Korn Ferry Announces Third Quarter Fiscal 2022

Results of Operations

Highlights

▪

Korn Ferry reports quarterly fee revenue of $680.7 million in Q3 FY'22, an increase of 43% from Q3 FY'21 and a sequential increase of 6% from Q2 FY'22.

▪

Net income attributable to Korn Ferry of $84.1 million and diluted and adjusted diluted earnings per share of $1.54 and $1.59 in Q3 FY'22, respectively, all reaching new highs.

▪

Operating income and Adjusted EBITDA both reached new highs in Q3 FY'22 at $126.3 million (operating margin of 18.6%) and $138.3 million (Adjusted EBITDA margin of 20.3%), respectively.

▪

The Company repurchased 304,500 shares of stock during the quarter for $22.1 million.

▪

Declared a quarterly dividend of $0.12 per share on March 8, 2022, which is payable on April 14, 2022, to stockholders of record on March 28, 2022.

▪

During the third quarter, the Company completed the acquisition of Lucas Group, which is included in the RPO and Professional Search segment.

Los Angeles, CA, March 9, 2022 - Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced third quarter fee revenue of $680.7 million, a new quarterly high. In addition, third quarter diluted earnings per share was $1.54 and adjusted diluted earnings per share was $1.59, both are new highs.

"I am extremely pleased with our results during the fiscal third quarter, as Korn Ferry once again achieved new financial performance highs. We generated $681 million in fee revenue, up 43% year over year and a new quarterly high. Our diluted and adjusted diluted earnings per share, at $1.54 and $1.59, respectively, were also new highs," said Gary D. Burnison, CEO, Korn Ferry.

"Our solid performance over recent quarters is a reflection of the relevance of our strategy and solutions, the resilience of our colleagues, and the connection with our Korn Ferry brand," Burnison added. "We are replicating and scaling our success and continuing to lead innovation at the intersection of talent and strategy in a digitally-enabled new world of work."

1

Selected Financial Results

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

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Fee revenue

$

680.7

$

475.4

$

1,905.6

$

1,254.9

Total revenue

$

685.0

$

477.9

$

1,916.5

$

1,262.6

Operating income

$

126.3

$

65.2

$

331.3

$

69.5

Operating margin

18.6

%

13.7

%

17.4

%

5.5

%

Net income attributable to Korn Ferry

$

84.1

$

51.3

$

234.7

$

48.3

Basic earnings per share

$

1.55

$

0.95

$

4.33

$

0.89

Diluted earnings per share

$

1.54

$

0.94

$

4.28

$

0.88

Adjusted Results (b):

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Adjusted EBITDA

$

138.3

$

96.7

$

394.5

$

173.4

Adjusted EBITDA margin

20.3

%

20.3

%

20.7

%

13.8

%

Adjusted net income attributable to Korn Ferry

$

86.9

$

51.9

$

245.7

$

71.1

Adjusted basic earnings per share

$

1.60

$

0.96

$

4.53

$

1.31

Adjusted diluted earnings per share

$

1.59

$

0.95

$

4.48

$

1.30

___________

(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 net restructuring charges when applicable. Adjusted results on a consolidated basis are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations):

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Integration/acquisition costs

$

3.2

$

-

$

4.3

$

0.7

Impairment of fixed assets

$

-

$

-

$

1.9

$

-

Impairment of right of use assets

$

-

$

-

$

7.4

$

-

Restructuring charges, net

$

-

$

0.8

$

-

$

30.7

The Company reported fee revenue in Q3 FY'22 of $680.7 million, an increase of 43% (up 46% on a constant currency basis) compared to Q3 FY'21. Fee revenue increased in all lines of business. The increase in fee revenue when compared to Q3 FY'21 was primarily due to an increase in new business in the quarter driven by the increased relevance of the Company's solutions.

Operating margin was 18.6% in Q3 FY'22 compared to 13.7% in the year-ago quarter. Adjusted EBITDA margin was 20.3% in both Q3 FY'22 and Q3 FY'21. Net income attributable to Korn Ferry was $84.1 million compared to $51.3 million in Q3 FY'21.

The year-over-year improvement in operating margin was due to the increase in fee revenue discussed above, improved productivity resulting from work being conducted virtually, and cost savings from the structural changes made to the Company's business during the pandemic. Partially offsetting this were increases in compensation and benefits expense, general and administrative expenses and cost of services expense. The increase in compensation and benefits expense was driven by higher salaries and related payroll taxes and performance-related bonus expense. The increase in general and administrative expenses was primarily due to the acquisition of the Lucas Group along with the associated integration and acquisition costs. The higher cost of services expense was primarily due to the Lucas Group acquisition.

Adjusted EBITDA margin remained unchanged compared to the year-ago quarter.

2

Results by Line of Business

Selected Consulting Data

(dollars in millions) (a)

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Fee revenue

$

162.9

$

136.3

$

476.3

$

362.3

Total revenue

$

163.8

$

136.6

$

478.6

$

363.2

Ending number of consultants and execution staff (b)

1,787

1,528

1,787

1,528

Hours worked in thousands (c)

424

372

1,295

1,137

Average bill rate (d)

$

384

$

367

$

368

$

319

Adjusted Results (e):

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Adjusted EBITDA

$

28.6

$

27.5

$

85.5

$

54.3

Adjusted EBITDA margin

17.5

%

20.2

%

17.9

%

15.0

%

___________

(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:

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Impairment of fixed assets

$

-

$

-

$

0.3

$

-

Impairment of right of use assets

$

-

$

-

$

2.5

$

-

Restructuring charges, net

$

-

$

0.3

$

-

$

14.2

Fee revenue was $162.9 million in Q3 FY'22 compared to $136.3 million in Q3 FY'21, an increase of $26.6 million or 20% (up 22% on a constant currency basis). Growth in Consulting fee revenue continues to be driven by significant client workforce transformation initiatives including DE&I and ESG, delivered through our Organization Strategy, Assessment and Succession, and Leadership Development solutions. In addition, Total Rewards offering has increased as clients address compensation and retention issues associated with labor market dislocation and pay governance issues.

Adjusted EBITDA was $28.6 million in Q3 FY'22 with an Adjusted EBITDA margin of 17.5% compared to Adjusted EBITDA of $27.5 million with an associated margin of 20.2%, respectively, in the year-ago quarter. This increase in Adjusted EBITDA resulted from the increase in fee revenue outlined above, partially offset by an increase in compensation and benefits expense. The increase in compensation and benefits expense was driven by higher salaries and related payroll taxes and performance-related bonus expense due to an increase in fee revenue and headcount.

3

Selected Digital Data

(dollars in millions) (a)

Digital leverages an artificial intelligence powered, machine-learning platform to help identify the best structures, roles, capabilities, and behaviors needed to drive business forward. This end-to-end platform combines Korn Ferry proprietary data, client data, and external market data to help make better, faster decisions about organizations, leadership, and people.

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Fee revenue

$

90.2

$

75.8

$

259.5

$

206.8

Total revenue

$

90.5

$

76.0

$

259.9

$

207.0

Ending number of consultants

284

302

284

302

Subscription & License fee revenue

$

29.0

$

22.6

$

79.7

$

66.3

Adjusted Results (b):

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Adjusted EBITDA

$

28.1

$

27.1

$

82.3

$

58.2

Adjusted EBITDA margin

31.2

%

35.8

%

31.7

%

28.1

%

___________

(a)

Numbers may not total due to rounding.

(b)

Adjusted results exclude the following:

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Impairment of fixed assets

$

-

$

-

$

0.2

$

-

Impairment of right of use assets

$

-

$

-

$

1.3

$

-

Integration/acquisition costs

$

-

$

-

$

-

$

0.6

Restructuring charges, net

$

-

$

-

$

-

$

2.9

Fee revenue was $90.2 million in Q3 FY'22 compared to $75.8 million in Q3 FY'21, an increase of $14.4 million or 19% (up 22% on a constant currency basis). The increase in fee revenue was primarily due to growth in Total Rewards offering as companies contend with elevated levels of attrition due to dislocation in the labor markets and professional development around sales effectiveness as companies reassess their commercial models in a post-COVID world.

Adjusted EBITDA was $28.1 million in Q3 FY'22 with an Adjusted EBITDA margin of 31.2% compared to $27.1 million and 35.8%, respectively, in the year-ago quarter. Contributing to the increase were higher fee revenues. Partially offsetting this was an increase in compensation and benefits expense, driven by higher performance-related bonus expense, salaries and related payroll taxes and commission expense.

4

Selected Executive Search Data(a)

(dollars in millions) (b)

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Fee revenue

$

239.0

$

168.1

$

691.4

$

436.3

Total revenue

$

240.0

$

168.5

$

694.2

$

438.0

Ending number of consultants

581

522

581

522

Average number of consultants

576

517

553

539

Engagements billed

4,335

3,260

8,862

6,464

New engagements (c)

1,787

1,301

5,362

3,747

Adjusted Results (d):

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Adjusted EBITDA

$

65.7

$

41.7

$

193.4

$

78.0

Adjusted EBITDA margin

27.5

%

24.8

%

28.0

%

17.9

%

________

(a)

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.

(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:

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Impairment of fixed assets

$

-

$

-

$

0.1

$

-

Impairment of right of use assets

$

-

$

-

$

0.9

$

-

Restructuring charges, net

$

-

$

0.4

$

-

$

10.4

Fee revenue was $239.0 million and $168.1 million in Q3 FY'22 and Q3 FY'21, respectively, a year-over-year increase of $70.9 million or 42% (up 44% on a constant currency basis). The increase in fee revenue was driven by an increase in the number of new search engagements as well as an increase in the average fee revenue per search. These increases were across all regions with the largest increase in North America.

Adjusted EBITDA was $65.7 million in Q3 FY'22 with an Adjusted EBITDA margin of 27.5% compared to Adjusted EBITDA of $41.7 million and Adjusted EBITDA margin of 24.8%, respectively, in the year-ago quarter. This improvement resulted from the increase in fee revenue discussed above, as well as productivity realized from work being conducted virtually and cost savings from the structural changes made during the pandemic. These changes were partially offset by increases in compensation and benefits expense due to an increase in performance-related bonus expense and salaries and related payroll taxes.

5

Selected RPO and Professional Search Data

(dollars in millions) (a)

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Fee revenue

$

188.7

$

95.2

$

478.5

$

249.5

Total revenue

$

190.6

$

96.8

$

483.8

$

254.3

Engagements billed (b)

2,716

1,430

4,770

2,659

New engagements (c)

1,693

867

3,729

2,088

Adjusted Results (d):

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Adjusted EBITDA

$

44.1

$

19.6

$

114.3

$

39.5

Adjusted EBITDA margin

23.4

%

20.6

%

23.9

%

15.8

%

___________

(a)

Numbers may not total due to rounding.

(b)

Represents professional search engagements billed.

(c)

Represents new professional search engagements opened in the respective period.

(d)

Adjusted results exclude the following:

Third Quarter

Year to Date

FY'22

FY'21

FY'22

FY'21

Impairment of fixed assets

$

-

$

-

$

1.3

$

-

Impairment of right of use assets

$

-

$

-

$

2.6

$

-

Integration/acquisition costs

$

1.4

$

-

$

1.4

$

-

Restructuring charges, net

$

-

$

0.1

$

-

$

3.2

Fee revenue was $188.7 million in Q3 FY'22, an increase of $93.5 million or 98% (up 101% on a constant currency basis), compared to the year-ago quarter. The higher fee revenue was driven by an increase in Professional Search fee revenue of $54.0 million or 150% (154% at constant currency) and an increase in recruitment process outsourcing ("RPO") fee revenue of $39.5 million or 67% (69% at constant currency). Professional Search fee revenue increased primarily due to an increase in both the number of engagements billed and the weighted-average fee billed per engagement and fee revenue generated by the acquisition of the Lucas Group that took place on November 1, 2021. RPO fee revenue increased due to the wider adoption of RPO services in the market in combination with our differentiated solutions.

Adjusted EBITDA was $44.1 million in Q3 FY'22 with an Adjusted EBITDA margin of 23.4% compared to $19.6 million and 20.6%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the higher fee revenue discussed above, as well as improved productivity realized from work being conducted virtually and cost savings resulting from the structural changes made during the pandemic. Partially offsetting this were increases in compensation and benefits expense driven by higher salaries and related payroll taxes and commission expense as a result of increases in fee revenue, overall profitability, headcount and the acquisition of the Lucas Group. Also partially offsetting the increase in Adjusted EBITDA was an increase in cost of services expense due to the acquisition of Lucas Group.

6

Outlook

Despite the continuing strength in new business trends coming out of Q3 FY'22, the very recent situation in Eastern Europe presents a level of risk and uncertainty that is difficult to quantify. With this in mind and 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:

▪

Q4 FY'22 fee revenue is expected to be in the range of $670 million and $690 million; and

▪

Q4 FY'22 diluted earnings per share is expected to range between $1.44 to $1.60.

On a consolidated adjusted basis:

▪

Q4 FY'22 adjusted diluted earnings per share is expected to be in the range from $1.49 to $1.63.

Q4 FY'22

Earnings Per Share Outlook

Low

High

Consolidated diluted earnings per share

$

1.44

$

1.60

Integration/acquisition costs

0.06

0.04

Tax rate impact

(0.01

)

(0.01

)

Consolidated adjusted diluted earnings per share(1)

$

1.49

$

1.63

________

(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 and SVP Finance Gregg Kvochak. 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.

7

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.comformore 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, 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. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to expected demand for our products and services, the magnitude and duration of the impact of the COVID-19 outbreak on our business, employees, customers and our ability to provide services in affected regions, and the potential opportunities for our business as a result of worldwide changes in how companies conduct business as a result of COVID-19. 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 the ultimate magnitude and duration of COVID-19 and any future pandemic 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 or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, the dependence on and costs of attracting and retaining qualified and experienced consultants, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, the portability of client relationships, consolidation of the industries we serve, changes and developments in government 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, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, dependence on third parties for the execution of critical functions, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, technical guidance relating to the Tax Act, treaties, or regulations on our business and our company, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our indebtedness, the phase-out of the London Interbank Offered Rate, the withdrawal of the United Kingdom from the European Union, expansion of social media platforms, seasonality, ability to effect acquisition and integrate acquired businesses and employment liability risk. For a detailed description of risks and uncertainties that could cause differences, 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, and Consolidated and Executive SearchAdjusted EBITDA margin.

8

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 Digital business and RPO & Professional Search business, 2) impairment of fixed assets associated with the decision to terminate and sublease some of our offices, 3) impairment of right of use assets due to the decision to terminate and sublease some of our offices and 4) charges we incurred to restructure the Company as a result of COVID-19. 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.

[Tables attached]

9

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

January 31,

January 31,

2022

2021

2022

2021

(unaudited)

Fee revenue

$

680,741

$

475,360

$

1,905,579

$

1,254,896

Reimbursed out-of-pocket engagement expenses

4,215

2,520

10,873

7,656

Total revenue

684,956

477,880

1,916,452

1,262,552

Compensation and benefits

445,870

326,333

1,273,746

917,530

General and administrative expenses

60,811

47,271

175,143

140,836

Reimbursed expenses

4,215

2,520

10,873

7,656

Cost of services

31,666

20,028

77,988

50,198

Depreciation and amortization

16,104

15,735

47,381

46,068

Restructuring charges, net

-

838

-

30,732

Total operating expenses

558,666

412,725

1,585,131

1,193,020

Operating income

126,290

65,155

331,321

69,532

Other (loss) income, net

(7,277

)

14,935

2,236

26,374

Interest expense, net

(7,029

)

(7,298

)

(18,820

)

(21,686

)

Income before provision for income taxes

111,984

72,792

314,737

74,220

Income tax provision

26,927

21,204

76,951

25,409

Net income

85,057

51,588

237,786

48,811

Net income attributable to noncontrolling interest

(956

)

(269

)

(3,090

)

(547

)

Net income attributable to Korn Ferry

$

84,101

$

51,319

$

234,696

$

48,264

Earnings per common share attributable to Korn Ferry:

Basic

$

1.55

$

0.95

$

4.33

$

0.89

Diluted

$

1.54

$

0.94

$

4.28

$

0.88

Weighted-average common shares outstanding:

Basic

52,999

52,596

52,958

53,030

Diluted

53,495

53,013

53,538

53,396

Cash dividends declared per share:

$

0.12

$

0.10

$

0.36

$

0.30

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY REPORTING SEGMENT

(dollars in thousands)

(unaudited)

Three Months Ended January 31,

Nine Months Ended January 31,

2022

2021

%Change

2022

2021

%Change

Fee revenue:

Consulting

$

162,889

$

136,268

19.5

%

$

476,260

$

362,271

31.5

%

Digital

90,194

75,791

19.0

%

259,504

206,807

25.5

%

Executive Search:

North America

152,597

106,002

44.0

%

449,472

266,485

68.7

%

EMEA

47,509

35,991

32.0

%

132,690

97,701

35.8

%

Asia Pacific

31,425

21,643

45.2

%

88,385

59,702

48.0

%

Latin America

7,468

4,468

67.1

%

20,815

12,419

67.6

%

Total Executive Search (a)

238,999

168,104

42.2

%

691,362

436,307

58.5

%

RPO and Professional Search

188,659

95,197

98.2

%

478,453

249,511

91.8

%

Total fee revenue

680,741

475,360

43.2

%

1,905,579

1,254,896

51.9

%

Reimbursed out-of-pocket engagement expenses

4,215

2,520

67.3

%

10,873

7,656

42.0

%

Total revenue

$

684,956

$

477,880

43.3

%

$

1,916,452

$

1,262,552

51.8

%

(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)

January 31,

April 30,

2022

2021

(unaudited)

ASSETS

Cash and cash equivalents

$

846,505

$

850,778

Marketable securities

73,110

63,667

Receivables due from clients, net of allowance for doubtful accounts of $34,617 and $29,324 at January 31, 2022 and April 30, 2021, respectively

603,346

448,733

Income taxes and other receivables

41,708

40,024

Unearned compensation

62,446

53,206

Prepaid expenses and other assets

40,635

30,724

Total current assets

1,667,750

1,487,132

Marketable securities, non-current

187,635

182,692

Property and equipment, net

131,198

131,778

Operating lease right-of-use assets, net

154,818

174,121

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

181,126

161,295

Deferred income taxes

77,000

73,106

Goodwill

699,518

626,669

Intangible assets, net

89,574

92,949

Unearned compensation, non-current

126,082

102,356

Investments and other assets

21,395

24,428

Total assets

$

3,336,096

$

3,056,526

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable

$

47,203

$

44,993

Income taxes payable

28,771

23,041

Compensation and benefits payable

429,683

394,606

Operating lease liability, current

46,583

47,986

Other accrued liabilities

298,911

239,444

Total current liabilities

851,151

750,070

Deferred compensation and other retirement plans

384,437

346,455

Operating lease liability, non-current

142,349

155,998

Long-term debt

395,303

394,794

Deferred tax liabilities

2,936

3,832

Other liabilities

24,675

36,602

Total liabilities

1,800,851

1,687,751

Stockholders' equity

Common stock: $0.01 par value, 150,000 shares authorized, 75,347 and 74,915 shares issued and 54,216 and 54,008 shares outstanding at January 31, 2022 and April 30, 2021, respectively

562,564

583,260

Retained earnings

1,049,431

834,949

Accumulated other comprehensive loss, net

(80,718

)

(51,820

)

Total Korn Ferry stockholders' equity

1,531,277

1,366,389

Noncontrolling interest

3,968

2,386

Total stockholders' equity

1,535,245

1,368,775

Total liabilities and stockholders' equity

$

3,336,096

$

3,056,526

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(dollars in thousands, except per share amounts)

(unaudited)

Three Months Ended

Nine Months Ended

January 31,

January 31,

2022

2021

2022

2021

Net income attributable to Korn Ferry

$

84,101

$

51,319

$

234,696

$

48,264

Net income attributable to non-controlling interest

956

269

3,090

547

Net income

85,057

51,588

237,786

48,811

Income tax provision

26,927

21,204

76,951

25,409

Income before provision for income taxes

111,984

72,792

314,737

74,220

Other loss (income), net

7,277

(14,935

)

(2,236

)

(26,374

)

Interest expense, net

7,029

7,298

18,820

21,686

Operating income

126,290

65,155

331,321

69,532

Depreciation and amortization

16,104

15,735

47,381

46,068

Other (loss) income, net

(7,277

)

14,935

2,236

26,374

Integration/acquisition costs (1)

3,214

-

4,298

737

Impairment of fixed assets (2)

-

-

1,915

-

Impairment of right of use assets (3)

-

-

7,392

-

Restructuring charges, net (4)

-

838

-

30,732

Adjusted EBITDA

$

138,331

$

96,663

$

394,543

$

173,443

Operating margin

18.6

%

13.7

%

17.4

%

5.5

%

Depreciation and amortization

2.4

%

3.3

%

2.5

%

3.7

%

Other (loss) income, net

(1.1

%)

3.2

%

0.1

%

2.1

%

Integration/acquisition costs (1)

0.4

%

-

0.2

%

0.1

%

Impairment of fixed assets (2)

-

-

0.1

%

-

Impairment of right of use assets (3)

-

-

0.4

%

-

Restructuring charges, net (4)

-

0.1

%

-

2.4

%

Adjusted EBITDA margin

20.3

%

20.3

%

20.7

%

13.8

%

Net income attributable to Korn Ferry

$

84,101

$

51,319

$

234,696

$

48,264

Integration/acquisition costs (1)

3,214

-

4,298

737

Impairment of fixed assets (2)

-

-

1,915

-

Impairment of right of use assets (3)

-

-

7,392

-

Restructuring charges, net (4)

-

838

-

30,732

Tax effect on the adjusted items (5)

(404

)

(276

)

(2,632

)

(8,597

)

Adjusted net income attributable to Korn Ferry

$

86,911

$

51,881

$

245,669

$

71,136

Basic earnings per common share

$

1.55

$

0.95

$

4.33

$

0.89

Integration/acquisition costs (1)

0.06

-

0.08

0.01

Impairment of fixed assets (2)

-

-

0.03

-

Impairment of right of use assets (3)

-

-

0.14

-

Restructuring charges, net (4)

-

0.02

-

0.57

Tax effect on the adjusted items (5)

(0.01

)

(0.01

)

(0.05

)

(0.16

)

Adjusted basic earnings per share

$

1.60

$

0.96

$

4.53

$

1.31

Diluted earnings per common share

$

1.54

$

0.94

$

4.28

$

0.88

Integration/acquisition costs (1)

0.06

-

0.08

0.01

Impairment of fixed assets (2)

-

-

0.03

-

Impairment of right of use assets (3)

-

-

0.14

-

Restructuring charges, net (4)

-

0.02

-

0.57

Tax effect on the adjusted items (5)

(0.01

)

(0.01

)

(0.05

)

(0.16

)

Adjusted diluted earnings per share

$

1.59

$

0.95

$

4.48

$

1.30

Explanation of Non-GAAP Adjustments

(1)

Costs associated with current and 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 (i.e., leasehold improvements) due to terminating and subleasing some of our office leases.

(3)

Costs associated with impairment of right-of-use assets due to terminating and subleasing some of our office leases.

(4)

Restructuring charges we incurred to rationalize our cost structure by eliminating redundant positions because of COVID-19.

(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 CONSOLIDATED NET INCOME AND

OPERATING INCOME (GAAP) TO ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

Three Months Ended January 31, 2022

Executive Search

Consulting

Digital

North America

EMEA

Asia Pacific

Latin America

Subtotal

RPO and Professional Search

Corporate

Consolidated

Fee revenue

$

162,889

$

90,194

$

152,597

$

47,509

$

31,425

$

7,468

$

238,999

$

188,659

$

-

$

680,741

Total revenue

$

163,824

$

90,501

$

153,454

$

47,666

$

31,448

$

7,470

$

240,038

$

190,593

$

-

$

684,956

Net income attributable to Korn Ferry

$

84,101

Net income attributable to noncontrolling interest

956

Other loss, net

7,277

Interest expense, net

7,029

Income tax provision

26,927

Operating income

126,290

Depreciation and amortization

16,104

Other loss, net

(7,277

)

Integration/acquisition costs

3,214

Adjusted EBITDA

$

28,556

$

28,142

$

45,702

$

8,080

$

9,451

$

2,484

$

65,717

$

44,109

$

(28,193

)

$

138,331

Adjusted EBITDA margin

17.5

%

31.2

%

29.9

%

17.0

%

30.1

%

33.3

%

27.5

%

23.4

%

20.3

%

Three Months Ended January 31, 2021

Executive Search

Consulting

Digital

North America

EMEA

Asia Pacific

Latin America

Subtotal

RPO and Professional Search

Corporate

Consolidated

Fee revenue

$

136,268

$

75,791

$

106,002

$

35,991

$

21,643

$

4,468

$

168,104

$

95,197

$

-

$

475,360

Total revenue

$

136,593

$

75,967

$

106,325

$

36,016

$

21,680

$

4,468

$

168,489

$

96,831

$

-

$

477,880

Net income attributable to Korn Ferry

$

51,319

Net income attributable to noncontrolling interest

269

Other income, net

(14,935

)

Interest expense, net

7,298

Income tax provision

21,204

Operating income

65,155

Depreciation and amortization

15,735

Other income, net

14,935

Restructuring charges, net

838

Adjusted EBITDA

$

27,515

$

27,134

$

30,941

$

3,918

$

6,375

$

458

$

41,692

$

19,630

$

(19,308

)

$

96,663

Adjusted EBITDA margin

20.2

%

35.8

%

29.2

%

10.9

%

29.5

%

10.3

%

24.8

%

20.6

%

20.3

%

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF CONSOLIDATED NET INCOME AND

OPERATING INCOME (GAAP) TO ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

Nine Months Ended January 31, 2022

Executive Search

Consulting

Digital

North America

EMEA

Asia Pacific

Latin America

Subtotal

RPO and Professional Search

Corporate

Consolidated

Fee revenue

$

476,260

$

259,504

$

449,472

$

132,690

$

88,385

$

20,815

$

691,362

$

478,453

$

-

$

1,905,579

Total revenue

$

478,563

$

259,894

$

451,836

$

133,080

$

88,447

$

20,821

$

694,184

$

483,811

$

-

$

1,916,452

Net income attributable to Korn Ferry

$

234,696

Net income attributable to noncontrolling interest

3,090

Other income, net

(2,236

)

Interest expense, net

18,820

Income tax provision

76,951

Operating income

331,321

Depreciation and amortization

47,381

Other income, net

2,236

Integration/acquisition costs

4,298

Impairment of fixed assets

1,915

Impairment of right of use assets

7,392

Adjusted EBITDA

$

85,458

$

82,330

$

137,939

$

23,328

$

25,972

$

6,204

$

193,443

$

114,334

$

(81,022

)

$

394,543

Adjusted EBITDA margin

17.9

%

31.7

%

30.7

%

17.6

%

29.4

%

29.8

%

28.0

%

23.9

%

20.7

%

Nine Months Ended January 31, 2021

Executive Search

Consulting

Digital

North America

EMEA

Asia Pacific

Latin America

Subtotal

RPO and Professional Search

Corporate

Consolidated

Fee revenue

$

362,271

$

206,807

$

266,485

$

97,701

$

59,702

$

12,419

$

436,307

$

249,511

$

-

$

1,254,896

Total revenue

$

363,234

$

207,027

$

267,790

$

97,925

$

59,840

$

12,419

$

437,974

$

254,317

$

-

$

1,262,552

Net income attributable to Korn Ferry

$

48,264

Net income attributable to noncontrolling interest

547

Other income, net

(26,374

)

Interest expense, net

21,686

Income tax provision

25,409

Operating income

69,532

Depreciation and amortization

46,068

Other income, net

26,374

Integration/acquisition costs

737

Restructuring charges, net

30,732

Adjusted EBITDA

$

54,282

$

58,161

$

57,439

$

8,445

$

11,610

$

480

$

77,974

$

39,453

$

(56,427

)

$

173,443

Adjusted EBITDA margin

15.0

%

28.1

%

21.6

%

8.6

%

19.4

%

3.9

%

17.9

%

15.8

%

13.8

%

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Korn Ferry International published this content on 09 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 March 2022 12:01:07 UTC.