Highlights
- Korn Ferry reports Q3 FY'24 fee revenue of $668.7 million, a
year-over-year decrease of 2% at both actual and constant
currency.
- Net income attributable to Korn Ferry was $59.1 million, while
diluted and adjusted diluted earnings per share were $1.13 and
$1.07 in Q3 FY'24, respectively.
- Operating income was $49.9 million with an operating margin of
7.5%, a 570bps increase compared to year-ago quarter, and Adjusted
EBITDA was $101.7 million with an Adjusted EBITDA margin of 15.2%,
a 110bps increase compared to year-ago quarter.
- Consulting and Digital continued to show resilient business
operations:
- Consulting fee revenue grew 3% year-over-year with a 12%
increase in average bill rate to $438 per hour.
- Digital fee revenue grew 6% year-over-year with an 11% increase
in Subscription & License fee revenue which approximated $33.0
million in the quarter.
- The Company repurchased 382,500 shares of stock during the
quarter for $21.0 million.
- Declared a quarterly dividend of $0.33 per share on March 5,
2024, which is payable on April 15, 2024 to stockholders of record
on March 27, 2024.
Korn Ferry (NYSE: KFY), a global organizational consulting firm,
today announced third quarter fee revenue of $668.7 million. In
addition, third quarter diluted earnings per share was $1.13 and
adjusted diluted earnings per share was $1.07.
“I am pleased with our third quarter results, as we generated
$669 million in fee revenue, down 2% year-over-year, with our
non-search offerings providing a substantial buffer against the
more cyclically sensitive recruiting offerings. Earnings and
profitability increased year-over-year and sequentially as we
delivered $102 million of Adjusted EBITDA, at a 15.2% margin,” said
Gary D. Burnison, CEO, Korn Ferry.
“Fee revenue from Consulting and Digital (up 3% and 6% over the
prior year, respectively), when combined with our Interim fee
revenue, now generate 50% of our top line. Our Consulting bill rate
increased 12% and our Digital subscription and license fee revenue
increased 11%,” Burnison added. “The strategy is clearly working –
I am enormously proud of our organization and the results
demonstrate the resiliency and potential for Korn Ferry.”
Selected Financial Results
(dollars in millions, except per share
amounts) (a)
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
668.7
$
680.8
$
2,071.9
$
2,104.5
Total revenue
$
676.9
$
686.8
$
2,095.6
$
2,125.7
Operating income
$
49.9
$
12.5
$
129.5
$
243.8
Operating margin
7.5
%
1.8
%
6.2
%
11.6
%
Net income attributable to Korn Ferry
$
59.1
$
11.2
$
104.0
$
162.0
Basic earnings per share
$
1.14
$
0.21
$
2.00
$
3.07
Diluted earnings per share
$
1.13
$
0.21
$
1.99
$
3.05
Adjusted Results (b):
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
101.7
$
96.1
$
295.9
$
359.4
Adjusted EBITDA margin
15.2
%
14.1
%
14.3
%
17.1
%
Adjusted net income attributable to Korn
Ferry (c)
$
55.8
$
53.0
$
158.3
$
209.1
Adjusted basic earnings per share (c)
$
1.07
$
1.01
$
3.04
$
3.96
Adjusted diluted earnings per share
(c)
$
1.07
$
1.01
$
3.03
$
3.93
______________________
(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
restructuring charges, net 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’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
4.4
$
1.6
$
4.4
Impairment of right of use assets
$
—
$
5.5
$
1.6
$
5.5
Integration/acquisition costs
$
3.9
$
2.5
$
13.1
$
9.5
Restructuring charges, net
$
4.6
$
41.2
$
68.6
$
41.2
(c)
Due to actions taken in
connection with the worldwide minimum tax, the Company recorded a
$9.7 million non-recurring tax benefit in the quarter ended January
31, 2024 that resulted in the release of a valuation allowance,
which is included in the Company's US GAAP results but excluded
from the Adjusted results.
The Company reported fee revenue in Q3 FY'24 of $668.7 million,
a year-over-year decrease of 2% at both actual and constant
currency. Fee revenue decreased primarily due to decreases in our
permanent placement talent acquisition offerings. This decrease was
due to a decline in demand driven by uncertain and challenging
global economic environment. This was partially offset by the
increases in Consulting and Digital fee revenue, as well as in the
Interim portion of Professional Search & Interim, resulting
from the acquisition of Salo ('the Acquisition") which was
effective February 1, 2023.
Operating margin was 7.5% in Q3 FY'24, compared to 1.8% in the
year-ago quarter, an increase of 570bps. Adjusted EBITDA margin was
15.2% in Q3 FY'24, compared to 14.1% in the year-ago quarter, an
increase of 110bps. Net income attributable to Korn Ferry was $59.1
million in Q3 FY'24, compared to $11.2 million in Q3 FY'23 and
Adjusted EBITDA was $101.7 million in Q3 FY'24 compared to $96.1
million in Q3 FY'23.
Operating income and margin increased compared to the year-ago
quarter primarily due to 1) lower restructuring charges, net
recorded in Q3 FY'24 compared to the year-ago quarter, 2) a
decrease in compensation and benefits expense driven by the
previous quarter's cost reduction actions, and 3) a decrease in
charges for impairment of fixed and right of use assets in the
year-ago quarter. This increase was partially offset by the
decrease in fee revenue discussed above, and higher cost of
services expense associated with the acquired Interim businesses.
Net income attributable to Korn Ferry increased due to the same
factors discussed above.
Adjusted EBITDA and margin increased due to the previous
quarter's cost reduction actions, partially offset by the decrease
in fee revenue discussed above and an increase in cost of services
expense associated with the acquired businesses.
Results by Line of Business
Selected Consulting Data
(dollars in millions) (a)
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
166.9
$
162.2
$
512.8
$
501.7
Total revenue
$
169.9
$
164.4
$
521.7
$
509.0
Ending number of consultants and execution
staff (b)
1,687
1,877
1,687
1,877
Hours worked in thousands (c)
381
414
1,239
1,340
Average bill rate (d)
$
438
$
392
$
414
$
374
Adjusted Results (e):
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
27.8
$
23.3
$
81.9
$
83.9
Adjusted EBITDA margin
16.7
%
14.4
%
16.0
%
16.7
%
______________________
(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’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
2.8
$
—
$
2.8
Impairment of right of use assets
$
—
$
3.1
$
0.6
$
3.1
Restructuring charges, net
$
1.1
$
10.8
$
18.9
$
10.8
Fee revenue was $166.9 million in Q3 FY'24 compared to $162.2
million in Q3 FY'23, an increase of $4.7 million or 3% at both
actual and constant currency. The increase in Consulting fee
revenue was primarily driven by growth in our organizational
strategy offering.
Adjusted EBITDA was $27.8 million in Q3 FY'24 compared to
Adjusted EBITDA of $23.3 million, in the year-ago quarter. Adjusted
EBITDA margin in the quarter increased year-over-year by 230bps
from 14.4% last year to 16.7% this year. This increase in Adjusted
EBITDA and Adjusted EBITDA margin resulted primarily from the
increase in fee revenue discussed above, combined with the previous
quarter's cost reduction actions, partially offset by an increase
in cost of services expense.
Selected Digital Data
(dollars in millions) (a)
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
90.3
$
85.1
$
275.4
$
263.2
Total revenue
$
90.4
$
85.1
$
275.6
$
263.5
Ending number of consultants
275
365
275
365
Subscription & License fee revenue
$
32.8
$
29.6
$
97.7
$
88.1
Adjusted Results (b):
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
27.4
$
22.2
$
80.7
$
73.9
Adjusted EBITDA margin
30.3
%
26.0
%
29.3
%
28.1
%
______________________
(a)
Numbers may not total due to
rounding.
(b)
Adjusted results exclude the
following:
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
1.5
$
1.5
$
1.5
Impairment of right of use assets
$
—
$
1.7
$
—
$
1.7
Restructuring charges, net
$
0.6
$
2.9
$
9.5
$
2.9
Fee revenue was $90.3 million in Q3 FY'24 compared to $85.1
million in Q3 FY'23, an increase of $5.2 million or 6% at both
actual and constant currency. The increase was primarily driven by
increases in leadership and professional development and assessment
& succession solutions.
Adjusted EBITDA was $27.4 million in Q3 FY'24 compared to $22.2
million in the year-ago quarter. Adjusted EBITDA margin in the
quarter increased year-over-year by 430bps from 26.0% last year to
30.3% this year. The increase in Adjusted EBITDA and margin was
mainly driven by the increase in fee revenue discussed above.
Selected Executive Search
Data(a)
(dollars in millions) (b)
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
199.3
$
212.0
$
607.5
$
663.2
Total revenue
$
201.2
$
213.8
$
613.5
$
668.7
Ending number of consultants
562
616
562
616
Average number of consultants
574
619
582
601
Engagements billed
3,469
4,080
7,269
8,272
New engagements (c)
1,367
1,516
4,349
4,835
Adjusted Results (d):
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
43.4
$
46.4
$
125.6
$
163.2
Adjusted EBITDA margin
21.8
%
21.9
%
20.7
%
24.6
%
______________________
(a)
Executive Search is the sum of
the individual Executive Search Reporting Segments described in our
annual and quarterly reporting on Forms 10-K and 10-Q 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’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
—
$
0.1
$
—
Impairment of right of use assets
$
—
$
—
$
0.9
$
—
Restructuring charges, net
$
2.3
$
19.4
$
28.2
$
19.4
Fee revenue was $199.3 million and $212.0 million in Q3 FY'24
and Q3 FY'23, respectively, a year-over-year decrease of $12.7
million or 6% (down 7% on a constant currency basis). The decrease
in fee revenue was primarily driven by a decline in executive
search activity, resulting from the uncertain and challenging
global economic environment.
Adjusted EBITDA was $43.4 million in Q3 FY'24 compared to
Adjusted EBITDA of $46.4 million in the year-ago quarter. The
decrease in Adjusted EBITDA was primarily due to the decrease in
fee revenue discussed above, partially offset by the previous
quarter's cost reduction actions. Despite the year-over-year
decrease in fee revenue and Adjusted EBITDA, Adjusted EBITDA margin
remained essentially flat year-over-year due to the previous
quarter's cost reduction actions.
Selected Professional Search &
Interim Data
(dollars in millions) (a)
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
130.9
$
118.0
$
411.5
$
351.7
Total revenue
$
131.8
$
118.6
$
414.3
$
354.4
Permanent Placement:
Fee revenue
$
52.4
$
65.0
$
167.2
$
218.5
Engagements billed
1,901
2,428
4,511
6,104
New engagements (b)
995
1,460
3,414
5,122
Ending number of consultants
344
448
344
448
Interim:
Fee revenue
$
78.5
$
53.0
$
244.3
$
133.1
Average bill rate (c)
$
129
$
107
$
126
$
110
Average weekly billable consultants
(d)
1,283
1,061
1,352
878
Adjusted Results (e):
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
23.8
$
22.0
$
73.7
$
83.6
Adjusted EBITDA margin
18.2
%
18.6
%
17.9
%
23.8
%
_____________________
(a)
Numbers may not total due to
rounding.
(b)
Represents new engagements opened
in the respective period.
(c)
Fee revenue from interim divided
by the number of hours worked by consultants.
(d)
The number of billable
consultants based on a weekly average in the respective period.
(e)
Adjusted results exclude the
following:
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
0.1
$
—
$
0.1
Impairment of right of use assets
$
—
$
0.6
$
—
$
0.6
Integration/acquisition costs
$
3.8
$
1.7
$
12.7
$
6.6
Restructuring charges, net
$
—
$
4.8
$
3.8
$
4.8
Fee revenue was $130.9 million in Q3 FY'24, an increase of $12.9
million or 11% at both actual and constant currency. The increase
in fee revenue was mainly driven by additional fee revenue from the
Acquisition, partially offset by a decrease in permanent placement
fee revenue.
Adjusted EBITDA was $23.8 million in Q3 FY'24 compared to $22.0
million in the year-ago quarter. The increase in Adjusted EBITDA
was primarily due to the increase in fee revenue discussed above
and the previous quarter's cost reduction actions, partially offset
by higher cost of services expense due to the Acquisition. Adjusted
EBITDA margin declined slightly (40bps) year-over-year due to the
factors noted above as well as a change in the mix of fee revenue
which included more Interim fee revenue, which has lower
profitability but is less cyclical as compared to professional
search permanent placement which comprised a greater portion of fee
revenue in the year-ago quarter.
Selected Recruitment Process
Outsourcing ("RPO") Data
(dollars in millions) (a)
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
81.2
$
103.5
$
264.7
$
324.8
Total revenue
$
83.6
$
104.9
$
270.5
$
330.1
Remaining revenue under contract (b)
$
695.8
$
836.9
$
695.8
$
836.9
RPO new business (c)
$
122.1
$
44.0
$
311.2
$
482.7
Adjusted Results (d):
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
9.3
$
9.8
$
28.6
$
43.6
Adjusted EBITDA margin
11.4
%
9.5
%
10.8
%
13.4
%
______________________
(a)
Numbers may not total due to
rounding.
(b)
Estimated fee revenue associated
with signed contracts for which revenue has not yet been
recognized.
(c)
Estimated total value of a
contract at the point of execution of the contract.
(d)
Adjusted results exclude the
following:
Third Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of right of use assets
$
—
$
0.1
$
0.1
$
0.1
Restructuring charges, net
$
0.7
$
3.1
$
7.9
$
3.1
Fee revenue was $81.2 million in Q3 FY'24, a decrease of $22.3
million or 22% at both actual and constant currency basis. RPO fee
revenue decreased due to reduced demand for the number of
placements being requested by existing clients as a result of the
challenging global economic environment as well as a continuation
of clients "labor hoarding".
Adjusted EBITDA was $9.3 million in Q3 FY'24 compared to $9.8
million in the year-ago quarter. The decrease resulted from the
decline in fee revenue which was partially offset by cost
reductions taken in the previous quarter. Despite the
year-over-year decrease in fee revenue and Adjusted EBITDA,
Adjusted EBITDA margin increased 190bps year-over-year from 9.5% to
11.4% due to the previous quarter's cost reduction actions.
Outlook
Assuming worldwide geopolitical conditions, economic conditions,
financial markets and foreign exchange rates remain steady, on a
consolidated basis:
- Q4 FY’24 fee revenue is expected to be in the range of $675
million and $695 million; and
- Q4 FY’24 diluted earnings per share is expected to range
between $1.06 to $1.14.
On a consolidated adjusted basis:
- Q4 FY’24 adjusted diluted earnings per share is expected to be
in the range from $1.09 to $1.17.
Q4 FY’24
Earnings Per Share
Outlook
Low
High
Consolidated diluted earnings per
share
$
1.06
$
1.14
Integration/acquisition and restructuring
charges
0.05
0.05
Tax Rate Impact
(0.02
)
(0.02
)
Consolidated adjusted diluted earnings per
share(1)
$
1.09
$
1.17
______________________
(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 the
investor relations 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, including statements relating to expected demand
for and relevance of our products and services, our workforce
reduction plan, 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. 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 global and local political
and or economic developments in or affecting countries where we
have operations, such as inflation, interest rates, global
slowdowns, or recessions, competition, geopolitical tensions,
shifts in global trade patterns, changes in demand for our services
as a result of automation, dependence on and costs of attracting
and retaining qualified and experienced consultants, impact of
inflationary pressures on our profitability, our ability to
maintain 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 government laws
and regulations, evolving investor and customer expectations with
regard to environmental, social and governance matters, currency
fluctuations in our international operations, risks related to
growth, alignment of our cost structure, including as a result of
recent workforce, real estate, and other restructuring initiatives,
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, develop and respond to new technology,
including artificial intelligence, 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,
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 and integrate acquired businesses, including Salo,
resulting organizational changes, our indebtedness, those relating
to the ultimate magnitude and duration of any pandemic or
outbreaks. For a detailed description of risks and uncertainties
that could cause differences from our expectations, 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 and to exclude a $9.7 million non-recurring
tax benefit from actions taken in connection with the worldwide
minimum tax that resulted in the release of a valuation
allowance;
- 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, and to exclude a $9.7 million non-recurring
tax benefit from actions taken in connection with the worldwide
minimum tax that resulted in the release of a valuation
allowance;
- 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, net 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 primarily due to
software impairment charge in our Digital segment in FY'24 and
impairment on leasehold improvements due to terminating and
deciding to sublease some of our office leases in FY'23, 3)
impairment of right of use assets due to the decision to terminate
and sublease some of our offices, 4) Restructuring charges, net to
align workforce to the challenging macroeconomic business
environment arising from persistent inflationary pressures, rising
interest rates and global economic and geopolitical uncertainty and
5) to exclude a $9.7 million non-recurring tax benefit from actions
taken in connection with the worldwide minimum tax that resulted in
the release of a valuation allowance. 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
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(in thousands, except per
share amounts)
Three Months Ended
January 31,
Nine Months Ended
January 31,
2024
2023
2024
2023
(unaudited)
Fee revenue
$
668,679
$
680,782
$
2,071,871
$
2,104,534
Reimbursed out-of-pocket engagement
expenses
8,194
6,063
23,711
21,178
Total revenue
676,873
686,845
2,095,582
2,125,712
Compensation and benefits
456,216
479,382
1,389,956
1,409,774
General and administrative expenses
62,661
72,785
194,315
202,328
Reimbursed expenses
8,194
6,063
23,711
21,178
Cost of services
75,814
57,903
231,516
157,152
Depreciation and amortization
19,509
17,037
58,075
50,359
Restructuring charges, net
4,612
41,162
68,558
41,162
Total operating expenses
627,006
674,332
1,966,131
1,881,953
Operating income
49,867
12,513
129,451
243,759
Other income, net
23,817
13,097
23,559
4,824
Interest expense, net
(4,946
)
(5,378
)
(16,282
)
(20,088
)
Income before provision for income
taxes
68,738
20,232
136,728
228,495
Income tax provision
9,018
8,463
29,779
63,575
Net income
59,720
11,769
106,949
164,920
Net income attributable to noncontrolling
interest
(649
)
(522
)
(2,984
)
(2,885
)
Net income attributable to Korn Ferry
$
59,071
$
11,247
$
103,965
$
162,035
Earnings per common share attributable to
Korn Ferry:
Basic
$
1.14
$
0.21
$
2.00
$
3.07
Diluted
$
1.13
$
0.21
$
1.99
$
3.05
Weighted-average common shares
outstanding:
Basic
51,126
51,278
51,129
51,639
Diluted
51,343
51,431
51,329
51,999
Cash dividends declared per share:
$
0.33
$
0.15
$
0.69
$
0.45
KORN FERRY AND
SUBSIDIARIES
FINANCIAL SUMMARY BY REPORTING
SEGMENT
(dollars in thousands)
(unaudited)
Three Months Ended January
31,
Nine Months Ended January
31,
2024
2023
% Change
2024
2023
% Change
Fee revenue:
Consulting
$
166,947
$
162,155
3.0
%
$
512,830
$
501,731
2.2
%
Digital
90,317
85,071
6.2
%
275,395
263,161
4.6
%
Executive Search:
North America
121,449
132,810
(8.6
%)
381,459
426,839
(10.6
%)
EMEA
48,999
48,960
0.1
%
138,873
140,661
(1.3
%)
Asia Pacific
21,324
22,621
(5.7
%)
65,167
72,410
(10.0
%)
Latin America
7,541
7,654
(1.5
%)
22,041
23,283
(5.3
%)
Total Executive Search (a)
199,313
212,045
(6.0
%)
607,540
663,193
(8.4
%)
Professional Search & Interim
130,890
117,980
10.9
%
411,453
351,670
17.0
%
RPO
81,212
103,531
(21.6
%)
264,653
324,779
(18.5
%)
Total fee revenue
668,679
680,782
(1.8
%)
2,071,871
2,104,534
(1.6
%)
Reimbursed out-of-pocket engagement
expenses
8,194
6,063
35.1
%
23,711
21,178
12.0
%
Total revenue
$
676,873
$
686,845
(1.5
%)
$
2,095,582
$
2,125,712
(1.4
%)
(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
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except per
share amounts)
January 31,
2024
April 30, 2023
(unaudited)
ASSETS
Cash and cash equivalents
$
736,797
$
844,024
Marketable securities
45,727
44,837
Receivables due from clients, net of
allowance for doubtful accounts of $50,302 and $44,377 at January
31, 2024 and April 30, 2023, respectively
589,717
569,601
Income taxes and other receivables
63,020
67,512
Unearned compensation
60,071
63,476
Prepaid expenses and other assets
49,377
49,219
Total current assets
1,544,709
1,638,669
Marketable securities, non-current
204,326
179,040
Property and equipment, net
163,600
161,876
Operating lease right-of-use assets,
net
167,441
142,690
Cash surrender value of company-owned life
insurance policies, net of loans
216,450
197,998
Deferred income taxes
121,267
102,057
Goodwill
909,330
909,491
Intangible assets, net
95,151
114,426
Unearned compensation, non-current
111,286
103,607
Investments and other assets
22,765
24,590
Total assets
$
3,556,325
$
3,574,444
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable
$
46,368
$
53,386
Income taxes payable
23,599
19,969
Compensation and benefits payable
423,268
532,934
Operating lease liability, current
36,895
45,821
Other accrued liabilities
312,511
324,150
Total current liabilities
842,641
976,260
Deferred compensation and other retirement
plans
427,464
396,534
Operating lease liability, non-current
151,159
119,220
Long-term debt
396,755
396,194
Deferred tax liabilities
5,709
5,352
Other liabilities
25,186
27,879
Total liabilities
1,848,914
1,921,439
Stockholders' equity
Common stock: $0.01 par value, 150,000
shares authorized, 77,511 and 76,693 shares issued and 52,345 and
52,269 shares outstanding at January 31, 2024 and April 30, 2023,
respectively
428,413
429,754
Retained earnings
1,378,140
1,311,081
Accumulated other comprehensive loss,
net
(102,930
)
(92,764
)
Total Korn Ferry stockholders' equity
1,703,623
1,648,071
Noncontrolling interest
3,788
4,934
Total stockholders' equity
1,707,411
1,653,005
Total liabilities and stockholders'
equity
$
3,556,325
$
3,574,444
KORN FERRY AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(dollars in thousands)
(unaudited)
Three Months Ended
January 31,
Nine Months Ended
January 31,
2024
2023
2024
2023
Net income attributable to Korn Ferry
$
59,071
$
11,247
$
103,965
$
162,035
Net income attributable to non-controlling
interest
649
522
2,984
2,885
Net income
59,720
11,769
106,949
164,920
Income tax provision
9,018
8,463
29,779
63,575
Income before provision for income
taxes
68,738
20,232
136,728
228,495
Other income, net
(23,817
)
(13,097
)
(23,559
)
(4,824
)
Interest expense, net
4,946
5,378
16,282
20,088
Operating income
49,867
12,513
129,451
243,759
Depreciation and amortization
19,509
17,037
58,075
50,359
Other income, net
23,817
13,097
23,559
4,824
Integration/acquisition costs (1)
3,899
2,456
13,057
9,472
Impairment of fixed assets (2)
—
4,375
1,575
4,375
Impairment of right of use assets (3)
—
5,471
1,629
5,471
Restructuring charges, net (4)
4,612
41,162
68,558
41,162
Adjusted EBITDA
$
101,704
$
96,111
$
295,904
$
359,422
Operating margin
7.5
%
1.8
%
6.2
%
11.6
%
Depreciation and amortization
2.9
%
2.5
%
2.8
%
2.4
%
Other income, net
3.5
%
1.9
%
1.2
%
0.2
%
Integration/acquisition costs (1)
0.6
%
0.4
%
0.6
%
0.4
%
Impairment of fixed assets (2)
—
%
0.7
%
0.1
%
0.2
%
Impairment of right of use assets (3)
—
%
0.8
%
0.1
%
0.3
%
Restructuring charges, net (4)
0.7
%
6.0
%
3.3
%
2.0
%
Adjusted EBITDA margin
15.2
%
14.1
%
14.3
%
17.1
%
Net income attributable to Korn Ferry
$
59,071
$
11,247
$
103,965
$
162,035
Integration/acquisition costs (1)
3,899
2,456
13,057
9,472
Impairment of fixed assets (2)
—
4,375
1,575
4,375
Impairment of right of use assets (3)
—
5,471
1,629
5,471
Restructuring charges, net (4)
4,612
41,162
68,558
41,162
Tax effect on the adjusted items (5)
(2,092
)
(11,705
)
(20,763
)
(13,410
)
Tax adjustment (6)
(9,714
)
—
(9,714
)
—
Adjusted net income attributable to Korn
Ferry
$
55,776
$
53,006
$
158,307
$
209,105
Explanation of
Non-GAAP Adjustments
(1)
Costs associated with 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 primarily due to software impairment charge in our
Digital segment in FY'24 and impairment on leasehold improvements
due to terminating and deciding to sublease some of our office
leases in FY'23.
(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 incurred to
align our workforce to the challenging macroeconomic business
environment arising from persistent inflationary pressures, rising
interest rates and global economic geopolitical uncertainty.
(5)
Tax effect on
integration/acquisition costs, impairment of fixed assets and right
of use assets, and restructuring charges, net.
(6)
Due to actions taken in
connection with the worldwide minimum tax, the Company recorded a
$9.7 million non-recurring tax benefit in the quarter ended January
31, 2024 that resulted in the release of a valuation allowance,
which is included in the Company's US GAAP results but excluded
from the Adjusted results.
KORN FERRY AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES - CONTINUED
(unaudited)
Three Months Ended
January 31,
Nine Months Ended
January 31,
2024
2023
2024
2023
Basic earnings per common share
$
1.14
$
0.21
$
2.00
$
3.07
Integration/acquisition costs (1)
0.07
0.05
0.25
0.18
Impairment of fixed assets (2)
—
0.08
0.03
0.08
Impairment of right of use assets (3)
—
0.10
0.03
0.10
Restructuring charges, net (4)
0.09
0.80
1.32
0.79
Tax effect on the adjusted items (5)
(0.04
)
(0.23
)
(0.40
)
(0.26
)
Tax adjustment (6)
(0.19
)
—
(0.19
)
—
Adjusted basic earnings per share
$
1.07
$
1.01
$
3.04
$
3.96
Diluted earnings per common share
$
1.13
$
0.21
$
1.99
$
3.05
Integration/acquisition costs (1)
0.07
0.05
0.25
0.18
Impairment of fixed assets (2)
—
0.08
0.03
0.08
Impairment of right of use assets (3)
—
0.10
0.03
0.10
Restructuring charges, net (4)
0.09
0.80
1.32
0.78
Tax effect on the adjusted items (5)
(0.04
)
(0.23
)
(0.40
)
(0.26
)
Tax adjustment (6)
(0.18
)
—
(0.19
)
—
Adjusted diluted earnings per share
$
1.07
$
1.01
$
3.03
$
3.93
Explanation
of Non-GAAP Adjustments
(1)
Costs associated with 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 primarily due to software impairment charge in our
Digital segment in FY'24 and impairment on leasehold improvements
due to terminating and deciding to sublease some of our office
leases in FY'23.
(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 incurred to
align our workforce to the challenging macroeconomic business
environment arising from persistent inflationary pressures, rising
interest rates and global economic geopolitical uncertainty.
(5)
Tax effect on
integration/acquisition costs, impairment of fixed assets and right
of use assets, and restructuring charges, net.
(6)
Due to actions taken in
connection with the worldwide minimum tax, the Company recorded a
$9.7 million non-recurring tax benefit in the quarter ended January
31, 2024 that resulted in the release of a valuation allowance,
which is included in the Company's US GAAP results but excluded
from the Adjusted results.
KORN FERRY AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES - CONTINUED
(unaudited)
Three Months Ended January
31,
2024
2023
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
166,947
$
169,929
$
27,812
16.7
%
$
162,155
$
164,414
$
23,305
14.4
%
Digital
90,317
90,394
27,370
30.3
%
85,071
85,087
22,153
26.0
%
Executive Search:
North America
121,449
123,059
29,382
24.2
%
132,810
134,255
30,446
22.9
%
EMEA
48,999
49,171
7,799
15.9
%
48,960
49,195
7,981
16.3
%
Asia Pacific
21,324
21,384
4,500
21.1
%
22,621
22,694
5,538
24.5
%
Latin America
7,541
7,543
1,750
23.2
%
7,654
7,658
2,462
32.2
%
Total Executive Search
199,313
201,157
43,431
21.8
%
212,045
213,802
46,427
21.9
%
Professional Search &
Interim
130,890
131,824
23,795
18.2
%
117,980
118,616
21,969
18.6
%
RPO
81,212
83,569
9,291
11.4
%
103,531
104,926
9,849
9.5
%
Corporate
—
—
(29,995
)
—
—
(27,592
)
Consolidated
$
668,679
$
676,873
$
101,704
15.2
%
$
680,782
$
686,845
$
96,111
14.1
%
Nine Months Ended January
31,
2024
2023
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
512,830
$
521,675
$
81,920
16.0
%
$
501,731
$
508,994
$
83,944
16.7
%
Digital
275,395
275,563
80,678
29.3
%
263,161
263,479
73,855
28.1
%
Executive Search:
North America
381,459
386,405
87,574
23.0
%
426,839
431,286
112,164
26.3
%
EMEA
138,873
139,621
19,056
13.7
%
140,661
141,443
24,577
17.5
%
Asia Pacific
65,167
65,454
14,690
22.5
%
72,410
72,669
18,723
25.9
%
Latin America
22,041
22,050
4,296
19.5
%
23,283
23,289
7,686
33.0
%
Total Executive Search
607,540
613,530
125,616
20.7
%
663,193
668,687
163,150
24.6
%
Professional Search &
Interim
411,453
414,348
73,746
17.9
%
351,670
354,430
83,587
23.8
%
RPO
264,653
270,466
28,617
10.8
%
324,779
330,122
43,562
13.4
%
Corporate
—
—
(94,673
)
—
—
(88,676
)
Consolidated
$
2,071,871
$
2,095,582
$
295,904
14.3
%
$
2,104,534
$
2,125,712
$
359,422
17.1
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240301952759/en/
Investor Relations: Tiffany Louder, (214) 310-8407 Media: Dan
Gugler, (310) 226-2645
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