Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

March 11, 2022

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

 

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

 

For the quarterly period ended January 31, 2022

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 4, 2022 was 53,902,870 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, 2022 (unaudited) and April 30, 2021

 

1

 

 

 

 

 

 

 

Consolidated Statements of Income (unaudited) for the three and nine months ended January 31, 2022 and 2021

 

2

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended January 31, 2022 and 2021

 

3

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for three and nine months ended January 31, 2022 and 2021

 

4

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended January 31, 2022 and 2021

 

5

 

 

 

 

 

 

 

Notes to Consolidated Unaudited Financial Statements

 

6

 

 

 

 

 

Item 2.

 

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

 

27

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

45

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

46

 

 

 

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

47

 

 

 

 

 

Item 1A.

 

Risk Factors

 

47

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

 

 

 

 

 

Item 6.

 

Exhibits

 

48

 

 

 

 

 

 

 

Signatures

 

49

 

 

 

 

 

 

 


 

 

Item 1. Consolidated Financial Statements

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

January 31,

2022

 

 

April 30,

2021

 

 

 

(unaudited)

 

 

 

 

 

 

 

(in thousands, except per share data)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

846,505

 

 

$

850,778

 

Marketable securities

 

 

73,110

 

 

 

63,667

 

Receivables due from clients, net of allowance for doubtful accounts of $34,617 and $29,324 at January 31, 2022 and April 30, 2021, respectively

 

 

603,346

 

 

 

448,733

 

Income taxes and other receivables

 

 

41,708

 

 

 

40,024

 

Unearned compensation

 

 

62,446

 

 

 

53,206

 

Prepaid expenses and other assets

 

 

40,635

 

 

 

30,724

 

Total current assets

 

 

1,667,750

 

 

 

1,487,132

 

 

 

 

 

 

 

 

 

 

Marketable securities, non-current

 

 

187,635

 

 

 

182,692

 

Property and equipment, net

 

 

131,198

 

 

 

131,778

 

Operating lease right-of-use assets, net

 

 

154,818

 

 

 

174,121

 

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

 

 

181,126

 

 

 

161,295

 

Deferred income taxes

 

 

77,000

 

 

 

73,106

 

Goodwill

 

 

699,518

 

 

 

626,669

 

Intangible assets, net

 

 

89,574

 

 

 

92,949

 

Unearned compensation, non-current

 

 

126,082

 

 

 

102,356

 

Investments and other assets

 

 

21,395

 

 

 

24,428

 

Total assets

 

$

3,336,096

 

 

$

3,056,526

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

47,203

 

 

$

44,993

 

Income taxes payable

 

 

28,771

 

 

 

23,041

 

Compensation and benefits payable

 

 

429,683

 

 

 

394,606

 

Operating lease liability, current

 

 

46,583

 

 

 

47,986

 

Other accrued liabilities

 

 

298,911

 

 

 

239,444

 

Total current liabilities

 

 

851,151

 

 

 

750,070

 

 

 

 

 

 

 

 

 

 

Deferred compensation and other retirement plans

 

 

384,437

 

 

 

346,455

 

Operating lease liability, non-current

 

 

142,349

 

 

 

155,998

 

Long-term debt

 

 

395,303

 

 

 

394,794

 

Deferred tax liabilities

 

 

2,936

 

 

 

3,832

 

Other liabilities

 

 

24,675

 

 

 

36,602

 

Total liabilities

 

 

1,800,851

 

 

 

1,687,751

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized,75,347 and 74,915 shares issued and 54,216 and 54,008 shares outstanding at January 31, 2022 and April 30, 2021, respectively

 

 

562,564

 

 

 

583,260

 

Retained earnings

 

 

1,049,431

 

 

 

834,949

 

Accumulated other comprehensive loss, net

 

 

(80,718

)

 

 

(51,820

)

Total Korn Ferry stockholders' equity

 

 

1,531,277

 

 

 

1,366,389

 

Noncontrolling interest

 

 

3,968

 

 

 

2,386

 

Total stockholders' equity

 

 

1,535,245

 

 

 

1,368,775

 

Total liabilities and stockholders' equity

 

$

3,336,096

 

 

$

3,056,526

 

 

 

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands, except per share data)

 

Fee revenue

 

$

680,741

 

 

$

475,360

 

 

$

1,905,579

 

 

$

1,254,896

 

Reimbursed out-of-pocket engagement expenses

 

 

4,215

 

 

 

2,520

 

 

 

10,873

 

 

 

7,656

 

          Total revenue

 

 

684,956

 

 

 

477,880

 

 

 

1,916,452

 

 

 

1,262,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

445,870

 

 

 

326,333

 

 

 

1,273,746

 

 

 

917,530

 

General and administrative expenses

 

 

60,811

 

 

 

47,271

 

 

 

175,143

 

 

 

140,836

 

Reimbursed expenses

 

 

4,215

 

 

 

2,520

 

 

 

10,873

 

 

 

7,656

 

Cost of services

 

 

31,666

 

 

 

20,028

 

 

 

77,988

 

 

 

50,198

 

Depreciation and amortization

 

 

16,104

 

 

 

15,735

 

 

 

47,381

 

 

 

46,068

 

Restructuring charges, net

 

 

 

 

 

838

 

 

 

 

 

 

30,732

 

          Total operating expenses

 

 

558,666

 

 

 

412,725

 

 

 

1,585,131

 

 

 

1,193,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

126,290

 

 

 

65,155

 

 

 

331,321

 

 

 

69,532

 

Other (loss) income, net

 

 

(7,277

)

 

 

14,935

 

 

 

2,236

 

 

 

26,374

 

Interest expense, net

 

 

(7,029

)

 

 

(7,298

)

 

 

(18,820

)

 

 

(21,686

)

Income before provision for income taxes

 

 

111,984

 

 

 

72,792

 

 

 

314,737

 

 

 

74,220

 

Income tax provision

 

 

26,927

 

 

 

21,204

 

 

 

76,951

 

 

 

25,409

 

Net income

 

 

85,057

 

 

 

51,588

 

 

 

237,786

 

 

 

48,811

 

          Net income attributable to noncontrolling interest

 

 

(956

)

 

 

(269

)

 

 

(3,090

)

 

 

(547

)

Net income attributable to Korn Ferry

 

$

84,101

 

 

$

51,319

 

 

$

234,696

 

 

$

48,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Korn Ferry:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

$

1.55

 

 

$

0.95

 

 

$

4.33

 

 

$

0.89

 

     Diluted

 

$

1.54

 

 

$

0.94

 

 

$

4.28

 

 

$

0.88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

 

52,999

 

 

 

52,596

 

 

 

52,958

 

 

 

53,030

 

     Diluted

 

 

53,495

 

 

 

53,013

 

 

 

53,538

 

 

 

53,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.12

 

 

$

0.10

 

 

$

0.36

 

 

$

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Net income

 

$

85,057

 

 

$

51,588

 

 

$

237,786

 

 

$

48,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(15,279

)

 

 

25,071

 

 

 

(30,818

)

 

 

47,374

 

Deferred compensation and pension plan adjustments, net of tax

 

 

1,159

 

 

 

663

 

 

 

1,851

 

 

 

1,988

 

Net unrealized loss on marketable securities, net of tax

 

 

(115

)

 

 

(5

)

 

 

(132

)

 

 

(39

)

Comprehensive income

 

 

70,822

 

 

 

77,317

 

 

 

208,687

 

 

 

98,134

 

Less: comprehensive income attributable to noncontrolling interest

 

 

(909

)

 

 

(257

)

 

 

(2,889

)

 

 

(612

)

Comprehensive income attributable to Korn Ferry

 

$

69,913

 

 

$

77,060

 

 

$

205,798

 

 

$

97,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2021

 

54,008

 

 

$

583,260

 

 

$

834,949

 

 

$

(51,820

)

 

$

1,366,389

 

 

$

2,386

 

 

$

1,368,775

 

Net income

 

 

 

 

 

 

 

74,823

 

 

 

 

 

 

74,823

 

 

 

1,574

 

 

 

76,397

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(8,023

)

 

 

(8,023

)

 

 

24

 

 

 

(7,999

)

Dividends paid to shareholders

 

 

 

 

 

 

 

(6,866

)

 

 

 

 

 

(6,866

)

 

 

 

 

 

(6,866

)

Purchase of stock

 

(297

)

 

 

(20,091

)

 

 

 

 

 

 

 

 

(20,091

)

 

 

 

 

 

(20,091

)

Issuance of stock

 

795

 

 

 

3,992

 

 

 

 

 

 

 

 

 

3,992

 

 

 

 

 

 

3,992

 

Stock-based compensation

 

 

 

 

6,962

 

 

 

 

 

 

 

 

 

6,962

 

 

 

 

 

 

6,962

 

Balance as of July 31, 2021

 

54,506

 

 

 

574,123

 

 

 

902,906

 

 

 

(59,843

)

 

 

1,417,186

 

 

 

3,984

 

 

 

1,421,170

 

Net income

 

 

 

 

 

 

 

75,772

 

 

 

 

 

 

75,772

 

 

 

560

 

 

 

76,332

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(6,687

)

 

 

(6,687

)

 

 

(178

)

 

 

(6,865

)

Dividends paid to shareholders

 

 

 

 

 

 

 

(6,683

)

 

 

 

 

 

(6,683

)

 

 

 

 

 

(6,683

)

Purchase of stock

 

(99

)

 

 

(7,353

)

 

 

 

 

 

 

 

 

(7,353

)

 

 

 

 

 

(7,353

)

Issuance of stock

 

59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

7,288

 

 

 

 

 

 

 

 

 

7,288

 

 

 

 

 

 

7,288

 

Balance as of October 31, 2021

 

54,466

 

 

 

574,058

 

 

 

971,995

 

 

 

(66,530

)

 

 

1,479,523

 

 

 

4,366

 

 

 

1,483,889

 

Net income

 

 

 

 

 

 

 

84,101

 

 

 

 

 

 

84,101

 

 

 

956

 

 

 

85,057

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(14,188

)

 

 

(14,188

)

 

 

(47

)

 

 

(14,235

)

Dividends paid to shareholders

 

 

 

 

 

 

 

(6,665

)