March 11, 2022 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended January 31, 2022

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

For the transition period from _________ to ___________

Commission File Number 001-14505

KORN FERRY

(Exact Name of Registrant as Specified in its Charter)

Delaware		95-2623879
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

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

(Address of principal executive offices) (Zip Code)

(310) 552-1834

(Registrant’s telephone number, including area code)

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	KFY	New York Stock Exchange

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

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

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

Large accelerated filer ☑			Accelerated filer ☐

Non-accelerated filer ☐			Smaller reporting company ☐
			Emerging growth company ☐

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

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

The number of shares outstanding of our common stock as of March 4, 2022 was 53,902,870 shares.

KORN FERRY

Table of Contents

Item #	Description	Page

	Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of January 31, 2022 (unaudited) and April 30, 2021	1

	Consolidated Statements of Income (unaudited) for the three and nine months ended January 31, 2022 and 2021	2

	Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended January 31, 2022 and 2021	3

	Consolidated Statements of Stockholders’ Equity (unaudited) for three and nine months ended January 31, 2022 and 2021	4

	Consolidated Statements of Cash Flows (unaudited) for the nine months ended January 31, 2022 and 2021	5

	Notes to Consolidated Unaudited Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

	Part II. Other Information

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 6.	Exhibits	48

	Signatures	49

Item 1. Consolidated Financial Statements

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	January 31, 2022			April 30, 2021
	(unaudited)
	(in thousands, except per share data)
ASSETS
Cash and cash equivalents	$	846,505		$	850,778
Marketable securities		73,110			63,667
Receivables due from clients, net of allowance for doubtful accounts of $34,617 and $29,324 at January 31, 2022 and April 30, 2021, respectively		603,346			448,733
Income taxes and other receivables		41,708			40,024
Unearned compensation		62,446			53,206
Prepaid expenses and other assets		40,635			30,724
Total current assets		1,667,750			1,487,132

Marketable securities, non-current		187,635			182,692
Property and equipment, net		131,198			131,778
Operating lease right-of-use assets, net		154,818			174,121
Cash surrender value of company-owned life insurance policies, net of loans		181,126			161,295
Deferred income taxes		77,000			73,106
Goodwill		699,518			626,669
Intangible assets, net		89,574			92,949
Unearned compensation, non-current		126,082			102,356
Investments and other assets		21,395			24,428
Total assets	$	3,336,096		$	3,056,526
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	47,203		$	44,993
Income taxes payable		28,771			23,041
Compensation and benefits payable		429,683			394,606
Operating lease liability, current		46,583			47,986
Other accrued liabilities		298,911			239,444
Total current liabilities		851,151			750,070

Deferred compensation and other retirement plans		384,437			346,455
Operating lease liability, non-current		142,349			155,998
Long-term debt		395,303			394,794
Deferred tax liabilities		2,936			3,832
Other liabilities		24,675			36,602
Total liabilities		1,800,851			1,687,751

Stockholders' equity
Common stock: $0.01 par value, 150,000 shares authorized,75,347 and 74,915 shares issued and 54,216 and 54,008 shares outstanding at January 31, 2022 and April 30, 2021, respectively		562,564			583,260
Retained earnings		1,049,431			834,949
Accumulated other comprehensive loss, net		(80,718	)		(51,820	)
Total Korn Ferry stockholders' equity		1,531,277			1,366,389
Noncontrolling interest		3,968			2,386
Total stockholders' equity		1,535,245			1,368,775
Total liabilities and stockholders' equity	$	3,336,096		$	3,056,526

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

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2022			2021			2022			2021
	(in thousands, except per share data)
Fee revenue	$	680,741		$	475,360		$	1,905,579		$	1,254,896
Reimbursed out-of-pocket engagement expenses		4,215			2,520			10,873			7,656
Total revenue		684,956			477,880			1,916,452			1,262,552

Compensation and benefits		445,870			326,333			1,273,746			917,530
General and administrative expenses		60,811			47,271			175,143			140,836
Reimbursed expenses		4,215			2,520			10,873			7,656
Cost of services		31,666			20,028			77,988			50,198
Depreciation and amortization		16,104			15,735			47,381			46,068
Restructuring charges, net		—			838			—			30,732
Total operating expenses		558,666			412,725			1,585,131			1,193,020

Operating income		126,290			65,155			331,321			69,532
Other (loss) income, net		(7,277	)		14,935			2,236			26,374
Interest expense, net		(7,029	)		(7,298	)		(18,820	)		(21,686	)
Income before provision for income taxes		111,984			72,792			314,737			74,220
Income tax provision		26,927			21,204			76,951			25,409
Net income		85,057			51,588			237,786			48,811
Net income attributable to noncontrolling interest		(956	)		(269	)		(3,090	)		(547	)
Net income attributable to Korn Ferry	$	84,101		$	51,319		$	234,696		$	48,264

Earnings per common share attributable to Korn Ferry:
Basic	$	1.55		$	0.95		$	4.33		$	0.89
Diluted	$	1.54		$	0.94		$	4.28		$	0.88

Weighted-average common shares outstanding:
Basic		52,999			52,596			52,958			53,030
Diluted		53,495			53,013			53,538			53,396

Cash dividends declared per share:	$	0.12		$	0.10		$	0.36		$	0.30

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

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2022			2021			2022			2021
	(in thousands)
Net income	$	85,057		$	51,588		$	237,786		$	48,811

Other comprehensive income:
Foreign currency translation adjustments		(15,279	)		25,071			(30,818	)		47,374
Deferred compensation and pension plan adjustments, net of tax		1,159			663			1,851			1,988
Net unrealized loss on marketable securities, net of tax		(115	)		(5	)		(132	)		(39	)
Comprehensive income		70,822			77,317			208,687			98,134
Less: comprehensive income attributable to noncontrolling interest		(909	)		(257	)		(2,889	)		(612	)
Comprehensive income attributable to Korn Ferry	$	69,913		$	77,060		$	205,798		$	97,522

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

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

										Accumulated Other			Total Korn Ferry						Total
	Common Stock						Retained			Comprehensive			Stockholders'			Noncontrolling			Stockholder's
	Shares			Amount			Earnings			Loss, Net			Equity			Interest			Equity
	(in thousands)
Balance as of April 30, 2021		54,008		$	583,260		$	834,949		$	(51,820	)	$	1,366,389		$	2,386		$	1,368,775
Net income		—			—			74,823			—			74,823			1,574			76,397
Other comprehensive loss		—			—			—			(8,023	)		(8,023	)		24			(7,999	)
Dividends paid to shareholders		—			—			(6,866	)		—			(6,866	)		—			(6,866	)
Purchase of stock		(297	)		(20,091	)		—			—			(20,091	)		—			(20,091	)
Issuance of stock		795			3,992			—			—			3,992			—			3,992
Stock-based compensation		—			6,962			—			—			6,962			—			6,962
Balance as of July 31, 2021		54,506			574,123			902,906			(59,843	)		1,417,186			3,984			1,421,170
Net income		—			—			75,772			—			75,772			560			76,332
Other comprehensive loss		—			—			—			(6,687	)		(6,687	)		(178	)		(6,865	)
Dividends paid to shareholders		—			—			(6,683	)		—			(6,683	)		—			(6,683	)
Purchase of stock		(99	)		(7,353	)		—			—			(7,353	)		—			(7,353	)
Issuance of stock		59			—			—			—			—			—			—
Stock-based compensation		—			7,288			—			—			7,288			—			7,288
Balance as of October 31, 2021		54,466			574,058			971,995			(66,530	)		1,479,523			4,366			1,483,889
Net income		—			—			84,101			—			84,101			956			85,057
Other comprehensive loss		—			—			—			(14,188	)		(14,188	)		(47	)		(14,235	)
Dividends paid to shareholders		—			—			(6,665	)

Form: 10-Q

Documents