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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to ___________

 

Commission File Number 001-14505

 

KORN FERRY

 

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

95-2623879

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

1900 Avenue of the Stars, Suite 2600, Los Angeles, California 90067

(Address of principal executive offices) (Zip Code)

(310552-1834

(Registrant’s telephone number, including area code)

 

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

KFY

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer        

 

 

 

 

Non-accelerated filer  

 

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  

 

The number of shares outstanding of our common stock as of March 5, 2021 was 54,006,769 shares.

 

 


 

KORN FERRY

Table of Contents

Item #

 

Description

 

Page

 

 

 

 

 

 

 

Part I. Financial Information

 

 

 

 

 

 

 

Item 1.

 

Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets as of January 31, 2021 (unaudited) and April 30, 2020

 

1

 

 

 

 

 

 

 

Consolidated Statements of Income (unaudited) for the three and nine months ended January 31, 2021 and 2020

 

2

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended January 31, 2021 and 2020

 

3

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for three and nine months ended January 31, 2021 and 2020

 

4

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended January 31, 2021 and 2020

 

5

 

 

 

 

 

 

 

Notes to Consolidated Unaudited Financial Statements

 

6

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

28

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

47

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

48

 

 

 

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

49

 

 

 

 

 

Item 1A.

 

Risk Factors

 

49

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities Use of Proceeds and Issuer Purchases of Equity Securities

 

49

 

 

 

 

 

Item 5.

 

Other Information

 

49

 

 

 

 

 

Item 6.

 

Exhibits

 

50

 

 

 

 

 

 

 

Signatures

 

51

 

 

 

 

 

 

 


 

 

Item 1. Consolidated Financial Statements

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

January 31,

2021

 

 

April 30,

2020

 

 

 

(unaudited)

 

 

 

 

 

 

 

(in thousands, except per share data)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

694,128

 

 

$

689,244

 

Marketable securities

 

 

45,931

 

 

 

41,951

 

Receivables due from clients, net of allowance for doubtful accounts of $29,174 and $23,795 at January 31, 2021 and April 30, 2020, respectively

 

 

448,448

 

 

 

397,165

 

Income taxes and other receivables

 

 

45,154

 

 

 

38,755

 

Unearned compensation

 

 

53,188

 

 

 

43,117

 

Prepaid expenses and other assets

 

 

28,737

 

 

 

26,851

 

Total current assets

 

 

1,315,586

 

 

 

1,237,083

 

 

 

 

 

 

 

 

 

 

Marketable securities, non-current

 

 

157,023

 

 

 

132,134

 

Property and equipment, net

 

 

134,226

 

 

 

142,728

 

Operating lease right-of-use assets, net

 

 

182,675

 

 

 

195,077

 

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

 

 

162,549

 

 

 

146,408

 

Deferred income taxes

 

 

57,865

 

 

 

55,479

 

Goodwill

 

 

625,549

 

 

 

613,943

 

Intangible assets, net

 

 

97,696

 

 

 

111,926

 

Unearned compensation, non-current

 

 

104,650

 

 

 

79,510

 

Investments and other assets

 

 

25,648

 

 

 

29,540

 

Total assets

 

$

2,863,467

 

 

$

2,743,828

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

37,858

 

 

$

45,684

 

Income taxes payable

 

 

9,664

 

 

 

21,158

 

Compensation and benefits payable

 

 

301,147

 

 

 

280,911

 

Operating lease liability, current

 

 

48,998

 

 

 

54,851

 

Other accrued liabilities

 

 

237,743

 

 

 

221,603

 

Total current liabilities

 

 

635,410

 

 

 

624,207

 

 

 

 

 

 

 

 

 

 

Deferred compensation and other retirement plans

 

 

333,551

 

 

 

289,136

 

Operating lease liability, non-current

 

 

164,656

 

 

 

180,766

 

Long-term debt

 

 

394,629

 

 

 

394,144

 

Deferred tax liabilities

 

 

380

 

 

 

1,056

 

Other liabilities

 

 

39,847

 

 

 

30,828

 

Total liabilities

 

 

1,568,473

 

 

 

1,520,137

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized, 74,911 and 73,205 shares issued and 53,997 and 54,450 shares outstanding at January 31, 2021 and April 30, 2020, respectively

 

 

576,798

 

 

 

585,560

 

Retained earnings

 

 

774,303

 

 

 

742,993

 

Accumulated other comprehensive loss, net

 

 

(57,914

)

 

 

(107,172

)

Total Korn Ferry stockholders' equity

 

 

1,293,187

 

 

 

1,221,381

 

Noncontrolling interest

 

 

1,807

 

 

 

2,310

 

Total stockholders' equity

 

 

1,294,994

 

 

 

1,223,691

 

Total liabilities and stockholders' equity

 

$

2,863,467

 

 

$

2,743,828

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

 

 

Three Months Ended

January 31,

 

 

Nine Months Ended

January 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(in thousands, except per share data)

 

Fee revenue

 

$

475,360

 

 

$

515,325

 

 

$

1,254,896

 

 

$

1,492,263

 

Reimbursed out-of-pocket engagement expenses

 

 

2,520

 

 

 

12,654

 

 

 

7,656

 

 

 

36,091

 

          Total revenue

 

 

477,880

 

 

 

527,979

 

 

 

1,262,552

 

 

 

1,528,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

326,333

 

 

 

348,597

 

 

 

917,530

 

 

 

1,014,475

 

General and administrative expenses

 

 

47,271

 

 

 

71,355

 

 

 

140,836

 

 

 

199,171

 

Reimbursed expenses

 

 

2,520

 

 

 

12,654

 

 

 

7,656

 

 

 

36,091

 

Cost of services

 

 

20,028

 

 

 

30,822

 

 

 

50,198

 

 

 

66,371

 

Depreciation and amortization

 

 

15,735

 

 

 

14,863

 

 

 

46,068

 

 

 

40,355

 

Restructuring charges, net

 

 

838

 

 

 

18,093

 

 

 

30,732

 

 

 

18,093

 

          Total operating expenses

 

 

412,725

 

 

 

496,384

 

 

 

1,193,020

 

 

 

1,374,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

65,155

 

 

 

31,595

 

 

 

69,532

 

 

 

153,798

 

Other income, net

 

 

14,935

 

 

 

5,055

 

 

 

26,374

 

 

 

8,014

 

Interest expense, net

 

 

(7,298

)

 

 

(6,919

)

 

 

(21,686

)

 

 

(15,186

)

Income before provision for income taxes

 

 

72,792

 

 

 

29,731

 

 

 

74,220

 

 

 

146,626

 

Income tax provision

 

 

21,204

 

 

 

8,775

 

 

 

25,409

 

 

 

38,988

 

Net income

 

 

51,588

 

 

 

20,956

 

 

 

48,811

 

 

 

107,638

 

          Net income attributable to noncontrolling interest

 

 

(269

)

 

 

(963

)

 

 

(547

)

 

 

(1,890

)

Net income attributable to Korn Ferry

 

$

51,319

 

 

$

19,993

 

 

$

48,264

 

 

$

105,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Korn Ferry:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

$

0.95

 

 

$

0.37

 

 

$

0.89

 

 

$

1.92

 

     Diluted

 

$

0.94

 

 

$

0.36

 

 

$

0.88

 

 

$

1.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

 

52,596

 

 

 

53,999

 

 

 

53,030

 

 

 

54,611

 

     Diluted

 

 

53,013

 

 

 

54,264

 

 

 

53,396

 

 

 

55,006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.10

 

 

$

0.10

 

 

$

0.30

 

 

$

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

2


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 

 

 

Three Months Ended

January 31,

 

 

Nine Months Ended

January 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Net income

 

$

51,588

 

 

$

20,956

 

 

$

48,811

 

 

$

107,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

25,071

 

 

 

497

 

 

 

47,374

 

 

 

(3,588

)

Deferred compensation and pension plan adjustments, net of tax

 

 

663

 

 

 

943

 

 

 

1,988

 

 

 

1,933

 

Net unrealized loss on marketable securities, net of tax

 

 

(5

)

 

 

(5

)

 

 

(39

)

 

 

(5

)

Net unrealized gain (loss) on interest rate swap, net of tax

 

 

 

 

 

495

 

 

 

 

 

 

(456

)

Comprehensive income

 

 

77,317

 

 

 

22,886

 

 

 

98,134

 

 

 

105,522

 

Less: comprehensive income attributable to noncontrolling interest

 

 

(257

)

 

 

(1,057

)

 

 

(612

)

 

 

(1,932

)

Comprehensive income attributable to Korn Ferry

 

$

77,060

 

 

$

21,829

 

 

$

97,522

 

 

$

103,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


 

 

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

Total

Korn Ferry

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

Noncontrolling

 

 

Stockholder's

 

 

Shares

 

 

Amount

 

 

Earnings

 

 

Loss, Net

 

 

Equity

 

 

Interest

 

 

Equity

 

 

(in thousands)

 

Balance as of April 30, 2020

 

54,450

 

 

$

585,560

 

 

$

742,993

 

 

$

(107,172

)

 

$

1,221,381

 

 

$

2,310

 

 

$

1,223,691

 

Net loss

 

 

 

 

 

 

 

(30,833

)

 

 

 

 

 

(30,833

)

 

 

(22

)

 

 

(30,855

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

25,580

 

 

 

25,580

 

 

 

75

 

 

 

25,655

 

Dividends paid to shareholders

 

 

 

 

 

 

 

(5,807

)

 

 

 

 

 

(5,807

)

 

 

 

 

 

(5,807

)

Purchase of stock

 

(161

)

 

 

(4,442

)

 

 

 

 

 

 

 

 

(4,442

)

 

 

 

 

 

(4,442

)

Issuance of stock

 

580

 

 

 

3,966

 

 

 

 

 

 

 

 

 

3,966

 

 

 

 

 

 

3,966

 

Stock-based compensation

 

 

 

 

5,813

 

 

 

 

 

 

 

 

 

5,813

 

 

 

 

 

 

5,813

 

Balance as of July 31, 2020

 

54,869

 

 

 

590,897

 

 

 

706,353

 

 

 

(81,592

)

 

 

1,215,658

 

 

 

2,363

 

 

 

1,218,021

 

Net Income

 

 

 

 

 

 

 

27,778

 

 

 

 

 

 

27,778

 

 

 

300

 

 

 

28,078

 

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

 

 

(2,063

)

 

 

(2,063

)

 

 

2

 

 

 

(2,061

)

Dividends paid to shareholders

 

 

 

 

 

 

 

(5,607

)

 

 

 

 

 

(5,607

)

 

 

 

 

 

(5,607

)

Dividends to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,115

)

 

 

(1,115

)

Purchase of stock

 

(757

)

 

 

(22,878

)

 

 

 

 

 

 

 

 

(22,878

)

 

 

 

 

 

(22,878

)

Issuance of stock

 

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

7,084

 

 

 

 

 

 

 

 

 

7,084

 

 

 

 

 

 

7,084

 

Balance as of October 31, 2020

 

54,153

 

 

 

575,103

 

 

 

728,524

 

 

 

(83,655

)

 

 

1,219,972

 

 

 

1,550

 

 

 

1,221,522

 

Net Income

 

 

 

 

 

 

 

51,319

 

 

 

 

 

 

51,319

 

 

 

269

 

 

 

51,588

 

Other comprehensive income (loss)