Korn Ferry Announces Fourth Quarter and Full Year FY’23 Results of Operations
06/27/2023 - 06:45 AM
Highlights
Korn Ferry reports Q4 FY’23 fee revenue of $730.9 million 1% (up 3% on a constant currency basis) compared to Q4 FY’22 and full year FY’23 fee revenue of $2,835.4 million 8% (up 12% on a constant currency basis) compared to FY’22.
Net income attributable to Korn Ferry for the fourth quarter and full year of FY’23 was $47.5 million $209.5 million $0.91 $1.01 $3.95 $4.94
Operating income and Adjusted EBITDA were $72.6 million 9.9% ) and $97.9 million 13.4% ), respectively, in Q4 FY'23, while full year amounts were $316.3 million 11.2% ) and $457.3 million 16.1% ), respectively.
The Company repurchased 255,000 shares of stock during the quarter for $13.4 million $8.0 million
On June 26, 2023, the Company increased its regular quarterly cash dividend by 20% to $0.18
For the full year the Company continued to maintain its balanced approach to capital allocation by investing $254.8 million $61.0 million $18.5 million $93.9 million $33.0 million
LOS ANGELES --(BUSINESS WIRE)--
Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced fourth quarter and annual fee revenue of $730.9 million $2,835.4 million $0.91 $1.01
“During fiscal year 2023 our fee revenue reached an all-time high of $2.84 billion 8% at actual, 12% constant currency. The story of this period though is really about the success of our diversification strategy, set forth over the past few years, which has created new revenue streams and offerings, as clearly evidenced by our clients and in our results,” said Gary D. Burnison, CEO, Korn Ferry.
“In FY’23 we added a completely new capability – an interim and transition management business with more than $400 million
“With a world immersed in Generative AI, Korn Ferry will continue to invest not only in these technologies, but also in advancing our proprietary data, assessment instruments and knowledge as these will be the ultimate differentiators.”
Selected Financial Results
(dollars in millions, except per share amounts) (a)
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
730.9
$
721.1
$
2,835.4
$
2,626.7
Total revenue
$
738.1
$
727.0
$
2,863.8
$
2,643.5
Operating income
$
72.6
$
138.8
$
316.3
$
470.1
Operating margin
9.9
%
19.2
%
11.2
%
17.9
%
Net income attributable to Korn Ferry
$
47.5
$
91.7
$
209.5
$
326.4
Basic earnings per share
$
0.91
$
1.71
$
3.98
$
6.04
Diluted earnings per share
$
0.91
$
1.70
$
3.95
$
5.98
Adjusted Results (b):
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
97.9
$
144.4
$
457.3
$
538.9
Adjusted EBITDA margin
13.4
%
20.0
%
16.1
%
20.5
%
Adjusted net income attributable to Korn Ferry
$
53.0
$
94.4
$
262.2
$
340.1
Adjusted basic earnings per share
$
1.02
$
1.77
$
4.98
$
6.30
Adjusted diluted earnings per share
$
1.01
$
1.75
$
4.94
$
6.23
______________________
(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 net restructuring charges when applicable. Adjusted results on a consolidated basis are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations):
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Integration/acquisition costs
$
5.5
$
3.6
$
14.9
$
7.9
Impairment of fixed assets
$
—
$
—
$
4.4
$
1.9
Impairment of right of use assets
$
—
$
—
$
5.5
$
7.4
Restructuring charges, net
$
1.4
$
—
$
42.6
$
—
Fiscal 2023 Fourth Quarter Results
The Company reported fee revenue in Q4 FY’23 of $730.9 million 1% (up 3% on a constant currency basis) compared to Q4 FY’22. Fee revenue increased primarily due to an increase in the Interim portion of Professional Search & Interim, resulting from the acquisitions of Patina, Infinity Consulting Solutions and Salo (collectively, the “acquisitions”). This was partially offset by decreases in Executive Search, the Permanent Placement portion of Professional Search & Interim and RPO mainly due to a decline in demand driven by global economic factors.
Operating margin was 9.9% in Q4 FY’23, compared to 19.2% in the year-ago quarter. Adjusted EBITDA margin was 13.4% in Q4 FY'23, compared to 20.0% in the year-ago quarter. Net income attributable to Korn Ferry was $47.5 million $91.7 million $97.9 million $144.4 million
Operating margin and Adjusted EBITDA margin decreased primarily due to a change in fee revenue mix, with fee revenue decreasing in Executive Search and Permanent Placement, which have higher margins, and being replaced with fee revenue in Interim that has lower margins, but is more resilient to economic factors and in line with our strategy.
Fiscal 2023 Full Year Results
The Company reported fee revenue in FY’23 of $2,835.4 million 8% (up 12% on a constant currency basis) compared to FY’22. Fee revenue increased in all lines of business except Executive Search which was down about 6% compared to FY22 mainly due to a decline in demand driven by global economic factors. The acquisitions included in Professional Search & Interim segment were a significant factor in the increase in fee revenue compared to FY22.
Operating margin was 11.2% in FY’23, compared to 17.9% in FY’22. Adjusted EBITDA margin was 16.1% in FY'23 compared to 20.5% in FY’22. Net income attributable to Korn Ferry was $209.5 million $326.4 million $457.3 million $538.9 million
Operating margin decreased primarily due to a change in fee revenue mix, with a decrease in fee revenue in Executive Search and Permanent Placement, which have higher margins, and being replaced with fee revenue in Interim that has lower margins, but is more resilient to economic factors and in line with our strategy and was also impacted by an increase in restructuring charges, net recorded in FY’23.
The decline in Adjusted EBITDA margin was primarily due to the change in fee revenue mix discussed above.
Results by Line of Business
Selected Consulting Data
(dollars in millions) (a)
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
175.3
$
173.9
$
677.0
$
650.2
Total revenue
$
178.0
$
175.6
$
687.0
$
654.2
Ending number of consultants and execution staff (b)
1,853
1,841
1,853
1,841
Hours worked in thousands (c)
450
471
1,790
1,766
Average bill rate (d)
$
390
$
369
$
378
$
368
Adjusted Results (e):
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
24.6
$
30.7
$
108.5
$
116.1
Adjusted EBITDA margin
14.0
%
17.6
%
16.0
%
17.9
%
______________________
(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:
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
—
$
2.8
$
0.3
Impairment of right of use assets
$
—
$
—
$
3.1
$
2.5
Restructuring charges, net
$
0.8
$
—
$
11.6
$
—
Fee revenue was $175.3 million $173.9 million $1.4 million 1% (up 3% on a constant currency basis). Consulting saw growth in our core solution Organizational Strategy, partially offset by a decline in fee revenue from Leadership Development.
Adjusted EBITDA was $24.6 million 14.0% compared to Adjusted EBITDA of $30.7 million 17.6% in the year-ago quarter. This decrease in Adjusted EBITDA resulted primarily from an increase in compensation and benefits expense due to higher performance-related bonus expense, partially offset by an increase in fee revenue.
Selected Digital Data
(dollars in millions) (a)
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
91.5
$
89.5
$
354.7
$
349.0
Total revenue
$
91.5
$
89.5
$
355.0
$
349.4
Ending number of consultants
347
305
347
305
Subscription & License fee revenue
$
31.6
$
29.1
$
119.7
$
108.7
Adjusted Results (b):
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
23.6
$
27.7
$
97.5
$
110.1
Adjusted EBITDA margin
25.8
%
31.0
%
27.5
%
31.5
%
______________________
(a)
Numbers may not total due to rounding.
(b)
Adjusted results exclude the following:
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
—
$
1.5
$
0.2
Impairment of right of use assets
$
—
$
—
$
1.7
$
1.3
Restructuring charges, net
$
—
$
—
$
2.9
$
—
Fee revenue was $91.5 million $89.5 million $2.0 million 2% (up 5% on a constant currency basis). The accumulation of sales of subscriptions in fiscal 2023 has created year-over-year growth in subscription based revenue with increases in both sales effectiveness and total rewards tools.
Adjusted EBITDA was $23.6 million 25.8% compared to $27.7 million 31.0% , respectively, in the year-ago quarter. The decrease in Adjusted EBITDA and Adjusted EBITDA margin resulted from an increase in compensation and benefits primarily due to an increase in average headcount compared to the year-ago quarter, partially offset by an increase in fee revenue discussed above.
Selected Executive Search Data(a)
(dollars in millions) (b)
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
212.6
$
244.2
$
875.8
$
935.6
Total revenue
$
214.6
$
245.7
$
883.3
$
939.9
Ending number of consultants
602
587
602
587
Average number of consultants
609
584
594
555
Engagements billed
3,772
4,417
10,091
11,085
New engagements (c)
1,508
1,851
6,343
7,213
Adjusted Results (d):
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
42.7
$
64.2
$
205.8
$
257.6
Adjusted EBITDA margin
20.1
%
26.3
%
23.5
%
27.5
%
______________________
(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.
(d)
Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that adjust for the following:
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
—
$
—
$
0.1
Impairment of right of use assets
$
—
$
—
$
—
$
0.9
Restructuring charges, net
$
0.6
$
—
$
20.1
$
—
Fee revenue was $212.6 million $244.2 million 13% (down 11% on a constant currency basis). Fee revenue saw a decline in all regions of Executive Search as a result of a 15% decrease in the number of engagements billed, partially offset by a 4% increase in weighted-average fee billed per engagement (calculated using local currency).
Adjusted EBITDA was $42.7 million 20.1% compared to Adjusted EBITDA of $64.2 million 26.3% , 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 decrease in performance-related bonus expense.
Selected Professional Search & Interim Data(a)
(dollars in millions) (b)
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
151.7
$
100.7
$
503.4
$
297.1
Total revenue
$
152.6
$
101.1
$
507.1
$
298.0
Permanent Placement:
Fee revenue
$
62.5
$
81.5
$
281.1
$
262.9
Engagements billed (c)
2,304
2,892
7,435
6,633
New engagements (d)
1,364
1,904
6,486
5,633
Ending number of consultants (e)
401
479
401
479
Interim: (started in Q3 FY'22)
Fee revenue
$
89.2
$
19.2
$
222.3
$
34.2
Average bill rate (f)
$
124
$
104
$
115
$
98
Average weekly billable consultants (g)
1,683
406
1,079
388
Adjusted Results (h):
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
27.3
$
33.4
$
110.9
$
106.0
Adjusted EBITDA margin
18.0
%
33.2
%
22.0
%
35.7
%
_____________________
(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 Q4 FY’22 and year to date 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:
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
—
$
0.1
$
0.9
Impairment of right of use assets
$
—
$
—
$
0.6
$
1.4
Integration/acquisition costs
$
4.3
$
2.3
$
11.0
$
3.7
Restructuring charges, net
$
—
$
—
$
4.8
$
—
Fee revenue was $151.7 million $51.0 million 51% (up 52% on a constant currency basis), compared to the year-ago quarter. The increase in fee revenue was mainly driven by the acquisitions, partially offset by a decrease in Permanent Placement fee revenue.
Adjusted EBITDA was $27.3 million 18.0% compared to $33.4 million 33.2% , respectively, in the year-ago quarter. The decrease in Adjusted EBITDA margin was primarily due to a change in the revenue mix with decreases in Permanent Placement fee revenue being more than offset by an increase in fee revenue from Interim due to the acquisitions, which have lower margins but are more resilient to economic factors and in line with our strategy.
Selected RPO Data(a)
(dollars in millions) (b)
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
99.8
$
112.8
$
424.6
$
394.8
Total revenue
$
101.4
$
115.0
$
431.5
$
401.9
Remaining revenue under contract(c)
$
776.7
$
776.8
$
776.7
$
776.8
RPO new business(d)
$
115.1
$
212.7
$
597.8
$
597.1
Adjusted Results (e):
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
9.0
$
17.4
$
52.6
$
59.1
Adjusted EBITDA margin
9.0
%
15.4
%
12.4
%
15.0
%
______________________
(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 Q4 FY’22 and year to date 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.
(e)
Adjusted results exclude the following:
Fourth Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
—
$
—
$
0.4
Impairment of right of use assets
$
—
$
—
$
0.1
$
1.2
Restructuring charges, net
$
—
$
—
$
3.1
$
—
Fee revenue was $99.8 million $13.0 million 12% (down 9% on a constant currency basis), compared to the year-ago quarter. RPO fee revenue decreased due to a decline in demand driven by global economic factors.
Adjusted EBITDA was $9.0 million 9.0% compared to $17.4 million 15.4% , respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was primarily due to the decrease in fee revenue, partially offset by a decrease in compensation and benefits expense.
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:
Q1 FY’24 fee revenue is expected to be in the range of $668 million $698 million
Q1 FY’24 diluted earnings per share is expected to range between $0.78 $0.95
On a consolidated adjusted basis:
Q1 FY’24 adjusted diluted earnings per share is expected to be in the range from $0.84 $1.00
Q1 FY’24
Low
High
Consolidated diluted earnings per share
$
0.78
$
0.95
Integration/acquisition costs
0.09
0.07
Tax rate Impact
(0.03
)
(0.02
)
Consolidated adjusted diluted earnings per share(1)
$
0.84
$
1.00
______________________
(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 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 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, including concerns regarding a potential recession, inflation, interest rates, tax rates, and economic uncertainty, 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 governance 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, including Infinity Consulting Solutions and Salo 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, 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; and
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 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
pril 30,
Year Ended
April 30,
2023
2022
2023
2022
(unaudited)
Fee revenue
$
730,874
$
721,139
$
2,835,408
$
2,626,718
Reimbursed out-of-pocket engagement expenses
7,250
5,864
28,428
16,737
Total revenue
738,124
727,003
2,863,836
2,643,455
Compensation and benefits
491,429
467,706
1,901,203
1,741,452
General and administrative expenses
66,130
62,129
268,458
237,272
Reimbursed expenses
7,250
5,864
28,428
16,737
Cost of services
81,347
36,411
238,499
114,399
Depreciation and amortization
17,976
16,140
68,335
63,521
Restructuring charges, net
1,411
—
42,573
—
Total operating expenses
665,543
588,250
2,547,496
2,173,381
Operating income
72,581
138,753
316,340
470,074
Other income (loss), net
437
(14,116
)
5,261
(11,880
)
Interest expense, net
(5,776
)
(6,473
)
(25,864
)
(25,293
)
Income before provision for income taxes
67,242
118,164
295,737
432,901
Income tax provision
19,108
25,105
82,683
102,056
Net income
48,134
93,059
213,054
330,845
Net income attributable to noncontrolling interest
(640
)
(1,395
)
(3,525
)
(4,485
)
Net income attributable to Korn Ferry
$
47,494
$
91,664
$
209,529
$
326,360
Earnings per common share attributable to Korn Ferry:
Basic
$
0.91
$
1.71
$
3.98
$
6.04
Diluted
$
0.91
$
1.70
$
3.95
$
5.98
Weighted-average common shares outstanding:
Basic
51,009
52,352
51,482
52,807
Diluted
51,234
52,834
51,883
53,401
Cash dividends declared per share:
$
0.15
$
0.12
$
0.60
$
0.48
KORN FERRY AND SUBSIDIARIES
FINANCIAL SUMMARY BY REPORTING SEGMENT
(dollars in thousands)
(unaudited)
Three Months Ended April 30,
Year Ended April 30,
2023
2022
% Change
2023
2022
% Change
Fee revenue:
Consulting
$
175,270
$
173,944
0.8
%
$
677,001
$
650,204
4.1
%
Digital
91,490
89,521
2.2
%
354,651
349,025
1.6
%
Executive Search:
North America
135,300
156,232
(13.4
)%
562,139
605,704
(7.2
%)
EMEA
46,353
49,502
(6.4
)%
187,014
182,192
2.6
%
Asia Pacific
23,188
30,211
(23.2
)%
95,598
118,596
(19.4
%)
Latin America
7,764
8,254
(5.9
)%
31,047
29,069
6.8
%
Total Executive Search (a)
212,605
244,199
(12.9
)%
875,798
935,561
(6.4
%)
Professional Search & Interim
151,725
100,685
50.7
%
503,395
297,096
69.4
%
RPO
99,784
112,790
(11.5
)%
424,563
394,832
7.5
%
Total fee revenue
730,874
721,139
1.3
%
2,835,408
2,626,718
7.9
%
Reimbursed out-of-pocket engagement expenses
7,250
5,864
23.6
%
28,428
16,737
69.9
%
Total revenue
$
738,124
$
727,003
1.5
%
$
2,863,836
$
2,643,455
8.3
%
(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)
April 30,
2023
April 30,
2022
ASSETS
Cash and cash equivalents
$
844,024
$
978,070
Marketable securities
44,837
57,244
Receivables due from clients, net of allowance for doubtful accounts of $44,377 $36,384
569,601
590,260
Income taxes and other receivables
67,512
31,884
Unearned compensation
63,476
60,749
Prepaid expenses and other assets
49,219
41,763
Total current assets
1,638,669
1,759,970
Marketable securities, non-current
179,040
175,783
Property and equipment, net
161,876
138,172
Operating lease right-of-use assets, net
142,690
167,734
Cash surrender value of company-owned life insurance policies, net of loans
197,998
183,308
Deferred income taxes
102,057
84,712
Goodwill
909,491
725,592
Intangible assets, net
114,426
89,770
Unearned compensation, non-current
103,607
118,238
Investments and other assets
24,590
21,267
Total assets
$
3,574,444
$
3,464,546
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable
$
53,386
$
50,932
Income taxes payable
19,969
34,450
Compensation and benefits payable
532,934
547,826
Operating lease liability, current
45,821
48,609
Other accrued liabilities
324,150
302,408
Total current liabilities
976,260
984,225
Deferred compensation and other retirement plans
396,534
357,175
Operating lease liability, non-current
119,220
151,212
Long-term debt
396,194
395,477
Deferred tax liabilities
5,352
2,715
Other liabilities
27,879
24,153
Total liabilities
1,921,439
1,914,957
Stockholders' equity
Common stock: $0.01
429,754
502,008
Retained earnings
1,311,081
1,134,523
Accumulated other comprehensive loss, net
(92,764
)
(92,185
)
Total Korn Ferry stockholders' equity
1,648,071
1,544,346
Noncontrolling interest
4,934
5,243
Total stockholders' equity
1,653,005
1,549,589
Total liabilities and stockholders' equity
$
3,574,444
$
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
April 30,
Year Ended
April 30,
2023
2022
2023
2022
Net income attributable to Korn Ferry
$
47,494
$
91,664
$
209,529
$
326,360
Net income attributable to non-controlling interest
640
1,395
3,525
4,485
Net income
48,134
93,059
213,054
330,845
Income tax provision
19,108
25,105
82,683
102,056
Income before provision for income taxes
67,242
118,164
295,737
432,901
Other (income) loss, net
(437
)
14,116
(5,261
)
11,880
Interest expense, net
5,776
6,473
25,864
25,293
Operating income
72,581
138,753
316,340
470,074
Depreciation and amortization
17,976
16,140
68,335
63,521
Other income (loss), net
437
(14,116
)
5,261
(11,880
)
Integration/acquisition costs (1)
5,450
3,608
14,922
7,906
Impairment of fixed assets (2)
—
—
4,375
1,915
Impairment of right of use assets (3)
—
—
5,471
7,392
Restructuring charges, net (4)
1,411
—
42,573
—
Adjusted EBITDA
$
97,855
$
144,385
$
457,277
$
538,928
Operating margin
9.9
%
19.2
%
11.2
%
17.9
%
Depreciation and amortization
2.5
%
2.2
%
2.4
%
2.4
%
Other income (loss), net
0.1
%
(1.9
) %
0.2
%
(0.5
) %
Integration/acquisition costs (1)
0.7
%
0.5
%
0.5
%
0.3
%
Impairment of fixed assets (2)
—
—
0.1
%
0.1
%
Impairment of right of use assets (3)
—
—
0.2
%
0.3
%
Restructuring charges, net (4)
0.2
%
—
1.5
%
—
Adjusted EBITDA margin
13.4
%
20.0
%
16.1
%
20.5
%
Net income attributable to Korn Ferry
$
47,494
$
91,664
$
209,529
$
326,360
Integration/acquisition costs (1)
5,450
3,608
14,922
7,906
Impairment of fixed assets (2)
—
—
4,375
1,915
Impairment of right of use assets (3)
—
—
5,471
7,392
Restructuring charges, net (4)
1,411
—
42,573
—
Tax effect on the adjusted items (5)
(1,309
)
(844
)
(14,719
)
(3,476
)
Adjusted net income attributable to Korn Ferry
$
53,046
$
94,428
$
262,151
$
340,097
Basic earnings per common share
$
0.91
$
1.71
$
3.98
$
6.04
Integration/acquisition costs (1)
0.11
0.08
0.29
0.15
Impairment of fixed assets (2)
—
—
0.08
0.04
Impairment of right of use assets (3)
—
—
0.10
0.14
Restructuring charges, net (4)
0.03
—
0.82
—
Tax effect on the adjusted items (5)
(0.03
)
(0.02
)
(0.29
)
(0.07
)
Adjusted basic earnings per share
$
1.02
$
1.77
$
4.98
$
6.30
Diluted earnings per common share
$
0.91
$
1.70
$
3.95
$
5.98
Integration/acquisition costs (1)
0.10
0.07
0.28
0.15
Impairment of fixed assets (2)
—
—
0.08
0.03
Impairment of right of use assets (3)
—
—
0.10
0.14
Restructuring charges, net (4)
0.03
—
0.82
—
Tax effect on the adjusted items (5)
(0.03
)
(0.02
)
(0.29
)
(0.07
)
Adjusted diluted earnings per share
$
1.01
$
1.75
$
4.94
$
6.23
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)
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 April 30,
2023
2022
Fee
Total
Adjusted
Adjusted
Fee
Total
Adjusted
Adjusted
(dollars in thousands)
Consulting
$
175,270
$
177,985
$
24,558
14.0 %
$
173,944
$
175,636
$
30,650
17.6 %
Digital
91,490
91,488
23,603
25.8 %
89,521
89,543
27,720
31.0 %
Executive Search:
North America
135,300
136,926
28,686
21.2 %
156,232
157,422
43,676
28.0 %
EMEA
46,353
46,671
6,803
14.7 %
49,502
49,786
8,476
17.1 %
Asia Pacific
23,188
23,287
5,499
23.7 %
30,211
30,258
9,133
30.2 %
Latin America
7,764
7,765
1,684
21.7 %
8,254
8,258
2,885
35.0 %
Total Executive Search
212,605
214,649
42,672
20.1 %
244,199
245,724
64,170
26.3 %
Professional Search & Interim
151,725
152,628
27,292
18.0 %
100,685
101,143
33,407
33.2 %
RPO
99,784
101,374
9,026
9.0 %
112,790
114,957
17,400
15.4 %
Corporate
—
—
(29,296)
—
—
(28,962)
Consolidated
$
730,874
$
738,124
$
97,855
13.4 %
$
721,139
$
727,003
$
144,385
20.0 %
Years Ended April 30,
2023
2022
Fee
Total
Adjusted
Adjusted
Fee
Total
Adjusted
Adjusted
(dollars in thousands)
Consulting
$
677,001
$
686,979
$
108,502
16.0 %
$
650,204
$
654,199
$
116,108
17.9 %
Digital
354,651
354,967
97,458
27.5 %
349,025
349,437
110,050
31.5 %
Executive Search:
North America
562,139
568,212
140,850
25.1 %
605,704
609,258
181,615
30.0 %
EMEA
187,014
188,114
31,380
16.8 %
182,192
182,866
31,804
17.5 %
Asia Pacific
95,598
95,956
24,222
25.3 %
118,596
118,705
35,105
29.6 %
Latin America
31,047
31,054
9,370
30.2 %
29,069
29,079
9,089
31.3 %
Total Executive Search
875,798
883,336
205,822
23.5 %
935,561
939,908
257,613
27.5 %
Professional Search & Interim
503,395
507,058
110,879
22.0 %
297,096
297,974
106,015
35.7 %
RPO
424,563
431,496
52,588
12.4 %
394,832
401,937
59,126
15.0 %
Corporate
—
—
(117,972)
—
—
(109,984)
Consolidated
$
2,835,408
$
2,863,836
$
457,277
16.1 %
$
2,626,718
$
2,643,455
$
538,928
20.5 %
View source version on businesswire.com: https://www.businesswire.com/news/home/20230620800168/en/
Investor Relations: Tiffany Louder, (214) 310-8407
Source: Korn Ferry
