KFY 10-Q

Korn Ferry (KFY)

10-Q 2023-03-10 For: 2023-01-31

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Added on April 04, 2026

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Delaware						95-2623879
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	KFY	New York Stock Exchange


			Large Accelerated Filer ☑			Accelerated filer o

			Non-accelerated filer o			Smaller reporting company o
						Emerging growth company o


Item #	Description	Page

	Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of January 31, 202 3 (unaudited) and April 30, 2022	1

	Consolidated Statements of Income (unaudited) for the three and nine months ended January 31, 202 3 and 20 2 2	2

	Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended January 31, 202 3 and 20 2 2	3

	Consolidated Statements of Stockholders’ Equity (unaudited) for three and nine months ended January 31, 202 3 and 20 2 2	4

	Consolidated Statements of Cash Flows (unaudited) for the nine months ended January 31, 202 3 and 20 2 2	6

	Notes to Consolidated Unaudited Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4.	Controls and Procedures	52

	Part II. Other Information

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 6.	Exhibits	54

	Signatures	55


	January 31, 2023		April 30, 2022
	(unaudited)
	(in thousands, except per share data)
ASSETS
Cash and cash equivalents	$	771,898	$	978,070
Marketable securities	48,253		57,244
Receivables due from clients, net of allowance for doubtful accounts of $43,606 and $36,384 at January 31, 2023 and April 30, 2022, respectively	628,693		590,260
Income taxes and other receivables	65,079		31,884
Unearned compensation	59,899		60,749
Prepaid expenses and other assets	39,605		41,763
Total current assets	1,613,427		1,759,970

Marketable securities, non-current	187,646		175,783
Property and equipment, net	154,983		138,172
Operating lease right-of-use assets, net	140,777		167,734
Cash surrender value of company-owned life insurance policies, net of loans	198,634		183,308
Deferred income taxes	93,403		84,712
Goodwill	793,285		725,592
Intangible assets, net	88,895		89,770
Unearned compensation, non-current	110,958		118,238
Investments and other assets	24,180		21,267
Total assets	$	3,406,188	$	3,464,546
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	42,035	$	50,932
Income taxes payable	17,005		34,450
Compensation and benefits payable	405,584		547,826
Operating lease liability, current	45,234		48,609
Other accrued liabilities	346,489		302,408
Total current liabilities	856,347		984,225

Deferred compensation and other retirement plans	393,155		357,175
Operating lease liability, non-current	118,438		151,212
Long-term debt	396,011		395,477
Deferred tax liabilities	2,336		2,715
Other liabilities	26,887		24,153
Total liabilities	1,793,174		1,914,957

Stockholders' equity
Common stock: $0.01 par value, 150,000 shares authorized, 76,691 and 75,409 shares issued and 52,522 and 53,190 shares outstanding at January 31, 2023 and April 30, 2022, respectively.	434,163		502,008
Retained earnings	1,271,618		1,134,523
Accumulated other comprehensive loss, net	(96,802)		(92,185)
Total Korn Ferry stockholders' equity	1,608,979		1,544,346
Noncontrolling interest	4,035		5,243
Total stockholders' equity	1,613,014		1,549,589
Total liabilities and stockholders' equity	$	3,406,188	$	3,464,546


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended January 31,				Nine Months Ended January 31,
	2023		2022		2023		2022

	(in thousands, except per share data)
Fee revenue	$	680,782	$	680,741	$	2,104,534	$	1,905,579
Reimbursed out-of-pocket engagement expenses	6,063		4,215		21,178		10,873
Total revenue	686,845		684,956		2,125,712		1,916,452

Compensation and benefits	479,382		445,870		1,409,774		1,273,746
General and administrative expenses	72,785		60,811		202,328		175,143
Reimbursed expenses	6,063		4,215		21,178		10,873
Cost of services	57,903		31,666		157,152		77,988
Depreciation and amortization	17,037		16,104		50,359		47,381
Restructuring charges, net	41,162		—		41,162		—
Total operating expenses	674,332		558,666		1,881,953		1,585,131

Operating income	12,513		126,290		243,759		331,321
Other income (loss), net	13,097		(7,277)		4,824		2,236
Interest expense, net	(5,378)		(7,029)		(20,088)		(18,820)
Income before provision for income taxes	20,232		111,984		228,495		314,737
Income tax provision	8,463		26,927		63,575		76,951
Net income	11,769		85,057		164,920		237,786
Net income attributable to noncontrolling interest	(522)		(956)		(2,885)		(3,090)
Net income attributable to Korn Ferry	$	11,247	$	84,101	$	162,035	$	234,696

Earnings per common share attributable to Korn Ferry:
Basic	$	0.21	$	1.55	$	3.07	$	4.33
Diluted	$	0.21	$	1.54	$	3.05	$	4.28

Weighted-average common shares outstanding:
Basic	51,278		52,999		51,639		52,958
Diluted	51,431		53,495		51,999		53,538

Cash dividends declared per share:	$	0.15	$	0.12	$	0.45	$	0.36


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss, Net		Total Korn Ferry Stockholders' Equity		Noncontrolling Interest		Total Stockholder's Equity
	Shares	Amount

	(in thousands)
Balance as of April 30, 2022	53,190	$	502,008	$	1,134,523	$	(92,185)	$	1,544,346	$	5,243	$	1,549,589
Net income	—	—		77,247		—		77,247		1,289		78,536
Other comprehensive loss	—	—		—		(16,259)		(16,259)		(48)		(16,307)
Dividends paid to shareholders	—	—		(8,703)		—		(8,703)		—		(8,703)
Purchase of stock	(735)	(44,276)		—		—		(44,276)		—		(44,276)
Issuance of stock	1,047	4,857		—		—		4,857		—		4,857
Stock-based compensation	—	7,538		—		—		7,538		—		7,538
Balance as of July 31, 2022	53,502	470,127		1,203,067		(108,444)		1,564,750		6,484		1,571,234
Net income	—	—		73,541		—		73,541		1,074		74,615
Other comprehensive loss	—	—		—		(28,221)		(28,221)		243		(27,978)
Dividends paid to shareholders	—	—		(8,171)		—		(8,171)		—		(8,171)
Dividends paid to noncontrolling interest	—	—		—		—		—		(3,133)		(3,133)
Purchase of stock	(627)	(33,286)		—		—		(33,286)		—		(33,286)
Issuance of stock	34	—		—		—		—		—		—
Stock-based compensation	—	9,439		—		—		9,439		—		9,439
Balance as of October 31, 2022	52,909	446,280		1,268,437		(136,665)		1,578,052		4,668		1,582,720
Net income	—	—		11,247		—		11,247		522		11,769
Other comprehensive income	—	—		—		39,863		39,863		433		40,296
Dividends paid to shareholders	—	—		(8,066)		—		(8,066)		—		(8,066)
Dividends paid to noncontrolling interest	—	—		—		—		—		(1,588)		(1,588)
Purchase of stock	(464)	(25,062)		—		—		(25,062)		—		(25,062)
Issuance of stock	77	3,595		—		—		3,595		—		3,595
Stock-based compensation	—	9,350		—		—		9,350		—		9,350
Balance as of January 31, 2023	52,522	$	434,163	$	1,271,618	$	(96,802)	$	1,608,979	$	4,035	$	1,613,014


			KORN FERRY AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS January 31, 2023


	Foreign Currency Translation		Deferred Compensation and Pension Plan		Unrealized Losses on Marketable Securities (1)		Accumulated Other Comprehensive Loss

	(in thousands)
Balance as of October 31, 2022	$	(136,991)	$	1,066	$	(740)	$	(136,665)
Unrealized gains arising during the period	39,482		—		321		39,803
Reclassification of realized net losses to net income	—		60		—		60
Balance as of January 31, 2023	$	(97,509)	$	1,126	$	(419)	$	(96,802)


	Foreign Currency Translation		Deferred Compensation and Pension Plan (2)		Unrealized Losses on Marketable Securities		Accumulated Other Comprehensive Loss

	(in thousands)
Balance as of April 30, 2022	$	(92,717)	$	961	$	(429)	$	(92,185)
Unrealized (losses) gains arising during the period	(4,792)		—		10		(4,782)
Reclassification of realized net losses to net income	—		165		—		165
Balance as of January 31, 2023	$	(97,509)	$	1,126	$	(419)	$	(96,802)


(1)			The tax effect on the unrealized gains was $0.1 million for three months ended January 31, 2023.
(2)			The tax effect on the reclassifications of realized net losses was $0.1 million for the nine months ended January 31, 2023.


(1)			The tax effect on unrealized (losses) gains were both $0.3 million for the three and nine months ended January 31, 2022. The tax effect on the reclassifications of realized net losses was $0.1 million and $0.3 million for the three and nine months ended January 31, 2022.


	Shares	Weighted- Average Grant Date Fair Value

	(in thousands, except per share data)
Non-vested, April 30, 2022	1,980	$	40.32
Granted	1,123	$	49.11
Vested	(1,002)	$	37.69
Forfeited/expired	(36)	$	55.73
Non-vested, January 31, 2023	2,065	$	50.08


	April 30, 2022
	Fair Value Measurement								Balance Sheet Classification
	Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non-current		Other Accrued Liabilities

	(in thousands)
Changes in Fair Value Recorded in
Other Comprehensive Loss
Level 2:
Commercial paper	$	41,627	$	—	$	(126)	$	41,501	$	15,489	$	26,012	$	—	$	—
Corporate notes/bonds	37,736		—		(450)		37,286		—		20,242		17,044		—
U.S. Treasury and Agency Securities	995		—		(8)		987		—		987		—		—
Total debt investments	$	80,358	$	—	$	(584)	$	79,774	$	15,489	$	47,241	$	17,044	$	—

Changes in Fair Value Recorded in
Net Income
Level 1:
Mutual funds (1)							$	168,742	$	—	$	10,003	$	158,739	$	—
Total equity investments							$	168,742	$	—	$	10,003	$	158,739	$	—
Cash							$	874,490	$	874,490	$	—	$	—	$	—
Money market funds							88,091		88,091		—		—		—
Level 2:
Foreign currency forward contracts							(204)		—		—		—		(204)
Total							$	1,210,893	$	978,070	$	57,244	$	175,783	$	(204)


	January 31, 2023
	Fair Value Measurement								Balance Sheet Classification
	Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non- current		Income Taxes & Other Receivables

	(in thousands)
Changes in Fair Value Recorded in
Other Comprehensive Loss
Level 2:
Commercial paper	$	16,294	$	—	$	(79)	$	16,215	$	—	$	16,215	$	—	$	—
Corporate notes/bonds	31,363		1		(489)		30,875		—		23,572		7,303		—

Total debt investments	$	47,657	$	1	$	(568)	$	47,090	$	—	$	39,787	$	7,303	$	—

Changes in Fair Value Recorded in
Net Income
Level 1:
Mutual funds (1)							$	188,809	$	—	$	8,466	$	180,343	$	—
Total equity investments							$	188,809	$	—	$	8,466	$	180,343	$	—
Cash							$	735,392	$	735,392	$	—	$	—	$	—
Money market funds							36,506		36,506		—		—		—
Level 2:
Foreign currency forward contracts							1,303		—		—		—		1,303
Total							$	1,009,100	$	771,898	$	48,253	$	187,646	$	1,303


(1)			These investments are held in trust for settlement of the Company’s vested obligations of $173.7 million and $160.8 million as of January 31, 2023 and April 30, 2022, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans). Unvested obligations under the deferred compensation plans totaled $22.3 million and $24.0 million as of January 31, 2023 and April 30, 2022, respectively. During the three and nine months ended January 31, 2023, the fair value of the investments increased; therefore, the Company recognized a gain of $12.7 million and $3.0 million, respectively, which was recorded in other income (loss), net. During the three months ended January 31, 2022, the fair value of the investments decreased; therefore, the Company recognized a loss of $7.7 million, which was recorded in other income (loss), net. During the nine months ended January 31, 2022, the fair value of the investments increased; therefore, the Company recognized a gain of $2.4 million, which was recorded in other income (loss), net.


(1)			The expected long-term rate of return on plan assets was 5.50% and 6.00% for January 31, 2023 and 2022, respectively.


(2)			The service cost, interest cost and the other components of net periodic benefit costs are included in compensation and benefits expense, interest expense, net and other income (loss), net, respectively, on the consolidated statements of income.


	Three Months Ended January 31,
	2023				2022
	Dollars		%		Dollars		%

	(dollars in thousands)
Industrial	$	199,341	29.3	%	$	181,016	26.6	%
Life Sciences/Healthcare	125,064		18.4		126,840		18.6
Financial Services	117,880		17.3		121,459		17.8
Technology	112,218		16.5		124,903		18.4
Consumer Goods	88,631		13.0		97,210		14.3
Education/Non–Profit/General	37,648		5.5		29,313		4.3
Fee Revenue	$	680,782	100.0	%	$	680,741	100.0	%


	Nine Months Ended January 31,
	2023				2022
	Dollars		%		Dollars		%

	(dollars in thousands)
Industrial	$	601,698	28.6	%	$	500,078	26.2	%
Life Sciences/Healthcare	391,863		18.6		370,009		19.4
Financial Services	367,878		17.5		341,099		17.9
Technology	359,475		17.1		323,504		17.0
Consumer Goods	283,859		13.5		271,233		14.2
Education/Non–Profit/General	99,761		4.7		99,656		5.3
Fee Revenue	$	2,104,534	100.0	%	$	1,905,579	100.0	%


	(in thousands)
Balance at April 30, 2022	$	36,384
Provision for credit losses	16,725
Write-offs	(10,116)
Recoveries of amounts previously written off	598
Foreign currency translation	15
Balance at January 31, 2023	$	43,606


	Less Than 12 Months				12 Months or longer				Balance Sheet Classification
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Cash and Cash Equivalent		Marketable Securities, Current		Marketable Securities, Non- Current

	(in thousands)
Balance at January 31, 2023
Commercial paper	$	13,567	$	78	$	2,648	$	1	$	—	$	16,215	$	—
Corporate notes/bonds	$	13,454	$	211	$	14,160	$	278	$	—	$	20,311	$	7,303

Balance at April 30, 2022
Commercial paper	$	37,002	$	125	$	4,499	$	1	$	15,489	$	26,012	$	—
Corporate notes/bonds	$	32,186	$	446	$	3,800	$	4	$	—	$	18,942	$	17,044
U.S. Treasury and Agency Securities	$	987	$	8	$	—	$	—	$	—	$	987	$	—


(1)			Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further excludes integration/acquisition costs, impairment of fixed assets, impairment of right-of-use assets, and restructuring charges, net.


Year			Percentage
2022			102.313%
2023			101.156%
2024 and thereafter			100.000%


In thousands	January 31, 2023		April 30, 2022
Senior Unsecured Notes	$	400,000	$	400,000
Less: Unamortized discount and issuance costs	(3,989)		(4,523)
Long-term borrowings, net of unamortized discount and debt issuance costs	$	396,011	$	395,477


Year Ending April 30,	Operating		Financing

	(in thousands)
2023 (excluding the nine months ended January 31, 2023)	$	12,944	$	390
2024	49,150		1,385
2025	40,665		1,144
2026	36,751		796
2027	18,780		538
Thereafter	22,323		396
Total lease payments	180,613		4,649
Less: imputed interest	16,941		389
Total	$	163,672	$	4,260


	Restructuring Liability
	(in thousands)
As of October 31, 2022	$	463
Restructuring charges, net	41,162
Reductions for cash payments	(7,634)
Reductions for non-cash payments	(10,827)
Exchange rate fluctuations	133
As of January 31, 2023	$	23,297


	Restructuring Liability
	(in thousands)
As of April 30, 2022	$	1,502
Restructuring charges, net	41,162
Reductions for cash payments	(8,067)
Reductions for non-cash payments	(10,827)
Exchange rate fluctuations	(473)
As of January 31, 2023	$	23,297


	(in thousands)
Current assets (1)	$	19,932
Long-term assets	1,496
Intangible assets (2)	16,400
Current liabilities	6,248
Long-term liabilities	566
Net assets acquired	31,014
Purchase price	99,322
Goodwill (3)	$	68,308


(1)			Included in current assets is acquired receivables in the amount of $19.4 million.
(2)			Acquisition-related intangible assets acquired in connection with the acquisition consists of customer relationships and tradenames of $15.3 million, and $1.1 million, respectively, with weighted-average useful lives from the date of purchase of seven years, and two years, respectively.
(3)			Tax deductible goodwill from the acquisition was $66.0 million as of January 31, 2023.


	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly- Announced Programs	Approximate Dollar Value of Shares That May Yet be Purchased Under the Programs (2)
November 1, 2022— November 30, 2022	210,000	$	55.67	210,000	$261.9 million
December 1, 2022— December 31, 2022	153,358	$	52.38	152,500	$254.0 million
January 1, 2023— January 31, 2023	100,566	$	53.08	100,000	$248.6 million
Total	463,924	$	54.02	462,500


Exhibit Number						Description
3.1*						Restated Certificate of Incorporation of the Company, dated January 7, 2019, filed as Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q, filed March 11, 2019.
3.2*						Seventh Amended and Restated Bylaws, effective January 1, 2019, filed as Exhibit 3.2 to the Company’s Report on Form 8-K, filed December 13, 2018.
10.1+						Summary of Non-Employee Director Compensation Program as effective December 15, 2022.
31.1						Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
31.2						Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
32.1						Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
101.INS						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2023, has been formatted in Inline XBRL and included as Exhibit 101.


	Korn Ferry
Date: March 10, 2023
	By:	/s/ Robert P. Rozek
		Robert P. Rozek
		Executive Vice President, Chief Financial Officer and Chief Corporate Officer (Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)