Korn Ferry 10-Q for FY2023 Q1

Korn Ferry (KFY)

10-Q 2022-09-08 For: 2022-07-31

Added on April 04, 2026

About this 10-Q

Korn Ferry filed this 10-Q on September 8, 2022, covering the quarter ended July 31, 2022 (FY2023 Q1).

Headline figures

Quarter ended July 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $703.15M; up 19.6% from $588.1M a year earlier
Net income: $77.25M; up 3.2% from net income of $74.82M a year earlier
Diluted EPS: $1.45; up 5.8% from $1.37 a year earlier

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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 ☐

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

Item #	Description	Page

	Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of July 31, 2022 (unaudited) and April 30, 2022	1

	Consolidated Statements of Income (unaudited) for the three months ended July 31, 2022 and 2021	2

	Consolidated Statements of Comprehensive Income (unaudited) for the three months ended July 31, 2022 and 2021	3

	Consolidated Statements of Stockholders’ Equity (unaudited) for three months ended July 31, 2022 and 2021	4

	Consolidated Statements of Cash Flows (unaudited) for the three months ended July 31, 2022 and 2021	5

	Notes to Consolidated Unaudited Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	38

	Part II. Other Information

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6.	Exhibits	40

	Signatures	41

	July 31, 2022			April 30, 2022
	(unaudited)
	(in thousands, except per share data)
ASSETS
Cash and cash equivalents	$	639,784		$	978,070
Marketable securities		71,172			57,244
Receivables due from clients, net of allowance for doubtful accounts of $39,432 and $36,384 at July 31, 2022 and April 30, 2022, respectively		637,061			590,260
Income taxes and other receivables		35,186			31,884
Unearned compensation		60,726			60,749
Prepaid expenses and other assets		53,363			41,763
Total current assets		1,497,292			1,759,970

Marketable securities, non-current		185,492			175,783
Property and equipment, net		147,117			138,172
Operating lease right-of-use assets, net		158,918			167,734
Cash surrender value of company-owned life insurance policies, net of loans		184,742			183,308
Deferred income taxes		81,422			84,712
Goodwill		724,426			725,592
Intangible assets, net		84,167			89,770
Unearned compensation, non-current		117,346			118,238
Investments and other assets		23,157			21,267
Total assets	$	3,204,079		$	3,464,546
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	55,003		$	50,932
Income taxes payable		37,552			34,450
Compensation and benefits payable		250,818			547,826
Operating lease liability, current		46,700			48,609
Other accrued liabilities		295,981			302,408
Total current liabilities		686,054			984,225

Deferred compensation and other retirement plans		380,137			357,175
Operating lease liability, non-current		140,611			151,212
Long-term debt		395,653			395,477
Deferred tax liabilities		4,052			2,715
Other liabilities		26,338			24,153
Total liabilities		1,632,845			1,914,957

Stockholders' equity
Common stock: $0.01 par value, 150,000 shares authorized, 76,568 and 75,409 shares issued and 53,502 and 53,190 shares outstanding at July 31, 2022 and April 30, 2022, respectively		470,127			502,008
Retained earnings		1,203,067			1,134,523
Accumulated other comprehensive loss, net		(108,444	)		(92,185	)
Total Korn Ferry stockholders' equity		1,564,750			1,544,346
Noncontrolling interest		6,484			5,243
Total stockholders' equity		1,571,234			1,549,589
Total liabilities and stockholders' equity	$	3,204,079		$	3,464,546

	Three Months Ended July 31,
	2022			2021
	(in thousands, except per share data)
Fee revenue	$	695,903		$	585,395
Reimbursed out-of-pocket engagement expenses		7,245			2,703
Total revenue		703,148			588,098

Compensation and benefits		465,626			396,236
General and administrative expenses		64,457			50,267
Reimbursed expenses		7,245			2,703
Cost of services		37,992			21,993
Depreciation and amortization		16,229			15,644
Total operating expenses		591,549			486,843

Operating income		111,599			101,255
Other income, net		775			4,447
Interest expense, net		(7,612	)		(5,426	)
Income before provision for income taxes		104,762			100,276
Income tax provision		26,226			23,879
Net income		78,536			76,397
Net income attributable to noncontrolling interest		(1,289	)		(1,574	)
Net income attributable to Korn Ferry	$	77,247		$	74,823

Earnings per common share attributable to Korn Ferry:
Basic	$	1.46		$	1.38
Diluted	$	1.45		$	1.37

Weighted-average common shares outstanding:
Basic		51,771			52,760
Diluted		52,106			53,320

Cash dividends declared per share:	$	0.15		$	0.12

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

	Foreign Currency Translation			Deferred Compensation and Pension Plan		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 arising during the period		(16,257	)		—		(53	)		(16,310	)
Reclassification of realized net losses to net income		—			51		—			51
Balance as of July 31, 2022	$	(108,974	)	$	1,012	$	(482	)	$	(108,444	)

	Shares			Weighted- Average Grant Date Fair Value
	(in thousands, except per share data)
Non-vested, April 30, 2022		1,980		$	40.32
Granted		1,047		$	46.74
Vested		(963	)	$	37.12
Forfeited/expired		(11	)	$	54.08
Non-vested, July 31, 2022		2,053		$	49.01

	July 31, 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		Income Taxes & Other Receivables
	(in thousands)
Changes in Fair Value Recorded in
Other Comprehensive Loss
Level 2:
Commercial paper	$	35,709	$	—	$	(180	)	$	35,529	$	—	$	35,529	$	—	$	—
Corporate notes/bonds		43,600		8		(470	)		43,138		—		24,138		19,000		—
U.S. Treasury and Agency Securities		996		—		(10	)		986		—		986		—		—
Total debt investments	$	80,305	$	8	$	(660	)	$	79,653	$	—	$	60,653	$	19,000	$	—

Changes in Fair Value Recorded in
Net Income
Level 1:
Mutual funds (1)								$	177,011	$	—	$	10,519	$	166,492	$	—
Total equity investments								$	177,011	$	—	$	10,519	$	166,492	$	—
Cash								$	577,195	$	577,195	$	—	$	—	$	—
Money market funds									62,589		62,589		—		—		—
Level 2:
Foreign currency forward contracts									497		—		—		—		497
Total								$	896,945	$	639,784	$	71,172	$	185,492	$	497

	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	)

	Three Months Ended July 31,
	2022					2021
	Dollars		%			Dollars		%
	(dollars in thousands)
Industrial	$	195,909		28.2	%	$	149,356		25.5	%
Life Sciences/Healthcare		133,204		19.1			115,190		19.7
Technology		122,652		17.6			94,934		16.2
Financial Services		118,799		17.1			105,649		18.0
Consumer Goods		95,948		13.8			81,564		13.9
Education/Non–Profit/General		29,391		4.2			38,702		6.7
Fee Revenue	$	695,903		100.0	%	$	585,395		100.0	%

	(in thousands)
Balance at April 30, 2022	$	36,384
Provision for credit losses		5,546
Write-offs		(2,601	)
Recoveries of amounts previously written off		586
Foreign currency translation		(483	)
Balance at July 31, 2022	$	39,432

	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 July 31, 2022
Commercial paper	$	33,831	$	178	$	1,698	$	2	$	—	$	35,529	$	—
Corporate notes/bonds	$	31,566	$	447	$	9,153	$	23	$	—	$	24,137	$	16,582
U.S. Treasury and Agency Securities	$	986	$	10	$	—	$	—	$	—	$	986	$	—
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 and further excludes integration/acquisition costs.

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

In thousands	July 31, 2022			April 30, 2022
Senior Unsecured Notes	$	400,000		$	400,000
Less: Unamortized discount and issuance costs		(4,347	)		(4,523	)
Long-term borrowings, net of unamortized discount and debt issuance costs	$	395,653		$	395,477

Year Ending April 30,	Operating		Financing
	(in thousands)
2023 (excluding the three months ended July 31, 2022)	$	40,153	$	1,151
2024		47,870		1,245
2025		40,610		1,001
2026		37,324		716
2027		17,940		522
Thereafter		24,736		388
Total lease payments		208,633		5,023
Less: imputed interest		21,322		445
Total	$	187,311	$	4,578

	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)

May 1, 2022— May 31, 2022		174,120	$	61.61		174,120	$18.4 million
June 1, 2022— June 30, 2022		41,227	$	57.52		40,000	$316.1 million
July 1, 2022— July 31, 2022		519,984	$	59.96		155,747	$306.7 million
Total		735,331	$	60.21		369,867

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*		First Amendment to Credit Agreement, dated June 24, 2022, by and among Korn Ferry, Bank of America, N.A., as administrative agent, and other lender parties thereto, filed as Exhibit 10.43 to the Company’s Annual Report on Form 10-K.
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 July 31, 2022, has been formatted in Inline XBRL and included as Exhibit 101.

	Korn Ferry
Date: September 8, 2022
	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)

By:		/s/ GARY D. BURNISON
Name:		Gary D. Burnison
Title:		Chief Executive Officer and President