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Korn Ferry Announces First Quarter Fiscal 2024 Results of Operations

Highlights

  • Korn Ferry reports Q1 FY'24 fee revenue of $699.2 million, essentially flat from Q1 FY'23.
  • Net income attributable to Korn Ferry was $46.6 million, while diluted and adjusted diluted earnings per share were $0.89 and $0.99 in Q1 FY'24, respectively.
  • Operating income was $56.8 million (operating margin of 8.1%) and Adjusted EBITDA was $95.7 million (Adjusted EBITDA margin of 13.7%), in Q1 FY'24.
  • The Company repurchased 90,000 shares of stock during the quarter for $4.2 million.
  • Declared a quarterly dividend of $0.18 per share on September 6, 2023, which is payable on October 13, 2023 to stockholders of record on September 22, 2023.

Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced first quarter fee revenue of $699.2 million. In addition, first quarter diluted earnings per share was $0.89 and adjusted diluted earnings per share was $0.99.

“During the fiscal first quarter we generated $699 million in fee revenue, flat year-over-year. Despite a more challenging market, I’m very proud of our organization and what we have achieved, particularly as earnings and profitability held steady sequentially as we delivered $0.89 of diluted earning per share and $0.99 of adjusted diluted earnings per share and $96 million of Adjusted EBITDA, with a 13.7% margin,” said Gary D. Burnison, CEO, Korn Ferry.

“Our diversification strategy continues to positively influence our results,” added Burnison. “Our Consulting and Digital businesses have never been more meaningful—especially in tomorrow’s economy where there will be continued demographic and skill shifts across much of the world. We’re responding with expertise and solutions focused on interim talent, learning and professional development, engagement, retention, culture, assessments, and organizational design, as well as total rewards. We are creating more ways to deepen relationships with our clients.”

Selected Financial Results

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

 

First Quarter

 

FY’24

 

FY’23

Fee revenue

$

699.2

 

 

$

695.9

 

Total revenue

$

706.3

 

 

$

703.1

 

Operating income

$

56.8

 

 

$

111.6

 

Operating margin

 

8.1

%

 

 

16.0

%

Net income attributable to Korn Ferry

$

46.6

 

 

$

77.2

 

Basic earnings per share

$

0.89

 

 

$

1.46

 

Diluted earnings per share

$

0.89

 

 

$

1.45

 

 

 

 

 

Adjusted Results (b):

First Quarter

 

FY’24

 

FY’23

Adjusted EBITDA

$

95.7

 

 

$

132.2

 

Adjusted EBITDA margin

 

13.7

%

 

 

19.0

%

Adjusted net income attributable to Korn Ferry

$

51.5

 

 

$

80.0

 

Adjusted basic earnings per share

$

0.99

 

 

$

1.51

 

Adjusted diluted earnings per share

$

0.99

 

 

$

1.50

 

______________________

(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, impairment of fixed assets, impairment of right of use assets and restructuring charges, net 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’24

 

FY’23

Integration/acquisition costs

$

4.1

 

$

3.6

Impairment of fixed assets

$

0.1

 

 

$

 

Impairment of right of use assets

$

1.6

 

 

$

 

Restructuring charges, net

$

0.4

 

 

$

 

The Company reported fee revenue in Q1 FY'24 of $699.2 million, essentially flat at actual and constant currency when compared to Q1 FY'23. Fee revenue remained constant primarily due to an increase in the Interim portion of Professional Search & Interim, resulting from the acquisitions of Infinity Consulting Solutions which was effective August 1, 2022 and Salo which was effective February 1, 2023 (collectively, the “acquisitions”). This was partially offset by decreases in our permanent placement talent acquisition offerings, which includes Executive Search, Permanent Placement and RPO, due to a decline in demand driven by global economic and other factors.

Operating margin was 8.1% in Q1 FY'24, compared to 16.0% in the year-ago quarter. Adjusted EBITDA margin was 13.7% in Q1 FY'24, compared to 19.0%, in the year-ago quarter. Net income attributable to Korn Ferry was $46.6 million in Q1 FY'24, compared to $77.2 million in Q1 FY'23 and Adjusted EBITDA was $95.7 million in Q1 FY'24 compared to $132.2 million in Q1 FY'23.

Operating income decreased primarily due to a higher cost of services expense associated with the recently acquired Interim businesses, and an increase in compensation and benefits expense. Net income attributable to Korn Ferry decreased due to the same factors discussed above and higher other income, net partially offset by lower income tax provision.

Adjusted EBITDA decreased due to the same factors discussed above (except other income, net and income tax provision).

Results by Line of Business

Selected Consulting Data

(dollars in millions) (a)

 

First Quarter

 

FY’24

 

FY’23

Fee revenue

$

168.1

 

 

$

166.5

 

Total revenue

$

170.8

 

 

$

168.7

 

 

 

 

 

Ending number of consultants and execution staff (b)

 

1,855

 

 

 

1,879

 

Hours worked in thousands (c)

 

427

 

 

 

459

 

Average bill rate (d)

$

394

 

 

$

363

 

 

 

 

 

Adjusted Results (e):

First Quarter

 

FY’24

 

FY’23

Adjusted EBITDA

$

25.2

 

 

$

29.6

 

Adjusted EBITDA margin

 

15.0

%

 

 

17.7

%

______________________

(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.

(e)

Adjusted results exclude the following:

 

First Quarter

 

FY’24

 

FY’23

Impairment of right of use assets

$

0.6

 

$

Restructuring charges, net

$

0.2

 

 

$

 

Fee revenue was $168.1 million in Q1 FY'24 compared to $166.5 million in Q1 FY'23, essentially flat at actual and constant currency. The slight increase in Consulting fee revenue was driven by growth in assessment & succession.

Adjusted EBITDA was $25.2 million in Q1 FY'24 with an Adjusted EBITDA margin of 15.0% compared to Adjusted EBITDA of $29.6 million with an associated margin of 17.7%, respectively, in the year-ago quarter. This decrease in Adjusted EBITDA resulted primarily from an increase in compensation and benefits expense, partially offset by a slight increase in Consulting fee revenue and a decrease in cost of services expense.

Selected Digital Data

(dollars in millions) (a)

 

First Quarter

 

FY’24

 

FY’23

Fee revenue

$

88.0

 

 

$

83.8

 

Total revenue

$

88.0

 

 

$

83.8

 

 

 

 

 

Ending number of consultants

 

336

 

 

 

331

 

Subscription & License fee revenue

$

32.5

 

 

$

29.6

 

 

 

 

 

Adjusted Results:

First Quarter

 

FY’24

 

FY’23

Adjusted EBITDA

$

24.3

 

 

$

24.2

 

Adjusted EBITDA margin

 

27.6

%

 

 

28.9

%

______________________

(a)

Numbers may not total due to rounding.

Fee revenue was $88.0 million in Q1 FY'24 compared to $83.8 million in Q1 FY'23, an increase of $4.2 million or 5% (up 5% on a constant currency basis). The increase was primarily due to growth in subscription-based fee revenue.

Adjusted EBITDA was $24.3 million in Q1 FY'24 with an Adjusted EBITDA margin of 27.6% compared to $24.2 million and 28.9%, respectively, in the year-ago quarter. Adjusted EBITDA remained relatively flat compared to the year-ago period.

Selected Executive Search Data(a)

(dollars in millions) (b)

 

First Quarter

 

FY’24

 

FY’23

Fee revenue

$

205.2

 

 

$

232.8

 

Total revenue

$

207.6

 

 

$

234.5

 

 

 

 

 

Ending number of consultants

 

612

 

 

 

619

 

Average number of consultants

 

607

 

 

 

603

 

Engagements billed

 

3,633

 

 

 

4,133

 

New engagements (c)

 

1,503

 

 

 

1,682

 

 

 

 

 

Adjusted Results (d):

First Quarter

 

FY’24

 

FY’23

Adjusted EBITDA

$

42.5

 

 

$

62.2

 

Adjusted EBITDA margin

 

20.7

%

 

 

26.7

%

______________________

(a)

Executive Search is the sum of the individual Executive Search Reporting Segments described in our annual and quarterly reporting on Forms 10-K and 10-Q 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.

(d)

Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that adjust for the following:

 

First Quarter

 

FY’24

 

FY’23

Impairment of fixed assets

$

0.1

 

$

Impairment of right of use assets

$

0.9

 

 

$

 

Restructuring charges, net

$

0.2

 

 

$

 

Fee revenue was $205.2 million and $232.8 million in Q1 FY'24 and Q1 FY'23, respectively, a year-over-year decrease of 12% at both actual and constant currency. The decrease in fee revenue was primarily driven by a decline in demand for executive searches as a result of clients being affected by the uncertain economic environment.

Adjusted EBITDA was $42.5 million in Q1 FY'24 with an Adjusted EBITDA margin of 20.7% compared to Adjusted EBITDA of $62.2 million and an Adjusted EBITDA margin of 26.7%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was primarily due to the decrease in fee revenue discussed above, partially offset by a lower performance-related bonus expense.

Selected Professional Search & Interim Data

(dollars in millions) (a)

 

First Quarter

 

FY’24

 

FY’23

Fee revenue

$

142.2

 

 

$

98.9

 

Total revenue

$

143.1

 

 

$

100.1

 

 

 

 

 

Permanent Placement:

 

 

 

Fee revenue

$

58.3

 

 

$

74.1

 

Engagements billed (b)

 

2,209

 

 

 

2,739

 

New engagements (c)

 

1,235

 

 

 

1,846

 

Ending number of consultants (d)

 

405

 

 

 

497

 

Interim:

 

 

 

Fee revenue

$

83.9

 

 

$

24.8

 

Average bill rate (e)

$

122

 

 

$

122

 

Average weekly billable consultants (f)

 

1,485

 

 

 

463

 

 

 

 

 

Adjusted Results (g):

First Quarter

 

FY’24

 

FY’23

Adjusted EBITDA

$

24.3

 

 

$

29.2

 

Adjusted EBITDA margin

 

17.1

%

 

 

29.5

%

_____________________

(a)

Numbers may not total due to rounding.

(b)

Represents engagements billed for professional search.

(c)

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

(d)

Represents number of employees originating professional search.

(e)

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

(f)

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

(g)

Adjusted results exclude the following:

 

First Quarter

 

FY’24

 

FY’23

Integration/acquisition costs

$

4.0

 

$

2.5

Fee revenue was $142.2 million in Q1 FY'24, an increase of 44% at both actual and constant currency compared to the year-ago quarter. The increase in fee revenue was mainly driven by additional fee revenue from the acquisitions, partially offset by a decrease in Permanent Placement fee revenue.

Adjusted EBITDA was $24.3 million in Q1 FY'24 with an Adjusted EBITDA margin of 17.1% compared to $29.2 million and 29.5%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to a change in the revenue mix, with decreases in Permanent Placement fee revenue that were more than offset by increases in fee revenue from Interim due to the acquisitions. Interim has lower margins but are typically more resilient to global economic fluctuations and in line with our strategy.

Selected Recruitment Process Outsourcing ("RPO") Data

(dollars in millions) (a)

 

First Quarter

 

FY’24

 

FY’23

Fee revenue

$

95.7

 

 

$

113.9

 

Total revenue

$

96.8

 

 

$

116.1

 

 

 

 

 

Remaining revenue under contract (b)

$

679.8

 

 

$

805.6

 

RPO new business (c)

$

48.2

 

 

$

148.4

 

 

 

 

 

Adjusted Results (d):

First Quarter

 

FY’24

 

FY’23

Adjusted EBITDA

$

10.5

 

 

$

17.7

 

Adjusted EBITDA margin

 

10.9

%

 

 

15.5

%

______________________

(a)

Numbers may not total due to rounding.

(b)

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

(c)

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

(d)

Adjusted results exclude the following:

 

First Quarter

 

FY’24

 

FY’23

Impairment of right of use assets

$

0.1

 

$

Fee revenue was $95.7 million in Q1 FY'24, a decrease of 16% at both actual and constant currency compared to the year-ago quarter. RPO fee revenue decreased due to reduced demand for the number of placements being requested by existing clients.

Adjusted EBITDA was $10.5 million in Q1 FY'24 with an Adjusted EBITDA margin of 10.9% compared to $17.7 million and 15.5%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was primarily due to the decline in demand and fee revenue driven by global economic and other factors, partially offset by a decrease in compensation and benefit expenses due in large part to a decrease in the average headcount compared to the year-ago quarter.

Outlook

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’4 fee revenue is expected to be in the range of $675 million and $695 million; and
  • Q2 FY’4 diluted earnings per share is expected to range between $0.85 to $0.97.

On a consolidated adjusted basis:

  • Q2 FY’4 adjusted diluted earnings per share is expected to be in the range from $0.91 to $1.01.

 

Q2 FY’24

Earnings Per Share

Outlook

 

Low

 

High

 

 

 

 

   

Consolidated diluted earnings per share

$

0.85

 

 

$

0.97

 

Integration/acquisition

 

0.08

 

 

 

0.06

 

Tax Rate Impact

 

(0.02

)

 

 

(0.02

)

Consolidated adjusted diluted earnings per share(1)

$

0.91

 

$

1.01

______________________

(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, SVP Business Development & Analytics Gregg Kvochak and VP Investor Relations Tiffany Louder. 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, including statements relating to expected demand for and relevance of our products and services, 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. 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 global and local political and or economic developments in or affecting countries where we have operations, such as inflation, interest rates, global slowdowns, or recessions, competition, geopolitical tensions, shifts in global trade patterns, changes in demand for our services as a result of automation, dependence on and costs of attracting and retaining qualified and experienced consultants, impact of inflationary pressures on our profitability, our ability to maintain relationships with customers and suppliers and retaining key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, portability of client relationships, consolidation of or within the industries we serve, changes and developments in government laws and regulations, evolving investor and customer expectations with regard to environmental, social and governance matters, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, including as a result of recent 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 our intellectual property ("IP"), our ability to enhance, develop and respond to new technology, including artificial intelligence, our 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, treaties, or regulations on our business and our Company, deferred tax assets that we may not be able to use, our ability to develop new products and services, changes in our accounting estimates and assumptions, the utilization and billing rates of our consultants, seasonality, the expansion of social media platforms, the ability to effect acquisitions and integrate acquired businesses, including Salo, resulting organizational changes, our indebtedness, those relating to the ultimate magnitude and duration of any pandemic or outbreaks. For a detailed description of risks and uncertainties that could cause differences from our expectations, 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, impairment of fixed assets, impairment of right of use assets and restructuring charges, net of income tax effect;
  • Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and restructuring charges, 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, impairment of fixed assets, impairment of right of use assets and restructuring charges, net 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 1) costs we incurred to acquire and integrate a portion of our Professional Search & Interim business, 2) impairment of fixed assets associated with the decision to terminate and sublease some of our offices, 3) impairment of right of use assets due to the decision to terminate and sublease some of our offices and 4) Restructuring charges, net to realign workforce with the Company's business needs and objectives. 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,

 

2023

 

2022

 

(unaudited)

Fee revenue

$

699,189

 

 

$

695,903

 

Reimbursed out-of-pocket engagement expenses

 

7,073

 

 

 

7,245

 

Total revenue

 

706,262

 

 

 

703,148

 

 

 

 

 

Compensation and benefits

 

479,881

 

 

 

465,626

 

General and administrative expenses

 

65,917

 

 

 

64,457

 

Reimbursed expenses

 

7,073

 

 

 

7,245

 

Cost of services

 

77,190

 

 

 

37,992

 

Depreciation and amortization

 

19,012

 

 

 

16,229

 

Restructuring charges, net

 

421

 

 

 

 

Total operating expenses

 

649,494

 

 

 

591,549

 

 

 

 

 

Operating income

 

56,768

 

 

 

111,599

 

Other income, net

 

13,577

 

 

 

775

 

Interest expense, net

 

(4,740

)

 

 

(7,612

)

Income before provision for income taxes

 

65,605

 

 

 

104,762

 

Income tax provision

 

18,420

 

 

 

26,226

 

Net income

 

47,185

 

 

 

78,536

 

Net income attributable to noncontrolling interest

 

(580

)

 

 

(1,289

)

Net income attributable to Korn Ferry

$

46,605

 

 

$

77,247

 

 

 

 

 

Earnings per common share attributable to Korn Ferry:

 

 

 

Basic

$

0.89

 

 

$

1.46

 

Diluted

$

0.89

 

 

$

1.45

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

Basic

 

50,934

 

 

 

51,771

 

Diluted

 

51,082

 

 

 

52,106

 

 

 

 

 

Cash dividends declared per share:

$

0.18

 

 

$

0.15

 

 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY REPORTING SEGMENT

(dollars in thousands)

(unaudited)

 

 

Three Months Ended July 31,

 

2023

 

2022

 

% Change

Fee revenue:

 

 

 

 

 

Consulting

$

168,088

 

$

166,484

 

1.0

%

Digital

 

87,986

 

 

 

83,761

 

 

5.0

%

Executive Search:

 

 

 

 

 

North America

 

127,498

 

 

 

151,544

 

 

(15.9

)%

EMEA

 

46,776

 

 

 

47,056

 

 

(0.6

)%

Asia Pacific

 

24,539

 

 

 

26,381

 

 

(7.0

)%

Latin America

 

6,421

 

 

 

7,808

 

 

(17.8

)%

Total Executive Search (a)

 

205,234

 

 

 

232,789

 

 

(11.8

)%

Professional Search & Interim

 

142,179

 

 

 

98,947

 

 

43.7

%

RPO

 

95,702

 

 

 

113,922

 

 

(16.0

)%

Total fee revenue

 

699,189

 

 

 

695,903

 

 

0.5

%

Reimbursed out-of-pocket engagement expenses

 

7,073

 

 

 

7,245

 

 

(2.4

)%

Total revenue

$

706,262

 

 

$

703,148

 

 

0.4

%

(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,

2023

 

April 30,

2023

 

(unaudited)

 

 

ASSETS

 

 

 

Cash and cash equivalents

$

562,209

 

 

$

844,024

 

Marketable securities

 

29,486

 

 

 

44,837

 

Receivables due from clients, net of allowance for doubtful accounts of $47,418 and $44,377 at July 31, 2023 and April 30, 2023, respectively

 

592,333

 

 

 

569,601

 

Income taxes and other receivables

 

58,443

 

 

 

67,512

 

Unearned compensation

 

66,878

 

 

 

63,476

 

Prepaid expenses and other assets

 

57,258

 

 

 

49,219

 

Total current assets

 

1,366,607

 

 

 

1,638,669

 

 

 

 

 

Marketable securities, non-current

 

189,359

 

 

 

179,040

 

Property and equipment, net

 

166,283

 

 

 

161,876

 

Operating lease right-of-use assets, net

 

132,638

 

 

 

142,690

 

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

 

200,103

 

 

 

197,998

 

Deferred income taxes

 

94,293

 

 

 

102,057

 

Goodwill

 

910,211

 

 

 

909,491

 

Intangible assets, net

 

107,979

 

 

 

114,426

 

Unearned compensation, non-current

 

121,918

 

 

 

103,607

 

Investments and other assets

 

24,077

 

 

 

24,590

 

Total assets

$

3,313,468

 

 

$

3,574,444

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Accounts payable

$

50,731

 

 

$

53,386

 

Income taxes payable

 

22,868

 

 

 

19,969

 

Compensation and benefits payable

 

240,956

 

 

 

532,934

 

Operating lease liability, current

 

43,800

 

 

 

45,821

 

Other accrued liabilities

 

297,436

 

 

 

324,150

 

Total current liabilities

 

655,791

 

 

 

976,260

 

 

 

 

 

Deferred compensation and other retirement plans

 

425,215

 

 

 

396,534

 

Operating lease liability, non-current

 

110,823

 

 

 

119,220

 

Long-term debt

 

396,379

 

 

 

396,194

 

Deferred tax liabilities

 

6,170

 

 

 

5,352

 

Other liabilities

 

26,560

 

 

 

27,879

 

Total liabilities

 

1,620,938

 

 

 

1,921,439

 

 

 

 

 

Stockholders' equity

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized, 77,474 and 76,693 shares issued and 52,705 and 52,269 shares outstanding at July 31, 2023 and April 30, 2023, respectively

 

429,093

 

 

 

429,754

 

Retained earnings

 

1,348,059

 

 

 

1,311,081

 

Accumulated other comprehensive loss, net

 

(90,471

)

 

 

(92,764

)

Total Korn Ferry stockholders' equity

 

1,686,681

 

 

 

1,648,071

 

Noncontrolling interest

 

5,849

 

 

 

4,934

 

Total stockholders' equity

 

1,692,530

 

 

 

1,653,005

 

Total liabilities and stockholders' equity

$

3,313,468

 

 

$

3,574,444

 

 

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,

 

2023

 

2022

 

 

 

 

Net income attributable to Korn Ferry

$

46,605

 

 

$

77,247

 

Net income attributable to non-controlling interest

 

580

 

 

 

1,289

 

Net income

 

47,185

 

 

 

78,536

 

Income tax provision

 

18,420

 

 

 

26,226

 

Income before provision for income taxes

 

65,605

 

 

 

104,762

 

Other income, net

 

(13,577

)

 

 

(775

)

Interest expense, net

 

4,740

 

 

 

7,612

 

Operating income

 

56,768

 

 

 

111,599

 

Depreciation and amortization

 

19,012

 

 

 

16,229

 

Other income, net

 

13,577

 

 

 

775

 

Integration/acquisition costs (1)

 

4,128

 

 

 

3,605

 

Impairment of fixed assets (2)

 

123

 

 

 

 

Impairment of right of use assets (3)

 

1,629

 

 

 

 

Restructuring charges, net (4)

 

421

 

 

 

 

Adjusted EBITDA

$

95,658

 

 

$

132,208

 

 

 

 

 

Operating margin

 

8.1

%

 

 

16.0

%

Depreciation and amortization

 

2.7

%

 

 

2.3

%

Other income, net

 

2.0

%

 

 

0.1

%

Integration/acquisition costs (1)

 

0.6

%

 

 

0.6

%

Impairment of fixed assets (2)

 

%

 

 

%

Impairment of right of use assets (3)

 

0.2

%

 

 

%

Restructuring charges, net (4)

 

0.1

%

 

 

%

Adjusted EBITDA margin

 

13.7

%

 

 

19.0

%

 

 

 

 

Net income attributable to Korn Ferry

$

46,605

 

 

$

77,247

 

Integration/acquisition costs (1)

 

4,128

 

 

 

3,605

 

Impairment of fixed assets (2)

 

123

 

 

 

 

Impairment of right of use assets (3)

 

1,629

 

 

 

 

Restructuring charges, net (4)

 

421

 

 

 

 

Tax effect on the adjusted items (5)

 

(1,419

)

 

 

(893

)

Adjusted net income attributable to Korn Ferry

$

51,487

 

 

$

79,959

 

 

 

 

 

Basic earnings per common share

$

0.89

 

 

$

1.46

 

Integration/acquisition costs (1)

 

0.08

 

 

 

0.07

 

Impairment of fixed assets (2)

 

 

 

 

 

Impairment of right of use assets (3)

 

0.03

 

 

 

 

Restructuring charges, net (4)

 

0.01

 

 

 

 

Tax effect on the adjusted items (5)

 

(0.02

)

 

 

(0.02

)

Adjusted basic earnings per share

$

0.99

 

 

$

1.51

 

 

 

 

 

Diluted earnings per common share

$

0.89

 

 

$

1.45

 

Integration/acquisition costs (1)

 

0.08

 

 

 

0.07

 

Impairment of fixed assets (2)

 

 

 

 

 

Impairment of right of use assets (3)

 

0.03

 

 

 

 

Restructuring charges, net (4)

 

0.01

 

 

 

 

Tax effect on the adjusted items (5)

 

(0.02

)

 

 

(0.02

)

Adjusted diluted earnings per share

$

0.99

 

 

$

1.50

 

Explanation of Non-GAAP Adjustments

(1)

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

(2)

Costs associated with impairment of fixed assets (i.e. leasehold improvements) due to terminating and deciding to sublease some of our office leases.

(3)

Costs associated with impairment of right-of-use assets due to terminating and deciding to sublease some of our office leases.

(4)

Restructuring charges we incurred to realign workforce with business needs and objectives due to shifts in global trade lanes and persistent inflationary pressures.

(5)

Tax effect on integration/acquisition costs, impairment of fixed assets and right of use assets, and restructuring charges, net.

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED

(unaudited)

 

 

Three Months Ended July 31,

 

2023

 

2022

 

Fee

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

Fee

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

(dollars in thousands)

Consulting

$

168,088

 

$

170,793

 

$

25,180

 

15.0

%

 

$

166,484

 

$

168,735

 

$

29,550

 

17.7

%

Digital

 

87,986

 

 

 

88,012

 

 

 

24,325

 

 

27.6

%

 

 

83,761

 

 

 

83,815

 

 

 

24,178

 

 

28.9

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

127,498

 

 

 

129,413

 

 

 

28,756

 

 

22.6

%

 

 

151,544

 

 

 

152,884

 

 

 

43,749

 

 

28.9

%

EMEA

 

46,776

 

 

 

47,135

 

 

 

5,638

 

 

12.1

%

 

 

47,056

 

 

 

47,329

 

 

 

8,515

 

 

18.1

%

Asia Pacific

 

24,539

 

 

 

24,610

 

 

 

6,315

 

 

25.7

%

 

 

26,381

 

 

 

26,452

 

 

 

7,351

 

 

27.9

%

Latin America

 

6,421

 

 

 

6,422

 

 

 

1,741

 

 

27.1

%

 

 

7,808

 

 

 

7,809

 

 

 

2,617

 

 

33.5

%

Total Executive Search

 

205,234

 

 

 

207,580

 

 

 

42,450

 

 

20.7

%

 

 

232,789

 

 

 

234,474

 

 

 

62,232

 

 

26.7

%

Professional Search & Interim

 

142,179

 

 

 

143,069

 

 

 

24,329

 

 

17.1

%

 

 

98,947

 

 

 

100,052

 

 

 

29,161

 

 

29.5

%

RPO

 

95,702

 

 

 

96,808

 

 

 

10,471

 

 

10.9

%

 

 

113,922

 

 

 

116,072

 

 

 

17,709

 

 

15.5

%

Corporate

 

 

 

 

 

 

 

(31,097

)

 

 

 

 

 

 

 

 

 

 

(30,622

)

 

 

Consolidated

$

699,189

 

 

$

706,262

 

 

$

95,658

 

 

13.7

%

 

$

695,903

 

 

$

703,148

 

 

$

132,208

 

 

19.0

%

 

Contacts

Investor Relations: Tiffany Louder, (214) 310-8407

Media: Dan Gugler, (310) 226-2645

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