Korn Ferry Announces Second Quarter Fiscal 2024 Results of Operations

Highlights

  • Korn Ferry reports Q2 FY'24 fee revenue of $704.0 million, a decrease of 3% (5% at constant currency) from Q2 FY'23.
  • Net loss attributable to Korn Ferry was $1.7 million in Q2FY'24, which includes a $52.8 million charge, net of tax, primarily relating to restructuring actions taken to realign our workforce due to the current challenging macroeconomic business environment, while diluted loss per share and adjusted diluted earnings per share were $0.04 and $0.97 in Q2 FY'24, respectively.
  • Operating income was $22.8 million (operating margin of 3.2%) and Adjusted EBITDA was $98.5 million (Adjusted EBITDA margin of 14.0%), in Q2 FY'24.
  • Continued fee revenue resilience in both Consulting and Digital, with each business reporting year-over-year growth of almost 3% in Q2 FY'24.
  • Strong new business wins in RPO totaling $141 million with $88 million in renewals and $53 million in new logos.
  • On December 5, 2023, the Company increased its regular quarterly cash dividend by 83% to $0.33 per share, which is payable on January 12, 2024 to stockholders of record on December 21, 2023.

LOS ANGELES--()--Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced second quarter fee revenue of $704.0 million. In addition, second quarter diluted loss per share was $0.04 and adjusted diluted earnings per share was $0.97. Diluted earnings per share includes a $52.8 million, or $1.01 per share, net of tax charge, primarily relating to restructuring actions taken to realign our workforce due to the current challenging macroeconomic business environment that is excluded from adjusted earnings per share.

“During the fiscal second quarter we generated $704 million in fee revenue, down 3% year-over-year. Despite a persistent, uneven economic environment, earnings and profitability held steady sequentially as we delivered $99 million of Adjusted EBITDA, at a 14% margin,” said Gary D. Burnison, CEO, Korn Ferry.

“I’m very proud of our organization and how we continue to develop increasingly relevant solutions in a rapidly changing world. In particular, our Consulting and Digital businesses now generate almost 40% of our top line, with Digital achieving all-time record revenue at constant currency during the quarter. Throughout history, change is a catalyst for opportunity. It’s times like these when great companies make their best moves – and Korn Ferry is a great company.”

Selected Financial Results

(dollars in millions, except per share amounts) (a)

 

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Fee revenue

$

704.0

 

 

$

727.8

 

 

$

1,403.2

 

 

$

1,423.8

 

Total revenue

$

712.4

 

 

$

735.7

 

 

$

1,418.7

 

 

$

1,438.9

 

Operating income

$

22.8

 

 

$

119.6

 

 

$

79.6

 

 

$

231.2

 

Operating margin

3.2

%

 

 

16.4

%

 

 

5.7

%

 

 

16.2

%

Net (loss) income attributable to Korn Ferry

$

(1.7

)

 

$

73.5

 

 

$

44.9

 

 

$

150.8

 

Basic (loss) earnings per share

$

(0.04

)

 

$

1.39

 

 

$

0.86

 

 

$

2.85

 

Diluted (loss) earnings per share

$

(0.04

)

 

$

1.38

 

 

$

0.86

 

 

$

2.83

 

Adjusted Results (b):

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Adjusted EBITDA

$

98.5

 

 

$

131.1

 

 

$

194.2

 

 

$

263.3

 

Adjusted EBITDA margin

 

14.0

%

 

 

18.0

%

 

 

13.8

%

 

 

18.5

%

Adjusted net income attributable to Korn Ferry

$

51.0

 

 

$

76.1

 

 

$

102.5

 

 

$

156.1

 

Adjusted basic earnings per share

$

0.98

 

 

$

1.44

 

 

$

1.97

 

 

$

2.95

 

Adjusted diluted earnings per share

$

0.97

 

 

$

1.43

 

 

$

1.96

 

 

$

2.93

 

 

(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):

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Integration/acquisition costs

$

5.0

 

$

3.4

 

$

9.2

 

$

7.0

Impairment of fixed assets

$

1.5

 

 

$

 

 

$

1.6

 

 

$

 

Impairment of right of use assets

$

 

 

$

 

 

$

1.6

 

 

$

 

Restructuring charges, net

$

63.5

 

 

$

 

 

$

63.9

 

 

$

 

The Company reported fee revenue in Q2 FY'24 of $704.0 million, a year-over-year decrease of 3% (down 5% on a constant currency basis). Fee revenue decreased primarily due to decreases in our permanent placement talent acquisition offerings, which includes Executive Search, Professional Search Permanent Placement and RPO, due to a decline in demand driven by global economic and other factors. This was partially offset by increases in the Interim portion of Professional Search & Interim, resulting from the acquisition of Salo (“the acquisition”) which was effective February 1, 2023, and increases in fee revenue in Consulting and Digital.

Operating margin was 3.2% in Q2 FY'24, compared to 16.4% in the year-ago quarter. Adjusted EBITDA margin was 14.0% in Q2 FY'24, compared to 18.0% in the year-ago quarter. Net loss attributable to Korn Ferry was $1.7 million in Q2 FY'24, compared to net income attributable to Korn Ferry of $73.5 million in Q2 FY'23 and Adjusted EBITDA was $98.5 million in Q2 FY'24 compared to $131.1 million in Q2 FY'23.

Operating income decreased primarily due to 1) restructuring charges, net recorded in Q2 FY'24 in order to align our workforce to eliminate excess capacity resulting from the challenging macroeconomic business environment, 2) the decrease in fee revenue discussed above, and 3) higher cost of services expense associated with the recently acquired Interim businesses, partially offset by a decrease in compensation and benefits expense driven by reduced headcount and other cost control measures. Net income attributable to Korn Ferry decreased due to the same factors discussed above, partially offset by lower income tax provision.

Adjusted EBITDA decreased due to the same factors discussed above, with the exception of restructuring charges.

Results by Line of Business

Selected Consulting Data

(dollars in millions) (a)

 

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Fee revenue

$

177.8

 

 

$

173.1

 

 

$

345.9

 

 

$

339.6

 

Total revenue

$

181.0

 

 

$

175.8

 

 

$

351.7

 

 

$

344.6

 

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (b)

 

1,780

 

 

 

1,899

 

 

 

1,780

 

 

 

1,899

 

Hours worked in thousands (c)

 

431

 

 

 

467

 

 

 

858

 

 

 

926

 

Average bill rate (d)

$

413

 

 

$

371

 

 

$

403

 

 

$

367

 

 

 

 

 

 

 

 

 

Adjusted Results (e):

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Adjusted EBITDA

$

28.9

 

 

$

31.1

 

 

$

54.1

 

 

$

60.6

 

Adjusted EBITDA margin

 

16.3

%

 

 

18.0

%

 

 

15.6

%

 

 

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:

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Impairment of right of use assets

$

 

$

 

$

0.6

 

$

Restructuring charges, net

$

17.6

 

 

$

 

 

$

17.8

 

 

$

 

Fee revenue was $177.8 million in Q2 FY'24 compared to $173.1 million in Q2 FY'23, an increase of $4.7 million or 3% (up 1% on a constant currency basis). The increase in Consulting fee revenue was driven by growth in our organizational strategy and assessment & succession solutions.

Adjusted EBITDA was $28.9 million in Q2 FY'24 with an Adjusted EBITDA margin of 16.3% compared to Adjusted EBITDA of $31.1 million with an Adjusted EBITDA margin of 18.0%, in the year-ago quarter. This decrease in Adjusted EBITDA resulted primarily from increases in compensation and benefits expense and cost of services, partially offset by an increase in Consulting fee revenue.

Selected Digital Data

(dollars in millions) (a)

 

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Fee revenue

$

97.1

 

 

$

94.3

 

 

$

185.1

 

 

$

178.1

 

Total revenue

$

97.2

 

 

$

94.6

 

 

$

185.2

 

 

$

178.4

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

284

 

 

 

365

 

 

 

284

 

 

 

365

 

Subscription & License fee revenue

$

32.4

 

 

$

28.9

 

 

$

64.9

 

 

$

58.5

 

 

 

 

 

 

 

 

 

Adjusted Results (b):

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Adjusted EBITDA

$

29.0

 

 

$

27.5

 

 

$

53.3

 

 

$

51.7

 

Adjusted EBITDA margin

 

29.9

%

 

 

29.2

%

 

 

28.8

%

 

 

29.0

%

 

(a)

 

Numbers may not total due to rounding.

(b)

 

Adjusted results exclude the following:

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Impairment of fixed assets

$

1.5

$

 

$

1.5

 

$

Restructuring charges, net

$

8.9

 

 

$

 

 

$

8.9

 

 

$

 

Fee revenue was $97.1 million in Q2 FY'24 compared to $94.3 million in Q2 FY'23, an increase of $2.8 million or 3% (up 1% on a constant currency basis). The increase was driven by increases in total rewards, organizational strategy and sales effectiveness offerings.

Adjusted EBITDA was $29.0 million in Q2 FY'24 with an Adjusted EBITDA margin of 29.9% compared to $27.5 million and 29.2%, respectively, in the year-ago quarter.

Selected Executive Search Data (a)

(dollars in millions) (b)

 

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Fee revenue

$

203.0

 

 

$

218.4

 

 

$

408.2

 

 

$

451.1

 

Total revenue

$

204.8

 

 

$

220.4

 

 

$

412.4

 

 

$

454.9

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

586

 

 

 

621

 

 

 

586

 

 

 

621

 

Average number of consultants

 

599

 

 

 

620

 

 

 

594

 

 

 

604

 

Engagements billed

 

3,488

 

 

 

4,054

 

 

 

5,555

 

 

 

6,386

 

New engagements (c)

 

1,479

 

 

 

1,637

 

 

 

2,982

 

 

 

3,319

 

 

 

 

 

 

 

 

 

Adjusted Results (d):

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Adjusted EBITDA

$

39.7

 

 

$

54.5

 

 

$

82.2

 

 

$

116.7

 

Adjusted EBITDA margin

 

19.6

%

 

 

25.0

%

 

 

20.1

%

 

 

25.9

%

 

(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:

 

Second 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

$

25.7

 

 

$

 

 

$

25.9

 

 

$

 

Fee revenue was $203.0 million and $218.4 million in Q2 FY'24 and Q2 FY'23, respectively, a year-over-year decrease of $15.4 million or 7% (down 9% 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 economic environment.

Adjusted EBITDA was $39.7 million in Q2 FY'24 with an Adjusted EBITDA margin of 19.6% compared to Adjusted EBITDA of $54.5 million and an Adjusted EBITDA margin of 25.0%, 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

(dollars in millions) (a)

 

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Fee revenue

$

138.4

 

 

$

134.7

 

 

$

280.6

 

 

$

233.7

 

Total revenue

$

139.5

 

 

$

135.8

 

 

$

282.5

 

 

$

235.8

 

 

 

 

 

 

 

 

 

Permanent Placement:

 

 

 

 

 

 

 

Fee revenue

$

56.5

 

 

$

79.5

 

 

$

114.8

 

 

$

153.6

 

Engagements billed (b)

 

2,018

 

 

 

3,006

 

 

 

3,455

 

 

 

4,709

 

New engagements (c)

 

1,184

 

 

 

1,816

 

 

 

2,419

 

 

 

3,662

 

Ending number of consultants (d)

 

383

 

 

 

527

 

 

 

383

 

 

 

527

 

Interim:

 

 

 

 

 

 

 

Fee revenue

$

81.9

 

 

$

55.3

 

 

$

165.8

 

 

$

80.1

 

Average bill rate (e)

$

126

 

 

$

107

 

 

$

124

 

 

$

111

 

Average weekly billable consultants (f)

 

1,336

 

 

 

1,111

 

 

 

1,387

 

 

 

787

 

 

 

 

 

 

 

 

 

Adjusted Results (g):

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Adjusted EBITDA

$

25.6

 

 

$

32.5

 

 

$

50.0

 

 

$

61.6

 

Adjusted EBITDA margin

 

18.5

%

 

 

24.1

%

 

 

17.8

%

 

 

26.4

%

 

(a)

 

Numbers may not total due to rounding.

(b)

 

Represents engagements billed for professional search.

(c)

 

Represents new engagements opened for professional search in the respective period.

(d)

 

Represents number of employees originating professional search.

(e)

 

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’24

 

FY’23

 

FY’24

 

FY’23

Integration/acquisition costs

$

4.9

 

$

2.5

 

$

8.9

 

$

5.0

Restructuring charges, net

$

3.8

 

 

$

 

 

$

3.8

 

 

$

 

Fee revenue was $138.4 million in Q2 FY'24, an increase of $3.7 million or 3% (up 2% on a constant currency basis) compared to the year-ago quarter. 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 $25.6 million in Q2 FY'24 with an Adjusted EBITDA margin of 18.5% compared to $32.5 million and 24.1%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to a change in the revenue mix, with increases in fee revenue from the acquisition, partially offset by the decreases in permanent placement fee revenue.

Selected Recruitment Process Outsourcing ("RPO") Data

(dollars in millions) (a)

 

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Fee revenue

$

87.7

 

 

$

107.3

 

 

$

183.4

 

 

$

221.2

 

Total revenue

$

90.1

 

 

$

109.1

 

 

$

186.9

 

 

$

225.2

 

 

 

 

 

 

 

 

 

Remaining revenue under contract (b)

$

680.5

 

 

$

922.8

 

 

$

680.5

 

 

$

922.8

 

RPO new business (c)

$

140.9

 

 

$

290.3

 

 

$

189.1

 

 

$

438.7

 

 

 

 

 

 

 

 

 

Adjusted Results (d):

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Adjusted EBITDA

$

8.9

 

 

$

16.0

 

 

$

19.3

 

 

$

33.7

 

Adjusted EBITDA margin

 

10.1

%

 

 

14.9

%

 

 

10.5

%

 

 

15.2

%

 

(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:

 

Second Quarter

 

Year to Date

 

FY’24

 

FY’23

 

FY’24

 

FY’23

Impairment of right of use assets

$

 

$

 

$

0.1

 

$

Restructuring charges, net

$

7.2

 

 

$

 

 

$

7.2

 

 

$

 

Fee revenue was $87.7 million in Q2 FY'24, a decrease of $19.6 million or 18% (down 20% on a constant currency basis) compared to the year-ago quarter. RPO fee revenue decreased due to reduced demand for the number of placements being requested by existing clients as a result of the challenging economic environment.

Adjusted EBITDA was $8.9 million in Q2 FY'24 with an Adjusted EBITDA margin of 10.1% compared to $16.0 million and 14.9%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was primarily due to the decline in demand and fee revenue driven by global economic factors, partially offset by a decrease in compensation and benefit expenses due in large part to a decrease in the average headcount compared to the year-ago quarter.

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:

  • Q3 FY’24 fee revenue is expected to be in the range of $645 million and $665 million; and
  • Q3 FY’24 diluted earnings per share is expected to range between to $0.87 to $0.95.

On a consolidated adjusted basis:

  • Q3 FY’24 adjusted diluted earnings per share is expected to be in the range from $0.96 to $1.02.

 

Q3 FY’24

Earnings Per Share Outlook

 

Low

 

High

Consolidated diluted earnings per share

$

0.87

 

 

$

0.95

 

Integration/acquisition and restructuring charges

 

0.13

 

 

 

0.09

 

Tax Rate Impact

 

(0.04

)

 

 

(0.02

)

Consolidated adjusted diluted earnings per share (1)

$

0.96

 

$

1.02

 

(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, 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;
  • 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, 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, 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 align workforce to the challenging macroeconomic business environment arising from persistent inflationary pressures, rising interest rates and global economic and geopolitical uncertainty. 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 OPERATIONS

(in thousands, except per share amounts)

 

 

Three Months Ended

October 31,

 

Six Months Ended

October 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

(unaudited)

 

Fee revenue

$

704,003

 

 

$

727,849

 

 

$

1,403,192

 

 

$

1,423,752

 

Reimbursed out-of-pocket engagement expenses

 

8,444

 

 

 

7,870

 

 

 

15,517

 

 

 

15,115

 

Total revenue

 

712,447

 

 

 

735,719

 

 

 

1,418,709

 

 

 

1,438,867

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

453,859

 

 

 

464,766

 

 

 

933,740

 

 

 

930,392

 

General and administrative expenses

 

65,737

 

 

 

65,086

 

 

 

131,654

 

 

 

129,543

 

Reimbursed expenses

 

8,444

 

 

 

7,870

 

 

 

15,517

 

 

 

15,115

 

Cost of services

 

78,512

 

 

 

61,257

 

 

 

155,702

 

 

 

99,249

 

Depreciation and amortization

 

19,554

 

 

 

17,093

 

 

 

38,566

 

 

 

33,322

 

Restructuring charges, net

 

63,525

 

 

 

 

 

 

63,946

 

 

 

 

Total operating expenses

 

689,631

 

 

 

616,072

 

 

 

1,339,125

 

 

 

1,207,621

 

 

 

 

 

 

 

 

 

Operating income

 

22,816

 

 

 

119,647

 

 

 

79,584

 

 

 

231,246

 

Other loss, net

 

(13,835

)

 

 

(9,048

)

 

 

(258

)

 

 

(8,273

)

Interest expense, net

 

(6,596

)

 

 

(7,098

)

 

 

(11,336

)

 

 

(14,710

)

Income before provision for income taxes

 

2,385

 

 

 

103,501

 

 

 

67,990

 

 

 

208,263

 

Income tax provision

 

2,341

 

 

 

28,886

 

 

 

20,761

 

 

 

55,112

 

Net income

 

44

 

 

 

74,615

 

 

 

47,229

 

 

 

153,151

 

Net income attributable to noncontrolling interest

 

(1,755

)

 

 

(1,074

)

 

 

(2,335

)

 

 

(2,363

)

Net (loss) income attributable to Korn Ferry

$

(1,711

)

 

$

73,541

 

 

$

44,894

 

 

$

150,788

 

 

 

 

 

 

 

 

 

(Loss) earnings per common share attributable to Korn Ferry:

 

 

 

 

 

 

 

Basic

$

(0.04

)

 

$

1.39

 

 

$

0.86

 

 

$

2.85

 

Diluted

$

(0.04

)

 

$

1.38

 

 

$

0.86

 

 

$

2.83

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

51,328

 

 

 

51,868

 

 

 

51,131

 

 

 

51,820

 

Diluted

 

51,328

 

 

 

52,005

 

 

 

51,401

 

 

 

52,143

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

$

0.18

 

 

$

0.15

 

 

$

0.36

 

 

$

0.30

 

 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY REPORTING SEGMENT

(dollars in thousands)

(unaudited)

 

 

Three Months Ended October 31,

 

Six Months Ended October 31,

 

 

2023

 

 

 

2022

 

 

% Change

 

 

2023

 

 

 

2022

 

 

% Change

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

Consulting

$

177,795

 

$

173,092

 

2.7

%

 

$

345,883

 

$

339,576

 

1.9

%

Digital

 

97,092

 

 

 

94,329

 

 

2.9

%

 

 

185,078

 

 

 

178,090

 

 

3.9

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

North America

 

132,512

 

 

 

142,485

 

 

(7.0

)%

 

 

260,010

 

 

 

294,029

 

 

(11.6

%)

EMEA

 

43,098

 

 

 

44,645

 

 

(3.5

)%

 

 

89,874

 

 

 

91,701

 

 

(2.0

%)

Asia Pacific

 

19,304

 

 

 

23,408

 

 

(17.5

)%

 

 

43,843

 

 

 

49,789

 

 

(11.9

%)

Latin America

 

8,079

 

 

 

7,821

 

 

3.3

%

 

 

14,500

 

 

 

15,629

 

 

(7.2

%)

Total Executive Search (a)

 

202,993

 

 

 

218,359

 

 

(7.0

)%

 

 

408,227

 

 

 

451,148

 

 

(9.5

%)

Professional Search & Interim

 

138,384

 

 

 

134,743

 

 

2.7

%

 

 

280,563

 

 

 

233,690

 

 

20.1

%

RPO

 

87,739

 

 

 

107,326

 

 

(18.3

)%

 

 

183,441

 

 

 

221,248

 

 

(17.1

%)

Total fee revenue

 

704,003

 

 

 

727,849

 

 

(3.3

)%

 

 

1,403,192

 

 

 

1,423,752

 

 

(1.4

%)

Reimbursed out-of-pocket engagement expenses

 

8,444

 

 

 

7,870

 

 

7.3

%

 

 

15,517

 

 

 

15,115

 

 

2.7

%

Total revenue

$

712,447

 

 

$

735,719

 

 

(3.2

)%

 

$

1,418,709

 

 

$

1,438,867

 

 

(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

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

October 31,

2023

 

April 30,

2023

 

(unaudited)

 

 

ASSETS

 

 

 

Cash and cash equivalents

$

620,836

 

 

$

844,024

 

Marketable securities

 

26,149

 

 

 

44,837

 

Receivables due from clients, net of allowance for doubtful accounts of $47,574 and $44,377 at October 31, 2023 and April 30, 2023, respectively

 

592,208

 

 

 

569,601

 

Income taxes and other receivables

 

66,073

 

 

 

67,512

 

Unearned compensation

 

62,533

 

 

 

63,476

 

Prepaid expenses and other assets

 

53,741

 

 

 

49,219

 

Total current assets

 

1,421,540

 

 

 

1,638,669

 

 

 

 

 

Marketable securities, non-current

 

196,860

 

 

 

179,040

 

Property and equipment, net

 

165,815

 

 

 

161,876

 

Operating lease right-of-use assets, net

 

122,621

 

 

 

142,690

 

Cash surrender value of company-owned life insurance policies, net of loans

 

202,094

 

 

 

197,998

 

Deferred income taxes

 

101,099

 

 

 

102,057

 

Goodwill

 

907,563

 

 

 

909,491

 

Intangible assets, net

 

101,423

 

 

 

114,426

 

Unearned compensation, non-current

 

119,357

 

 

 

103,607

 

Investments and other assets

 

22,589

 

 

 

24,590

 

Total assets

$

3,360,961

 

 

$

3,574,444

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Accounts payable

$

46,375

 

 

$

53,386

 

Income taxes payable

 

19,446

 

 

 

19,969

 

Compensation and benefits payable

 

327,129

 

 

 

532,934

 

Operating lease liability, current

 

42,774

 

 

 

45,821

 

Other accrued liabilities

 

328,395

 

 

 

324,150

 

Total current liabilities

 

764,119

 

 

 

976,260

 

 

 

 

 

Deferred compensation and other retirement plans

 

406,220

 

 

 

396,534

 

Operating lease liability, non-current

 

100,321

 

 

 

119,220

 

Long-term debt

 

396,565

 

 

 

396,194

 

Deferred tax liabilities

 

6,629

 

 

 

5,352

 

Other liabilities

 

26,607

 

 

 

27,879

 

Total liabilities

 

1,700,461

 

 

 

1,921,439

 

 

 

 

 

Stockholders' equity

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized, 77,505 and 76,693 shares issued and 52,656 and 52,269 shares outstanding at October 31, 2023 and April 30, 2023, respectively

 

435,340

 

 

 

429,754

 

Retained earnings

 

1,336,686

 

 

 

1,311,081

 

Accumulated other comprehensive loss, net

 

(115,873

)

 

 

(92,764

)

Total Korn Ferry stockholders' equity

 

1,656,153

 

 

 

1,648,071

 

Noncontrolling interest

 

4,347

 

 

 

4,934

 

Total stockholders' equity

 

1,660,500

 

 

 

1,653,005

 

Total liabilities and stockholders' equity

$

3,360,961

 

 

$

3,574,444

 

 

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,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Korn Ferry

$

(1,711

)

 

$

73,541

 

 

$

44,894

 

 

$

150,788

 

Net income attributable to non-controlling interest

 

1,755

 

 

 

1,074

 

 

 

2,335

 

 

 

2,363

 

Net income

 

44

 

 

 

74,615

 

 

 

47,229

 

 

 

153,151

 

Income tax provision

 

2,341

 

 

 

28,886

 

 

 

20,761

 

 

 

55,112

 

Income before provision for income taxes

 

2,385

 

 

 

103,501

 

 

 

67,990

 

 

 

208,263

 

Other loss, net

 

13,835

 

 

 

9,048

 

 

 

258

 

 

 

8,273

 

Interest expense, net

 

6,596

 

 

 

7,098

 

 

 

11,336

 

 

 

14,710

 

Operating income

 

22,816

 

 

 

119,647

 

 

 

79,584

 

 

 

231,246

 

Depreciation and amortization

 

19,554

 

 

 

17,093

 

 

 

38,566

 

 

 

33,322

 

Other loss, net

 

(13,835

)

 

 

(9,048

)

 

 

(258

)

 

 

(8,273

)

Integration/acquisition costs (1)

 

5,030

 

 

 

3,411

 

 

 

9,158

 

 

 

7,016

 

Impairment of fixed assets (2)

 

1,452

 

 

 

 

 

 

1,575

 

 

 

 

Impairment of right of use assets (3)

 

 

 

 

 

 

 

1,629

 

 

 

 

Restructuring charges, net (4)

 

63,525

 

 

 

 

 

 

63,946

 

 

 

 

Adjusted EBITDA

$

98,542

 

 

$

131,103

 

 

$

194,200

 

 

$

263,311

 

 

 

 

 

 

 

 

 

Operating margin

 

3.2

%

 

 

16.4

%

 

 

5.7

%

 

 

16.2

%

Depreciation and amortization

 

2.8

%

 

 

2.3

%

 

 

2.7

%

 

 

2.4

%

Other loss, net

 

(1.9

)%

 

 

(1.2

)%

 

 

0.0

%

 

 

(0.6

)%

Integration/acquisition costs (1)

 

0.7

%

 

 

0.5

%

 

 

0.7

%

 

 

0.5

%

Impairment of fixed assets (2)

 

0.2

%

 

 

%

 

 

0.1

%

 

 

%

Impairment of right of use assets (3)

 

%

 

 

%

 

 

0.1

%

 

 

%

Restructuring charges, net (4)

 

9.0

%

 

 

%

 

 

4.5

%

 

 

%

Adjusted EBITDA margin

 

14.0

%

 

 

18.0

%

 

 

13.8

%

 

 

18.5

%

 

 

 

 

 

 

 

 

Net (loss) income attributable to Korn Ferry

$

(1,711

)

 

$

73,541

 

 

$

44,894

 

 

$

150,788

 

Integration/acquisition costs (1)

 

5,030

 

 

 

3,411

 

 

 

9,158

 

 

 

7,016

 

Impairment of fixed assets (2)

 

1,452

 

 

 

 

 

 

1,575

 

 

 

 

Impairment of right of use assets (3)

 

 

 

 

 

 

 

1,629

 

 

 

 

Restructuring charges, net (4)

 

63,525

 

 

 

 

 

 

63,946

 

 

 

 

Tax effect on the adjusted items (5)

 

(17,252

)

 

 

(812

)

 

 

(18,671

)

 

 

(1,705

)

Adjusted net income attributable to Korn Ferry

$

51,044

 

 

$

76,140

 

 

$

102,531

 

 

$

156,099

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per common share

$

(0.04

)

 

$

1.39

 

 

$

0.86

 

 

$

2.85

 

Integration/acquisition costs (1)

 

0.10

 

 

 

0.07

 

 

 

0.18

 

 

 

0.13

 

Impairment of fixed assets (2)

 

0.03

 

 

 

 

 

 

0.03

 

 

 

 

Impairment of right of use assets (3)

 

 

 

 

 

 

 

0.03

 

 

 

 

Restructuring charges, net (4)

 

1.24

 

 

 

 

 

 

1.24

 

 

 

 

Tax effect on the adjusted items (5)

 

(0.35

)

 

 

(0.02

)

 

 

(0.37

)

 

 

(0.03

)

Adjusted basic earnings per share

$

0.98

 

 

$

1.44

 

 

$

1.97

 

 

$

2.95

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per common share

$

(0.04

)

 

$

1.38

 

 

$

0.86

 

 

$

2.83

 

Integration/acquisition costs (1)

 

0.10

 

 

 

0.07

 

 

 

0.18

 

 

 

0.13

 

Impairment of fixed assets (2)

 

0.03

 

 

 

 

 

 

0.03

 

 

 

 

Impairment of right of use assets (3)

 

 

 

 

 

 

 

0.03

 

 

 

 

Restructuring charges, net (4)

 

1.23

 

 

 

 

 

 

1.23

 

 

 

 

Tax effect on the adjusted items (5)

 

(0.35

)

 

 

(0.02

)

 

 

(0.37

)

 

 

(0.03

)

Adjusted diluted earnings per share

$

0.97

 

 

$

1.43

 

 

$

1.96

 

 

$

2.93

 

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.

(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 eliminate excess capacity resulting from the challenging macroeconomic business environment.

(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 October 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

$

177,795

 

$

180,953

 

$

28,928

 

16.3

%

 

$

173,092

 

$

175,845

 

$

31,089

 

18.0

%

Digital

 

97,092

 

 

 

97,157

 

 

 

28,983

 

 

29.9

%

 

 

94,329

 

 

 

94,577

 

 

 

27,524

 

 

29.2

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

132,512

 

 

 

133,933

 

 

 

29,436

 

 

22.2

%

 

 

142,485

 

 

 

144,147

 

 

 

37,969

 

 

26.6

%

EMEA

 

43,098

 

 

 

43,315

 

 

 

5,619

 

 

13.0

%

 

 

44,645

 

 

 

44,919

 

 

 

8,081

 

 

18.1

%

Asia Pacific

 

19,304

 

 

 

19,460

 

 

 

3,875

 

 

20.1

%

 

 

23,408

 

 

 

23,523

 

 

 

5,834

 

 

24.9

%

Latin America

 

8,079

 

 

 

8,085

 

 

 

805

 

 

10.0

%

 

 

7,821

 

 

 

7,822

 

 

 

2,607

 

 

33.3

%

Total Executive Search

 

202,993

 

 

 

204,793

 

 

 

39,735

 

 

19.6

%

 

 

218,359

 

 

 

220,411

 

 

 

54,491

 

 

25.0

%

Professional Search & Interim

 

138,384

 

 

 

139,455

 

 

 

25,622

 

 

18.5

%

 

 

134,743

 

 

 

135,762

 

 

 

32,457

 

 

24.1

%

RPO

 

87,739

 

 

 

90,089

 

 

 

8,855

 

 

10.1

%

 

 

107,326

 

 

 

109,124

 

 

 

16,004

 

 

14.9

%

Corporate

 

 

 

 

 

 

 

(33,581

)

 

 

 

 

 

 

 

 

 

 

(30,462

)

 

 

Consolidated

$

704,003

 

 

$

712,447

 

 

$

98,542

 

 

14.0

%

 

$

727,849

 

 

$

735,719

 

 

$

131,103

 

 

18.0

%

 

 

Six Months Ended October 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

$

345,883

 

$

351,746

 

$

54,108

 

15.6

%

 

$

339,576

 

$

344,580

 

$

60,639

 

17.9

%

Digital

 

185,078

 

 

 

185,169

 

 

 

53,308

 

 

28.8

%

 

 

178,090

 

 

 

178,392

 

 

 

51,702

 

 

29.0

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

260,010

 

 

 

263,346

 

 

 

58,192

 

 

22.4

%

 

 

294,029

 

 

 

297,031

 

 

 

81,718

 

 

27.8

%

EMEA

 

89,874

 

 

 

90,450

 

 

 

11,257

 

 

12.5

%

 

 

91,701

 

 

 

92,248

 

 

 

16,596

 

 

18.1

%

Asia Pacific

 

43,843

 

 

 

44,070

 

 

 

10,190

 

 

23.2

%

 

 

49,789

 

 

 

49,975

 

 

 

13,185

 

 

26.5

%

Latin America

 

14,500

 

 

 

14,507

 

 

 

2,546

 

 

17.6

%

 

 

15,629

 

 

 

15,631

 

 

 

5,224

 

 

33.4

%

Total Executive Search

 

408,227

 

 

 

412,373

 

 

 

82,185

 

 

20.1

%

 

 

451,148

 

 

 

454,885

 

 

 

116,723

 

 

25.9

%

Professional Search & Interim

 

280,563

 

 

 

282,524

 

 

 

49,951

 

 

17.8

%

 

 

233,690

 

 

 

235,814

 

 

 

61,618

 

 

26.4

%

RPO

 

183,441

 

 

 

186,897

 

 

 

19,326

 

 

10.5

%

 

 

221,248

 

 

 

225,196

 

 

 

33,713

 

 

15.2

%

Corporate

 

 

 

 

 

 

 

(64,678

)

 

 

 

 

 

 

 

 

 

 

(61,084

)

 

 

Consolidated

$

1,403,192

 

 

$

1,418,709

 

 

$

194,200

 

 

13.8

%

 

$

1,423,752

 

 

$

1,438,867

 

 

$

263,311

 

 

18.5

%

 

Contacts

Investor Relations:
Tiffany Louder, (214) 310-8407

Media:
Dan Gugler, (310) 226-2645

Contacts

Investor Relations:
Tiffany Louder, (214) 310-8407

Media:
Dan Gugler, (310) 226-2645