10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on March 11, 2022
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
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(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 |
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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.
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).
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.
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company |
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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
The number of shares outstanding of our common stock as of March 4, 2022 was
KORN FERRY
Table of Contents
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Description |
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Part I. Financial Information |
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Item 1. |
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Consolidated Balance Sheets as of January 31, 2022 (unaudited) and April 30, 2021 |
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1 |
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2 |
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3 |
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4 |
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5 |
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6 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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27 |
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Item 3. |
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45 |
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Item 4. |
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46 |
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Part II. Other Information |
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Item 1. |
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47 |
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Item 1A. |
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47 |
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Item 2. |
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47 |
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Item 6. |
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48 |
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49 |
Item 1. Consolidated Financial Statements
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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January 31, 2022 |
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April 30, 2021 |
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(unaudited) |
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(in thousands, except per share data) |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Receivables due from clients, net of allowance for doubtful accounts of $ |
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Income taxes and other receivables |
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Unearned compensation |
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Prepaid expenses and other assets |
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Total current assets |
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Marketable securities, non-current |
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Property and equipment, net |
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Operating lease right-of-use assets, net |
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Cash surrender value of company-owned life insurance policies, net of loans |
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Deferred income taxes |
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Goodwill |
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Intangible assets, net |
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Unearned compensation, non-current |
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Investments and other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Accounts payable |
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$ |
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$ |
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Income taxes payable |
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Compensation and benefits payable |
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Operating lease liability, current |
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Other accrued liabilities |
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Total current liabilities |
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Deferred compensation and other retirement plans |
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Operating lease liability, non-current |
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Long-term debt |
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Deferred tax liabilities |
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Other liabilities |
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Total liabilities |
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Stockholders' equity |
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Common stock: $ |
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Retained earnings |
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Accumulated other comprehensive loss, net |
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( |
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Total Korn Ferry stockholders' equity |
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Noncontrolling interest |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
1
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
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Three Months Ended January 31, |
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Nine Months Ended January 31, |
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2022 |
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2021 |
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2022 |
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2021 |
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(in thousands, except per share data) |
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Fee revenue |
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$ |
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$ |
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$ |
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$ |
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Reimbursed out-of-pocket engagement expenses |
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Total revenue |
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Compensation and benefits |
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General and administrative expenses |
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Reimbursed expenses |
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Cost of services |
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Depreciation and amortization |
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Restructuring charges, net |
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— |
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— |
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Total operating expenses |
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Operating income |
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Other (loss) income, net |
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( |
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Interest expense, net |
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( |
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Income before provision for income taxes |
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Income tax provision |
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Net income |
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Net income attributable to noncontrolling interest |
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( |
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Net income attributable to Korn Ferry |
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$ |
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$ |
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$ |
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$ |
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Earnings per common share attributable to Korn Ferry: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding: |
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Basic |
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Diluted |
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Cash dividends declared per share: |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
2
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
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Three Months Ended January 31, |
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Nine Months Ended January 31, |
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2022 |
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2021 |
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2022 |
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2021 |
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(in thousands) |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income: |
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Foreign currency translation adjustments |
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( |
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( |
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Deferred compensation and pension plan adjustments, net of tax |
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Net unrealized loss on marketable securities, net of tax |
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( |
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( |
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( |
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( |
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Comprehensive income |
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Less: comprehensive income attributable to noncontrolling interest |
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( |
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( |
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( |
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( |
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Comprehensive income attributable to Korn Ferry |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
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Accumulated Other |
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Total Korn Ferry |
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Total |
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Common Stock |
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Retained |
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Comprehensive |
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Stockholders' |
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Noncontrolling |
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Stockholder's |
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Shares |
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Amount |
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Earnings |
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Loss, Net |
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Equity |
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Interest |
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Equity |
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(in thousands) |
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Balance as of April 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
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( |
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( |
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Dividends paid to shareholders |
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— |
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— |
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( |
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— |
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( |
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— |
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( |
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Purchase of stock |
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( |
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( |
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— |
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— |
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( |
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— |
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( |
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Issuance of stock |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance as of July 31, 2021 |
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( |
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Net income |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
) |
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( |
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Dividends paid to shareholders |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
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Purchase of stock |
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( |
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( |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance as of October 31, 2021 |
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( |
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Net income |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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( |
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Dividends paid to shareholders |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
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Dividends to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Purchase of stock |
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( |
) |
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( |
) |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of stock |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance as of January 31, 2022 |
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$ |
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$ |
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|
$ |
( |
) |
|
$ |
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$ |
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$ |
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Accumulated Other |
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Total Korn Ferry |
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Total |
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Common Stock |
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Retained |
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Comprehensive |
|
|
Stockholders' |
|
|
Noncontrolling |
|
|
Stockholder's |
|
||||||||||
|
Shares |
|
|
Amount |
|
|
Earnings |
|
|
Loss, Net |
|
|
Equity |
|
|
Interest |
|
|
Equity |
|
|||||||
|
(in thousands) |
|
|||||||||||||||||||||||||
Balance as of April 30, 2020 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net loss |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to shareholders |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Purchase of stock |
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of stock |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Stock-based compensation |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance as of July 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Dividends paid to shareholders |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividends to noncontrolling interest |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Purchase of stock |
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance as of October 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Dividends paid to shareholders |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Purchase of stock |
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of stock |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Stock-based compensation |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance as of January 31, 2021 |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
Nine Months Ended January 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
Impairment of right of use assets |
|
|
|
|
|
|
— |
|
Impairment of fixed assets |
|
|
|
|
|
|
— |
|
Provision for doubtful accounts |
|
|
|
|
|
|
|
|
Gain on cash surrender value of life insurance policies |
|
|
( |
) |
|
|
( |
) |
Gain on marketable securities |
|
|
( |
) |
|
|
( |
) |
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Change in other assets and liabilities: |
|
|
|
|
|
|
|
|
Deferred compensation |
|
|
|
|
|
|
|
|
Receivables due from clients |
|
|
( |
) |
|
|
( |
) |
Income taxes and other receivables |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Unearned compensation |
|
|
( |
) |
|
|
( |
) |
Income taxes payable |
|
|
|
|
|
|
( |
) |
Accounts payable and accrued liabilities |
|
|
|
|
|
|
|
|
Other |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of marketable securities |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales/maturities of marketable securities |
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
( |
) |
|
|
— |
|
Premium on company-owned life insurance policies |
|
|
( |
) |
|
|
( |
) |
Proceeds from life insurance policies |
|
|
|
|
|
|
|
|
Dividends received from unconsolidated subsidiaries |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payments of tax withholdings on restricted stock |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of common stock upon exercise of employee stock options and in connection with an employee stock purchase plan |
|
|
|
|
|
|
|
|
Dividends paid to shareholders |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
Principal payments on finance leases |
|
|
( |
) |
|
|
( |
) |
Payments on life insurance policy loans |
|
|
( |
) |
|
|
( |
) |
Dividends paid to noncontrolling interest |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
5
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 |
1. Organization and Summary of Significant Accounting Policies
Nature of Business
Korn Ferry, a Delaware corporation, and its subsidiaries (the “Company”) is a global organizational consulting firm. The Company helps clients synchronize strategy and talent to drive superior performance. The Company works with organizations to design their structures, roles and responsibilities. The Company helps organizations hire the right people to bring their strategy to life and advise them on how to reward, develop and motivate their people.
The Company is pursuing a strategy that will help Korn Ferry to focus on clients and collaborate intensively across the organization. This approach builds on the best of the Company’s past and gives the Company a clear path to the future with focused initiatives to increase its client and commercial impact. Korn Ferry is transforming how clients address their talent management needs. The Company has evolved from a mono-line to a diversified business, giving its consultants more frequent and expanded opportunities to engage with clients.
The Company has
1. |
Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Total Rewards. This work is supported by a comprehensive range of some of the world’s leading intellectual property (“lP”) and data. |
2. |
Digital leverages an artificial intelligence powered machine-learning platform to identify structure, roles, capabilities and behaviors needed to drive business forward. This end-to-end system combines Korn Ferry proprietary data, client data and external market data to generate insight and recommend action. |
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. This business is managed and reported on a geographic basis and represents four of the Company’s reportable segments (Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific and Executive Search Latin America). |
4. |
Recruitment Process Outsourcing (“RPO”) & 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. |
Basis of Consolidation and Presentation
The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended April 30, 2021 for the Company and its wholly and majority owned/controlled domestic and international subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The preparation of the consolidated financial statements conform with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and prevailing practice within our different industries. The consolidated financial statements include all adjustments, consisting of normal recurring accruals and any other adjustments that management considers necessary for a fair presentation of the results for these periods. The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year.
The Company has control of a Mexican subsidiary and consolidates the operations of this subsidiary. Noncontrolling interest, which represents the Mexican partners’
The Company considers events or transactions that occur after the balance sheet date but before the consolidated financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosures.
6
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Use of Estimates and Uncertainties
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates, and changes in estimates are reported in current operations as new information is learned or upon the amounts becoming fixed or determinable. The most significant areas that require management’s judgment are revenue recognition, deferred compensation, annual performance-related bonuses, evaluation of the carrying value of receivables, goodwill and other intangible assets, share-based payments, leases and the recoverability of deferred income taxes.
Revenue Recognition
Substantially all fee revenue is derived from talent and organizational consulting services and digital sales, stand-alone or as part of a solution, fees for professional services related to executive and professional recruitment performed on a retained basis and RPO, either stand-alone or as part of a solution.
Revenue is recognized when control of the goods and services are transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue contracts with customers are evaluated based on the five-step model outlined in Accounting Standards Codification (“ASC”) 606 (“ASC 606”): 1) identify the contract with a customer; 2) identify the performance obligation(s) in the contract; 3) determine the transaction price; 4) allocate the transaction price to the separate performance obligation(s); and 5) recognize revenue when (or as) each performance obligation is satisfied.
Consulting fee revenue is primarily recognized as services are rendered, measured by total hours incurred as a percentage of the total estimated hours at completion. It is possible that updated estimates for consulting engagements may vary from initial estimates with such updates being recognized in the period of determination. Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate.
Digital fee revenue is generated from IP platforms enabling large-scale, technology-based talent programs for pay, talent development, engagement, and assessment and is consumed directly by an end user or indirectly through a consulting engagement. Revenue is recognized as services are delivered and the Company has a legally enforceable right to payment. Revenue also comes from the sale of the Company’s proprietary IP subscriptions, which are considered symbolic IP due to the dynamic nature of the content. As a result, revenue is recognized over the term of the contract. Functional IP licenses grant customers the right to use IP content via the delivery of a flat file. Because the IP content license has significant stand-alone functionality, revenue is recognized upon delivery and when an enforceable right to payment exists. Revenue for tangible and digital products sold by the Company, such as books and digital files, is recognized when these products are shipped.
Fee revenue from executive and professional search activities is generally one-third of the estimated first-year cash compensation of the placed candidate, plus a percentage of the fee to cover indirect engagement-related expenses. In addition to the search retainer, an uptick fee is billed when the actual compensation awarded by the client for a placement is higher than the estimated compensation. In the aggregate, upticks have been a relatively consistent percentage of the original estimated fee; therefore, the Company estimates upticks using the expected value method based on historical data on a portfolio basis. In a standard search engagement, there is one performance obligation, which is the promise to undertake a search. The Company generally recognizes such revenue over the course of a search and when it is legally entitled to payment as outlined in the billing terms of the contract. Any revenues associated with services that are provided on a contingent basis are recognized once the contingency is resolved, as this is when control is transferred to the customer. These assumptions determine the timing of revenue recognition for the reported period.
RPO fee revenue is generated through two distinct phases: 1) the implementation phase and 2) the post-implementation recruitment phase. The fees associated with the implementation phase are recognized over the period that the related implementation services are provided. The post-implementation recruitment phase represents end-to-end recruiting services to clients for which there are both fixed and variable fees, which are recognized over the period that the related recruiting services are performed.
Reimbursements
The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in the consolidated statements of income.
7
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Allowance for Doubtful Accounts
An allowance is established for doubtful accounts by taking a charge to general and administrative expenses. The Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivable. Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is primarily based on historical loss-rate experience. When required, the Company adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions. The Company generally assesses future economic condition for a period of sixty to ninety days, which corresponds with the contractual life of its accounts receivables. After the Company exhausts all collection efforts, the amount of the allowance is reduced for balances written off as uncollectible.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. As of January 31, 2022 and April 30, 2021, the Company’s investments in cash equivalents consisted of money market funds and commercial paper with initial maturity of less than 90 days for which market prices are readily available and as of January 31, 2022 also included US Treasury and Agency securities with initial maturity of less than 90 days for which market prices are readily available.
Marketable Securities
The Company currently has investments in marketable securities and mutual funds that are classified as either equity securities or available-for-sale debt securities. The classification of the investments in these marketable securities and mutual funds is assessed upon purchase and reassessed at each reporting period. These investments are recorded at fair value and are classified as marketable securities in the accompanying consolidated balance sheets. The investments that the Company may sell within the next 12 months are carried as current assets.
The Company invests in mutual funds (for which market prices are readily available) that are held in trust to satisfy obligations under the Company’s deferred compensation plans. Such investments are classified as equity securities and mirror the employees’ investment elections in their deemed accounts in the Executive Capital Accumulation Plan and similar plans in Asia Pacific and Canada (“ECAP”) from a pre-determined set of securities. Realized gains (losses) on marketable securities are determined by specific identification. Interest is recognized on an accrual basis; dividends are recorded as earned on the ex-dividend date. Interest, dividend income and the changes in fair value in marketable securities are recorded in the accompanying consolidated statements of income in other (loss) income, net.
The Company also invests cash in excess of its daily operating requirements and capital needs primarily in marketable fixed income (debt) securities in accordance with the Company’s investment policy, which restricts the type of investments that can be made. The Company’s investment portfolio includes commercial paper and corporate notes/bonds as of January 31, 2022 and April 30, 2021 and also includes US Treasury and Agency securities as of April 30, 2021. These marketable fixed income (debt) securities are classified as available-for-sale securities based on management’s decision, at the date such securities are acquired, not to hold these securities to maturity or actively trade them. The Company carries these marketable debt securities at fair value based on the market prices for these marketable debt securities or similar debt securities whose prices are readily available. The changes in fair values, net of applicable taxes, are recorded as unrealized gains or losses as a component of comprehensive income unless the change is due to credit loss. A credit loss is recorded in the statements of income in other (loss) income, net; any amount in excess of the credit loss is recorded as unrealized losses as a component of comprehensive income. Generally, the amount of the loss is the difference between the cost or amortized cost and its then current fair value; a credit loss is the difference between the discounted expected future cash flows to be collected from the debt security and the cost or amortized cost of the debt security. During the three and nine months ended January 31, 2022 and 2020,
Fair Value of Financial Instruments
Fair value is the price the Company would receive to sell an asset or transfer a liability (exit price) in an orderly transaction between market participants. For those assets and liabilities recorded or disclosed at fair value, the Company determines the fair value based upon the quoted market price, if available. If a quoted market price is not available for identical assets, the fair value is based upon the quoted market price of similar assets. The fair values are assigned a level within the fair value hierarchy as defined below:
▪ |
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
▪ |
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
▪ |
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
8
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
As of January 31, 2022 and April 30, 2021, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included cash, cash equivalents, accounts receivable, marketable securities and foreign currency forward contracts. The carrying amount of cash, cash equivalents and accounts receivable approximates fair value due to the short-term maturity of these instruments. The fair values of marketable securities classified as equity securities are obtained from quoted market prices, and the fair values of marketable securities classified as available-for-sale and foreign currency forward contracts are obtained from a third party, which are based on quoted prices or market prices for similar assets and financial instruments.
Foreign Currency Forward Contracts Not Designated as Hedges
The Company has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures primarily originating from intercompany balances due to cross border work performed in the ordinary course of business. These foreign currency forward contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to ASC 815, Derivatives and Hedging. Accordingly, the fair value of these contracts is recorded as of the end of the reporting period in the accompanying consolidated balance sheets, while the change in fair value is recorded to the accompanying consolidated statements of income.
Business Acquisitions
Business acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity, and recognize and measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value of the assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than 12 months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed and requires the Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a business combination. During the nine months ended January 31, 2021, the Company recorded an adjustment of $
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and current and non-current operating lease liability, in the consolidated balance sheets. Finance leases are included in property and equipment, net, other accrued liabilities and other liabilities in the consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term, and the lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the periods in which they are incurred.
The Company has lease agreements with lease and non-lease components. For all leases with non-lease components the Company accounts for the lease and non-lease components as a single lease component.
Impairment of Long-Lived Assets
Long-lived assets include property, equipment, ROU assets and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment, management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability, as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. During the nine months ended January 31, 2022, the Company reduced its real estate footprint and as a result, the Company took an impairment charge of ROU assets of $
9
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
consolidated statements of income in general and administrative expenses. During the three months ended January 31, 2022 and the three and nine months ended January 31, 2021, there were
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of a reporting unit’s goodwill exceeds the fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). Goodwill is tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Results of the annual qualitative impairment test performed as of January 31, 2022, indicated that the fair value of each of the reporting units exceeded its carrying amount and no reporting units were at risk of failing the impairment test. As a result,
Intangible assets primarily consist of customer lists, non-compete agreements, proprietary databases and IP. Intangible assets are recorded at their estimated fair value at the date of acquisition and are amortized in a pattern in which the asset is consumed, if that pattern can be reliably determined, or using the straight-line method over their estimated useful lives, which range from
Compensation and Benefits Expense
Compensation and benefits expense in the accompanying consolidated statements of income consist of compensation and benefits paid to consultants (employees who originate business), executive officers and administrative and support personnel. The most significant portions of this expense are salaries and the amounts paid under the annual performance-related bonus plan to employees. The portion of the expense applicable to salaries is comprised of amounts earned by employees during a reporting period. The portion of the expenses applicable to annual performance-related bonuses refers to the Company’s annual employee performance-related bonus with respect to a fiscal year, the amount of which is communicated and paid to each eligible employee following the completion of the fiscal year.
Each quarter, management makes its best estimate of its annual performance-related bonuses, which requires management to, among other things, project annual consultant productivity (as measured by engagement fees billed and collected by Executive Search consultants and revenue and other performance/profitability metrics for Consulting, Digital and RPO & Professional Search consultants), the level of engagements referred by a consultant in one line of business to a different line of business, and Company performance, including profitability, competitive forces and future economic conditions and their impact on the Company’s results. At the end of each fiscal year, annual performance-related bonuses take into account final individual consultant productivity (including referred work), Company/line of business results, including profitability, the achievement of strategic objectives, the results of individual performance appraisals and the current economic landscape. Accordingly, each quarter the Company reevaluates the assumptions used to estimate annual performance-related bonus liability and adjusts the carrying amount of the liability recorded on the consolidated balance sheet and reports any changes in the estimate in current operations.
Because annual performance-based bonuses are communicated and paid only after the Company reports its full fiscal year results, actual performance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus estimate historically have been immaterial and are recorded in current operations in the period in which they are determined. The performance-related bonus expense was $
Other expenses included in compensation and benefits expense are due to changes in deferred compensation and pension plan liabilities, changes in cash surrender value (“CSV”) of company-owned life insurance (“COLI”) contracts, amortization of stock-based compensation awards, payroll taxes and employee insurance benefits. Unearned compensation on the consolidated balance sheets includes long-term retention awards that are generally amortized over four-to-
10
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Restructuring Charges, Net
The Company accounts for its restructuring charges as a liability when the obligations are incurred and records such charges at fair value. Changes in the estimates of the restructuring charges are recorded in the period the change is determined.
Stock-Based Compensation
The Company has employee compensation plans under which various types of stock-based instruments are granted. These instruments principally include restricted stock units, restricted stock and an Employee Stock Purchase Plan (“ESPP”). The Company recognizes compensation expense related to restricted stock units, restricted stock and the estimated fair value of stock purchases under the ESPP on a straight-line basis over the service period for the entire award.
Recently Adopted Accounting Standards
In March 2020, the Financial Accounting Standards Board (the“FASB”) issued guidance on Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional expedients and exceptions to the guidance on contract modifications and hedge accounting related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative rates. Entities can elect to adopt this guidance as of any date within an interim period that includes or is subsequent to March 12, 2020 and can adopt it for new contracts and contract modifications entered into through December 31, 2022. The Company adopted this guidance in its fiscal year beginning
Recently Proposed Accounting Standards – Not Yet Adopted
In October 2021, the FASB issued an amendment in accounting for contract assets and contract liabilities from contracts with customers, which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. The amendment of this standard becomes effective in fiscal years beginning after December 15, 2022, The amendment should be applied prospectively to business combinations that occur after the effective date. The Company will adopt this guidance in its fiscal year beginning May 1, 2023. The Company is currently evaluating the impact of this accounting guidance but does not anticipate that it will have a material impact on the consolidated financial statements.
2. Basic and Diluted Earnings Per Share
ASC 260, Earnings Per Share, requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends prior to vesting as a separate class of securities in calculating earnings per share. The Company has granted and expects to continue to grant to certain employees under its restricted stock agreements grants that contain non-forfeitable rights to dividends. Such grants are considered participating securities. Therefore, the Company is required to apply the two-class method in calculating earnings per share. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The dilutive effect of participating securities is calculated using the more dilutive of the treasury method or the two-class method.
Basic earnings per common share was computed using the two-class method by dividing basic net earnings attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share was computed using the two-class method by dividing diluted net earnings attributable to common stockholders by the weighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common equivalent shares include all in-the-money outstanding options or other contracts to issue common stock as if they were exercised or converted. Financial instruments that are not in the form of common stock, but when converted into common stock increase earnings per share, are anti-dilutive and are not included in the computation of diluted earnings per share.
During the three and nine months ended January 31, 2022, restricted stock awards of
11
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
The following table summarizes basic and diluted earnings per common share attributable to common stockholders:
|
|
Three Months Ended January 31, |
|
|
Nine Months Ended January 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(in thousands, except per share data) |
|
|||||||||||||
Net income attributable to Korn Ferry |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Less: distributed and undistributed earnings to nonvested restricted stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings attributable to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: undistributed earnings to nonvested restricted stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: reallocation of undistributed earnings to nonvested restricted stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings attributable to common stockholders |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESPP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Diluted earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
3. Comprehensive Income
Comprehensive income is comprised of net income and all changes to stockholders’ equity, except those changes resulting from investments by stockholders (changes in paid in capital) and distributions to stockholders (dividends) and is reported in the accompanying consolidated statements of comprehensive income. Accumulated other comprehensive loss, net of taxes, is recorded as a component of stockholders’ equity.
The components of accumulated other comprehensive loss, net were as follows:
|
|
January 31, 2022 |
|
|
April 30, 2021 |
|
||
|
|
(in thousands) |
|
|||||
Foreign currency translation adjustments |
|
$ |
( |
) |
|
$ |
( |
) |
Deferred compensation and pension plan adjustments, net of tax |
|
|
( |
) |
|
|
( |
) |
Marketable securities unrealized loss, net of tax |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive loss, net |
|
$ |
( |
) |
|
$ |
( |
) |
The following table summarizes the changes in each component of accumulated other comprehensive loss, net for the three months ended January 31, 2022:
|
|
Foreign Currency Translation |
|
|
Deferred Compensation and Pension Plan (1) |
|
|
Unrealized Losses on Marketable Securities |
|
|
Accumulated Other Comprehensive Loss |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Balance as of October 31, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Unrealized (losses) gains arising during the period |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Reclassification of realized net losses to net income |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance as of January 31, 2022 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
12
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
The following table summarizes the changes in each component of accumulated other comprehensive loss, net for the nine months ended January 31, 2022:
|
|
Foreign Currency Translation |
|
|
Deferred Compensation and Pension Plan (1) |
|
|
Unrealized Losses on Marketable Securities |
|
|
Accumulated Other Comprehensive Loss |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Balance as of April 30, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Unrealized (losses) gains arising during the period |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Reclassification of realized net losses to net income |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 31, 2022 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
|
The following table summarizes the changes in each component of accumulated other comprehensive loss, net for the three months ended January 31, 2021:
|
|
Foreign Currency Translation |
|
|
Deferred Compensation and Pension Plan (1) |
|
|
Unrealized Losses on Marketable Securities |
|
|
Accumulated Other Comprehensive Loss |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Balance as of October 31, 2020 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
Unrealized gains (losses) arising during the period |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
Reclassification of realized net losses to net income |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance as of January 31, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following table summarizes the changes in each component of accumulated other comprehensive loss, net for the nine months ended January 31, 2021:
|
|
Foreign Currency Translation |
|
|
Deferred Compensation and Pension Plan (1) |
|
|
Unrealized Gains (Losses) on Marketable Securities |
|
|
Accumulated Other Comprehensive Loss |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Balance as of April 30, 2020 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Unrealized gains (losses) arising during the period |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
Reclassification of realized net losses to net income |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance as of January 31, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
|
4. Employee Stock Plans
Stock-Based Compensation
The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of operations for the periods indicated:
|
|
Three Months Ended January 31, |
|
|
Nine Months Ended January 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Restricted stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
ESPP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
13
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Stock Incentive Plan
At the Company’s 2019 Annual Meeting of Stockholders, held on October 3, 2019, the Company’s stockholders approved an amendment and restatement to the Korn Ferry Amended and Restated 2008 Stock Incentive Plan (the 2019 amendment and restatement being the “Fourth A&R 2008 Plan”), which, among other things, eliminated the fungible share counting provision and decreased the total number of shares of the Company’s common stock available for stock-based awards by
Restricted Stock
The Company grants time-based restricted stock awards to executive officers and other senior employees generally vesting over a conjunction with the Company’s performance review. Time-based restricted stock awards are granted at a price equal to fair value, which is determined based on the closing price of the Company’s common stock on the grant date. The Company recognizes compensation expense for time-based restricted stock awards on a straight-line basis over the vesting period.
period. In addition, certain key management members typically receive time-based restricted stock awards upon commencement of employment and may receive them annually inThe Company also grants market-based restricted stock units to executive officers and other senior employees. The market-based units vest after
Restricted stock activity during the nine months ended January 31, 2022 is summarized below:
|
|
Shares |
|
|
Weighted- Average Grant Date Fair Value |
|
||
|
|
(in thousands, except per share data) |
|
|||||
Non-vested, April 30, 2021 |
|
|
|
|
|
$ |
|
|
Granted |
|
|
|
|
|
$ |
|
|
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited/expired |
|
|
( |
) |
|
$ |
|
|
Non-vested, January 31, 2022 |
|
|
|
|
|
$ |
|
|
As of January 31, 2022, there were
As of January 31, 2022, there was $
Employee Stock Purchase Plan
The Company has an ESPP that, in accordance with Section 423 of the Internal Revenue Code, allows eligible employees to authorize payroll deductions of up to
14
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Common Stock
During the three and nine months ended January 31, 2022, the Company repurchased (on the open market or through privately negotiated transactions)
5. Financial Instruments
The following tables show the Company’s financial instruments and balance sheet classifications as of January 31, 2022 and April 30, 2021:
|
|
January 31, 2022 |
|
|||||||||||||||||||||||||||||
|
|
Fair Value Measurement |
|
|
Balance Sheet Classification |
|
||||||||||||||||||||||||||
|
|
Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Marketable Securities, Current |
|
|
Marketable Securities, Non- current |
|
|
Income taxes and other receivables |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Changes in Fair Value Recorded in |
|
|||||||||||||||||||||||||||||||
Other Comprehensive Loss |
|
|||||||||||||||||||||||||||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
Corporate notes/bonds |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
U.S. Treasury and Agency Securities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total debt investments |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Fair Value Recorded in |
|
|||||||||||||||||||||||||||||||
Net Income |
|
|||||||||||||||||||||||||||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
Total equity investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
15
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
|
|
April 30, 2021 |
|
|||||||||||||||||||||||||||||
|
|
Fair Value Measurement |
|
|
Balance Sheet Classification |
|
||||||||||||||||||||||||||
|
|
Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Marketable Securities, Current |
|
|
Marketable Securities, Non-current |
|
|
Other Accrued Liabilities |
|
||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||
Changes in Fair Value Recorded in |
|
|||||||||||||||||||||||||||||||
Other Comprehensive Income |
|
|||||||||||||||||||||||||||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
Corporate notes/bonds |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
U.S. Treasury and Agency Securities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Total debt investments |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Fair Value Recorded in |
|
|||||||||||||||||||||||||||||||
Net Income |
|
|||||||||||||||||||||||||||||||
Level 1: |
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
Total equity investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(1) |
|
Investments in marketable securities classified as available-for-sale securities are made based on the Company’s investment policy, which restricts the types of investments that can be made. As of January 31, 2022 and April 30, 2021, marketable securities classified as available-for-sale consisted of commercial paper and corporate notes/bonds, and as of April 30, 2021 also includes US Treasury and Agency securities, for which market prices for similar assets are readily available. Investments that have an original maturity of 90 days or less and are considered highly liquid investments are classified as cash equivalents. As of January 31, 2022, available-for-sale marketable securities had remaining maturities ranging from
16
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Foreign Currency Forward Contracts Not Designated as Hedges
The fair value of derivatives not designated as hedge instruments are as follows:
|
|
January 31, 2022 |
|
|
April 30, 2021 |
|
||
|
|
(in thousands) |
|
|||||
Derivative assets: |
|
|
|
|
|
|
|
|
Foreign currency forward contracts |
|
$ |
|
|
|
$ |
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
Foreign currency forward contracts |
|
$ |
|
|
|
$ |
|
|
As of January 31, 2022, the total notional amounts of the forward contracts purchased and sold were $
6. Deferred Compensation and Retirement Plans
The Company has several deferred compensation and retirement plans for eligible consultants and vice presidents that provide defined benefits to participants based on the deferral of current compensation or contributions made by the Company subject to vesting and retirement or termination provisions. Among these plans is a defined benefit pension plan for certain employees in the U.S. The assets of this plan are held separately from the assets of the sponsor in self-administered funds. All other defined benefit obligations from other plans are unfunded.
The components of net periodic benefit costs are as follows:
|
|
Three Months Ended January 31, |
|
|
Nine Months Ended January 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net periodic service credit amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net periodic benefit costs (2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
The Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plans as a means of setting aside funds to cover such plans. The gross CSV of these contracts of $
The Company’s ECAP is intended to provide certain employees an opportunity to defer their salary and/or bonus on a pre-tax basis. In addition, the Company, as part of its compensation philosophy, makes discretionary contributions into the ECAP and such contributions may be granted to key employees annually based on the employee’s performance. Certain key
17
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
management may also receive Company ECAP contributions upon commencement of employment. The Company amortizes these contributions on a straight-line basis over the service period, generally a
The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are adjusted with a corresponding charge (or credit) to compensation and benefits costs. During the three months ended January 31, 2022, deferred compensation liability decreased; therefore, the Company recognized a reduction in compensation expense of $
7. Fee Revenue
Contract Balances
A contract asset (unbilled receivables) is recorded when the Company transfers control of products or services before there is an unconditional right to payment. A contract liability (deferred revenue) is recorded when cash is received in advance of performance of the obligation. Deferred revenue represents the future performance obligations to transfer control of products or services for which the Company has already received consideration. Deferred revenue is presented in other accrued liabilities on the consolidated balance sheets.
The following table outlines the Company’s contract asset and liability balances as of January 31, 2022 and April 30, 2021:
|
|
January 31, 2022 |
|
|
April 30, 2021 |
|
||
|
|
(in thousands) |
|
|||||
Contract assets-unbilled receivables |
|
$ |
|
|
|
$ |
|
|
Contract liabilities-deferred revenue |
|
$ |
|
|
|
$ |
|
|
During the nine months ended January 31, 2022, the Company recognized revenue of $
Performance Obligations
The Company has elected to apply the practical expedient to exclude the value of unsatisfied performance obligations for contracts with a duration of one year or less, which applies to all executive search and professional search fee revenue. As of January 31, 2022, the aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year at inception was $
Disaggregation of Revenue
The Company disaggregates its revenue by line of business and further by region for Executive Search. This information is presented in Note 11—Segments.
18
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
The following table provides further disaggregation of fee revenue by industry:
|
|
Three Months Ended January 31, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
Dollars |
|
|
% |
|
|
Dollars |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Industrial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Life Sciences/Healthcare |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Goods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education/Non-Profit/General |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee Revenue |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
|
Nine Months Ended January 31, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
Dollars |
|
|
% |
|
|
Dollars |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Industrial |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Life Sciences/Healthcare |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Goods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education/Non-Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee Revenue |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
8. Credit Losses
The Company is exposed to credit losses primarily through the provision of its Executive Search, Consulting and Digital services. The Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is primarily based on historical loss-rate experience. When required, the Company adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions. The Company generally assesses future economic conditions for a period of sixty to ninety days, which corresponds with the contractual life of its accounts receivables. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.
The activity in the allowance for credit losses on the Company's trade receivables is as follows:
|
|
(in thousands) |
|
|
Balance at April 30, 2021 |
|
$ |
|
|
Provision for credit losses |
|
|
|
|
Write-offs |
|
|
( |
) |
Recoveries of amounts previously written off |
|
|
|
|
Foreign currency translation |
|
|
( |
) |
Balance at January 31, 2022 |
|
$ |
|
|
The fair value and unrealized losses on available for sale debt securities, aggregated by investment category and the length of time the security has been in an unrealized loss position, are as follows:
|
|
Less Than 12 Months |
|
|
Balance Sheet Classification |
|
||||||||||||
Balance at January 31, 2022 |
|
Fair Value |
|
|
Unrealized Loss |
|
|
Cash and Cash Equivalent |
|
Marketable Securities, Current |
|
Marketable Securities, Non- Current |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||
Commercial paper |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
Corporate notes/bonds |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
19
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
|
|
Less Than 12 Months |
|
|
Balance Sheet Classification |
|
||||||||||||
Balance at April 30, 2021 |
|
Fair Value |
|
|
Unrealized Loss |
|
|
Cash and Cash Equivalent |
|
Marketable Securities, Current |
|
Marketable Securities, Non- Current |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||
Commercial paper |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
Corporate notes/bonds |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
The unrealized losses on
9. Income Taxes
The provision for income tax was an expense of $
10. Restructuring Charges, Net
There were
Changes in the restructuring liability during the three months ended January 31, 2022, were as follows:
|
|
Restructuring Liability |
|
|
|
|
(in thousands) |
|
|
As of October 31, 2021 |
|
$ |
|
|
Reductions for cash payments |
|
|
( |
) |
Exchange rate fluctuations |
|
|
( |
) |
As of January 31, 2022 |
|
$ |
|
|
Changes in the restructuring liability during the nine months ended January 31, 2022, were as follows:
|
|
Restructuring Liability |
|
|
|
|
(in thousands) |
|
|
As of April 30, 2021 |
|
$ |
|
|
Reductions for cash payments |
|
|
( |
) |
Exchange rate fluctuations |
|
|
( |
) |
As of January 31, 2022 |
|
$ |
|
|
As of January 31, 2022 and April 30, 2021, the restructuring liability is included in the current portion of other accrued liabilities on the consolidated balance sheets, except for $
20
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
11. Segments
The Company has
The Company’s
|
1. |
Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development and Total Rewards. This work is supported by a comprehensive range of some of the world’s leading lP and data. |
|
2. |
Digital leverages an artificial intelligence powered, machine-learning platform to identify structure, roles, capabilities and behaviors needed to drive business forward. This end-to-end system combines Korn Ferry proprietary data, client data, and external market data to generate insight and recommend action. |
|
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 & 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 & 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 Corporate to record global expenses.
The Company evaluates performance and allocates resources based on the Company’s chief operating decision maker (“CODM”) 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 reportable segments are as follows:
|
|
Three Months Ended January 31, 2022 |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Executive Search |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Consulting |
|
|
Digital |
|
|
North America |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Latin America |
|
|
Subtotal |
|
|
RPO & Professional Search |
|
|
Corporate |
|
|
Consolidated |
|
||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||||||
Fee revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Korn Ferry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Integration/acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
(1) |
|
21
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
|
|
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 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Korn Ferry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
(1) |
|
|
|
Nine Months Ended January 31, 2022 |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Executive Search |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Consulting |
|
|
Digital |
|
|
North America |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Latin America |
|
|
Subtotal |
|
|
RPO & Professional Search |
|
|
Corporate |
|
|
Consolidated |
|
||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||||||
Fee revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Korn Ferry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration/acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of fixed assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of right of use assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
(1) |
|
22
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
|
|
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 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Korn Ferry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration/acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
(1) |
|
12. Long-Term Debt
4.625% Senior Unsecured Notes due 2027
On December 16, 2019, the Company completed a private placement of
Year |
|
Percentage |
|
2022 |
|
|
|
2023 |
|
|
|
2024 and thereafter |
|
|
|
The Notes allow the Company to pay $
23
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Long-term debt, at amortized cost, consisted of the following:
In thousands |
|
January 31, 2022 |
|
|
April 30, 2021 |
|
||
Senior Unsecured Notes |
|
$ |
|
|
|
$ |
|
|
Less: Unamortized discount and issuance costs |
|
|
( |
) |
|
|
( |
) |
Long-term borrowings, net of unamortized discount and debt issuance costs |
|
$ |
|
|
|
$ |
|
|
Credit Facility
On
The principal balance of the Revolver, if any, is due on the date of its termination. The Revolver matures on
At the Company’s option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Agreement may fluctuate between LIBOR plus
As of January 31, 2022 and April 30, 2021, there was
The Company had a total of $
13. Leases
The Company’s lease portfolio is comprised of operating leases for office space and equipment and finance leases for equipment. Equipment leases are comprised of vehicles and office equipment. The majority of the Company’s leases include both lease and non-lease components. Non-lease components primarily include maintenance, insurance, taxes and other utilities. The Company combines fixed payments for non-lease components with its lease payments and accounts for them as a single lease component, which increases its ROU assets and lease liabilities. Some of the leases include one or more options to renew or terminate the lease at the Company’s discretion. Generally, the renewal and termination options are not included in the ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company has elected not to recognize a ROU asset or lease liability for leases with an initial term of 12 months or less.
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the future minimum lease payments. The Company applies the portfolio approach when determining the incremental borrowing rate since it has a centrally managed treasury function. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments in a similar economic environment.
Operating leases contain both office and equipment leases and have remaining terms that range from less than
24
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
During the nine months ended January 31, 2022, the Company reduced its real estate footprint and as a result recorded an impairment charge of the ROU assets of $
The components of lease expense were as follows:
|
|
Three Months Ended January 31, |
|
|
Nine Months Ended January 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of ROU assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease impairment cost |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Sublease income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total lease cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Supplemental cash flow information related to leases was as follows:
|
|
Nine Months Ended January 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
|
|
|
$ |
|
|
Financing cash flows from finance leases |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
ROU assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
|
Operating leases |
|
$ |
|
|
|
$ |
|
|
Finance leases |
|
$ |
|
|
|
$ |
|
|
Supplemental balance sheet information related to leases was as follows:
|
|
January 31, 2022 |
|
|
April 30, 2021 |
|
||
|
|
(in thousands) |
|
|||||
Finance Leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost |
|
$ |
|
|
|
$ |
|
|
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Other accrued liabilities |
|
$ |
|
|
|
$ |
|
|
Other liabilities |
|
|
|
|
|
|
|
|
Total finance lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease terms: |
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Weighted average discount rate: |
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
% |
|
|
|
% |
Finance leases |
|
|
|
% |
|
|
|
% |
25
|
KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2022 (continued) |
Maturities of lease liabilities were as follows:
Year Ending April 30, |
|
Operating |
|
|
Financing |
|
||
|
|
(in thousands) |
|
|||||
2022 (excluding the nine months ended January 31, 2022) |
|
$ |
|
|
|
$ |
|
|
2023 |
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
Total lease payments |
|
|
|
|
|
|
|
|
Less: imputed interest |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
14. Acquisitions
On November 1, 2021, the Company completed its acquisition of Lucas Group for $
Lucas Group contributes a substantial professional search and contracting expertise that is expected to enhance the Company’s search portfolio. Lucas Group is a professional search and contract staffing firm, targeting middle market businesses. The addition of Lucas Group to Korn Ferry’s broader talent acquisition portfolio – spanning Executive Search, RPO, and Professional Search – is expected to accelerate Korn Ferry’s ability to capture additional share of this significant market. Lucas Group is included in the RPO & Professional Search segment. Actual results of operations of Lucas Group are included in the Company’s consolidated financial statements from November 1, 2021, the effective date of the acquisition.
The following table provides a summary of the net assets acquired:
|
(in thousands) |
|
|
Current assets (1) |
$ |
|
|
Long-term assets |
|
|
|
Intangible assets (2) |
|
|
|
Current liabilities |
|
|
|
Long-term liabilities |
|
|
|
Net assets acquired |
|
|
|
Purchase price |
|
|
|
Goodwill |
$ |
|
|
(1) |
|
(2) |
|
The aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities assumed on their estimated fair values at the date of acquisition. As of January 31, 2022, these allocations remain preliminary with regard to income taxes. The measurement period for purchase price allocation ends as soon as information on the facts and circumstances become available, not to exceed 12 months.
15. Subsequent Event
Quarterly Dividend Declaration
On
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, “forward-looking” statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements generally can be identified by use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “may,” “will,” “likely,” “estimates,” “potential,” “continue” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals, as well as the magnitude and duration of the impact of the global (“COVID-19”) pandemic on our business, employees, customers and our ability to provide services in affected regions. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, those relating to the ultimate magnitude and duration of COVID-19 and of any future pandemics or similar 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 and or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, dependence on and costs of attracting and retaining qualified and experienced consultants, maintaining our relationships with customers and suppliers and retaining key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, portability of client relationships, consolidation of or within the industries we serve, changes and developments in governmental laws and regulations, evolving investor and customer expectations with regard to environmental 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 or events, changes to data security, data privacy, and data protection laws, dependence on third parties for the execution of critical functions, limited protection of our intellectual property (“IP”), our ability to enhance and develop new technology, our ability to successfully recover from a disaster or other business continuity problems, employment liability risk, an impairment in the carrying value of goodwill and other intangible assets, treaties, or regulations on our business and our Company, deferred tax assets that we may not be able to use, our ability to develop new products and services, the impact of the United Kingdom’s withdrawal from the European Union, changes in our accounting estimates and assumptions, the utilization and billing rates of our consultants, seasonality, the expansion of social media platforms, the ability to effect acquisitions, our indebtedness, the phase-out of LIBOR, and the matters disclosed under the heading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A included in the Annual Report on Form 10-K for the fiscal year ended April 30, 2021 (the “Form 10-K”). Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.
The following presentation of management’s discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. We also make available on the Investor Relations portion of our website earnings slides and other important information, which we encourage you to review.
Executive Summary
Korn Ferry (referred to herein as the “Company” or in the first-person notations “we,” “our” and “us”) is a global organizational consulting firm. We help clients synchronize strategy, operations and talent to drive superior business 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.
We are pursuing a strategy that will help Korn Ferry to focus on clients and collaborate intensively across the organization. This approach builds on the best of our past and gives us a clear path to the future with focused initiatives to increase our client and commercial impact. Korn Ferry is transforming how clients address their talent management needs. We have evolved from a mono-line business to a multi-faceted consultancy business, giving our consultants more frequent and expanded opportunities to engage with clients.
27
Our seven reportable segments operate through the following four lines of business:
|
1. |
Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Total Rewards. This work is supported by a comprehensive range of some of the world’s leading lP and data. |
|
2. |
Digital leverages an artificial intelligence (“AI”) powered, machine-learning platform to identify the best structures, roles, capabilities and behaviors needed to drive business forward. The end-to-end system combines Korn Ferry proprietary data, client data, and external market data to generate insight and recommend action. |
|
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. |
Recruitment Process Outsourcing (“RPO”) & 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. |
The Company has seven reportable segments: Consulting, Digital, Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific, Executive Search Latin America and RPO & Professional Search.
|
▪ |
Approximately 75% of the executive searches we performed in fiscal 2021 were for board level, chief executive and other senior executive and general management positions. Our 3,635 search engagement clients in fiscal 2021 included many of the world’s largest and most prestigious public and private companies. |
|
▪ |
We have built strong client loyalty, with 90% of the assignments performed during fiscal 2021 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years. |
|
▪ |
Approximately 70% of our revenues were generated from clients that have utilized multiple lines of our business. |
|
▪ |
A vital pillar of our growth strategy is Digital. Our data and IP are embedded into the core business processes of our clients, helping us generate long-term relationships through large scale and technology-based talent programs. |
|
▪ |
In fiscal 2021, Korn Ferry was recognized as one of the top RPO providers in the Baker’s Dozen list, marking our 14th consecutive year on the list. We were also named leader on the Everest PEAK Matrix for four years running and achieved star performer status in 2021, with an improved leader position from 2020. Through decades of experience, we have enhanced our RPO solution to deliver quality candidates that drive our clients’ business strategies. We leverage proprietary IP and data sets to guide clients on the critical skills and competencies to look for, compensation information to align with market demand, and assessment tools to ensure candidate fit. In fiscal 2021, we introduced Nimble, a new, fully integrated recruitment technology solution incorporating Candidate Relationship Management, AI Assistance & Screening and Korn Ferry Assessments. |
The Impact of COVID-19
In March 2020, COVID-19 was reported to have spread to over 100 countries, territories or areas, worldwide, and in the fourth quarter of fiscal 2020, the World Health Organization declared it a pandemic. The negative business impact from the pandemic was felt throughout all the geographical areas in which we do business during the first quarter of fiscal 2021. Governments and companies implemented social distancing - limiting either travel or in person individual or group face-to-face interaction as well as working from home to adhere to stay at home orders from national, state and city governments. Such restrictions initially impacted our ability to provide our products and services to our clients with such impact lessening in the second, third and fourth quarters of fiscal 2021 as the world learned to work in different ways. Starting in the fourth quarter of fiscal 2020 and continuing in the first quarter of fiscal 2021, the outbreak restricted the level of economic activity in the areas in which we operate and had an adverse impact on demand for and sales of our products and services. As a result of this, we initiated a plan in April 2020 that was intended to adjust our cost base to the economic environment at that time and to position us to invest in the recovery. This plan resulted in restructuring charges of $0.8 million and $30.7 million associated with severance during the three and nine months ended January 31, 2021, respectively. During the last five quarters, the Company’s business conditions improved substantially from where it was in the second and first quarters of fiscal 2021 as demand has increased driven by the relevance of the Company’s solutions in helping businesses solve their organizational and human capital issues.
28
Performance Highlights
On November 1, 2021, we completed the acquisition of Lucas Group for $90.9 million, net of cash acquired. Lucas Group contributes a substantial professional search and contracting expertise that is expected to enhance our search portfolio. Lucas Group is a professional search and contracting staffing firm, targeting middle market businesses. The addition of Lucas Group to Korn Ferry’s broader talent acquisition portfolio – spanning Executive Search, Recruitment Process Outsourcing, and Professional Search – is expected to accelerate our ability to capture additional share of this significant market. Lucas Group is included in the RPO & Professional Search segment.
The Company evaluates performance and allocates resources based on the chief operating decision maker’s review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such 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). For the three months ended January 31, 2022, Adjusted EBITDA excludes $3.2 million of integration/acquisition costs. For the nine months ended January 31, 2022, Adjusted EBITDA excluded a $7.4 million impairment of right-of-use assets, $4.3 million of integration/acquisition costs and $1.9 million impairment of fixed assets.
Consolidated and the subtotals of Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and have limitations as analytical tools. They should not be viewed as a substitute for financial information determined in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. In addition, they may not necessarily be comparable to non-GAAP performance measures that may be presented by other companies.
Management believes the presentation of these non-GAAP financial measures provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges, items of income and other items that may not be indicative of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance and the identification of operating trends that may otherwise be distorted by the factors discussed above. Korn Ferry includes these non-GAAP financial measures because management believes it is 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. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies in the accompanying consolidated financial statements, except that the above noted items are excluded to arrive at Adjusted EBITDA. Management further believes that 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.
Fee revenue was $680.7 million during the three months ended January 31, 2022, an increase of $205.3 million, or 43%, compared to $475.4 million in the three months ended January 31, 2021, with increases in fee revenue across all lines of business primarily due to the relevance of the Company’s solutions. Exchange rates unfavorably impacted fee revenue by $8.1 million, or 2%, in the three months ended January 31, 2022 compared to the year-ago quarter. Net income attributable to Korn Ferry in the three months ended January 31, 2022 was $84.1 million, an increase of $32.8 million as compared to net income attributable to Korn Ferry of $51.3 million in the year-ago quarter. Adjusted EBITDA in the three months ended January 31, 2022 was $138.3 million, an increase of $41.6 million as compared to $96.7 million in the year-ago quarter. During the three months ended January 31, 2022, the Executive Search, RPO & Professional Search, Consulting, and Digital lines of business contributed $65.7 million, $44.1 million, $28.6 million and $28.1 million, respectively, to Adjusted EBITDA, which was offset by Corporate expenses net of other income of $28.2 million.
Our cash, cash equivalents and marketable securities increased by $10.2 million to $1,107.3 million at January 31, 2022, compared to $1,097.1 million at April 30, 2021. This increase was primarily due to an inflow of cash from operations, partially offset by cash used for the acquisition of Lucas Group, annual bonuses earned in fiscal 2021 and paid during the first quarter of fiscal 2022, retention payments, capital expenditures, the semi-annual interest payment on the 4.625% Senior Unsecured Notes due 2027 (the “Notes”), dividends paid to stockholders and stock repurchases made during the nine months ended January 31, 2022. As of January 31, 2022, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $164.0 million and a fair value of $184.1 million. Our vested obligations for which these assets were held in trust totaled $175.2 million as of January 31, 2022 and our unvested obligations totaled $25.9 million.
Our working capital increased by $79.5 million to $816.6 million as of January 31, 2022, as compared to $737.1 million at April 30, 2021. We believe that cash on hand and funds from operations and other forms of liquidity will be sufficient to meet our anticipated working capital, capital expenditures, general corporate requirements, repayment of debt obligations and dividend payments under our dividend policy in the next 12 months. We had $645.3 million and $646.0 million available for borrowing under our Revolver (as defined herein) at January 31, 2022 and April 30, 2021, respectively. As of January 31, 2022 and April 30, 2021, there were $4.7 million and $4.0 million of standby letters of credit issued, respectively, under our long-term debt
29
arrangements. We had a total of $10.3 million and $11.0 million of standby letters of credit with other financial institutions as of January 31, 2022 and April 30, 2021, respectively.
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, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Fee revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Reimbursed out-of-pocket engagement expenses |
|
|
0.6 |
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
0.6 |
|
Total revenue |
|
|
100.6 |
|
|
|
100.5 |
|
|
|
100.6 |
|
|
|
100.6 |
|
Compensation and benefits |
|
|
65.5 |
|
|
|
68.6 |
|
|
|
66.8 |
|
|
|
73.1 |
|
General and administrative expenses |
|
|
8.9 |
|
|
|
9.9 |
|
|
|
9.2 |
|
|
|
11.2 |
|
Reimbursed expenses |
|
|
0.6 |
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
0.6 |
|
Cost of services |
|
|
4.7 |
|
|
|
4.2 |
|
|
|
4.1 |
|
|
|
4.0 |
|
Depreciation and amortization |
|
|
2.4 |
|
|
|
3.3 |
|
|
|
2.5 |
|
|
|
3.7 |
|
Restructuring charges, net |
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
2.4 |
|
Operating income |
|
|
18.6 |
|
|
|
13.7 |
|
|
|
17.4 |
|
|
|
5.5 |
|
Net income |
|
|
12.5 |
% |
|
|
10.9 |
% |
|
|
12.5 |
% |
|
|
3.9 |
% |
Net income attributable to Korn Ferry |
|
|
12.4 |
% |
|
|
10.8 |
% |
|
|
12.3 |
% |
|
|
3.8 |
% |
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, |
|
||||||||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||||
|
|
Dollars |
|
|
% |
|
|
Dollars |
|
|
% |
|
|
Dollars |
|
|
% |
|
|
Dollars |
|
|
% |
|
||||||||
|
|
(dollars in thousands) |
|
|||||||||||||||||||||||||||||
Fee revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting |
|
$ |
162,889 |
|
|
|
23.9 |
% |
|
$ |
136,268 |
|
|
|
28.7 |
% |
|
$ |
476,260 |
|
|
|
25.0 |
% |
|
$ |
362,271 |
|
|
|
28.9 |
% |
Digital |
|
|
90,194 |
|
|
|
13.3 |
|
|
|
75,791 |
|
|
|
15.9 |
|
|
|
259,504 |
|
|
|
13.6 |
|
|
|
206,807 |
|
|
|
16.5 |
|
Executive Search: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
152,597 |
|
|
|
22.4 |
|
|
|
106,002 |
|
|
|
22.3 |
|
|
|
449,472 |
|
|
|
23.6 |
|
|
|
266,485 |
|
|
|
21.2 |
|
EMEA |
|
|
47,509 |
|
|
|
7.0 |
|
|
|
35,991 |
|
|
|
7.6 |
|
|
|
132,690 |
|
|
|
7.0 |
|
|
|
97,701 |
|
|
|
7.8 |
|
Asia Pacific |
|
|
31,425 |
|
|
|
4.6 |
|
|
|
21,643 |
|
|
|
4.6 |
|
|
|
88,385 |
|
|
|
4.6 |
|
|
|
59,702 |
|
|
|
4.8 |
|
Latin America |
|
|
7,468 |
|
|
|
1.1 |
|
|
|
4,468 |
|
|
|
0.9 |
|
|
|
20,815 |
|
|
|
1.1 |
|
|
|
12,419 |
|
|
|
1.0 |
|
Total Executive Search |
|
|
238,999 |
|
|
|
35.1 |
|
|
|
168,104 |
|
|
|
35.4 |
|
|
|
691,362 |
|
|
|
36.3 |
|
|
|
436,307 |
|
|
|
34.8 |
|
RPO & Professional Search |
|
|
188,659 |
|
|
|
27.7 |
|
|
|
95,197 |
|
|
|
20.0 |
|
|
|
478,453 |
|
|
|
25.1 |
|
|
|
249,511 |
|
|
|
19.9 |
|
Total fee revenue |
|
|
680,741 |
|
|
|
100.0 |
% |
|
|
475,360 |
|
|
|
100.0 |
% |
|
|
1,905,579 |
|
|
|
100.0 |
% |
|
|
1,254,896 |
|
|
|
100.0 |
% |
Reimbursed out-of-pocket engagement expense |
|
|
4,215 |
|
|
|
|
|
|
|
2,520 |
|
|
|
|
|
|
|
10,873 |
|
|
|
|
|
|
|
7,656 |
|
|
|
|
|
Total revenue |
|
$ |
684,956 |
|
|
|
|
|
|
$ |
477,880 |
|
|
|
|
|
|
$ |
1,916,452 |
|
|
|
|
|
|
$ |
1,262,552 |
|
|
|
|
|
In the tables that follow, the Company presents a subtotal for Executive Search Adjusted EBITDA and a single percentage for Executive Search Adjusted EBITDA margin, which reflects the aggregate of all of the individual Executive Search Regions. These figures are non-GAAP financial measures and are presented as they are consistent with the Company’s lines of business and are financial metrics used by the Company’s investor base.
30
|
|
Three Months Ended January 31, 2022 |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Executive Search |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Consulting |
|
|
Digital |
|
|
North America |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Latin America |
|
|
Subtotal |
|
|
RPO & Professional Search |
|
|
Corporate |
|
|
Consolidated |
|
||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||||||
Fee revenue |
|
$ |
162,889 |
|
|
$ |
90,194 |
|
|
$ |
152,597 |
|
|
$ |
47,509 |
|
|
$ |
31,425 |
|
|
$ |
7,468 |
|
|
$ |
238,999 |
|
|
$ |
188,659 |
|
|
$ |
— |
|
|
$ |
680,741 |
|
Total revenue |
|
$ |
163,824 |
|
|
$ |
90,501 |
|
|
$ |
153,454 |
|
|
$ |
47,666 |
|
|
$ |
31,448 |
|
|
$ |
7,470 |
|
|
$ |
240,038 |
|
|
$ |
190,593 |
|
|
$ |
— |
|
|
$ |
684,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Korn Ferry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
84,101 |
|
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
956 |
|
Other loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,277 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,029 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,927 |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
126,290 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,104 |
|
Other loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,277 |
) |
Integration/acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,214 |
|
Adjusted EBITDA |
|
$ |
28,556 |
|
|
$ |
28,142 |
|
|
$ |
45,702 |
|
|
$ |
8,080 |
|
|
$ |
9,451 |
|
|
$ |
2,484 |
|
|
$ |
65,717 |
|
|
$ |
44,109 |
|
|
$ |
(28,193 |
) |
|
$ |
138,331 |
|
Adjusted EBITDA margin |
|
|
17.5 |
% |
|
|
31.2 |
% |
|
|
29.9 |
% |
|
|
17.0 |
% |
|
|
30.1 |
% |
|
|
33.3 |
% |
|
|
27.5 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
20.3 |
% |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
65,155 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,735 |
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,935 |
|
Restructuring charges, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
% |
|
|
Nine Months Ended January 31, 2022 |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Executive Search |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Consulting |
|
|
Digital |
|
|
North America |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Latin America |
|
|
Subtotal |
|
|
RPO & Professional Search |
|
|
Corporate |
|
|
Consolidated |
|
||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||||||
Fee revenue |
|
$ |
476,260 |
|
|
$ |
259,504 |
|
|
$ |
449,472 |
|
|
$ |
132,690 |
|
|
$ |
88,385 |
|
|
$ |
20,815 |
|
|
$ |
691,362 |
|
|
$ |
478,453 |
|
|
$ |
— |
|
|
$ |
1,905,579 |
|
Total revenue |
|
$ |
478,563 |
|
|
$ |
259,894 |
|
|
$ |
451,836 |
|
|
$ |
133,080 |
|
|
$ |
88,447 |
|
|
$ |
20,821 |
|
|
$ |
694,184 |
|
|
$ |
483,811 |
|
|
$ |
— |
|
|
$ |
1,916,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Korn Ferry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
234,696 |
|
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,090 |
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,236 |
) |
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,820 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,951 |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
331,321 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,381 |
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|