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Korn Ferry Announces Fourth Quarter and Full Year FY’23 Results of Operations

Highlights

  • Korn Ferry reports Q4 FY’23 fee revenue of $730.9 million, an increase of 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, an increase of 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 and $209.5 million, respectively, while diluted and adjusted diluted earnings per share were $0.91 and $1.01 in Q4 FY’23, and were $3.95 and $4.94 for the full year, respectively.
  • Operating income and Adjusted EBITDA were $72.6 million (operating margin of 9.9%) and $97.9 million (Adjusted EBITDA margin of 13.4%), respectively, in Q4 FY'23, while full year amounts were $316.3 million (operating margin of 11.2%) and $457.3 million (Adjusted EBITDA margin of 16.1%), respectively.
  • The Company repurchased 255,000 shares of stock during the quarter for $13.4 million and paid dividends of $8.0 million.
  • On June 26, 2023, the Company increased its regular quarterly cash dividend by 20% to $0.18 per share, which is payable on July 31, 2023 to stockholders of record on July 7, 2023.
  • For the full year the Company continued to maintain its balanced approach to capital allocation by investing $254.8 million in acquisitions, investing $61.0 million in cap-ex primarily related to the Digital business and corporate infrastructure, spending $18.5 million on debt service costs, and returning $93.9 million and $33.0 million to shareholders in the form of share repurchases and dividends, respectively.

Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced fourth quarter and annual fee revenue of $730.9 million and $2,835.4 million, respectively. In addition, fourth quarter diluted earnings per share was $0.91 and adjusted diluted earnings per share was $1.01.

“During fiscal year 2023 our fee revenue reached an all-time high of $2.84 billion, up 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 of annual revenue on a run rate basis,” added Burnison. “Additionally, the Consulting and Digital businesses have never been more relevant as our clients increasingly seek transformation, growth and profitability.

“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, an increase of 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 in Q4 FY'23, compared to $91.7 million in Q4 FY’22 and Adjusted EBITDA was $97.9 million in Q4 FY’23, compared to $144.4 million in Q4 FY’22.

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, an increase of 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 in FY’23 as compared to $326.4 million in FY’22 and Adjusted EBITDA was $457.3 million in FY’23 as compared to $538.9 million in FY’22.

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 in Q4 FY’23 compared to $173.9 million in Q4 FY’22, an increase of $1.4 million or 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 in Q4 FY’23 with an Adjusted EBITDA margin of 14.0% compared to Adjusted EBITDA of $30.7 million with an associated margin of 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 in Q4 FY’23 compared to $89.5 million in Q4 FY’22, an increase of $2.0 million or 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 in Q4 FY’23 with an Adjusted EBITDA margin of 25.8% compared to $27.7 million and 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 and $244.2 million in Q4 FY’23 and Q4 FY’22, respectively, a year-over-year decrease of 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 in Q4 FY’23 with an Adjusted EBITDA margin of 20.1% compared to Adjusted EBITDA of $64.2 million and an Adjusted EBITDA margin of 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 in Q4 FY’23, an increase of $51.0 million or 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 in Q4 FY’23 with an Adjusted EBITDA margin of 18.0% compared to $33.4 million and 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 in Q4 FY’23, a decrease of $13.0 million or 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 in Q4 FY’23 with an Adjusted EBITDA margin of 9.0% compared to $17.4 million and 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 and $698 million; and
  • Q1 FY’24 diluted earnings per share is expected to range between $0.78 to $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 to $1.00.

 

Q1 FY’24

Earnings Per Share

Outlook

 

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 Companys 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 Ferrys performance as excluding the impact of exchange rate changes on Korn Ferrys 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 Ferrys 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

A
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 and $36,384 at April 30, 2023 and 2022, respectively

 

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 par value, 150,000 shares authorized, 76,693 and 75,409 shares issued and 52,269 and 53,190 shares outstanding at April 30, 2023 and 2022, respectively

 

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

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

Fee

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

(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

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

Fee

revenue

 

Total

revenue

 

Adjusted

EBITDA

 

Adjusted

EBITDA

margin

 

(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 %

 

Contacts

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

Media: Dan Gugler, (310) 226-2645

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