[KORN FERRY LETTERHEAD]

April 7, 2021

Securities and Exchange Commission

Division of Corporation Finance

Office of Trade & Services

100 F Street, N.E.

Washington, D.C. 20549

Attn: Suying Li and Rufus Decker

VIA EDGAR

 

Re:		Korn Ferry
		Form 10-K for the Fiscal Year Ended April 30, 2020
		Filed July 15, 2020
		File No. 001-14505

Dear Ms. Li and Mr. Decker,

This letter is a follow-up to our conference call on March 30, 2021 and is a supplement to our letter to you dated March 15, 2021, which was in response to your letter dated March 4, 2021, regarding Korn Ferry’s (the “Company”) annual report on Form 10-K for the fiscal year ended April 30, 2020 (filed July 15, 2020).

Form 10-K for the Fiscal Year Ended April 30, 2020

Consolidated Financial Statements

Note 11. Segments, Page F-38

As discussed during our March 30, 2021 conference call, the following provides a description of our internal management system and includes proposed changes to information disclosed about our segments.

Our management system begins with the Annual Operating Plan (“AOP”). As we begin the AOP process, the CEO (“CODM”) and CFO set Fee Revenue, Adjusted EBITDA, and Adjusted EBITDA Margin targets (financial targets) for Consulting, Digital, and RPOPS on a global basis. In the case of Executive Search (“ES”), the same financial targets are set, but we set them separately for each Region – North America, Latin America, Europe, Middle East, and Africa, and Asia Pacific. Upon receiving targets, each line of business and, in the case of ES, each Region will build a plan that includes the level of new business and the incremental resources required to achieve the targets. As a professional services “people business”, the primary resource allocation decisions made by the CODM are focused on hiring fee earners and execution/delivery resources.

As we begin our fiscal year and for each quarterly reporting period, as outlined above, the CODM receives new business and fee revenue reports for each month. For the first two months of a quarter, the CODM’s review of segment Adjusted EBITDA is conducted informally, through conversation with the CFO. For the last month of the quarter, the CODM receives the earnings call deck that is fully described in our prior letter. The CODM uses the monthly new business and fee revenue reports and the Adjusted EBITDA from the quarterly earnings call deck to assess performance and to determine if any changes are required for resource allocation decisions – i.e., do we stay the course or increase or decrease our hiring activities.

The CODM does not use operating income information even though it is included in the Appendix of the earnings call deck that is provided to him. Instead, he uses Adjusted EBITDA because it facilitates comparisons to historical performance and the financial targets set as part of the AOP process, clearer analyses of potential future performance and forward earnings potential, and the identification of trends, in each case without the distortion that may be caused by less predictable charges and events. In addition, as discussed on our call, the mark-to-market adjustments for assets held in trust for deferred compensation programs is required by US GAAP to be recorded in other income which is below operating income. The mark-to-market adjustment for the deferred compensation obligations is required to be recorded in compensation expense which falls within operating income. These amounts, which essentially offset each other, are both included in Adjusted EBITDA, making that financial metric a more reliable management tool from the CODM’s perspective. Last, in our conversations with sell-side and buy-side analysts and portfolio managers, the firm’s results are always discussed in terms of Adjusted EBITDA, further reinforcing the CODM’s use of this financial metric.

On our call, we discussed several changes to our reporting:

 

1)

Tables in our Segment footnote – Going forward, we will no longer reconcile operating income to Adjusted EBITDA for Consulting, Digital, RPOPS, each Region for ES, and Corporate. We will not do this because under ASC 280, Adjusted EBITDA is deemed to be a GAAP measure for our reportable segments as it is the measure of profit and loss used by the CODM in allocating resources. We will also eliminate the ES subtotal column, as discussed on our call. With respect to the Consolidated column, ASC 280 specifically requires a reconciliation of the total of reported segment revenues, profit or loss measurement and assets reported by segment to the corresponding consolidated GAAP totals. Accordingly, the reconciliation for Consolidated Adjusted EBITDA will be to Net Income Attributable to Korn Ferry which is deemed to be the closest and most relevant GAAP number.

To the extent that reconciling items between operating income and Adjusted EBITDA (on a segment basis) are no longer presented but are still required to be disclosed by ASC 280, such amounts will be included in the footnote in narrative format.

See Appendix 1 for mock-up.

 

2

Note that the table discussed above is also presented in our earnings press release and in our MD&A. Both of those presentations will be changed to be consistent with the table in the footnote with one exception – they will include the ES combined subtotal to present our results by our Lines of Business, which is important as a number of our investors analyze our financial results this way. For this combined subtotal, we will also include the reconciliation of combined ES operating income to combined ES Adjusted EBITDA

See tables in the Results of Operations section of the MD&A write-up in Appendix 2.

 

2)

MD&A – As we discussed on our call, our MD&A will be modified to align to our segment footnote. More specifically, our discussion around ES Fee Revenue, Compensation and Benefits, General and Administrative Expenses, and Adjusted EBITDA will be done for each Region. We will no longer present a discussion around each of the above areas for combined ES nor will we discuss operating income trends.

See Appendix 2 for mock-up.

 

3)

Earnings call deck – Per the above, the earnings call deck only includes one page for ES and, with the exception of fee revenue, presents the other financial metrics on a combined basis. We have modified the slide so that both Fee Revenue and Adjusted EBITDA are presented on a Regional basis (consistent with how this information has been considered by the CODM historically) in addition to a combined, Line of Business basis.

See Appendix 3 for mock-up.

We appreciate the Staff’s responsiveness with respect to the Company’s filing and look forward to resolving any concerns the Staff may have. If you have any questions, please contact me at (310) 226-6366 or Ari Lanin of Gibson, Dunn & Crutcher LLP at (310) 552-8581.

 

 

cc:	Don Ferrera, Ernst & Young LLP (via electronic mail)

Ari Lanin, Gibson, Dunn & Crutcher LLP (via electronic mail)

 

3

Appendix 1 – Table in our Segment footnote

11. Segments

The Company has invested in its digital business over the past year in order to digitize and harmonize the structure of its IP content and data and to build a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement. These investments, combined with the acquisition of the Acquired Companies, resulted in a reassessment in the third quarter of fiscal 2020 of how the Company managed its former Advisory business. Given the Company’s strategy and development of financial and operational metrics for the consulting and digital businesses, the Company’s chief operating decision maker (“CODM”) had begun to make resource allocation decisions and assess performance separately between Consulting and Digital. Therefore, on November 1, 2019, the Company changed the composition of its global segments, and under the new reporting format, the Advisory segment was separated into two segments: Consulting and Digital. Revenues are directly attributed to a segment and expenses not directly associated with a specific segment are allocated based on the most relevant measures applicable, including revenues, headcount, and other factors.

The Company operates through four lines of business:

 

1.

Consulting helps clients synchronize their strategy and their talent by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Rewards and Benefits. This work is supported and underpinned by a comprehensive range of some of the world’s leading lP and data.

 

2.

Digital leverages an artificial intelligence powered platform to identify structure, roles, capabilities, and behaviors needed to drive business forward. This end-to-end system gives clients one enterprise-wide talent framework and delivers an achievable blueprint for success along with the guidance and tools to deliver it.

 

3.

Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent. Behavioral interviewing and proprietary assessments are used to determine ideal organizational fit, and salary benchmarking builds appropriate frameworks for compensation and retention.

 

4.

RPO and Professional Search combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to clients. Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions.

Executive Search is managed by geographic regional leaders. Worldwide operations for Consulting, Digital, and RPO and Professional Search are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Consulting, Digital, and RPO & Professional Search report directly to the Chief Executive Officer of the Company. The Company also operates a Corporate segment to record global expenses.

The Company evaluates performance and allocates resources based on the CODM’s review of 1) fee revenue and 2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such costs or charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other impairment charges). The CODM is not provided asset information by reportable segment.

Financial highlights by reporting segments are as follows:

 

		Three Months Ended January 31, 2021
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	136,268			$	75,791			$	106,002			$	35,991			$	21,643			$	4,468			$	95,197			$	—			$	475,360
Total revenue		$	136,593			$	75,967			$	106,325			$	36,016			$	21,680			$	4,468			$	96,831			$	—			$	477,880
Net income attributable to Korn Ferry																																		$	51,319
Net income attributable to noncontrolling interest																																			269
Other income, net																																			(14,935	)
Interest expense, net																																			7,298
Income tax provision																																			21,204
Operating income																																		$	65,155
Depreciation and amortization																																			15,735
Other income, net																																			14,935
Restructuring charges, net																																			838
Adjusted EBITDA(1)		$	27,515			$	27,134			$	30,941			$	3,918			$	6,375			$	458			$	19,630			$	(19,308	)		$	96,663

 

(1)	Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes net restructuring charges.

		Three Months Ended January 31, 2020
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	140,525			$	99,389			$	106,888			$	44,301			$	25,089			$	7,283			$	91,850			$	—			$	515,325
Total revenue		$	144,298			$	100,663			$	110,230			$	45,077			$	25,365			$	7,351			$	94,995			$	—			$	527,979
Net income attributable to Korn Ferry																																		$	19,993
Net income attributable to noncontrolling interest																																			963
Other income, net																																			(5,055	)
Interest expense, net																																			6,919
Income tax provision																																			8,775
Operating income																																		$	31,595
Depreciation and amortization																																			14,863
Other income, net																																			5,055
Integration/acquisition costs																																			6,704
Restructuring charges, net																																			18,093
Separation costs																																			1,783
Adjusted EBITDA(1)		$	18,699			$	25,852			$	26,618			$	6,878			$	5,505			$	1,655			$	15,211			$	(22,325	)		$	78,093

 

(1)	Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes integration/acquisition costs, net restructuring charges and separation costs.

 

		Nine Months Ended January 31, 2021
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	362,271			$	206,807			$	266,485			$	97,701			$	59,702			$	12,419			$	249,511			$	—			$	1,254,896
Total revenue		$	363,234			$	207,027			$	267,790			$	97,925			$	59,840			$	12,419			$	254,317			$	—			$	1,262,552
Net income attributable to Korn Ferry																																		$	48,264
Net income attributable to noncontrolling interest																																			547
Other income, net																																			(26,374	)
Interest expense, net																																			21,686
Income tax provision																																			25,409
Operating income																																		$	69,532
Depreciation and amortization																																			46,068
Other income, net																																			26,374
Integration/acquisition costs																																			737
Restructuring charges, net																																			30,732
Adjusted EBITDA(1)		$	54,282			$	58,161			$	57,439			$	8,445			$	11,610			$	480			$	39,453			$	(56,427	)		$	173,443

 

(1)	Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes, integration/acquisition costs and net restructuring charges.

 

		Nine Months Ended January 31, 2020
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	422,103			$	223,097			$	332,428			$	130,652			$	78,395			$	23,140			$	282,448			$	—			$	1,492,263
Total revenue		$	433,832			$	224,371			$	342,753			$	132,830			$	79,201			$	23,211			$	292,156			$	—			$	1,528,354
Net income attributable to Korn Ferry																																		$	105,748
Net income attributable to noncontrolling interest																																			1,890
Other income, net																																			(8,014	)
Interest expense, net																																			15,186
Income tax provision																																			38,988
Operating income																																		$	153,798
Depreciation and amortization																																			40,355
Other income, net																																			8,014
Integration/acquisition costs																																			9,319
Restructuring charges, net																																			18,093
Separation costs																																			1,783
Adjusted EBITDA(1)		$	49,990			$	66,084			$	88,611			$	21,725			$	19,063			$	4,186			$	47,456			$	(65,753	)		$	231,362

 

(1)	Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes integration/acquisition costs, net restructuring charges and separation costs.

Appendix 2 – Introduction to MD&A

Results of Operations

The following table summarizes the results of our operations as a percentage of fee revenue:

(Numbers may not total exactly due to rounding)

 

		Three Months Ended January 31,								Nine Months Ended January 31,
		2021				2020				2021				2020
Fee revenue			100.0	%			100.0	%			100.0	%			100.0	%
Reimbursed out-of-pocket engagement expenses			0.5				2.5				0.6				2.4
Total revenue			100.5				102.5				100.6				102.4
Compensation and benefits			68.6				67.6				73.1				68.0
General and administrative expenses			9.9				13.8				11.2				13.3
Reimbursed expenses			0.5				2.5				0.6				2.4
Cost of services			4.2				6.0				4.0				4.4
Depreciation and amortization			3.3				2.9				3.7				2.7
Restructuring charges, net			0.2				3.5				2.4				1.2
Operating income			13.7				6.1				5.5				10.3
Net income			10.9	%			4.1	%			3.9	%			7.2	%
Net income attributable to Korn Ferry			10.8	%			3.9	%			3.8	%			7.1	%

The following tables summarize the results of our operations:

(Numbers may not total exactly due to rounding)

 

		Three Months Ended January 31,																Nine Months Ended January 31,
		2021								2020								2021								2020
		Dollars				%				Dollars				%				Dollars				%				Dollars				%
		(dollars in thousands)
Fee revenue
Consulting		$	136,268				28.7	%		$	140,525				27.3	%		$	362,271				28.9	%		$	422,103				28.3	%
Digital			75,791				15.9				99,389				19.3				206,807				16.5				223,097				15.0
Executive Search:
North America			106,002				22.3				106,888				20.7				266,485				21.2				332,428				22.3
EMEA			35,991				7.6				44,301				8.6				97,701				7.8				130,652				8.8
Asia Pacific			21,643				4.6				25,089				4.9				59,702				4.8				78,395				5.3
Latin America			4,468				0.9				7,283				1.4				12,419				1.0				23,140				1.6
Total Executive Search			168,104				35.4				183,561				35.6				436,307				34.8				564,615				37.8
RPO & Professional Search			95,197				20.0				91,850				17.8				249,511				19.9				282,448				18.9
Total fee revenue			475,360				100.0	%			515,325				100.0	%			1,254,896				100.0	%			1,492,263				100.0	%
Reimbursed out-of-pocket engagement expense			2,520								12,654								7,656								36,091
Total revenue		$	477,880							$	527,979							$	1,262,552							$	1,528,354

 

		Three Months Ended January 31,																Nine Months Ended January 31,
		2021								2020								2021								2020
		Dollars				Margin (1)				Dollars				Margin (1)				Dollars				Margin (1)				Dollars				Margin (1)
		(dollars in thousands)
Operating income
Consulting		$	22,175				16.3	%		$	2,663				1.9	%		$	25,869				7.1	%		$	24,272				5.8	%
Digital			19,214				25.4				8,463				8.5				32,410				15.7				41,036				18.4
Executive Search:
North America			17,655				16.7				21,808				20.4				32,411				12.2				80,254				24.1
EMEA			3,114				8.7				4,644				10.5				(1,596	)			(1.6	)			18,466				14.1
Asia Pacific			5,844				27.0				5,070				20.2				9,958				16.7				17,866				22.8
Latin America			264				5.9				1,198				16.4				(578	)			(4.7	)			2,999				13.0
Total Executive Search			26,877				16.0				32,720				17.8				40,195				9.2				119,585				21.2
RPO & Professional Search			18,360				19.3				14,144				15.4				33,027				13.2				44,279				15.7
Corporate			(21,471	)							(26,395	)							(61,969	)							(75,374	)
Total operating income		$	65,155				13.7	%		$	31,595				6.1	%		$	69,532				5.5	%		$	153,798				10.3	%

 

(1)	Margin calculated as a percentage of fee revenue by segment.

		Three Months Ended January 31, 2021
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	136,268			$	75,791			$	106,002			$	35,991			$	21,643			$	4,468			$	168,104			$	95,197			$	—			$	475,360
Total revenue		$	136,593			$	75,967			$	106,325			$	36,016			$	21,680			$	4,468			$	168,489			$	96,831			$	—			$	477,880
Net income attributable to Korn Ferry																																						$	51,319
Net income attributable to noncontrolling interest																																							269
Other income, net																																							(14,935	)
Interest expense, net																																							7,298
Income tax provision																																							21,204
Operating income																										$	26,877											$	65,155
Depreciation and amortization																											1,449												15,735
Other income, net																											12,996												14,935
Restructuring charges, net																											370												838
Adjusted EBITDA		$	27,515			$	27,134			$	30,941			$	3,918			$	6,375			$	458			$	41,692			$	19,630			$	(19,308	)		$	96,663
Adjusted EBITDA margin			20.2	%			35.8	%			29.2	%			10.9	%			29.5	%			10.3	%			24.8	%			20.6	%							20.3	%

 

		Three Months Ended January 31, 2020
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	140,525			$	99,389			$	106,888			$	44,301			$	25,089			$	7,283			$	183,561			$	91,850			$	—			$	515,325
Total revenue		$	144,298			$	100,663			$	110,230			$	45,077			$	25,365			$	7,351			$	188,023			$	94,995			$	—			$	527,979
Net income attributable to Korn Ferry																																						$	19,993
Net income attributable to noncontrolling interest																																							963
Other income, net																																							(5,055	)
Interest expense, net																																							6,919
Income tax provision																																							8,775
Operating income loss																										$	32,720											$	31,595
Depreciation and amortization																											1,893												14,863
Other income, net																											4,260												5,055
Integration/acquisition costs																											—												6,704
Restructuring charges, net																											—												18,093
Separation costs																											1,783												1,783
Adjusted EBITDA		$	18,699			$	25,852			$	26,618			$	6,878			$	5,505			$	1,655			$	40,656			$	15,211			$	(22,325	)		$	78,093
Adjusted EBITDA margin			13.3	%			26.0	%			24.9	%			15.5	%			21.9	%			22.7	%			22.1	%			16.6	%							15.2	%

 

		Nine Months Ended January 31, 2021
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	362,271			$	206,807			$	266,485			$	97,701			$	59,702			$	12,419			$	436,307			$	249,511			$	—			$	1,254,896
Total revenue		$	363,234			$	207,027			$	267,790			$	97,925			$	59,840			$	12,419			$	437,974			$	254,317			$	—			$	1,262,552
Net income attributable to Korn Ferry																																						$	48,264
Net income attributable to noncontrolling interest																																							547
Other income, net																																							(26,374	)
Interest expense, net																																							21,686
Income tax provision																																							25,409
Operating income																										$	40,195											$	69,532
Depreciation and amortization																											4,541												46,068
Other income, net																											22,826												26,374
Integration/acquisition costs																											—												737
Restructuring charges, net																											10,412												30,732
Adjusted EBITDA		$	54,282			$	58,161			$	57,439			$	8,445			$	11,610			$	480			$	77,974			$	39,453			$	(56,427	)		$	173,443
Adjusted EBITDA margin			15.0	%			28.1	%			21.6	%			8.6	%			19.4	%			3.9	%			17.9	%			15.8	%							13.8	%

		Nine Months Ended January 31, 2020
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO & Professional Search				Corporate				Consolidated
		(in thousands)
Fee revenue		$	422,103			$	223,097			$	332,428			$	130,652			$	78,395			$	23,140			$	564,615			$	282,448			$	—			$	1,492,263
Total revenue		$	433,832			$	224,371			$	342,753			$	132,830			$	79,201			$	23,211			$	577,995			$	292,156			$	—			$	1,528,354
Net income attributable to Korn Ferry																																						$	105,748
Net income attributable to noncontrolling interest																																							1,890
Other income, net																																							(8,014	)
Interest expense, net																																							15,186
Income tax provision																																							38,988
Operating income																										$	119,585											$	153,798
Depreciation and amortization																											5,887												40,355
Other income, net																											6,330												8,014
Integration/acquisition costs																											—												9,319
Restructuring charges, net																											—												18,093
Separation costs																											1,783												1,783
Adjusted EBITDA		$	49,990			$	66,084			$	88,611			$	21,725			$	19,063			$	4,186			$	133,585			$	47,456			$	(65,753	)		$	231,362
Adjusted EBITDA margin			11.8	%			29.6	%			26.7	%			16.6	%			24.3	%			18.1	%			23.7	%			16.8	%							15.5	%

Three Months Ended January 31, 2021 Compared to Three Months Ended January 31, 2020

Fee Revenue

Executive Search North America reported fee revenue of $106.0 million, a decrease of $0.9 million, or 1%, in the three months ended January 31, 2021 compared to $106.9 million in the year-ago quarter. The decrease in fee revenue was due to an 8% decrease in the number of engagements billed, partially offset by a 7% increase in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended January 31, 2021 compared to the year-ago quarter.

Executive Search EMEA reported fee revenue of $36.0 million, a decrease of $8.3 million, or 19%, in the three months ended January 31, 2021 compared to $44.3 million in the year-ago quarter. The decrease in fee revenue was due to a 20% decrease in the number of engagements billed and a 4% decrease in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended January 31, 2021 compared to the year-ago quarter. Exchange rates favorably impacted fee revenue by $2.4 million, or 5%, in the three months ended January 31, 2021 compared to the year-ago quarter. Performance in the United Kingdom, Switzerland, Germany and France were the primary contributors to the decrease in fee revenue in the three months ended January 31, 2021 compared to the year-ago quarter.

Executive Search Asia Pacific reported fee revenue of $21.6 million, a decrease of $3.5 million, or 14%, in the three months ended January 31, 2021 compared to $25.1 million in the year-ago quarter. The decrease in fee revenue was due to a 17% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the three months ended January 31, 2021 compared to the year-ago quarter. Exchange rates favorably impacted fee revenue by $1.0 million, or 4%, in the three months ended January 31, 2021 compared to the year-ago quarter. The performance in Australia, Singapore and Hong Kong were the primary contributors to the decrease in fee revenue in the three months ended January 31, 2021 compared to the year-ago quarter.

Executive Search Latin America reported fee revenue of $4.5 million, a decrease of $2.8 million, or 38%, in the three months ended January 31, 2021 compared to $7.3 million in the year-ago quarter. The decrease in fee revenue was due to a 39% decrease in the number of engagements billed partially offset by a 10% increase in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended January 31, 2021 compared to the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.7 million, or 10%, in the three months ended January 31, 2021 compared to the year-ago quarter. The decrease in fee revenue in the region was due to lower fee revenue in Mexico, Chile and Brazil in the three months ended January 31, 2021 compared to the year-ago quarter.

Compensation and Benefits

Executive Search North America compensation and benefits expense increased by $7.5 million, or 10%, to $80.8 million in the three months ended January 31, 2021 from $73.3 million in the year-ago quarter. The increase in compensation and benefits expense was due to expenses associated with our deferred compensation and retirement plans driven by increases in the fair value of participants’ accounts in the three months ended January 31, 2021 compared to the year-ago quarter. This was partially offset by lower salaries and related payroll taxes due to a 24% decrease in average headcount as a result of actions taken to align our cost structure with the lower level of business demand in the three months ended January 31, 2021 compared to the year-ago quarter. North America Executive Search compensation and benefits expense, as a percentage of fee revenue, increased to 76% in the three months ended January 31, 2021 from 69% in the year-ago quarter.