Highlights
- Korn Ferry reports fee revenue of $680.8 million in Q3 FY’23,
essentially flat (increase of 4% at constant currency) from Q3
FY’22.
- Net income and adjusted net income attributable to Korn Ferry
were $11.2 million and $53.0 million in Q3 FY’23, while diluted and
adjusted diluted earnings per share were $0.21 and $1.01 in Q3
FY’23, respectively.
- Operating income and Adjusted EBITDA were $12.5 million
(operating margin of 1.8%) and $96.1 million (Adjusted EBITDA
margin of 14.1%), respectively, in Q3 FY’23.
- The Company repurchased 462,500 shares of stock during the
quarter for $25.0 million.
- Declared a quarterly dividend of $0.15 per share on March 7,
2023, which is payable on April 14, 2023 to stockholders of record
on March 28, 2023.
- On February 1, 2023, Korn Ferry completed the acquisition of
Salo, a leading provider of finance, accounting and HR interim
talent, which will be included in the Professional Search &
Interim segment in Q4 FY'23.
Korn Ferry (NYSE: KFY), a global organizational consulting firm,
today announced third quarter fee revenue of $680.8 million. In
addition, third quarter diluted earnings per share was $0.21 and
adjusted diluted earnings per share was $1.01. Adjusted diluted
earnings per share for the third quarter excludes $41.8 million,
net of tax or $0.80 per share, of restructuring charges, net, due
to the realignment of our workforce, impairment of certain real
estate assets and integration/acquisition costs.
“During the fiscal third quarter we generated $681 million in
fee revenue, flat year-over-year and up 4% at constant currency.
Our fully diluted earnings per share and Adjusted fully diluted
earnings per share were $0.21 and $1.01, respectively, and our
Adjusted EBITDA was $96 million, a 14.1% margin,” said Gary D.
Burnison, CEO, Korn Ferry.
“Korn Ferry is incredibly well-positioned as clients continue to
navigate an economy in transition. We will continue to prioritize
faster growing, larger addressable, less cyclical markets that set
up our firm and our clients for success. As an example, the recent
addition of Salo now brings our interim services to be more than
10% of our firm’s revenue on a pro forma basis.”
Selected Financial Results
(dollars in millions, except per share
amounts) (a)
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
680.8
$
680.7
$
2,104.5
$
1,905.6
Total revenue
$
686.8
$
685.0
$
2,125.7
$
1,916.5
Operating income
$
12.5
$
126.3
$
243.8
$
331.3
Operating margin
1.8
%
18.6
%
11.6
%
17.4
%
Net income attributable to Korn Ferry
$
11.2
$
84.1
$
162.0
$
234.7
Basic earnings per share
$
0.21
$
1.55
$
3.07
$
4.33
Diluted earnings per share
$
0.21
$
1.54
$
3.05
$
4.28
Adjusted Results (b):
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
96.1
$
138.3
$
359.4
$
394.5
Adjusted EBITDA margin
14.1
%
20.3
%
17.1
%
20.7
%
Adjusted net income attributable to Korn
Ferry
$
53.0
$
86.9
$
209.1
$
245.7
Adjusted basic earnings per share
$
1.01
$
1.60
$
3.96
$
4.53
Adjusted diluted earnings per share
$
1.01
$
1.59
$
3.93
$
4.48
______________________
(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,
impairment of right of use assets and net restructuring charges
when applicable. Adjusted results on a consolidated basis are
non-GAAP financial measures that adjust for the following, as
applicable (see attached reconciliations):
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Integration/acquisition costs
$
2.5
$
3.2
$
9.5
$
4.3
Impairment of fixed assets
$
4.4
$
—
$
4.4
$
1.9
Impairment of right of use assets
$
5.5
$
—
$
5.5
$
7.4
Restructuring charges, net
$
41.2
$
—
$
41.2
$
—
The Company reported fee revenue in Q3 FY’23 of $680.8 million,
essentially flat (up 4% on a constant currency basis) compared to
Q3 FY’22. Fee revenue decreased in Executive Search and
Professional Search mainly due to a decline in demand for our
products and services driven by the global economic factors. This
decline in fee revenue was fully offset by increases in RPO and
Interim fee revenue resulting from the acquisitions of Patina and
Infinity Consulting Solutions (collectively, the
“acquisitions”).
Operating margin was 1.8% in Q3 FY’23, compared to 18.6% in the
year-ago quarter. Adjusted EBITDA margin was 14.1% in Q3 FY’23,
compared to 20.3%, in the year-ago quarter. Net income attributable
to Korn Ferry was $11.2 million in Q3 FY’23, compared to $84.1
million in Q3 FY’22 and Adjusted EBITDA was $96.1 million in Q3
FY’23 compared to $138.3 million in Q3 FY’22.
Operating margin decreased primarily due to 1) restructuring
charges, net recorded in Q3 FY'23, 2) impairment of fixed assets
and right of use assets due to the Company deciding to abandon
and/or sublease office space that it was no longer using, 3) change
in fee revenue mix discussed above and 4) an increase in
compensation and benefits expense due to increased headcount and
wage inflation.
Adjusted EBITDA margin decreased due to a change in the fee
revenue mix and the increase in compensation and benefits expense
discussed above.
Results by Line of Business
Selected Consulting Data
(dollars in millions) (a)
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
162.2
$
162.9
$
501.7
$
476.3
Total revenue
$
164.4
$
163.8
$
509.0
$
478.6
Ending number of consultants and execution
staff (b)
1,877
1,787
1,877
1,787
Hours worked in thousands (c)
414
424
1,340
1,295
Average bill rate (d)
$
392
$
384
$
374
$
368
Adjusted Results (e):
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
23.3
$
28.6
$
83.9
$
85.5
Adjusted EBITDA margin
14.4
%
17.5
%
16.7
%
17.9
%
______________________
(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:
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
2.8
$
—
$
2.8
$
0.3
Impairment of right of use assets
$
3.1
$
—
$
3.1
$
2.5
Restructuring charges, net
$
10.8
$
—
$
10.8
$
—
Fee revenue was $162.2 million in Q3 FY’23 compared to $162.9
million in Q3 FY’22, essentially flat (up 4% on a constant currency
basis). Consulting saw growth in Performance Management, Leadership
Development Programs, Organizational Effectiveness, ESG and Reward
Implementation, offset by declines in LD Strategy, and Competency
Modeling.
Adjusted EBITDA was $23.3 million in Q3 FY’23 with an Adjusted
EBITDA margin of 14.4% compared to Adjusted EBITDA of $28.6 million
with an associated margin of 17.5%, respectively, in the year-ago
quarter. This decrease in Adjusted EBITDA resulted primarily from
an increase in compensation and benefits expense due to increased
headcount and wage inflation.
Selected Digital Data
(dollars in millions) (a)
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
85.1
$
90.2
$
263.2
$
259.5
Total revenue
$
85.1
$
90.5
$
263.5
$
259.9
Ending number of consultants
365
284
365
284
Subscription & License fee revenue
$
29.6
$
29.0
$
88.1
$
79.7
Adjusted Results (b):
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
22.2
$
28.1
$
73.9
$
82.3
Adjusted EBITDA margin
26.0
%
31.2
%
28.1
%
31.7
%
______________________
(a)
Numbers may not total due to rounding.
(b)
Adjusted results exclude the
following:
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
1.5
$
—
$
1.5
$
0.2
Impairment of right of use assets
$
1.7
$
—
$
1.7
$
1.3
Restructuring charges, net
$
2.9
$
—
$
2.9
$
—
Fee revenue was $85.1 million in Q3 FY’23 compared to $90.2
million in Q3 FY’22, a decrease of $5.1 million or 6% (down 1% on a
constant currency basis). Subscription based revenue remained
steady with growth in sales effectiveness tools, however, there was
a decline in service delivery supporting content and usage of
assessment tools, especially in the tech industry aligned with the
industry's recent scaling back of employees.
Adjusted EBITDA was $22.2 million in Q3 FY’23 with an Adjusted
EBITDA margin of 26.0% compared to $28.1 million and 31.2%,
respectively, in the year-ago quarter. The decrease in Adjusted
EBITDA and Adjusted EBITDA margin resulted from the decrease in fee
revenue outlined above along with an increase in general and
administrative expenses.
Selected Executive Search
Data(a)
(dollars in millions) (b)
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
212.0
$
239.0
$
663.2
$
691.4
Total revenue
$
213.8
$
240.0
$
668.7
$
694.2
Ending number of consultants
616
581
616
581
Average number of consultants
619
576
601
553
Engagements billed
4,080
4,335
8,272
8,862
New engagements (c)
1,516
1,787
4,835
5,362
Adjusted Results (d):
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
46.4
$
65.7
$
163.2
$
193.4
Adjusted EBITDA margin
21.9
%
27.5
%
24.6
%
28.0
%
______________________
(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:
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
—
$
—
$
0.1
Impairment of right of use assets
$
—
$
—
$
—
$
0.9
Restructuring charges, net
$
19.4
$
—
$
19.4
$
—
Fee revenue was $212.0 million and $239.0 million in Q3 FY’23
and Q3 FY’22, respectively, a year-over-year decrease of 11% (down
9% on a constant currency basis). The decrease in fee revenue was
driven by a 6% decrease in the number of the engagements billed and
a 3% decrease in weighted-average fee billed per engagement
(calculated using local currency). Fee revenue decreased in North
America and Asia, partially offset by higher fee revenue in
EMEA.
Adjusted EBITDA was $46.4 million in Q3 FY’23 with an Adjusted
EBITDA margin of 21.9% compared to Adjusted EBITDA of $65.7 million
and Adjusted EBITDA margin of 27.5%, respectively, in the year-ago
quarter. The decrease in Adjusted EBITDA was primarily due to the
decrease in fee revenue discussed above.
Selected Professional Search &
Interim Data(a)
(dollars in millions) (b)
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
118.0
$
90.0
$
351.7
$
196.4
Total revenue
$
118.6
$
90.2
$
354.4
$
196.8
Permanent Placement:
Fee revenue
$
65.0
$
75.0
$
218.5
$
181.4
Engagements billed (c)
2,428
2,716
6,104
4,770
New engagements (d)
1,460
1,693
5,122
3,729
Ending number of consultants (e)
448
455
448
455
Interim (started in Q3 FY'22):
Fee revenue
$
53.0
$
15.0
$
133.1
$
15.0
Average bill rate (f)
$
107
$
91
$
110
$
91
Average weekly billable consultants
(g)
1,061
370
878
370
Adjusted Results (h):
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
22.0
$
31.3
$
83.6
$
72.6
Adjusted EBITDA margin
18.6
%
34.8
%
23.8
%
37.0
%
_____________________
(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 Q3 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.
(f)
Fee revenue from interim divided by the
number of hours worked by consultants.
(g)
The number of billable consultants based
on a weekly average in the respective period.
(h)
Adjusted results exclude the
following:
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
0.1
$
—
$
0.1
$
0.9
Impairment of right of use assets
$
0.6
$
—
$
0.6
$
1.4
Integration/acquisition costs
$
1.7
$
1.4
$
6.6
$
1.4
Restructuring charges, net
$
4.8
$
—
$
4.8
$
—
Fee revenue was $118.0 million in Q3 FY’23, an increase of $28.0
million or 31% (up 33% on a constant currency basis), compared to
the year-ago quarter. The increase in fee revenue was driven by the
growth in Interim fee revenue of $38.0 million primarily due to the
acquisitions, partially offset by a decrease in permanent placement
fee revenue of $10.0 million.
Adjusted EBITDA was $22.0 million in Q3 FY’23 with an Adjusted
EBITDA margin of 18.6% compared to $31.3 million and 34.8%,
respectively, in the year-ago quarter. The decrease in Adjusted
EBITDA margin was primarily due to the change in fee revenue mix
discussed above along with an increase in compensation and benefits
expense due to increased headcount and wage inflation.
Selected RPO Data(a)
(dollars in millions) (b)
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Fee revenue
$
103.5
$
98.6
$
324.8
$
282.0
Total revenue
$
104.9
$
100.4
$
330.1
$
287.0
Remaining revenue under contract(c)
$
836.9
$
698.1
$
836.9
$
698.1
RPO new business(d)
$
44.0
$
135.2
$
482.7
$
384.4
Adjusted Results (e):
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Adjusted EBITDA
$
9.8
$
12.8
$
43.6
$
41.7
Adjusted EBITDA margin
9.5
%
12.9
%
13.4
%
14.8
%
______________________
(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 Q3 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:
Third Quarter
Year to Date
FY’23
FY’22
FY’23
FY’22
Impairment of fixed assets
$
—
$
—
$
—
$
0.4
Impairment of right of use assets
$
0.1
$
—
$
0.1
$
1.2
Restructuring charges, net
$
3.1
$
—
$
3.1
$
—
Fee revenue was $103.5 million in Q3 FY’23, an increase of $4.9
million or 5% (up 9% 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 $9.8 million in Q3 FY’23 with an Adjusted
EBITDA margin of 9.5% compared to $12.8 million and 12.9%,
respectively, in the year-ago quarter. The decrease in Adjusted
EBITDA was due to increases in compensation and benefits expense
driven by an increase in headcount associated with recent new
business wins and wage inflation, and higher general and
administrative expenses, partially offset by an increase in fee
revenue.
Outlook
Assuming 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:
- Q4 FY’23 fee revenue is expected to be in the range of $690
million and $710 million; and
- Q4 FY’23 diluted earnings per share is expected to range
between $0.89 to $0.98.
On a consolidated adjusted basis:
- Q4 FY’23 adjusted diluted earnings per share is expected to be
in the range from $0.97 to $1.05.
Q4 FY’23 Earnings Per
Share Outlook
Low
High
Consolidated diluted earnings per
share
$
0.89
$
0.98
Integration/acquisition
0.11
0.10
Tax Rate Impact
(0.03
)
(0.03
)
Consolidated adjusted diluted earnings per
share(1)
$
0.97
$
1.05
______________________
(1)
Consolidated adjusted diluted earnings per
share is a non-GAAP financial measure that excludes the items
listed in the 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, SVP
Business Development & Analytics Gregg Kvochak and VP Investor
Relations Tiffany Louder. 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 Salo 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,
impairment of right of use assets and restructuring charges net of
income tax effect;
- Adjusted basic and diluted earnings per share, adjusted to
exclude integration/acquisition costs, impairment of fixed assets,
impairment of right of use assets and restructuring charges 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, impairment of right of use assets and
restructuring charges 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, 3)
impairment of right of use assets due to the decision to terminate
and sublease some of our offices and 4) Restructuring charges, net
to realign workforce with the Company's business needs and
objectives. 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
January 31,
Nine Months Ended
January 31,
2023
2022
2023
2022
(unaudited)
Fee revenue
$
680,782
$
680,741
$
2,104,534
$
1,905,579
Reimbursed out-of-pocket engagement
expenses
6,063
4,215
21,178
10,873
Total revenue
686,845
684,956
2,125,712
1,916,452
Compensation and benefits
479,382
445,870
1,409,774
1,273,746
General and administrative expenses
72,785
60,811
202,328
175,143
Reimbursed expenses
6,063
4,215
21,178
10,873
Cost of services
57,903
31,666
157,152
77,988
Depreciation and amortization
17,037
16,104
50,359
47,381
Restructuring charges, net
41,162
—
41,162
—
Total operating expenses
674,332
558,666
1,881,953
1,585,131
Operating income
12,513
126,290
243,759
331,321
Other income (loss), net
13,097
(7,277
)
4,824
2,236
Interest expense, net
(5,378
)
(7,029
)
(20,088
)
(18,820
)
Income before provision for income
taxes
20,232
111,984
228,495
314,737
Income tax provision
8,463
26,927
63,575
76,951
Net income
11,769
85,057
164,920
237,786
Net income attributable to noncontrolling
interest
(522
)
(956
)
(2,885
)
(3,090
)
Net income attributable to Korn Ferry
$
11,247
$
84,101
$
162,035
$
234,696
Earnings per common share attributable to
Korn Ferry:
Basic
$
0.21
$
1.55
$
3.07
$
4.33
Diluted
$
0.21
$
1.54
$
3.05
$
4.28
Weighted-average common shares
outstanding:
Basic
51,278
52,999
51,639
52,958
Diluted
51,431
53,495
51,999
53,538
Cash dividends declared per share:
$
0.15
$
0.12
$
0.45
$
0.36
KORN FERRY AND
SUBSIDIARIES
FINANCIAL SUMMARY BY REPORTING
SEGMENT
(dollars in thousands)
(unaudited)
Three Months Ended January
31,
Nine Months Ended January
31,
2023
2022
% Change
2023
2022
% Change
Fee revenue:
Consulting
$
162,155
$
162,889
(0.5
)%
$
501,731
$
476,260
5.3
%
Digital
85,071
90,194
(5.7
)%
263,161
259,504
1.4
%
Executive Search:
North America
132,810
152,597
(13.0
)%
426,839
449,472
(5.0
%)
EMEA
48,960
47,509
3.1
%
140,661
132,690
6.0
%
Asia Pacific
22,621
31,425
(28.0
)%
72,410
88,385
(18.1
%)
Latin America
7,654
7,468
2.5
%
23,283
20,815
11.9
%
Total Executive Search (a)
212,045
238,999
(11.3
)%
663,193
691,362
(4.1
%)
Professional Search & Interim
117,980
90,015
31.1
%
351,670
196,411
79.0
%
RPO
103,531
98,644
5.0
%
324,779
282,042
15.2
%
Total fee revenue
680,782
680,741
0.0
%
2,104,534
1,905,579
10.4
%
Reimbursed out-of-pocket engagement
expenses
6,063
4,215
43.8
%
21,178
10,873
94.8
%
Total revenue
$
686,845
$
684,956
0.3
%
$
2,125,712
$
1,916,452
10.9
%
(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)
January 31,
2023
April 30, 2022
(unaudited)
ASSETS
Cash and cash equivalents
$
771,898
$
978,070
Marketable securities
48,253
57,244
Receivables due from clients, net of
allowance for doubtful accounts of $43,606 and $36,384 at January
31, 2023 and April 30, 2022, respectively
628,693
590,260
Income taxes and other receivables
65,079
31,884
Unearned compensation
59,899
60,749
Prepaid expenses and other assets
39,605
41,763
Total current assets
1,613,427
1,759,970
Marketable securities, non-current
187,646
175,783
Property and equipment, net
154,983
138,172
Operating lease right-of-use assets,
net
140,777
167,734
Cash surrender value of company-owned life
insurance policies, net of loans
198,634
183,308
Deferred income taxes
93,403
84,712
Goodwill
793,285
725,592
Intangible assets, net
88,895
89,770
Unearned compensation, non-current
110,958
118,238
Investments and other assets
24,180
21,267
Total assets
$
3,406,188
$
3,464,546
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable
$
42,035
$
50,932
Income taxes payable
17,005
34,450
Compensation and benefits payable
405,584
547,826
Operating lease liability, current
45,234
48,609
Other accrued liabilities
346,489
302,408
Total current liabilities
856,347
984,225
Deferred compensation and other retirement
plans
393,155
357,175
Operating lease liability, non-current
118,438
151,212
Long-term debt
396,011
395,477
Deferred tax liabilities
2,336
2,715
Other liabilities
26,887
24,153
Total liabilities
1,793,174
1,914,957
Stockholders' equity
Common stock: $0.01 par value, 150,000
shares authorized, 76,691 and 75,409 shares issued and 52,522 and
53,190 shares outstanding at January 31, 2023 and April 30, 2022,
respectively
434,163
502,008
Retained earnings
1,271,618
1,134,523
Accumulated other comprehensive loss,
net
(96,802
)
(92,185
)
Total Korn Ferry stockholders' equity
1,608,979
1,544,346
Noncontrolling interest
4,035
5,243
Total stockholders' equity
1,613,014
1,549,589
Total liabilities and stockholders'
equity
$
3,406,188
$
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
January 31,
Nine Months Ended
January 31,
2023
2022
2023
2022
Net income attributable to Korn Ferry
$
11,247
$
84,101
$
162,035
$
234,696
Net income attributable to non-controlling
interest
522
956
2,885
3,090
Net income
11,769
85,057
164,920
237,786
Income tax provision
8,463
26,927
63,575
76,951
Income before provision for income
taxes
20,232
111,984
228,495
314,737
Other (income) loss, net
(13,097
)
7,277
(4,824
)
(2,236
)
Interest expense, net
5,378
7,029
20,088
18,820
Operating income
12,513
126,290
243,759
331,321
Depreciation and amortization
17,037
16,104
50,359
47,381
Other income (loss), net
13,097
(7,277
)
4,824
2,236
Integration/acquisition costs (1)
2,456
3,214
9,472
4,298
Impairment of fixed assets (2)
4,375
—
4,375
1,915
Impairment of right of use assets (3)
5,471
—
5,471
7,392
Restructuring charges, net (4)
41,162
—
41,162
—
Adjusted EBITDA
$
96,111
$
138,331
$
359,422
$
394,543
Operating margin
1.8
%
18.6
%
11.6
%
17.4
%
Depreciation and amortization
2.5
%
2.4
%
2.4
%
2.5
%
Other income (loss), net
1.9
%
(1.1
)%
0.2
%
0.1
%
Integration/acquisition costs (1)
0.4
%
0.4
%
0.4
%
0.2
%
Impairment of fixed assets (2)
0.7
%
—
0.2
%
0.1
%
Impairment of right of use assets (3)
0.8
%
—
0.3
%
0.4
%
Restructuring charges, net (4)
6.0
%
—
2.0
%
—
Adjusted EBITDA margin
14.1
%
20.3
%
17.1
%
20.7
%
Net income attributable to Korn Ferry
$
11,247
$
84,101
$
162,035
$
234,696
Integration/acquisition costs (1)
2,456
3,214
9,472
4,298
Impairment of fixed assets (2)
4,375
—
4,375
1,915
Impairment of right of use assets (3)
5,471
—
5,471
7,392
Restructuring charges, net (4)
41,162
—
41,162
—
Tax effect on the adjusted items (5)
(11,705
)
(404
)
(13,410
)
(2,632
)
Adjusted net income attributable to Korn
Ferry
$
53,006
$
86,911
$
209,105
$
245,669
Basic earnings per common share
$
0.21
$
1.55
$
3.07
$
4.33
Integration/acquisition costs (1)
0.05
0.06
0.18
0.08
Impairment of fixed assets (2)
0.08
—
0.08
0.03
Impairment of right of use assets (3)
0.10
—
0.10
0.14
Restructuring charges, net (4)
0.80
—
0.79
—
Tax effect on the adjusted items (5)
(0.23
)
(0.01
)
(0.26
)
(0.05
)
Adjusted basic earnings per share
$
1.01
$
1.60
$
3.96
$
4.53
Diluted earnings per common share
$
0.21
$
1.54
$
3.05
$
4.28
Integration/acquisition costs (1)
0.05
0.06
0.18
0.08
Impairment of fixed assets (2)
0.08
—
0.08
0.03
Impairment of right of use assets (3)
0.10
—
0.10
0.14
Restructuring charges, net (4)
0.80
—
0.78
—
Tax effect on the adjusted items (5)
(0.23
)
(0.01
)
(0.26
)
(0.05
)
Adjusted diluted earnings per share
$
1.01
$
1.59
$
3.93
$
4.48
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
deciding to sublease some of our office leases.
(3)
Costs associated with impairment of
right-of-use assets due to terminating and deciding to sublease
some of our office leases.
(4)
Restructuring charges we incurred to
realign workforce with business needs and objectives due to shifts
in global trade lanes and persistent inflationary pressures.
(5)
Tax effect on integration/acquisition
costs, impairment of fixed assets and right of use assets, and
restructuring charges, net.
KORN FERRY AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES - CONTINUED
(unaudited)
Three Months Ended January
31,
2023
2022
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
162,155
$
164,414
$
23,305
14.4
%
$
162,889
$
163,824
$
28,556
17.5
%
Digital
85,071
85,087
22,153
26.0
%
90,194
90,501
28,142
31.2
%
Executive Search:
North America
132,810
134,255
30,446
22.9
%
152,597
153,454
45,702
29.9
%
EMEA
48,960
49,195
7,981
16.3
%
47,509
47,666
8,080
17.0
%
Asia Pacific
22,621
22,694
5,538
24.5
%
31,425
31,448
9,451
30.1
%
Latin America
7,654
7,658
2,462
32.2
%
7,468
7,470
2,484
33.3
%
Total Executive Search
212,045
213,802
46,427
21.9
%
238,999
240,038
65,717
27.5
%
Professional Search &
Interim
117,980
118,616
21,969
18.6
%
90,015
90,198
31,344
34.8
%
RPO
103,531
104,926
9,849
9.5
%
98,644
100,395
12,765
12.9
%
Corporate
—
—
(27,592
)
—
—
(28,193
)
Consolidated
$
680,782
$
686,845
$
96,111
14.1
%
$
680,741
$
684,956
$
138,331
20.3
%
Nine Months Ended January
31,
2023
2022
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
501,731
$
508,994
$
83,944
16.7
%
$
476,260
$
478,563
$
85,458
17.9
%
Digital
263,161
263,479
73,855
28.1
%
259,504
259,894
82,330
31.7
%
Executive Search:
North America
426,839
431,286
112,164
26.3
%
449,472
451,836
137,939
30.7
%
EMEA
140,661
141,443
24,577
17.5
%
132,690
133,080
23,328
17.6
%
Asia Pacific
72,410
72,669
18,723
25.9
%
88,385
88,447
25,972
29.4
%
Latin America
23,283
23,289
7,686
33.0
%
20,815
20,821
6,204
29.8
%
Total Executive Search
663,193
668,687
163,150
24.6
%
691,362
694,184
193,443
28.0
%
Professional Search &
Interim
351,670
354,430
83,587
23.8
%
196,411
196,832
72,608
37.0
%
RPO
324,779
330,122
43,562
13.4
%
282,042
286,979
41,726
14.8
%
Corporate
—
—
(88,676
)
—
—
(81,022
)
Consolidated
$
2,104,534
$
2,125,712
$
359,422
17.1
%
$
1,905,579
$
1,916,452
$
394,543
20.7
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230303005334/en/
Investor Relations: Tiffany Louder, (214) 310-8407 Media: Dan
Gugler, (310) 226-2645
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