KORN FERRY Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain certain statements that we
believe are, or may be considered to be, "forward-looking" statements, within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements generally can be identified by use of
statements that include phrases such as "believe," "expect," "anticipate,"
"intend," "plan," "foresee," "may," "will," "likely," "estimates," "potential,"
"continue" or other similar words or phrases. Similarly, statements that
describe our objectives, plans or goals, as well as the magnitude and duration
of the impact of the global ("COVID-19") pandemic on our business, employees,
customers and our ability to provide services in affected regions. These
forward-looking statements are subject to risks and uncertainties that could
cause our actual results to differ materially from those contemplated by the
relevant forward-looking statement. The principal risk factors that could cause
actual performance and future actions to differ materially from the
forward-looking statements include, but are not limited to, those relating to
the ultimate magnitude and duration of COVID-19 and of any future pandemics or
similar outbreaks, and related restrictions and operational requirements that
apply to our business and the businesses of our clients, and any related
negative impacts on our business, employees, customers and our ability to
provide services in affected regions, global and local political and or economic
developments in or affecting countries where we have operations, competition,
changes in demand for our services as a result of automation, dependence on and
costs of attracting and retaining qualified and experienced consultants,
maintaining our 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 governmental laws and regulations, evolving investor and
customer expectations with regard to environmental matters, currency
fluctuations in our international operations, risks related to growth, alignment
of our cost structure, 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 and develop new technology,
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, the impact of the
The following presentation of management's discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. We also make available on the Investor Relations portion of our website earnings slides and other important information, which we encourage you to review.
Executive Summary
We are pursuing a strategy that will help
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Our seven reportable segments operate through the following four lines of business:
1. Consulting aligns organization structure, culture, performance and people to
drive sustainable growth by addressing four fundamental needs: Organizational
Strategy, Assessment and Succession, Leadership and Professional Development ,
and Total Rewards. This work is supported by a comprehensive range of some of
the world's leading lP and data.
2. Digital leverages an artificial intelligence ("AI") powered, machine-learning
platform to identify the best structures, roles, capabilities and behaviors
needed to drive business forward. The end-to-end system combines Korn Ferry
proprietary data, client data, and external market data to generate insight
and recommend action.
3. Executive Search helps organizations recruit board level, chief executive and
other senior executive and general management talent. Behavioral interviewing
and proprietary assessments are used to determine ideal organizational fit,
and salary benchmarking builds appropriate frameworks for compensation and
retention.
4. RPO & Professional Search combines people, process expertise and IP-enabled
technology to deliver enterprise talent acquisition solutions to clients.
Transaction sizes range from single professional searches to team, department
and line of business projects, and global outsource recruiting solutions.
The Company has seven reportable segments: Consulting, Digital, Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific, Executive Search Latin America and RPO & Professional Search.
? Approximately 75% of the executive searches we performed in fiscal 2021 were
for board level, chief executive and other senior executive and general
management positions. Our 3,635 search engagement clients in fiscal 2021
included many of the world's largest and most prestigious public and private
companies.
? We have built strong client loyalty, with 90% of the assignments performed
during fiscal 2021 having been on behalf of clients for whom we had conducted
assignments in the previous three fiscal years.
? Approximately 70% of our revenues were generated from clients that have
utilized multiple lines of our business.
? A vital pillar of our growth strategy is Digital. Our data and IP are
embedded into the core business processes of our clients, helping us generate
long-term relationships through large scale and technology-based talent
programs.
? In fiscal 2021, Korn Ferry was recognized as one of the top RPO providers in
the Baker's Dozen list, marking our 14th consecutive year on the list. We
were also named leader on the Everest PEAK Matrix for four years running and
achieved star performer status in 2021, with an improved leader position from
2020. Through decades of experience, we have enhanced our RPO solution to
deliver quality candidates that drive our clients' business strategies. We
leverage proprietary IP and data sets to guide clients on the critical skills
and competencies to look for, compensation information to align with market
demand, and assessment tools to ensure candidate fit. In fiscal 2021, we
introduced Nimble, a new, fully integrated recruitment technology solution
incorporating Candidate Relationship Management, AI Assistance & Screening
and Korn Ferry Assessments.
The Impact of COVID-19
In
While advances have been made in the science and societal and economic consequences of COVID-19, there remains significant uncertainty about the future impacts of COVID-19. On the positive side, governments around the world have begun distributing and administering the vaccine. In addition, the world has adopted new ways of working and interacting with
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substantial acceptance of business being conducted in a virtual world. On the
negative side, there is a new more contagious variant of the virus that is
infecting areas around the world, including portions of
Performance Highlights
The Company evaluates performance and allocates resources based on the chief
operating decision maker's review of (1) fee revenue and (2) adjusted earnings
before interest, taxes, depreciation and amortization ("Adjusted EBITDA"). To
the extent that such charges occur, Adjusted EBITDA excludes restructuring
charges, integration/acquisition costs, certain separation costs and certain
non-cash charges (goodwill, intangible asset and other than temporary
impairments of investments). For the three months ended
Consolidated and the subtotals of Executive Search Adjusted EBITDA and Adjusted
EBITDA margin are non-GAAP financial measures and have limitations as analytical
tools. They should not be viewed as a substitute for financial information
determined in accordance with
Management believes the presentation of these non-GAAP financial measures
provides meaningful supplemental information regarding
Fee revenue was
Our cash, cash equivalents and marketable securities decreased by
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which these assets were held in trust totaled
Our working capital increased by
Results of Operations
The following table summarizes the results of our operations as a percentage of fee revenue:
(Numbers may not total exactly due to rounding)
Three Months Ended
July 31,
2021 2020
Fee revenue 100.0 % 100.0 %Reimbursed out-of-pocket engagement expenses 0.5 0.8 Total revenue
100.5 100.8
Compensation and benefits 67.7 82.5
General and administrative expenses 8.6 13.7
Reimbursed expenses 0.5 0.8
Cost of services 3.8 4.1
Depreciation and amortization 2.7 4.4
Restructuring charges, net - 8.0
Operating income (loss) 17.3 (12.7 )
Net income (loss) 13.1 % (9.0 %)
Net income (loss) attributable to
The following tables summarize the results of our operations:
(Numbers may not total exactly due to rounding)
Three Months Ended
July 31,
2021 2020
Dollars % Dollars %
(dollars in thousands)
Fee revenue
Consulting $ 148,478 25.3 % $ 99,318 28.9 %
Digital 80,671 13.8 55,973 16.3
Executive Search:
North America 138,678 23.7 69,315 20.1
EMEA 42,747 7.3 30,081 8.8
Asia Pacific 28,703 4.9 17,252 5.0
Latin America 6,776 1.2 3,495 1.0
Total Executive Search 216,904 37.1 120,143 34.9
RPO & Professional Search 139,342 23.8 68,663 19.9
Total fee revenue 585,395 100.0 % 344,097 100.0 %
Reimbursed out-of-pocket engagement expense 2,703 2,786
Total revenue $ 588,098 $ 346,883
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In the tables that follow, the Company presents a subtotal for Executive Search Adjusted EBITDA and a single percentage for Executive Search Adjusted EBITDA margin, which reflects the aggregate of all of the individual Executive Search Regions. These figures are non-GAAP financial measures and are presented as they are consistent with the Company's lines of business and are financial metrics used by the Company's investor base.
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