Highlights
- Korn Ferry reports fee revenue of $727.8 million in Q2 FY’23,
an increase of 14% (20% at constant currency) from Q2 FY’22 and a
sequential increase of 5% (7% on a constant currency basis) from Q1
FY'23.
- Net income attributable to Korn Ferry was $73.5 million in Q2
FY’23, while diluted and adjusted diluted earnings per share were
$1.38 and $1.43 in Q2 FY’23, respectively.
- Operating income and Adjusted EBITDA were $119.6 million
(operating margin of 16.4%) and $131.1 million (Adjusted EBITDA
margin of 18.0%), respectively, in Q2 FY’23.
- The Company repurchased 622,500 shares of stock during the
quarter for $33.1 million.
- Declared a quarterly dividend of $0.15 per share on December 7,
2022, which is payable on January 13, 2023 to stockholders of
record on December 21, 2022.
- During the second quarter, the Company completed the
acquisition of Infinity Consulting Solutions, which is included in
the Professional Search & Interim segment.
Korn Ferry (NYSE: KFY), a global organizational consulting firm,
today announced second quarter fee revenue of $727.8 million. In
addition, second quarter diluted earnings per share was $1.38 and
adjusted diluted earnings per share was $1.43.
“During the fiscal second quarter we generated $728 million in
fee revenue, up 14% year-over-year and up 20% at constant currency.
Our diluted earnings per share and Adjusted earnings per share were
$1.38 and $1.43, respectively, and our Adjusted EBITDA was $131
million, representing an 18% margin,” said Gary D. Burnison, CEO,
Korn Ferry.
“It’s clear that the global economy has been in transition for
several months. We are seeing change on every front – from over a
decade of high liquidity and historically low interest rates to
changes in Central Bank policies, significant shifts in global
trade lanes and persistent inflationary pressures. In response,
companies and our clients will undoubtedly have to continue
adjusting their organizational and workforce strategies to
tomorrow, which is opportunity for Korn Ferry.”
Selected Financial Results
(dollars in millions, except per share
amounts) (a)
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
727.8
$
639.4
$
1,423.8
$
1,224.8
Total revenue
$
735.7
$
643.4
$
1,438.9
$
1,231.5
Operating income
$
119.6
$
103.8
$
231.2
$
205.0
Operating margin
16.4
%
16.2
%
16.2
%
16.7
%
Net income attributable to Korn Ferry
$
73.5
$
75.8
$
150.8
$
150.6
Basic earnings per share
$
1.39
$
1.40
$
2.85
$
2.78
Diluted earnings per share
$
1.38
$
1.38
$
2.83
$
2.75
Adjusted Results (b):
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
131.1
$
134.9
$
263.3
$
256.2
Adjusted EBITDA margin
18.0
%
21.1
%
18.5
%
20.9
%
Adjusted net income attributable to Korn
Ferry
$
76.1
$
83.9
$
156.1
$
158.8
Adjusted basic earnings per share
$
1.44
$
1.55
$
2.95
$
2.93
Adjusted diluted earnings per share
$
1.43
$
1.53
$
2.93
$
2.90
____________________
(a)
Numbers may not total due to rounding.
(b)
Adjusted EBITDA refers to earnings before
interest, taxes, depreciation and amortization, further adjusted to
exclude integration/acquisition costs, impairment of fixed assets
and impairment of right of use assets when applicable. Adjusted
results on a consolidated basis are non-GAAP financial measures
that adjust for the following, as applicable (see attached
reconciliations):
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Integration/acquisition costs
$
3.4
$
1.1
$
7.0
$
1.1
Impairment of fixed assets
$
—
$
1.9
$
—
$
1.9
Impairment of right of use assets
$
—
$
7.4
$
—
$
7.4
The Company reported fee revenue in Q2 FY’23 of $727.8 million,
a year-over-year increase of 14% (up 20% on a constant currency
basis) compared to Q2 FY’22. Fee revenue increased in all lines of
business except Executive Search which was down about 7% compared
to Q2 FY'22. The acquisitions of Lucas Group, Patina and Infinity
Consulting Solutions (collectively, the “acquisitions”) which are
included in the Professional Search & Interim segment, were a
significant factor in the year-over-year increase in fee revenue
compared to the year-ago quarter.
Operating margin was 16.4% in Q2 FY’23, compared to 16.2% in the
year-ago quarter. Adjusted EBITDA margin was 18.0% in Q2 FY’23,
compared to 21.1%, in the year-ago quarter. Net income attributable
to Korn Ferry was $73.5 million in Q2 FY’23, compared to $75.8
million in Q2 FY’22 and Adjusted EBITDA was $131.1 million in Q2
FY’23 compared to $134.9 million in Q2 FY’22.
Operating income increased due to the increase in fee revenue as
discussed above. Partially offsetting this increase were increases
in 1) cost of services expense associated with the acquisitions and
2) compensation and benefits expense primarily due to an increase
in headcount, partially offset by a decrease in our deferred
compensation liabilities due to market movements.
Adjusted EBITDA decreased due to the factors noted above and a
decrease in other income due to a decline in the value of our
marketable securities (which are held in trust to satisfy
obligations under our deferred compensation plans) due to market
movements.
Results by Line of Business
Selected Consulting Data
(dollars in millions) (a)
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
173.1
$
164.9
$
339.6
$
313.4
Total revenue
$
175.8
$
165.7
$
344.6
$
314.7
Ending number of consultants and execution
staff (b)
1,899
1,739
1,899
1,739
Hours worked in thousands (c)
467
445
926
871
Average bill rate (d)
$
371
$
371
$
367
$
360
Adjusted Results (e):
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
31.1
$
30.1
$
60.6
$
56.9
Adjusted EBITDA margin
18.0
%
18.2
%
17.9
%
18.2
%
______________________
(a)
Numbers may not total due to rounding.
(b)
Represents number of employees
originating, delivering and executing consulting services.
(c)
The number of hours worked by consultant
and execution staff during the period.
(d)
The amount of fee revenue divided by the
number of hours worked by consultants and execution staff.
(e)
Adjusted results exclude the
following:
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
0.3
$
—
$
0.3
Impairment of right of use assets
$
—
$
2.5
$
—
$
2.5
Fee revenue was $173.1 million in Q2 FY’23 compared to $164.9
million in Q2 FY’22, an increase of $8.2 million or 5% (up 12% on a
constant currency basis). Consulting saw growth in Organization
Design, Change Management, and Workforce Sales Compensation,
partially offset by a decline in Assessment & Succession.
Adjusted EBITDA was $31.1 million in Q2 FY’23 with an Adjusted
EBITDA margin of 18.0% compared to Adjusted EBITDA of $30.1 million
with an associated margin of 18.2%, respectively, in the year-ago
quarter. This increase in Adjusted EBITDA resulted from the
increase in fee revenue outlined above, partially offset by an
increase in compensation and benefits expense and cost of services
expense, driven by higher salaries and related payroll taxes.
Selected Digital Data
(dollars in millions) (a)
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
94.3
$
88.6
$
178.1
$
169.3
Total revenue
$
94.6
$
88.7
$
178.4
$
169.4
Ending number of consultants
365
282
365
282
Subscription & License fee revenue
$
28.9
$
26.3
$
58.5
$
50.7
Adjusted Results (b):
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
27.5
$
28.6
$
51.7
$
54.2
Adjusted EBITDA margin
29.2
%
32.2
%
29.0
%
32.0
%
______________________
(a)
Numbers may not total due to rounding.
(b)
Adjusted results exclude the
following:
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
0.2
$
—
$
0.2
Impairment of right of use assets
$
—
$
1.3
$
—
$
1.3
Fee revenue was $94.3 million in Q2 FY’23 compared to $88.6
million in Q2 FY’22, an increase of $5.7 million or 6% (up 15% on a
constant currency basis). The increase in fee revenue continues to
be driven by Development offerings as companies invest in sales
effectiveness tools and training programs to build their commercial
team capabilities to maximize revenue growth.
Adjusted EBITDA was $27.5 million in Q2 FY’23 with an Adjusted
EBITDA margin of 29.2% compared to $28.6 million and 32.2%,
respectively, in the year-ago quarter. The decrease in Adjusted
EBITDA and Adjusted EBITDA margin was due to 1) an increase in
general and administrative expenses and 2) an increase in
compensation and benefits expense, driven by higher salaries and
related payroll taxes associated with the increased investment made
on product development initiatives and an increase in the
commercial salesforce. This was partially offset by higher fee
revenue.
Selected Executive Search
Data(a)
(dollars in millions) (b)
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
218.4
$
235.5
$
451.1
$
452.4
Total revenue
$
220.4
$
236.5
$
454.9
$
454.1
Ending number of consultants
621
570
621
570
Average number of consultants
620
568
604
547
Engagements billed
4,054
4,365
6,386
6,631
New engagements (c)
1,637
1,830
3,319
3,575
Adjusted Results (d):
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
54.5
$
66.1
$
116.7
$
127.7
Adjusted EBITDA margin
25.0
%
28.1
%
25.9
%
28.2
%
______________________
(a)
Executive Search is the sum of the
individual Executive Search Reporting Segments and is presented on
a consolidated basis as it is consistent with the Company’s
discussion of its Lines of Business, and financial metrics used by
the Company’s investor base.
(b)
Numbers may not total due to rounding.
(c)
Represents new engagements opened in the
respective period.
(d)
Executive Search Adjusted EBITDA and
Adjusted EBITDA margin are non-GAAP financial measures that adjust
for the following:
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
0.1
$
—
$
0.1
Impairment of right of use assets
$
—
$
0.9
$
—
$
0.9
Fee revenue was $218.4 million and $235.5 million in Q2 FY’23
and Q2 FY’22, respectively, a year-over-year decrease of $17.1
million or 7% (down 4% on a constant currency basis). The decrease
in fee revenue was driven by a decrease in the number of the
engagements billed. Fee revenue decreased in North America and Asia
and was partially offset by higher fee revenue in EMEA and Latin
America.
Adjusted EBITDA was $54.5 million in Q2 FY’23 with an Adjusted
EBITDA margin of 25.0% compared to Adjusted EBITDA of $66.1 million
and Adjusted EBITDA margin of 28.1%, respectively, in the year-ago
quarter. The decrease in Adjusted EBITDA was due to the decrease in
fee revenue discussed above, partially offset by a decrease in
compensation and benefits expense due to a decrease in
performance-related bonus expense.
Selected Professional Search &
Interim Data(a)
(dollars in millions) (b)
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
134.7
$
54.6
$
233.7
$
106.4
Total revenue
$
135.8
$
54.7
$
235.8
$
106.6
Permanent Placement:
Fee revenue
$
79.5
$
54.6
$
153.6
$
106.4
Engagements billed (c)
3,006
1,824
4,709
2,925
New engagements (d)
1,816
1,048
3,662
2,036
Ending number of consultants (e)
527
210
527
210
Interim (started in Q3 FY'22):
Fee revenue
$
55.3
$
—
$
80.1
$
—
Average bill rate (f)
$
107
$
—
$
111
$
—
Average weekly billable consultants
(g)
1,111
—
787
—
Adjusted Results (h):
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
32.5
$
21.8
$
61.6
$
41.3
Adjusted EBITDA margin
24.1
%
40.0
%
26.4
%
38.8
%
_____________________
(a)
In the first quarter of fiscal 2023, the
Company changed the composition of its global segments.
Professional Search & Interim segment represents the single
hire to multi hire permanent placement and interim business that
was previously included in the RPO & Professional Search
segment. Segment data for Q2 FY’22 and year to date FY'22 has been
recast to reflect the division of the RPO & Professional Search
segment into the RPO segment and Professional Search & Interim
segment.
(b)
Numbers may not total due to rounding.
(c)
Represents engagements billed for
professional search.
(d)
Represents new engagements opened for
professional search in the respective period.
(e)
Represents number of employees originating
professional search.
(d)
Fee revenue from interim divided by the
number of hours worked by consultants.
(f)
The number of billable consultants based
on a weekly average in the respective period.
(g)
Adjusted results exclude the
following:
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
0.9
$
—
$
0.9
Impairment of right of use assets
$
—
$
1.4
$
—
$
1.4
Integration/acquisition costs
$
2.5
$
—
$
5.0
$
—
Fee revenue was $134.7 million in Q2 FY’23, an increase of $80.1
million or 147% (up 159% on a constant currency basis), compared to
the year-ago quarter. Interim fee revenue and permanent placement
fee revenue increased by $55.3 million and $24.9 million,
respectively, primarily due to the acquisitions.
Adjusted EBITDA was $32.5 million in Q2 FY’23 with an Adjusted
EBITDA margin of 24.1% compared to $21.8 million and 40.0%,
respectively, in the year-ago quarter. The increase in Adjusted
EBITDA was due to the higher fee revenue discussed above. Partially
offsetting this increase were increases in compensation and
benefits expense driven by higher salaries and related payroll
taxes and commission expense driven by increases in fee revenue and
headcount associated with the acquisitions. Also partially
offsetting the increase in Adjusted EBITDA was an increase in cost
of services expense due to the recently acquired interim
businesses.
Selected RPO Data(a)
(dollars in millions) (b)
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
107.3
$
95.9
$
221.2
$
183.4
Total revenue
$
109.1
$
97.8
$
225.2
$
186.6
Remaining revenue under contract(c)
$
958.3
$
663.4
$
958.3
$
663.4
RPO new business(d)
$
290.3
$
136.2
$
438.7
$
249.2
Adjusted Results (e):
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
16.0
$
14.4
$
33.7
$
29.0
Adjusted EBITDA margin
14.9
%
15.1
%
15.2
%
15.8
%
______________________
(a)
In the first quarter of fiscal 2023, the
Company changed the composition of its global segments. RPO segment
represents the recruitment outsourcing business that was previously
included in the RPO & Professional Search segment. Segment data
for Q2 FY’22 and year to date FY'22 has been recast to reflect the
division of the RPO & Professional Search segment into a RPO
segment and Professional Search & Interim segment.
(b)
Numbers may not total due to rounding.
(c)
Estimated fee revenue associated with
signed contracts for which revenue has not yet been recognized.
(d)
Estimated total value of a contract at the
point of execution of the contract.
(e)
Adjusted results exclude the
following:
Second Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
0.4
$
—
$
0.4
Impairment of right of use assets
$
—
$
1.2
$
—
$
1.2
Fee revenue was $107.3 million in Q2 FY’23, an increase of $11.4
million or 12% (up 19% on a constant currency basis), compared to
the year-ago quarter. RPO fee revenue increased due to the wider
adoption of RPO services in the market in combination with our
differentiated solutions.
Adjusted EBITDA was $16.0 million in Q2 FY’23 with an Adjusted
EBITDA margin of 14.9% compared to $14.4 million and 15.1%,
respectively, in the year-ago quarter. The increase in Adjusted
EBITDA was due to the higher fee revenue discussed above. Partially
offsetting this were increases in compensation and benefits expense
driven by higher salaries and related payroll taxes driven by
increases in headcount associated with increased levels of fee
revenue.
Outlook
Despite the continuing strength in new business trends coming
out of Q2 FY’23, economic factors like global inflation, rising
interest rates, and escalating geo-political tensions present a
level of risk and uncertainty that is difficult to quantify. In
light of such uncertainty, we are in the process of developing a
plan (the "Plan") to reduce our operating costs by $45 million to
$55 million. We expect to implement the Plan in the third quarter,
but do not anticipate any meaningful run-rate savings to begin
until the fourth quarter. With this in mind and assuming
anticipated charges and savings related to the Plan, no new major
pandemic related lockdowns or further changes in worldwide
geopolitical conditions, economic conditions, financial markets or
foreign exchange rates, on a consolidated basis:
- Q3 FY’23 fee revenue is expected to be in the range of $660
million and $690 million; and
- Q3 FY’23 diluted earnings per share is expected to range
between $0.40 to $0.66.
On a consolidated adjusted basis:
- Q3 FY’23 and Q4 FY'23 Adjusted EBITDA margin is expected to be
in the range of 14% to 15%.
Reconciliation of Operating
margin to Adjusted EBITDA margin
Low
High
Consolidated operating margin
7.0
%
8.0
%
Depreciation and amortization
2.6
%
2.6
%
Integration/acquisition and cost
realignment
4.4
%
4.4
%
Consolidated Adjusted EBITDA margin(1)
14.0
%
15.0
%
- Q3 FY’23 adjusted diluted earnings per share is expected to be
in the range from $0.88 to $1.00.
Q3 FY’23
Earnings Per Share
Outlook
Low
High
Consolidated diluted earnings per
share
$
0.40
$
0.66
Integration/acquisition and cost
realignment
0.66
0.47
Tax Rate Impact
(0.18
)
(0.13
)
Consolidated adjusted diluted earnings per
share(1)
$
0.88
$
1.00
______________________
(1)
Consolidated Adjusted EBITDA margin and consolidated adjusted
diluted earnings per share are non-GAAP financial measures that
exclude the items listed in the applicable table.
Earnings Conference Call Webcast
The earnings conference call will be held today at 12:00 PM
(EST) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP
Finance Gregg Kvochak. The conference call will be webcast and
available online at ir.kornferry.com. We will also post to this
section of our website earnings slides, which will accompany our
webcast, and other important information, and encourage you to
review the information that we make available on our website.
About Korn Ferry
Korn Ferry is a global organizational consulting firm. We help
clients synchronize strategy and talent to drive superior
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. Visit kornferry.com for more
information.
Forward-Looking Statements
Statements in this press release and our conference call that
relate to our outlook, projections, goals, strategies, future plans
and expectations, and other statements of future events or
conditions are forward-looking statements that involve a number of
risks and uncertainties. Words such as “believes”, “expects”,
“anticipates”, “goals”, “estimates”, “guidance”, “may”, “should”,
“could”, “will” or “likely”, and variations of such words and
similar expressions are intended to identify such forward-looking
statements. Statements that refer to or are based on estimates,
forecasts, projections, uncertain events or assumptions, including
statements relating to expected demand for our products and
services. Readers are cautioned not to place undue reliance on such
statements. Such statements are based on current expectations;
actual results in future periods may differ materially from those
currently expected or desired because of a number of risks and
uncertainties that are beyond the control of Korn Ferry. The
potential risks and uncertainties include those relating to the
ultimate magnitude and duration of any pandemic or 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 or economic developments in or affecting countries where
we have operations, competition, changes in demand for our services
as a result of automation, the dependence on and costs of
attracting and retaining qualified and experienced consultants,
dislocation in the labor markets and increasing competition for
highly skilled workers, our ability to maintain relationships with
customers and suppliers and retain key employees, maintaining our
brand name and professional reputation, impact of inflationary
pressures on our profitability, potential legal liability and
regulatory developments, the portability of client relationships,
consolidation of the industries we serve, changes and developments
in government laws and regulations, evolving investor and customer
expectations with regard to environmental, social and governmental
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,
changes to data security, data privacy and data protection laws,
limited protection of our intellectual property, our ability to
enhance and develop new technology, our ability to develop new
products and services, the utilization and billing rates of our
consultants, dependence on third parties for the execution of
critical functions, our ability to successfully recover from a
disaster or other business continuity problems, changes in our
accounting estimates/assumptions, treaties, or regulations on our
business and our company, impairment of goodwill and other
intangible assets, deferred tax assets that we may not be able to
use, our indebtedness, expansion of social media platforms,
seasonality, ability to effect acquisition and integrate acquired
businesses, including Infinity Consulting Solutions and employment
liability risk. For a detailed description of risks and
uncertainties that could cause differences, please refer to Korn
Ferry’s periodic filings with the Securities and Exchange
Commission. Korn Ferry disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Use of Non-GAAP Financial Measures
This press release contains financial information calculated
other than in accordance with U.S. Generally Accepted Accounting
Principles (“GAAP”). In particular, it includes:
- Adjusted net income attributable to Korn Ferry, adjusted to
exclude integration/acquisition costs, impairment of fixed assets
and impairment of right of use assets net of income tax
effect;
- Adjusted basic and diluted earnings per share, adjusted to
exclude integration/acquisition costs, impairment of fixed assets
and impairment of right of use assets, net of income tax
effect;
- Constant currency (calculated using a quarterly average)
percentages that represent the percentage change that would have
resulted had exchange rates in the prior period been the same as
those in effect in the current period;
- Consolidated and Executive Search Adjusted EBITDA, which is
earnings before interest, taxes, depreciation and amortization,
further adjusted to exclude integration/acquisition costs,
impairment of fixed assets and impairment of right of use assets,
when applicable, and Consolidated and Executive Search Adjusted
EBITDA margin.
This non-GAAP disclosure has limitations as an analytical tool,
should not be viewed as a substitute for financial information
determined in accordance with GAAP, and should not be considered in
isolation or as a substitute for analysis of the Company’s results
as reported under GAAP, nor is it necessarily comparable to
non-GAAP performance measures that may be presented by other
companies.
Management believes the presentation of non-GAAP financial
measures in this press release provides meaningful supplemental
information regarding Korn Ferry’s performance by excluding certain
charges that may not be indicative of Korn Ferry’s ongoing
operating results. These non-GAAP financial measures are
performance measures and are not indicative of the liquidity of
Korn Ferry. These charges, which are described in the footnotes in
the attached reconciliations, represent 1) costs we incurred to
acquire and integrate a portion of our Professional Search &
Interim business, 2) impairment of fixed assets associated with the
decision to terminate and sublease some of our offices and 3)
impairment of right of use assets due to the decision to terminate
and sublease some of our offices. The use of non-GAAP financial
measures facilitates comparisons to Korn Ferry’s historical
performance. Korn Ferry includes non-GAAP financial measures
because management believes they are 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.
Adjusted net income attributable to Korn Ferry, adjusted basic and
diluted earnings per share and Consolidated and Executive Search
Adjusted EBITDA, exclude certain charges that management does not
consider on-going in nature and allows management and investors to
make more meaningful period-to-period comparisons of the Company’s
operating results. Management further believes that Consolidated
and Executive Search 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. In the case of constant currency percentages,
management believes the presentation of such information provides
useful supplemental information regarding Korn Ferry's performance
as excluding the impact of exchange rate changes on Korn Ferry's
financial performance allows investors to make more meaningful
period-to-period comparisons of the Company’s operating results, to
better identify operating trends that may otherwise be masked or
distorted by exchange rate changes and to perform related trend
analysis, and provides a higher degree of transparency of
information used by management in its evaluation of Korn Ferry's
ongoing operations and financial and operational
decision-making.
KORN FERRY AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME
(in thousands, except per
share amounts)
Three Months Ended
October 31,
Six Months Ended
October 31,
2022
2021
2022
2021
(unaudited)
Fee revenue
$
727,849
$
639,443
$
1,423,752
$
1,224,838
Reimbursed out-of-pocket engagement
expenses
7,870
3,955
15,115
6,658
Total revenue
735,719
643,398
1,438,867
1,231,496
Compensation and benefits
464,766
431,640
930,392
827,876
General and administrative expenses
65,086
64,065
129,543
114,332
Reimbursed expenses
7,870
3,955
15,115
6,658
Cost of services
61,257
24,329
99,249
46,322
Depreciation and amortization
17,093
15,633
33,322
31,277
Total operating expenses
616,072
539,622
1,207,621
1,026,465
Operating income
119,647
103,776
231,246
205,031
Other (loss) income, net
(9,048
)
5,066
(8,273
)
9,513
Interest expense, net
(7,098
)
(6,365
)
(14,710
)
(11,791
)
Income before provision for income
taxes
103,501
102,477
208,263
202,753
Income tax provision
28,886
26,145
55,112
50,024
Net income
74,615
76,332
153,151
152,729
Net income attributable to noncontrolling
interest
(1,074
)
(560
)
(2,363
)
(2,134
)
Net income attributable to Korn Ferry
$
73,541
$
75,772
$
150,788
$
150,595
Earnings per common share attributable to
Korn Ferry:
Basic
$
1.39
$
1.40
$
2.85
$
2.78
Diluted
$
1.38
$
1.38
$
2.83
$
2.75
Weighted-average common shares
outstanding:
Basic
51,868
53,114
51,820
52,937
Diluted
52,005
53,568
52,143
53,494
Cash dividends declared per share:
$
0.15
$
0.12
$
0.30
$
0.24
KORN FERRY AND
SUBSIDIARIES
FINANCIAL SUMMARY BY REPORTING
SEGMENT
(dollars in thousands)
(unaudited)
Three Months Ended October
31,
Six Months Ended October
31,
2022
2021
% Change
2022
2021
% Change
Fee revenue:
Consulting
$
173,092
$
164,893
5.0
%
$
339,576
$
313,371
8.4
%
Digital
94,329
88,639
6.4
%
178,090
169,310
5.2
%
Executive Search:
North America
142,485
158,197
(9.9
)%
294,029
296,875
(1.0
%)
EMEA
44,645
42,434
5.2
%
91,701
85,181
7.7
%
Asia Pacific
23,408
28,257
(17.2
)%
49,789
56,960
(12.6
%)
Latin America
7,821
6,571
19.0
%
15,629
13,347
17.1
%
Total Executive Search (a)
218,359
235,459
(7.3
)%
451,148
452,363
(0.3
%)
Professional Search & Interim
134,743
54,559
147.0
%
233,690
106,396
119.6
%
RPO
107,326
95,893
11.9
%
221,248
183,398
20.6
%
Total fee revenue
727,849
639,443
13.8
%
1,423,752
1,224,838
16.2
%
Reimbursed out-of-pocket engagement
expenses
7,870
3,955
99.0
%
15,115
6,658
127.0
%
Total revenue
$
735,719
$
643,398
14.3
%
$
1,438,867
$
1,231,496
16.8
%
(a)
Total Executive Search is the sum of the
individual Executive Search Reporting Segments and is presented on
a consolidated basis as it is consistent with the Company’s
discussion of its Lines of Business, and financial metrics used by
the Company’s investor base.
KORN FERRY AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands, except per
share amounts)
October 31,
2022
April 30, 2022
(unaudited)
ASSETS
Cash and cash equivalents
$
593,900
$
978,070
Marketable securities
59,188
57,244
Receivables due from clients, net of
allowance for doubtful accounts of $40,959 and $36,384 at October
31, 2022 and April 30, 2022, respectively
670,408
590,260
Income taxes and other receivables
48,070
31,884
Unearned compensation
62,411
60,749
Prepaid expenses and other assets
46,388
41,763
Total current assets
1,480,365
1,759,970
Marketable securities, non-current
178,565
175,783
Property and equipment, net
153,041
138,172
Operating lease right-of-use assets,
net
151,537
167,734
Cash surrender value of company-owned life
insurance policies, net of loans
184,230
183,308
Deferred income taxes
83,899
84,712
Goodwill
790,063
725,592
Intangible assets, net
94,408
89,770
Unearned compensation, non-current
122,361
118,238
Investments and other assets
23,266
21,267
Total assets
$
3,261,735
$
3,464,546
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable
$
48,623
$
50,932
Income taxes payable
26,094
34,450
Compensation and benefits payable
327,949
547,826
Operating lease liability, current
49,039
48,609
Other accrued liabilities
303,470
302,408
Total current liabilities
755,175
984,225
Deferred compensation and other retirement
plans
369,960
357,175
Operating lease liability, non-current
127,886
151,212
Long-term debt
395,831
395,477
Deferred tax liabilities
2,776
2,715
Other liabilities
27,387
24,153
Total liabilities
1,679,015
1,914,957
Stockholders' equity
Common stock: $0.01 par value, 150,000
shares authorized, 76,622 and 75,409 shares issued and 52,909 and
53,190 shares outstanding at October 31, 2022 and April 30, 2022,
respectively
446,280
502,008
Retained earnings
1,268,437
1,134,523
Accumulated other comprehensive loss,
net
(136,665
)
(92,185
)
Total Korn Ferry stockholders' equity
1,578,052
1,544,346
Noncontrolling interest
4,668
5,243
Total stockholders' equity
1,582,720
1,549,589
Total liabilities and stockholders'
equity
$
3,261,735
$
3,464,546
KORN FERRY AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(dollars in thousands, except
per share amounts)
(unaudited)
Three Months Ended
October 31,
Six Months Ended
October 31,
2022
2021
2022
2021
Net income attributable to Korn Ferry
$
73,541
$
75,772
$
150,788
$
150,595
Net income attributable to non-controlling
interest
1,074
560
2,363
2,134
Net income
74,615
76,332
153,151
152,729
Income tax provision
28,886
26,145
55,112
50,024
Income before provision for income
taxes
103,501
102,477
208,263
202,753
Other loss (income), net
9,048
(5,066
)
8,273
(9,513
)
Interest expense, net
7,098
6,365
14,710
11,791
Operating income
119,647
103,776
231,246
205,031
Depreciation and amortization
17,093
15,633
33,322
31,277
Other (loss) income, net
(9,048
)
5,066
(8,273
)
9,513
Integration/acquisition costs (1)
3,411
1,084
7,016
1,084
Impairment of fixed assets (2)
—
1,915
—
1,915
Impairment of right of use assets (3)
—
7,392
—
7,392
Adjusted EBITDA
$
131,103
$
134,866
$
263,311
$
256,212
Operating margin
16.4
%
16.2
%
16.2
%
16.7
%
Depreciation and amortization
2.3
%
2.4
%
2.4
%
2.6
%
Other (loss) income, net
(1.2
)%
0.8
%
(0.6
)%
0.8
%
Integration/acquisition costs (1)
0.5
%
0.2
%
0.5
%
0.1
%
Impairment of fixed assets (2)
—
0.3
%
—
0.1
%
Impairment of right of use assets (3)
—
1.2
%
—
0.6
%
Adjusted EBITDA margin
18.0
%
21.1
%
18.5
%
20.9
%
Net income attributable to Korn Ferry
$
73,541
$
75,772
$
150,788
$
150,595
Integration/acquisition costs (1)
3,411
1,084
7,016
1,084
Impairment of fixed assets (2)
—
1,915
—
1,915
Impairment of right of use assets (3)
—
7,392
—
7,392
Tax effect on the adjusted items (4)
(812
)
(2,228
)
(1,705
)
(2,228
)
Adjusted net income attributable to Korn
Ferry
$
76,140
$
83,935
$
156,099
$
158,758
Basic earnings per common share
$
1.39
$
1.40
$
2.85
$
2.78
Integration/acquisition costs (1)
0.07
0.02
0.13
0.02
Impairment of fixed assets (2)
—
0.04
—
0.04
Impairment of right of use assets (3)
—
0.14
—
0.14
Tax effect on the adjusted items (4)
(0.02
)
(0.05
)
(0.03
)
(0.05
)
Adjusted basic earnings per share
$
1.44
$
1.55
$
2.95
$
2.93
Diluted earnings per common share
$
1.38
$
1.38
$
2.83
$
2.75
Integration/acquisition costs (1)
0.07
0.02
0.13
0.02
Impairment of fixed assets (2)
—
0.04
—
0.04
Impairment of right of use assets (3)
—
0.14
—
0.14
Tax effect on the adjusted items (4)
(0.02
)
(0.05
)
(0.03
)
(0.05
)
Adjusted diluted earnings per share
$
1.43
$
1.53
$
2.93
$
2.90
Explanation of Non-GAAP
Adjustments
(1)
Costs associated with current and previous
acquisitions, such as legal and professional fees, retention awards
and the on-going integration expenses to combine the companies.
(2)
Costs associated with impairment of fixed
assets (i.e. leasehold improvements) due to terminating and
subleasing some of our office leases.
(3)
Costs associated with impairment of
right-of-use assets due to terminating and subleasing some out our
office leases.
(4)
Tax effect on integration/acquisition
costs and impairment of fixed assets and right of use assets.
KORN FERRY AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES - CONTINUED
(unaudited)
Three Months Ended October
31,
2022
2021
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
173,092
$
175,845
$
31,089
18.0
%
$
164,893
$
165,732
$
30,061
18.2
%
Digital
94,329
94,577
27,524
29.2
%
88,639
88,712
28,556
32.2
%
Executive Search:
North America
142,485
144,147
37,969
26.6
%
158,197
159,082
48,907
30.9
%
EMEA
44,645
44,919
8,081
18.1
%
42,434
42,571
7,663
18.1
%
Asia Pacific
23,408
23,523
5,834
24.9
%
28,257
28,267
8,201
29.0
%
Latin America
7,821
7,822
2,607
33.3
%
6,571
6,572
1,366
20.8
%
Total Executive Search
218,359
220,411
54,491
25.0
%
235,459
236,492
66,137
28.1
%
Professional Search &
Interim
134,743
135,762
32,457
24.1
%
54,559
54,702
21,825
40.0
%
RPO
107,326
109,124
16,004
14.9
%
95,893
97,760
14,433
15.1
%
Corporate
—
—
(30,462
)
—
—
(26,146
)
Consolidated
$
727,849
$
735,719
$
131,103
18.0
%
$
639,443
$
643,398
$
134,866
21.1
%
Six Months Ended October
31,
2022
2021
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
339,576
$
344,580
$
60,639
17.9
%
$
313,371
$
314,739
$
56,902
18.2
%
Digital
178,090
178,392
51,702
29.0
%
169,310
169,393
54,188
32.0
%
Executive Search:
North America
294,029
297,031
81,718
27.8
%
296,875
298,382
92,237
31.1
%
EMEA
91,701
92,248
16,596
18.1
%
85,181
85,414
15,248
17.9
%
Asia Pacific
49,789
49,975
13,185
26.5
%
56,960
56,999
16,521
29.0
%
Latin America
15,629
15,631
5,224
33.4
%
13,347
13,351
3,720
27.9
%
Total Executive Search
451,148
454,885
116,723
25.9
%
452,363
454,146
127,726
28.2
%
Professional Search &
Interim
233,690
235,814
61,618
26.4
%
106,396
106,634
41,264
38.8
%
RPO
221,248
225,196
33,713
15.2
%
183,398
186,584
28,961
15.8
%
Corporate
—
—
(61,084
)
—
—
(52,829
)
Consolidated
$
1,423,752
$
1,438,867
$
263,311
18.5
%
$
1,224,838
$
1,231,496
$
256,212
20.9
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221130006205/en/
Investor Relations: Gregg Kvochak, (310) 556-8550 Media: Dan
Gugler, (310) 226-2645
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