and duration of any pandemic or outbreaks, and related restrictions and operational requirements that apply to our business and the businesses of our clients, and any related negative impacts on our business, employees, customers and our ability to provide services in affected regions, global and local political or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, the dependence on and costs of attracting and retaining qualified and experienced consultants, dislocation in the labor markets and increasing competition for highly skilled workers, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, impact of inflationary pressures on our profitability, potential legal liability and regulatory developments, the portability of client relationships, consolidation of the industries we serve, changes and developments in government laws and regulations, evolving investor and customer expectations with regard to environmental, social and governmental matters, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, dependence on third parties for the execution of critical functions, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, treaties, or regulations on our business and our company, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our indebtedness, expansion of social media platforms, seasonality, ability to effect acquisition and integrate acquired businesses and employment liability risk. For a detailed description of risks and uncertainties that could cause differences, please refer to Korn Ferry’s periodic filings with the Securities and Exchange Commission. Korn Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). In particular, it includes:

  • Adjusted net income attributable to Korn Ferry, adjusted to exclude integration/acquisition costs, net of income tax effect;
  • Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, net of income tax effect;
  • Constant currency (calculated using a quarterly average) percentages that represent the percentage change that would have resulted had exchange rates in the prior period been the same as those in effect in the current period;
  • Consolidated and Executive Search Adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs, when applicable, and Consolidated and Executive Search Adjusted EBITDA margin.

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges that may not be indicative of Korn Ferry’s ongoing operating results. These non-GAAP financial measures are performance measures and are not indicative of the liquidity of Korn Ferry. These charges, which are described in the footnotes in the attached reconciliations, represent costs we incurred to acquire and integrate a portion of our Professional Search & Interim business. The use of non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance. Korn Ferry includes non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Consolidated and Executive Search Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company’s operating results. Management further believes that Consolidated and Executive Search Adjusted EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company. In the case of constant currency percentages, management believes the presentation of such information provides useful supplemental information regarding Korn Ferry's performance as excluding the impact of exchange rate changes on Korn Ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the Company’s operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry's ongoing operations and financial and operational decision-making.

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts) 

 

 

Three Months Ended

 

 

July 31,

 

 

2022

 

2021

 

 

(unaudited)

Fee revenue

 

$

695,903

 

 

$

585,395

 

Reimbursed out-of-pocket engagement expenses

 

 

7,245

 

 

 

2,703

 

Total revenue

 

 

703,148

 

 

 

588,098

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

465,626

 

 

 

396,236

 

General and administrative expenses

 

 

64,457

 

 

 

50,267

 

Reimbursed expenses

 

 

7,245

 

 

 

2,703

 

Cost of services

 

 

37,992

 

 

 

21,993

 

Depreciation and amortization

 

 

16,229

 

 

 

15,644

 

Total operating expenses

 

 

591,549

 

 

 

486,843

 

 

 

 

 

 

 

 

Operating income

 

 

111,599

 

 

 

101,255

 

Other income, net

 

 

775

 

 

 

4,447

 

Interest expense, net

 

 

(7,612

)

 

 

(5,426

)

Income before provision for income taxes

 

 

104,762

 

 

 

100,276

 

Income tax provision

 

 

26,226

 

 

 

23,879

 

Net income

 

 

78,536

 

 

 

76,397

 

Net income attributable to noncontrolling interest

 

 

(1,289

)

 

 

(1,574

)

Net income attributable to Korn Ferry

 

$

77,247

 

 

$

74,823

 

 

 

 

 

 

 

 

Earnings per common share attributable to Korn Ferry:

 

 

 

 

 

 

Basic

 

$

1.46

 

 

$

1.38

 

Diluted

 

$

1.45

 

 

$

1.37

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

51,771

 

 

 

52,760

 

Diluted

 

 

52,106

 

 

 

53,320

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.15

 

 

$

0.12

 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY REPORTING SEGMENT

(dollars in thousands)

(unaudited) 

 

 

Three Months Ended July 31,

 

 

2022

 

2021

 

% Change

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

Consulting

 

$

166,484

 

$

148,478

 

12.1

%

Digital

 

 

83,761

 

 

80,671

 

3.8

%

Executive Search:

 

 

 

 

 

 

 

 

North America

 

 

151,544

 

 

138,678

 

9.3

%

EMEA

 

 

47,056

 

 

42,747

 

10.1

%

Asia Pacific

 

 

26,381

 

 

28,703

 

(8.1

%)

Latin America

 

 

7,808

 

 

6,776

 

15.2

%

Total Executive Search (a)

 

 

232,789

 

 

216,904

 

7.3

%

Professional Search & Interim

 

 

98,947

 

 

51,837

 

90.9

%

RPO

 

 

113,922

 

 

87,505

 

30.2

%

Total fee revenue

 

 

695,903

 

 

585,395

 

18.9

%

Reimbursed out-of-pocket engagement expenses

 

 

7,245

 

 

2,703

 

168.0

%

Total revenue

 

$

703,148

 

$

588,098

 

19.6

%

(a)

 

Total Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts) 

 

 

July 31,

 

April 30,

 

 

2022

 

2022

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

639,784

 

 

$

978,070

 

Marketable securities

 

 

71,172

 

 

 

57,244

 

Receivables due from clients, net of allowance for doubtful accounts of $39,432 and $36,384 at July 31, 2022 and April 30, 2022, respectively

 

 

637,061

 

 

 

590,260

 

Income taxes and other receivables

 

 

35,186

 

 

 

31,884

 

Unearned compensation

 

 

60,726

 

 

 

60,749

 

Prepaid expenses and other assets

 

 

53,363

 

 

 

41,763

 

Total current assets

 

 

1,497,292

 

 

 

1,759,970

 

 

 

 

 

 

 

 

Marketable securities, non-current

 

 

185,492

 

 

 

175,783

 

Property and equipment, net

 

 

147,117

 

 

 

138,172

 

Operating lease right-of-use assets, net

 

 

158,918

 

 

 

167,734

 

Cash surrender value of company-owned life insurance policies, net of loans

 

 

184,742

 

 

 

183,308

 

Deferred income taxes

 

 

81,422

 

 

 

84,712

 

Goodwill

 

 

724,426

 

 

 

725,592

 

Intangible assets, net

 

 

84,167

 

 

 

89,770

 

Unearned compensation, non-current

 

 

117,346

 

 

 

118,238

 

Investments and other assets

 

 

23,157

 

 

 

21,267

 

Total assets

 

$

3,204,079

 

 

$

3,464,546

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Accounts payable

 

$

55,003

 

 

$

50,932

 

Income taxes payable

 

 

37,552

 

 

 

34,450

 

Compensation and benefits payable

 

 

250,818

 

 

 

547,826

 

Operating lease liability, current

 

 

46,700

 

 

 

48,609

 

Other accrued liabilities

 

 

295,981

 

 

 

302,408

 

Total current liabilities

 

 

686,054

 

 

 

984,225

 

 

 

 

 

 

 

 

Deferred compensation and other retirement plans

 

 

380,137

 

 

 

357,175

 

Operating lease liability, non-current

 

 

140,611

 

 

 

151,212

 

Long-term debt

 

 

395,653

 

 

 

395,477

 

Deferred tax liabilities

 

 

4,052

 

 

 

2,715

 

Other liabilities

 

 

26,338

 

 

 

24,153

 

Total liabilities

 

 

1,632,845

 

 

 

1,914,957

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized, 76,568 and 75,409 shares issued and 53,502 and 53,190 shares outstanding at July 31, 2022 and April 30, 2022, respectively

 

 

470,127

 

 

 

502,008

 

Retained earnings

 

 

1,203,067

 

 

 

1,134,523

 

Accumulated other comprehensive loss, net

 

 

(108,444

)

 

 

(92,185

)

Total Korn Ferry stockholders' equity

 

 

1,564,750

 

 

 

1,544,346

 

Noncontrolling interest

 

 

6,484

 

 

 

5,243

 

Total stockholders' equity

 

 

1,571,234

 

 

 

1,549,589

 

Total liabilities and stockholders' equity

 

$

3,204,079

 

 

$

3,464,546

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(dollars in thousands, except per share amounts)

(unaudited) 

 

Three Months Ended

 

July 31,

 

2022

 

2021

 

 

Net income attributable to Korn Ferry

$

77,247

 

 

$

74,823

 

Net income attributable to non-controlling interest

 

1,289

 

 

 

1,574

 

Net income

 

78,536

 

 

 

76,397

 

Income tax provision

 

26,226

 

 

 

23,879

 

Income before provision for income taxes

 

104,762

 

 

 

100,276

 

Other income, net

 

(775

)

 

 

(4,447

)

Interest expense, net

 

7,612

 

 

 

5,426

 

Operating income

 

111,599

 

 

 

101,255

 

Depreciation and amortization

 

16,229

 

 

 

15,644

 

Other income, net

 

775

 

 

 

4,447

 

Integration/acquisition costs (1)

 

3,605

 

 

 

-

 

Adjusted EBITDA

$

132,208

 

 

$

121,346

 

 

 

 

 

 

 

Operating margin

 

16.0

%

 

 

17.3

%

Depreciation and amortization

 

2.3

%

 

 

2.7

%

Other income, net

 

0.1

%

 

 

0.7

%

Integration/acquisition costs (1)

 

0.6

%

 

 

-

 

Adjusted EBITDA margin

 

19.0

%

 

 

20.7

%

 

 

 

 

 

 

Net income attributable to Korn Ferry

$

77,247

 

 

$

74,823

 

Integration/acquisition costs (1)

 

3,605

 

 

 

-

 

Tax effect on the adjusted items (2)

 

(893

)

 

 

-

 

Adjusted net income attributable to Korn Ferry

$

79,959

 

 

$

74,823

 

 

 

 

 

 

 

Basic earnings per common share

$

1.46

 

 

$

1.38

 

Integration/acquisition costs (1)

 

0.07

 

 

 

-

 

Tax effect on the adjusted items (2)

 

(0.02

)

 

 

-

 

Adjusted basic earnings per share

$

1.51

 

 

$

1.38

 

 

 

 

 

 

 

Diluted earnings per common share

$

1.45

 

 

$

1.37

 

Integration/acquisition costs (1)

 

0.07

 

 

 

-

 

Tax effect on the adjusted items (2)

 

(0.02

)

 

 

-

 

Adjusted diluted earnings per share

$

1.50

 

 

$

1.37

 

Explanation of Non-GAAP Adjustments

(1)

Costs associated with current and previous acquisitions, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.

(2) 

Tax effect on integration/acquisition costs.

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED

(unaudited)

 

Three Months Ended July 31,

 

2022

 

2021

 

Fee

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

Fee

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

(dollars in thousands)

Consulting

$

166,484

 

$

168,735

 

$

29,550

 

 

17.7

%

 

$

148,478

 

$

149,007

 

$

26,841

 

 

18.1

%

Digital

 

83,761

 

 

83,815

 

 

24,178

 

 

28.9

%

 

 

80,671

 

 

80,681

 

 

25,632

 

 

31.8

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

151,544

 

 

152,884

 

 

43,749

 

 

28.9

%

 

 

138,678

 

 

139,300

 

 

43,330

 

 

31.2

%

EMEA

 

47,056

 

 

47,329

 

 

8,515

 

 

18.1

%

 

 

42,747

 

 

42,843

 

 

7,585

 

 

17.7

%

Asia Pacific

 

26,381

 

 

26,452

 

 

7,351

 

 

27.9

%

 

 

28,703

 

 

28,732

 

 

8,320

 

 

29.0

%

Latin America

 

7,808

 

 

7,809

 

 

2,617

 

 

33.5

%

 

 

6,776

 

 

6,779

 

 

2,354

 

 

34.7

%

Total Executive Search

 

232,789

 

 

234,474

 

 

62,232

 

 

26.7

%

 

 

216,904

 

 

217,654

 

 

61,589

 

 

28.4

%

Professional Search & Interim

 

98,947

 

 

100,052

 

 

29,161

 

 

29.5

%

 

 

51,837

 

 

51,932

 

 

19,439

 

 

37.5

%

RPO

 

113,922

 

 

116,072

 

 

17,709

 

 

15.5

%

 

 

87,505

 

 

88,824

 

 

14,528

 

 

16.6

%

Corporate

 

-

 

 

-

 

 

(30,622

)

 

 

 

 

-

 

 

-

 

 

(26,683

)

 

 

Consolidated

$

695,903

 

$

703,148

 

$

132,208

 

 

19.0

%

 

$

585,395

 

$

588,098

 

$

121,346

 

 

20.7

%

 

Contacts

Investor Relations: Gregg Kvochak, (310) 556-8550

Media: Dan Gugler, (310) 226-2645

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