Fourth Quarter and Full Year Highlights
- Korn Ferry reports Q4 FY'24 fee revenue of $690.8 million, a
year-over-year decrease of 5% in both actual and constant currency
and full year FY'24 fee revenue of $2,762.7 million, a
year-over-year decrease of 3% in both actual and constant
currency.
- Our full year FY'24 Marquee and Regional Account fee revenue
generated slightly more than 37% of our consolidated fee revenue
and grew 3% year-over-year at actual, and 2% at constant
currency.
- Net income attributable to Korn Ferry for the fourth quarter
and full year of FY'24 was $65.2 million and $169.2 million,
respectively, while diluted and adjusted diluted earnings per share
were $1.24 and $1.26 in Q4 FY'24, and $3.23 and $4.28 for the full
year, respectively.
- Operating income in the fourth quarter was $83.5 million with
an operating margin of 12.1%, while full year operating income was
$212.9 million with an operating margin of 7.7%.
- Fourth quarter Adjusted EBITDA was $112.3 million with an
Adjusted EBITDA margin of 16.3%, our fourth consecutive quarter of
improved Adjusted EBITDA margin. Full year Adjusted EBITDA was
$408.2 million with an Adjusted EBITDA margin of 14.8%.
- Consulting and Digital both posted full year record high fee
revenue at $695.0 million and $366.7 million, respectively.
- Subscription and License full year fee revenue increased 9% to
$131 million.
- Consulting's full year average hourly bill rate increased 11%
to $420, with an average bill rate of $437 in the fourth
quarter.
- The Company repurchased 365,000 shares of stock during the
quarter for $22.9 million, bringing full year repurchases to
930,000 shares for $52.5 million.
- On June 12, 2024, the Company increased its regular quarterly
dividend to $0.37 per share, which is payable on July 31, 2024 to
stockholders of record on July 3, 2024.
Korn Ferry (NYSE: KFY), a global organizational consulting firm,
today announced fourth quarter and annual fee revenue of $690.8
million and $2,762.7 million, respectively. In addition, fourth
quarter diluted earnings per share was $1.24 and adjusted diluted
earnings per share was $1.26.
“I am pleased with our fourth quarter results, as we generated
$691 million in fee revenue,” said Gary D. Burnison, CEO, Korn
Ferry. “Earnings and profitability increased year-over-year and
sequentially as we delivered $112 million of Adjusted EBITDA, at a
16.3% margin, which is our fourth consecutive quarter of
profitability improvement.”
“In an economic environment in which companies are fighting for
growth and relevancy, our portfolio is performing as designed and
the strategy is clearly working. Cyclically sensitive talent
acquisition offerings are being buoyed by continued stability from
our diversified offerings – particularly Consulting, complemented
by Digital, which have generated solid performance. As we look to a
new fiscal year, I have never been more proud of our organization –
from our colleagues, expertise, IP and insights to the incredibly
innovative and relevant solutions we offer to clients in a rapidly
changing world.”
Selected Financial
Results
(dollars in millions, except per
share amounts) (a)
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
690.8
$
730.9
$
2,762.7
$
2,835.4
Total revenue
$
699.9
$
738.1
$
2,795.5
$
2,863.8
Operating income
$
83.5
$
72.6
$
212.9
$
316.3
Operating margin
12.1
%
9.9
%
7.7
%
11.2
%
Net income attributable to Korn Ferry
$
65.2
$
47.5
$
169.2
$
209.5
Basic earnings per share
$
1.26
$
0.91
$
3.25
$
3.98
Diluted earnings per share
$
1.24
$
0.91
$
3.23
$
3.95
Adjusted Results (b):
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
112.3
$
97.9
$
408.2
$
457.3
Adjusted EBITDA margin
16.3
%
13.4
%
14.8
%
16.1
%
Adjusted net income attributable to Korn
Ferry (c)
$
65.7
$
53.0
$
224.0
$
262.2
Adjusted basic earnings per share (c)
$
1.27
$
1.02
$
4.31
$
4.98
Adjusted diluted earnings per share
(c)
$
1.26
$
1.01
$
4.28
$
4.94
________________
(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):
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
—
$
1.6
$
4.4
Impairment of right of use assets
$
—
$
—
$
1.6
$
5.5
Integration/acquisition costs
$
1.8
$
5.5
$
14.9
$
14.9
Restructuring charges, net
$
—
$
1.4
$
68.6
$
42.6
(c)
Due to actions taken in
connection with the worldwide minimum tax, the Company recorded a
$9.7 million non-recurring tax benefit in FY'24 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.
Fiscal 2024 Fourth Quarter Results
The Company reported fee revenue in Q4 FY'24 of $690.8 million,
a decrease of 5% in both actual and constant currency compared to
Q4 FY'23. Moderation in fee revenue from our talent acquisition
offerings was buoyed by year-over-year growth in our Consulting fee
revenue and stability in our Digital fee revenue, in-line with our
business diversification strategy. The moderation in fee revenue in
our talent acquisition offerings was driven by the challenging
global economic environment (the "economic environment").
Operating income was $83.5 million (at an operating margin of
12.1%) in Q4 FY'24, compared to $72.6 million (at an operating
margin of 9.9%) in the year-ago quarter, an increase of 15% (and
220bps). Net income attributable to Korn Ferry was $65.2 million in
Q4 FY'24, compared to $47.5 million in Q4 FY'23. Adjusted EBITDA
was $112.3 million in Q4 FY'24 compared to $97.9 million in Q4
FY'23. Adjusted EBITDA margin was 16.3% in Q4 FY'24, an increase of
290bps.
Operating income and margin increased as a result of pro-active
workforce capacity management ("workforce actions") taken during
the year and the lower cost of services expense and
integration/acquisition costs compared to the year-ago quarter.
These increases were partially offset by the decrease in fee
revenue discussed above. Net income attributable to Korn Ferry
increased due to the same factors discussed above.
Adjusted EBITDA and margin increased due to the same factors
discussed above, but excluded integration/acquisition costs.
Fiscal 2024 Full Year Results
The Company reported fee revenue in FY'24 of $2,762.7 million, a
decrease of 3% in both actual and constant currency compared to
FY'23. Fee revenue decreased primarily due to decreases in our
permanent placement talent acquisition offerings, due to the
economic environment. This decrease was partially offset by an
increase in fee revenue from the Interim portion of Professional
Search & Interim, resulting from the acquisitions of Infinity
Consulting Solutions and Salo, which were acquired on August 1,
2022, and February 1, 2023, respectively, as well as year-over-year
growth in Consulting and Digital fee revenue, again, in-line with
our business diversification strategy.
Operating income was $212.9 million (margin of 7.7%) in FY'24,
compared to $316.3 million (margin of 11.2%) in FY'23. Net income
attributable to Korn Ferry was $169.2 million in FY'24 compared to
$209.5 million in FY'23. Adjusted EBITDA was $408.2 million
(adjusted EBITDA margin 14.8%) in FY'24 compared to $457.3 million
(adjusted EBITDA margin 16.1%) in FY'23.
Operating income and margin decreased primarily due to a
decrease in fee revenue from our permanent placement talent
acquisition offerings, which have higher margins, an increase in
Interim fee revenue (lower margins) and cost of services expense,
and higher restructuring charges, net recorded during FY'24
compared to the year-ago period. These decreases were partially
offset by decreases in compensation and benefits expense resulting
from workforce actions taken during FY'24, and lower impairment
charges of both fixed and right of use assets. Net income
attributable to Korn Ferry declined due to the same factors
discussed above partially offset by a lower effective tax rate in
the current year.
Adjusted EBITDA and margin decreased due to the same factors as
operating income discussed above excluding the restructuring
charges.
Results by Line of Business
Selected Consulting Data
(dollars in millions) (a)
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
182.2
$
175.3
$
695.0
$
677.0
Total revenue
$
185.1
$
178.0
$
706.8
$
687.0
Ending number of consultants and execution
staff (b)
1,678
1,853
1,678
1,853
Hours worked in thousands (c)
417
450
1,656
1,790
Average bill rate (d)
$
437
$
390
$
420
$
378
Adjusted Results (e):
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
32.3
$
24.6
$
114.3
$
108.5
Adjusted EBITDA margin
17.8
%
14.0
%
16.4
%
16.0
%
________________
(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:
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
—
$
—
$
2.8
Impairment of right of use assets
$
—
$
—
$
0.6
$
3.1
Restructuring charges, net
$
—
$
0.8
$
18.9
$
11.6
Fee revenue was $182.2 million in Q4 FY'24 compared to $175.3
million in Q4 FY'23, an increase of $6.9 million or 4% (up 5% on a
constant currency basis). Growth was strongest in our assessment
& succession solutions, leadership development, and
organizational strategy offerings, with all product areas posting
year-over-year increases in fee revenue. Fee revenue was also
positively impacted by a year-over-year 12% increase in our average
bill rate to $437 per hour.
Adjusted EBITDA increased 31% to $32.3 million compared to the
fourth quarter of FY'23. Adjusted EBITDA margin in the quarter
increased year-over-year by 380bps to 17.8% this year. These
increases resulted primarily from higher fee revenue in the
previously discussed solution areas, higher bill rates, and
workforce actions taken during the year and were slightly offset by
an increase in cost of services expense and higher general and
administrative expenses.
Selected Digital Data
(dollars in millions) (a)
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
91.3
$
91.5
$
366.7
$
354.7
Total revenue
$
91.4
$
91.5
$
366.9
$
355.0
Ending number of consultants
267
347
267
347
Subscription & License fee revenue
$
33.3
$
31.6
$
131.0
$
119.7
Adjusted Results (b):
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
28.0
$
23.6
$
108.7
$
97.5
Adjusted EBITDA margin
30.7
%
25.8
%
29.6
%
27.5
%
________________
(a)
Numbers may not total due to
rounding.
(b)
Adjusted results exclude the
following:
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
—
$
1.5
$
1.5
Impairment of right of use assets
$
—
$
—
$
—
$
1.7
Restructuring charges, net
$
—
$
—
$
9.5
$
2.9
Fee revenue was $91.3 million in Q4 FY'24 compared to $91.5
million in Q4 FY'23, flat year-over-year and up 1% on a constant
currency basis.
Adjusted EBITDA was $28.0 million in Q4 FY'24 compared to $23.6
million in the year-ago quarter. Adjusted EBITDA margin in the
quarter increased year-over-year by 490bps to 30.7%. The increase
in Adjusted EBITDA and Adjusted EBITDA margin was mainly due to
workforce actions taken during FY'24.
Selected Executive Search
Data(a)
(dollars in millions) (b)
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
198.7
$
212.6
$
806.2
$
875.8
Total revenue
$
200.8
$
214.6
$
814.3
$
883.3
Ending number of consultants
542
602
542
602
Average number of consultants
552
609
572
594
Engagements billed
3,456
3,772
8,978
10,091
New engagements (c)
1,586
1,608
6,091
6,686
Adjusted Results (d):
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
45.5
$
42.7
$
171.1
$
205.8
Adjusted EBITDA margin
22.9
%
20.1
%
21.2
%
23.5
%
________________
(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:
Fourth 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
$
—
$
0.6
$
28.2
$
20.1
Fee revenue was $198.7 million and $212.6 million in Q4 FY'24
and Q4 FY'23, respectively, a decrease of $13.9 million or 7% (down
6% on a constant currency basis). The decrease in fee revenue was
primarily driven by a decline in the number of Executive Search
engagements billed, as a result of the current economic
environment.
Adjusted EBITDA was $45.5 million in Q4 FY'24 compared to $42.7
million in the year-ago quarter. Adjusted EBITDA margin increased
by 280bps to 22.9% in Q4 FY'24. The increase in Adjusted EBITDA and
Adjusted EBITDA margin was primarily due to workforce actions taken
during the year and increased consultant productivity, partially
offset by the decrease in fee revenue discussed above.
Selected Professional Search &
Interim Data
(dollars in millions) (a)
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
129.2
$
151.7
$
540.6
$
503.4
Total revenue
$
130.1
$
152.6
$
544.5
$
507.1
Permanent Placement:
Fee revenue
$
56.3
$
62.5
$
223.5
$
281.1
Engagements billed
1,939
2,304
5,619
7,435
New engagements (b)
1,086
1,364
4,500
6,486
Ending number of consultants
331
401
331
401
Interim:
Fee revenue
$
72.9
$
89.2
$
317.1
$
222.3
Average bill rate (c)
$
133
$
124
$
127
$
115
Average weekly billable consultants
(d)
1,157
1,683
1,303
1,079
Adjusted Results (e):
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
28.1
$
27.3
$
101.9
$
110.9
Adjusted EBITDA margin
21.8
%
18.0
%
18.8
%
22.0
%
________________
(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:
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of fixed assets
$
—
$
—
$
—
$
0.1
Impairment of right of use assets
$
—
$
—
$
—
$
0.6
Integration/acquisition costs
$
1.8
$
4.3
$
14.5
$
11.0
Restructuring charges, net
$
—
$
—
$
3.8
$
4.8
Fee revenue was $129.2 million in Q4 FY'24, a decrease of $22.5
million or 15% in both actual and constant currency. The decrease
in fee revenue in both the Permanent Placement and Interim portions
of the business resulted from the economic environment and, in the
case of the Interim portion, the continued wind-down during Q4
FY’23 of a non-recurring engagement that ultimately concluded in Q1
FY’24.
Adjusted EBITDA was $28.1 million in Q4 FY'24 compared to $27.3
million in the year-ago quarter. Adjusted EBITDA margin increased
year-over-year by 380bps to 21.8% in Q4 FY'24. The increase in
Adjusted EBITDA and Adjusted EBITDA margin was primarily due to the
lower cost of services expense, combined with decreases in
compensation and benefit and general and administrative expense
(both excluding integration/acquisition costs) as a result of
workforce and other cost saving actions, partially offset by the
decrease in fee revenue discussed above.
Selected Recruitment Process
Outsourcing ("RPO") Data
(dollars in millions) (a)
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Fee revenue
$
89.5
$
99.8
$
354.1
$
424.6
Total revenue
$
92.5
$
101.4
$
363.0
$
431.5
Remaining revenue under contract (b)
$
657.1
$
776.7
$
657.1
$
776.7
RPO new business (c)
$
128.4
$
115.1
$
439.6
$
597.8
Adjusted Results (d):
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Adjusted EBITDA
$
11.8
$
9.0
$
40.4
$
52.6
Adjusted EBITDA margin
13.2
%
9.0
%
11.4
%
12.4
%
________________
(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:
Fourth Quarter
Year to Date
FY’24
FY’23
FY’24
FY’23
Impairment of right of use assets
$
—
$
—
$
0.1
$
0.1
Restructuring charges, net
$
—
$
—
$
7.9
$
3.1
Fee revenue was $89.5 million in Q4 FY'24, a decrease of $10.3
million or 10% in both actual and constant currency. RPO fee
revenue decreased due to moderation in the hiring volume in the
existing base of clients due to the economic environment, a higher
percentage of FY'24 new business coming from renewals and
extensions versus new logos, as well as a continuation of clients'
"labor hoarding" throughout the year.
Adjusted EBITDA was $11.8 million in Q4 FY'24 compared to $9.0
million in the year-ago quarter. Adjusted EBITDA margin increased
420bps to 13.2% in Q4 FY'24. The increase in Adjusted EBITDA and
Adjusted EBITDA margin both resulted from the workforce actions
taken during the year, partially offset by the decline in fee
revenue discussed above.
Outlook
Assuming worldwide geopolitical conditions, economic conditions,
financial markets and foreign exchange rates remain steady, on a
consolidated basis:
- Q1 FY’25 fee revenue is expected to be in the range of $655
million and $675 million; and
- Q1 FY’25 diluted earnings per share is expected to range
between $1.05 to $1.15.
On a consolidated adjusted basis:
- Q1 FY’25 adjusted diluted earnings per share is expected to be
in the range from $1.07 to $1.17.
Q1 FY’25
Earnings Per Share
Outlook
Low
High
Consolidated diluted earnings per
share
$
1.05
$
1.15
Integration/acquisition costs
0.03
0.03
Tax rate impact
(0.01
)
(0.01
)
Consolidated adjusted diluted earnings per
share(1)
$
1.07
$
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 11:00 AM
(EDT) 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, expected results of
our business diversification strategy, 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, resulting
organizational changes, our indebtedness, and 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; and
- 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 a
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
CONSOLIDATED STATEMENTS OF
INCOME
(in thousands, except per
share amounts)
Three Months Ended
April 30,
Year Ended April
30,
2024
2023
2024
2023
(unaudited)
Fee revenue
$
690,800
$
730,874
$
2,762,671
$
2,835,408
Reimbursed out-of-pocket engagement
expenses
9,123
7,250
32,834
28,428
Total revenue
699,923
738,124
2,795,505
2,863,836
Compensation and benefits
454,208
491,429
1,844,164
1,901,203
General and administrative expenses
64,724
66,130
259,039
268,458
Reimbursed expenses
9,123
7,250
32,834
28,428
Cost of services
68,499
81,347
300,015
238,499
Depreciation and amortization
19,891
17,976
77,966
68,335
Restructuring charges, net
—
1,411
68,558
42,573
Total operating expenses
616,445
665,543
2,582,576
2,547,496
Operating income
83,478
72,581
212,929
316,340
Other income, net
7,122
437
30,681
5,261
Interest expense, net
(4,686
)
(5,776
)
(20,968
)
(25,864
)
Income before provision for income
taxes
85,914
67,242
222,642
295,737
Income tax provision
20,302
19,108
50,081
82,683
Net income
65,612
48,134
172,561
213,054
Net income attributable to noncontrolling
interest
(423
)
(640
)
(3,407
)
(3,525
)
Net income attributable to Korn Ferry
$
65,189
$
47,494
$
169,154
$
209,529
Earnings per common share attributable to
Korn Ferry:
Basic
$
1.26
$
0.91
$
3.25
$
3.98
Diluted
$
1.24
$
0.91
$
3.23
$
3.95
Weighted-average common shares
outstanding:
Basic
50,764
51,009
51,038
51,482
Diluted
51,487
51,234
51,432
51,883
Cash dividends declared per share:
$
0.33
$
0.15
$
1.02
$
0.60
KORN FERRY AND
SUBSIDIARIES
FINANCIAL SUMMARY BY REPORTING
SEGMENT
(dollars in thousands)
(unaudited)
Three Months Ended April
30,
Year Ended April 30,
2024
2023
% Change
2024
2023
% Change
Fee revenue:
Consulting
$
182,177
$
175,270
3.9
%
$
695,007
$
677,001
2.7
%
Digital
91,304
91,490
(0.2
%)
366,699
354,651
3.4
%
Executive Search:
North America
125,468
135,300
(7.3
%)
506,927
562,139
(9.8
%)
EMEA
45,643
46,353
(1.5
%)
184,516
187,014
(1.3
%)
Asia Pacific
20,696
23,188
(10.7
%)
85,863
95,598
(10.2
%)
Latin America
6,896
7,764
(11.2
%)
28,937
31,047
(6.8
%)
Total Executive Search (a)
198,703
212,605
(6.5
%)
806,243
875,798
(7.9
%)
Professional Search & Interim
129,162
151,725
(14.9
%)
540,615
503,395
7.4
%
RPO
89,454
99,784
(10.4
%)
354,107
424,563
(16.6
%)
Total fee revenue
690,800
730,874
(5.5
%)
2,762,671
2,835,408
(2.6
%)
Reimbursed out-of-pocket engagement
expenses
9,123
7,250
25.8
%
32,834
28,428
15.5
%
Total revenue
$
699,923
$
738,124
(5.2
%)
$
2,795,505
$
2,863,836
(2.4
%)
(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)
April 30, 2024
April 30, 2023
ASSETS
Cash and cash equivalents
$
941,005
$
844,024
Marketable securities
42,742
44,837
Receivables due from clients, net of
allowance for doubtful accounts of $44,192 and $44,377 at April 30,
2024 and 2023, respectively
541,014
569,601
Income taxes and other receivables
40,696
67,512
Unearned compensation
59,247
63,476
Prepaid expenses and other assets
49,456
49,219
Total current assets
1,674,160
1,638,669
Marketable securities, non-current
211,681
179,040
Property and equipment, net
161,849
161,876
Operating lease right-of-use assets,
net
160,464
142,690
Cash surrender value of company-owned life
insurance policies, net of loans
218,977
197,998
Deferred income taxes
133,564
102,057
Goodwill
908,376
909,491
Intangible assets, net
88,833
114,426
Unearned compensation, non-current
99,913
103,607
Investments and other assets
21,052
24,590
Total assets
$
3,678,869
$
3,574,444
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable
$
50,112
$
53,386
Income taxes payable
24,076
19,969
Compensation and benefits payable
525,466
532,934
Operating lease liability, current
36,073
45,821
Other accrued liabilities
298,792
324,150
Total current liabilities
934,519
976,260
Deferred compensation and other retirement
plans
440,396
396,534
Operating lease liability, non-current
143,507
119,220
Long-term debt
396,946
396,194
Deferred tax liabilities
4,540
5,352
Other liabilities
21,636
27,879
Total liabilities
1,941,544
1,921,439
Stockholders' equity
Common stock: $0.01 par value, 150,000
shares authorized, 77,460 and 76,693 shares issued and 51,983 and
52,269 shares outstanding at April 30, 2024 and 2023,
respectively
414,885
429,754
Retained earnings
1,425,844
1,311,081
Accumulated other comprehensive loss,
net
(107,671
)
(92,764
)
Total Korn Ferry stockholders' equity
1,733,058
1,648,071
Noncontrolling interest
4,267
4,934
Total stockholders' equity
1,737,325
1,653,005
Total liabilities and stockholders'
equity
$
3,678,869
$
3,574,444
KORN FERRY AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(dollars in thousands)
(unaudited)
Three Months Ended
April 30,
Year Ended April
30,
2024
2023
2024
2023
Net income attributable to Korn Ferry
$
65,189
$
47,494
$
169,154
$
209,529
Net income attributable to non-controlling
interest
423
640
3,407
3,525
Net income
65,612
48,134
172,561
213,054
Income tax provision
20,302
19,108
50,081
82,683
Income before provision for income
taxes
85,914
67,242
222,642
295,737
Other income, net
(7,122
)
(437
)
(30,681
)
(5,261
)
Interest expense, net
4,686
5,776
20,968
25,864
Operating income
83,478
72,581
212,929
316,340
Depreciation and amortization
19,891
17,976
77,966
68,335
Other income, net
7,122
437
30,681
5,261
Integration/acquisition costs (1)
1,809
5,450
14,866
14,922
Impairment of fixed assets (2)
—
—
1,575
4,375
Impairment of right of use assets (3)
—
—
1,629
5,471
Restructuring charges, net (4)
—
1,411
68,558
42,573
Adjusted EBITDA
$
112,300
$
97,855
$
408,204
$
457,277
Operating margin
12.1
%
9.9
%
7.7
%
11.2
%
Depreciation and amortization
2.9
%
2.5
%
2.8
%
2.4
%
Other income, net
1.0
%
0.1
%
1.1
%
0.2
%
Integration/acquisition costs (1)
0.3
%
0.7
%
0.5
%
0.5
%
Impairment of fixed assets (2)
—
%
—
%
0.1
%
0.1
%
Impairment of right of use assets (3)
—
%
—
%
0.1
%
0.2
%
Restructuring charges, net (4)
—
%
0.2
%
2.5
%
1.5
%
Adjusted EBITDA margin
16.3
%
13.4
%
14.8
%
16.1
%
Net income attributable to Korn Ferry
$
65,189
$
47,494
$
169,154
$
209,529
Integration/acquisition costs (1)
1,809
5,450
14,866
14,922
Impairment of fixed assets (2)
—
—
1,575
4,375
Impairment of right of use assets (3)
—
—
1,629
5,471
Restructuring charges, net (4)
—
1,411
68,558
42,573
Tax effect on the adjusted items (5)
(1,267
)
(1,309
)
(22,030
)
(14,719
)
Tax adjustment (6)
—
—
(9,714
)
—
Adjusted net income attributable to Korn
Ferry
$
65,731
$
53,046
$
224,038
$
262,151
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 fiscal 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
April 30,
Year Ended April
30,
2024
2023
2024
2023
Basic earnings per common share
$
1.26
$
0.91
$
3.25
$
3.98
Integration/acquisition costs (1)
0.04
0.11
0.29
0.29
Impairment of fixed assets (2)
—
—
0.03
0.08
Impairment of right of use assets (3)
—
—
0.03
0.10
Restructuring charges, net (4)
—
0.03
1.33
0.82
Tax effect on the adjusted items (5)
(0.03
)
(0.03
)
(0.43
)
(0.29
)
Tax adjustment (6)
—
—
(0.19
)
—
Adjusted basic earnings per share
$
1.27
$
1.02
$
4.31
$
4.98
Diluted earnings per common share
$
1.24
$
0.91
$
3.23
$
3.95
Integration/acquisition costs (1)
0.04
0.10
0.29
0.28
Impairment of fixed assets (2)
—
—
0.03
0.08
Impairment of right of use assets (3)
—
—
0.03
0.10
Restructuring charges, net (4)
—
0.03
1.32
0.82
Tax effect on the adjusted items (5)
(0.02
)
(0.03
)
(0.43
)
(0.29
)
Tax adjustment (6)
—
—
(0.19
)
—
Adjusted diluted earnings per share
$
1.26
$
1.01
$
4.28
$
4.94
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 fiscal 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 April
30,
2024
2023
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
182,177
$
185,130
$
32,340
17.8
%
$
175,270
$
177,985
$
24,558
14.0
%
Digital
91,304
91,361
27,991
30.7
%
91,490
91,488
23,603
25.8
%
Executive Search:
North America
125,468
127,140
33,136
26.4
%
135,300
136,926
28,686
21.2
%
EMEA
45,643
45,931
6,846
15.0
%
46,353
46,671
6,803
14.7
%
Asia Pacific
20,696
20,819
4,233
20.5
%
23,188
23,287
5,499
23.7
%
Latin America
6,896
6,906
1,275
18.5
%
7,764
7,765
1,684
21.7
%
Total Executive Search
198,703
200,796
45,490
22.9
%
212,605
214,649
42,672
20.1
%
Professional Search &
Interim
129,162
130,105
28,122
21.8
%
151,725
152,628
27,292
18.0
%
RPO
89,454
92,531
11,782
13.2
%
99,784
101,374
9,026
9.0
%
Corporate
—
—
(33,425
)
—
—
(29,296
)
Consolidated
$
690,800
$
699,923
$
112,300
16.3
%
$
730,874
$
738,124
$
97,855
13.4
%
Year Ended April 30,
2024
2023
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
(dollars in thousands)
Consulting
$
695,007
$
706,805
$
114,260
16.4
%
$
677,001
$
686,979
$
108,502
16.0
%
Digital
366,699
366,924
108,669
29.6
%
354,651
354,967
97,458
27.5
%
Executive Search:
North America
506,927
513,545
120,710
23.8
%
562,139
568,212
140,850
25.1
%
EMEA
184,516
185,552
25,902
14.0
%
187,014
188,114
31,380
16.8
%
Asia Pacific
85,863
86,273
18,923
22.0
%
95,598
95,956
24,222
25.3
%
Latin America
28,937
28,956
5,571
19.3
%
31,047
31,054
9,370
30.2
%
Total Executive Search
806,243
814,326
171,106
21.2
%
875,798
883,336
205,822
23.5
%
Professional Search &
Interim
540,615
544,453
101,868
18.8
%
503,395
507,058
110,879
22.0
%
RPO
354,107
362,997
40,399
11.4
%
424,563
431,496
52,588
12.4
%
Corporate
—
—
(128,098
)
—
—
(117,972
)
Consolidated
$
2,762,671
$
2,795,505
$
408,204
14.8
%
$
2,835,408
$
2,863,836
$
457,277
16.1
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240606730247/en/
Investor Relations: Tiffany Louder, (214) 310-8407 Media: Dan
Gugler, (310) 226-2645
Korn Ferry (NYSE:KFY)
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Korn Ferry (NYSE:KFY)
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