ANNUAL REPORT 2023 DEAR
SHAREHOLDERS,
As we conclude fiscal year 2023, I am incredibly proud
of our firm, our colleagues, and our purpose – to enable
people and organizations to Be More Than.
Our accomplishments over these last 12 months are a reminder of just
how far Korn Ferry has come and how much more capable we’ve become.
And that calls to mind another performance, several years ago.
The concert hall was packed, and a massive grand piano stood in the
spotlight. We gave a thunderous round of applause when the pianist sat
down and began to play. Then, halfway through Rachmaninoff’s Third
Piano Concerto, this world-famous artist suddenly stopped in the middle,
rose to his feet, and announced he simply couldn’t play any longer.
It happened years ago, but I can still remember the
stunned silence hanging over that concert hall.
Punctuating this surreal moment, the conductor left the
podium, slowly approached the pianist, and whispered a
few words that nobody heard. After a moment, the pianist
gathered himself, then resumed playing with a passion
and vigor we had not heard all evening. Throughout
the rest of the concert, one question was on my mind:
What did the conductor say to the pianist? Later
I learned of his simple but profound words…
“We do it because we love the music.”
This message of passion embodies what we
are all about – whether the devotion and
dedication of our 10,000-plus Korn Ferry
colleagues around the globe, or our clients
who are unleashing the potential of their
people and driving superior performance
through our firm’s expertise and offerings.
Simply stated, Korn Ferry is changing lives,
and our vision to become the premier
organizational consultancy is clearly working.
2
The story of this period is the success of our
diversification strategy, set forth over the past
few years, which has created new revenue
streams and offerings, as evidenced by our
clients and in our results. For fiscal year 2023,
our fee revenue reached an all-time high of $2.84
billion, up 12%1 at constant currency, 8% actual.
In the fiscal year, we added a completely new
capability – an interim and transition management
business with more than $400 million of annual
revenue on a run rate basis, bringing our total
Professional Search and Interim business to
approximately $600 million of annual revenue
on a run rate basis. This is the direct result of
our strategy that, more than three years ago,
anticipated workplace mobility would emerge
post pandemic – and it has, just as we thought.
Additionally, the firm’s Consulting and
Digital businesses have never been more
relevant as our clients increasingly seek
transformation, growth and profitability.
Our evolving capability and broad offerings are
propelling Korn Ferry and our clients through this
transitory period. Our organizational strategy,
leadership and professional development,
assessment and succession, rewards, and
talent acquisition capabilities will continue to
help clients execute their business strategy.
It’s also important to understand how our moves
of the past are informing the future. Looking at
our historical financial performance through the
cycles, it’s clear our diverse offerings and larger
scale have resulted in progressively better results
– from peak to peak and trough to trough. In
other words, the ceiling and the floor continue to
be incrementally higher through each turn. And
our 10-year fee revenue CAGR has been 13%.
As we look ahead, no doubt tectonic shifts
will continue to be profound. How we
produce and consume. Where and how
we work. How we are entertained. Shifting
trade lanes. Inflation and interest rates.
And now, Generative AI. These mega trends can
result in change that is fundamentally good for our
clients and for Korn Ferry. The foundation of our firm
began with IP and science. Now, in a world immersed
in Generative AI, we plan to continue investing not
only in these technologies, but also in our proprietary
data, assessment instruments and knowledge –
all of which will be the ultimate differentiators.
We have also anchored our firm around
a well-balanced strategy, supported by
a diverse slate of solutions and IP:
• A major account strategy that represents more
than 35% of our portfolio as of the fiscal year end
• As previously mentioned, a new interim
and transition management capability that
essentially did not exist for us just a year ago
• Consulting and Digital capabilities that
represent 36% of our total fiscal year revenue
• An award-winning RPO business, which now
represents 15% of our total fiscal year revenue
• An integrated go-to-market strategy
– One Korn Ferry – that has resulted in
almost 30% of our fee revenue coming
from cross line-of-business referrals
• A new Korn Ferry that trains and develops
more than 1 million professionals a year
• More than six billion data points, including more
than 98 million assessments and engagement
data on nearly 33 million employees
I’d like to thank our colleagues around the globe
for all they do and their love of the music. I am
also grateful to our leadership team and board
of directors for their unwavering commitment
to Korn Ferry. We are still at the very beginning
of what Korn Ferry will be, with much tangible
opportunity ahead to help our clients Be More Than.
3
PERFORMANCE
HIGHLIGHTS
FY 23
The story of this period is about the success of our diversification strategy,
set forth over the past few years, which has created new revenue streams
and offerings, as clearly evidenced by our clients and in our results.
Fee Revenue
Adjusted EBITDA2
$2.84
BILLION
$457
MILLION
Diverse Mix of Revenue
($ Millions)
Professional
Search and
Interim
$503
Executive
Search
$876
4
Consulting
$677
Digital
$355
RPO
$425
Fiscal Year Fee
Revenue Trend
($ Billions)
1
8
.
1
$
3
6
2
$
.
4
8
2
$
.
FY 21
FY 22
FY 23
Adjusted EBITDA
($ Millions)
2
6
8
2
$
9
3
5
$
7
5
4
$
FY 21
FY 22
FY 23
Adjusted
EBITDA Margin
2
%
8
5
1
.
%
5
0
2
.
%
1
.
6
1
FY 21
FY 22
FY 23
5
[1] This is the percentage change in fee revenue that would have resulted had fiscal year 2022 foreign exchange rates been the same as the foreign exchange rates in fiscal year 2023.[2] Adjusted EBITDA, a non-GAAP financial measure, refers to earnings before interest, taxes, depreciation and amortization, adjusted to exclude acquisition / integration costs, impairment of fixed assets (leasehold improvements), the impairment of right-of-use asset and restructuring charges. See page 34 of the accompanying Form 10-K for the fiscal year ended April 30, 2023 for a presentation of the most directly comparable GAAP measure for Adjusted EBITDA (Net income attributable to Korn Ferry) and a reconciliation to that measure. Page 34 of the accompanying Form 10-K also presents a reconciliation to Operating Income, the numerator used when calculating the most directly comparable GAAP measure for Adjusted EBITDA Margin (Operating Margin), which for the fiscal year ended April 30, 2023 was 11.2%. This document may contain certain statements that we believeare, or may be considered to be, “forward-looking statements” — that is,statements regarding future events, objectives, or plans that by theirnature are uncertain. For details on the uncertainties that may causeour actual future results to materially differ from those expressed in ourforward-looking statements, see our accompanying Form 10-K for the fiscal year ended April 30, 2023 and quarterly reports on Form 10-Q. We do not undertake to update our forward-looking statements. This document also includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially. BECAUSE
WE LOVE
THE MUSIC
6
This message of passion
embodies what we are all
about – whether the devotion
and dedication of our 10,000-
plus Korn Ferry colleagues
around the globe, or our clients
who are unleashing the
potential of their people and
driving superior performance
through our firm’s expertise
and offerings.
7
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
Form 10-K
þ
o
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2023
OR
For the transition period from ____to _____
Commission File Number 001-14505
KORN FERRY
(Exact Name of Registrant as Specified in its Charter)
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
Delaware
95-2623879
1900 Avenue of the Stars, Suite 1500, Los Angeles, California
(Address of Principal Executive Offices)
90067
(Zip Code)
(310) 552-1834
(Registrant’s Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
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
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
þ
o
o
Accelerated filer
Smaller reporting company
o
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant on October 31,
2022, the last business day of the registrant’s most recently completed second fiscal quarter (assuming that the registrant’s only affiliates
are its officers, directors and 10% or greater stockholders) was approximately $2,220,447,158 based upon the closing market price of
$55.59 on that date of a share of common stock as reported on the New York Stock Exchange.
The number of shares outstanding of our common stock as of June 22, 2023 was 52,180,966 shares.
Documents incorporated by reference
Portions of the registrant’s definitive proxy statement for its 2023 Annual Meeting of Stockholders are incorporated by reference into Part III
of this Form 10-K.
KORN FERRY
Index to Annual Report on Form 10-K for the Fiscal Year Ended April 30, 2023
Description
Part I.
Page
Item #
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers
Part II.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A
Item 9B
Item 9C
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Item 16
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Part III.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Part IV.
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Financial Statements and Financial Statement Schedules
1
10
23
23
24
24
26
27
28
48
49
49
49
49
50
51
51
51
51
51
52
54
55
F-1
Item 1. Business
Company Overview
PART I.
Korn Ferry (referred to herein as the “Company” or in the first-person notations “we,” “our,” and “us”) is a leading global
organizational consulting firm.
Korn Ferry has evolved from our executive search-focused roots into a company with a more diverse service and digital and
other solution offering that is designed to align with our clients’ desire to synchronize their strategy, operations, and talent to
drive superior performance. We believe we are the premier organizational consultancy uniquely positioned to leverage our
extensive intellectual property to help companies bring talent and strategy together, helping them have the right people in
the right places and providing them with the right rewards. We seek to bring their strategies to life by designing their
organizational structure and helping them hire, motivate and retain the best people. And we help professionals navigate and
advance their career.
Our fiscal 2023 performance reflects the relevance of our strategy, the top-line synergies created by our end-to-end talent
and leadership solutions, and the increasing reach and relevance of the Korn Ferry brand. Thanks to the passion and
performance of our colleagues, we have concluded the year with strong results, in what was a very challenging
macroeconomic environment.
During fiscal 2023, we worked with almost 15,000 organizations. Our clients include the world’s largest and most prestigious
public and private companies, middle-market and emerging growth companies, and government and non-profit
organizations. We have built strong client loyalty, with nearly 80% of our engagements in fiscal 2023 completed on behalf of
clients for whom we had conducted engagements in the previous three fiscal years. We work with:
•
•
•
•
•
•
96% of the S&P 100, and 85% of the S&P 500
94% of the Euronext 100
85% of the FTSE 100
91% of the S&P Europe 350
60% of the S&P Asia 50
80% of the S&P Latin America 40
In addition, we work with:
•
•
•
•
3 in every 4 best companies to work for (Fortune Magazine)
1 in every 2 of the fastest growing companies in the world (Fortune Magazine)
79% of the world’s top performing companies (Drucker Institute)
96% of the top 50 world's most admired companies (Fortune Magazine)
We also continued to make significant investments across the breadth of our business and in our people. This commitment
includes strategic acquisitions and the innovation and development of our platforms, solutions and ways of working. A
testament to Korn Ferry’s forward-thinking approach is the acquisition of our third and fourth Interim hiring firms in the last 18
months. This strategic decision has not only boosted our standing, particularly in the Professional Search and Interim
sectors, but we believe also enables us to capitalize on significant opportunities for growth while effectively responding to
prevailing shifts in the workforce. These shifts include a heightened focus on agility and cost-management, a growing need
for specialized expertise and on-demand skills, as well as the accommodation of evolving employee preferences and
dynamics within the workforce. These investments are intended to expand our offerings to help us further differentiate
ourselves in the marketplace and reflect our continued focus on high-demand areas emerging in this environment.
A critical driver of our success has been the evolution and maturation of our go-to-market (“GTM”) activities. Our "Marquee"
and "Regional" accounts lead these activities with approximately 340 accounts or 2% of our total clients, representing more
than 35% of our total fee revenue. We continue to invest in Global Account Leaders (“GALs”), resulting in us exiting the year
with more than 70 colleagues in this role. Leveraging our acquisition of the Miller Heiman Group, we use our own sales
effectiveness methodologies and discipline in our Marquee and Regional account programs to drive rates of top-line growth
in excess of the rest of our portfolio.
We continue to capitalize on the top-line synergies created by our end-to-end solutions that are designed to address the
many aspects of an employee’s engagement with their employer. This manifests itself in our ability to continue generating
additional fee revenues based on referrals from one line of business to another, generating more than 25% of total fee
revenues for fiscal 2023. In fact, by integrating the previously mentioned acquired companies into Korn Ferry, we were able
to generate an incremental $50.0 million in fee revenues since November 1, 2021, (the date of acquisition of our first Interim
business) through referrals between the acquired companies and our business prior the acquisitions.
With vision, innovation and focus as our guide, we believe we are now a company with a more durable business, with
greater and expanding relevance, and with an increasingly sustainable level of business and profitability that is poised for
further growth in the years to come.
1
Fiscal 2023 Performance Highlights
Our results reflect the dedication and hard work of our more than 10,600 talented colleagues. They focus on creating value
for our stakeholders, our colleagues themselves, our clients, our shareholders, and the communities in which we operate.
Our strategic growth reflects a more balanced and sustainable organization.
•
•
•
•
Our performance was solid during what can be described as times of macroeconomic and geopolitical
turbulence and uncertainty, generating $2,835.4 million in fee revenue, up 8.0% compared to fiscal 2022.
Net Income Attributable to Korn Ferry was $209.5 million. Operating income and Adjusted EBITDA* were
$316.3 million (margin of 11.2%) and $457.3 million (margin of 16.1%), respectively.
Diluted Earnings Per Share was $3.95.
During fiscal 2023, we continued with our balanced approach to capital allocation. For the full year, the
Company invested $254.8 million in acquisitions and $61.0 million in capital expenditures primarily related to
the Digital business and corporate infrastructure. We also spent $18.5 million on debt service costs, and
returned $93.9 million and $33.0 million to shareholders in the form of share repurchases and dividends,
respectively.
* Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA margin are non-GAAP financial measure
and have limitations as analytical tools. See Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations for a discussion of why management believes the presentation of non-
GAAP financial measures provide meaningful supplemental information regarding Korn Ferry’s performance.
The Korn Ferry Story
Our Strategy
Our systematic approach to solving business challenges has us uniquely positioned to build the services and solutions that
people, teams and organizations need so that business strategy is implemented and performance follows. Our approach is
focused on the following strategic priorities to increase our client and commercial impact:
1.
2.
3.
4.
5.
Drive a One Korn Ferry go-to-market strategy through our Marquee and Regional Accounts and integration
across solutions and geographies.
Create the Top-of-Mind Brand in Organizational Consulting - Lead innovation through relevant market offerings
and evolve our thought leadership around talent strategy.
Deliver Client Excellence and Innovation and diversify our offerings into fully integrated, scalable and
sustainable client engagements.
Advance Korn Ferry as a Premier Career Destination - Attract and retain top talent through continued
investment in building a world-class organization through a capable, motivated, and agile workforce.
Pursue Transformational M&A Opportunities at the Intersection of Talent and Strategy.
Our Core Capabilities
We continue to integrate, replicate and scale our solutions and to lead innovation in the digitally enabled new world of work.
The depth and breadth of our offerings across the talent lifecycle—from attraction to assessment to recruitment to
development, management, and reward—place us in a distinctive position. We offer end-to-end solutions—a view into an
organization’s entire talent ecosystem—to create positive client outcomes. Our five core capabilities include:
•
•
•
•
Organization Strategy: We map talent strategy to business strategy, designing operating models and
organization structures that help companies put strategic plans into action.
Assessment and Succession: Our assessment and succession solutions help pinpoint clear and actionable
opportunities for growth. Leaders and employees are empowered to take action on their own development,
while companies use strategic perspectives to build stronger plans and make smarter investments today and
into the future.
Talent Acquisition: From Executive Search, Professional Search & Interim and Recruitment Process
Outsourcing ("RPO") covering single to multi-hire permanent positions and interim contractors, we help
organizations attract and retain the right people across functions, levels and skills.
Leadership and Professional Development: We help develop leaders along each stage of their career with
a spectrum of intensive high-touch and scalable high-tech development experiences.
2
•
Total Rewards: We help organizations pay their people fairly for doing the right things with rewards they value
at a cost that the organization can afford.
Our Integrated Solutions
We also offer integrated solutions that bring together expertise from across our core capabilities to navigate broader
business challenges around leading through change, transforming for growth and keeping top talent.
Our solutions are powered by the Korn Ferry Intelligence Cloud and are enabled by the combination of our rich and unique
data and a suite of Digital Performance Management Tools that combine the expertise of Korn Ferry with the power of Open
artificial intelligence ("AI"). Focused on business outcomes, the combination of Korn Ferry intellectual property ("IP") and
advanced technology enables our experts to deliver actionable insights and personalized recommendations accurately and
efficiently. These solutions include:
•
•
•
•
•
•
•
•
Workforce Transformation: We offer practical and pragmatic solutions to support organizations in re-shaping
workforces for the future. These solutions are designed to enhance workforce productivity, agility, engagement,
and alignment with the organization's strategic goals.
Cost Optimization: We work with leaders to manage cost drivers: organization, people and rewards. We help
make client organizations fit for the future by putting in place strategies designed to enable our clients to
achieve cost reductions while maintaining performance and growth.
Leadership Development and Coaching at Scale: Businesses need to prepare for the future by creating a
culture of learning that helps them quickly adapt to new trends and demands. Leveraging our Korn Ferry
Advance platform, we combine our expertise in leadership development with technology to provide quality
coaching and development at scale across organizations.
M&A Solutions: We use a framework that helps organizations look beyond balance sheets and focus on
people. From the assessment and selection of leaders to drive the go-forward strategy, to the future
organization design and governance, we help shape the combined purpose, ensure you have the right people
in the right roles and craft the integration and change management activities to maximize the investment. We
also help buyers achieve leadership and cultural accretive acquisitions which drive superior financial results.
Environmental, Social & Governance ("ESG") and Sustainability: We believe our people-focused
approach to ESG practices contribute to long-term value creation. By aligning strategy, people and business
operations in this area, we help companies build resilience, foster innovation, and improve their reputation,
positioning them for sustainable growth and success in both turbulent and prosperous times.
Diversity, Equity & Inclusion: We believe diverse and inclusive organizations drive better business
performance, attract and retain high-caliber talent, foster innovation for competitive advantage, and enhance
brand reputation. Our expertise in this area runs deep. We help clients comply and create more inclusive,
equitable, and successful organizations reflective of today's diverse and interconnected world.
Sales Effectiveness powered by KF Sell: Today's selling environment is more complex than ever, with sales
teams challenged to deliver value. Sellers need the right tools, training, and approach to be successful. Korn
Ferry leverages the KF Sell platform and award-winning Miller-Heiman sales methodology to help
organizations achieve their top-line growth objectives.
Career Mobility for Tech Talent powered by KF Career: We retain, engage and develop tech talent to
create a competitive advantage for our clients' organizations. For example, using KF Career for Tech, clients
can benchmark their teams, identify skill gaps, create career mobility for tech talent and deliver a progressive
employee experience where the individuals, team and company move together in synergy.
Our Businesses
The Company has recently acquired companies that have added critical mass to our existing Professional Search & Interim
business. This provided the Chief Operating Decision Maker ("CODM") with the opportunity to reassess how he managed
and allocated resources to the prior RPO & Professional Search segment. Therefore, beginning in fiscal 2023, the Company
separated RPO & Professional Search into two segments to align with the CODM's strategy to make separate resource
allocation decisions and assess performance separately between Professional Search & Interim and RPO.
The Company now has eight reportable segments that operate through the following five lines of business, supported by a
corporate center. This structure allows us to bring our resources together to focus on our clients and partner with them to
solve the challenges they face in their businesses.
1.
Consulting aligns organizational structure, culture, performance, development, and people to drive
sustainable growth by addressing four fundamental organizational and talent needs: Organization Strategy,
Assessment and Succession, Leadership and Professional Development, and Total Rewards. We enable this
work with a comprehensive set of Digital Performance Management Tools, based on our best-in-class IP and
3
data. The Consulting teams employ an integrated approach across our core capabilities and integrated
solutions described above to help clients execute their strategy in a digitally enabled world.
Summary of financial fiscal 2023 highlights:
•
•
•
Fee revenue was $677.0 million, an increase of 4.0% compared to fiscal 2022, representing 24%
of total fee revenue.
Adjusted EBITDA and Adjusted EBITDA margin were $108.5 million and 16.0%, respectively.
The number of consulting and execution staff at year-end was 1,853 with an increase in the
average bill rate (fee revenue divided by the number of hours worked by consultants and
execution staff) of $10 per hour or 3% compared to fiscal 2022.
Client Base—During fiscal 2023, the Consulting segment partnered with over 4,800 clients across the globe,
and 28% of Consulting’s fiscal 2023 fee revenue was referred from Korn Ferry’s other lines of business. Our
clients come from the private, public, and not-for-profit sectors across every major industry and represent
diverse business challenges.
Competition—The people and organizational consulting market is fragmented, with different companies
offering our core solutions. Our competitors include consulting organizations affiliated with accounting,
insurance, information systems, and strategy consulting firms such as McKinsey, Willis Towers Watson and
Deloitte. We also compete with smaller boutique firms specializing in specific regional, industry, or functional
leadership and human resources ("HR") consulting aspects.
2.
Digital develops technology-enabled Performance Management Tools that empower our clients. At the core of
our offerings is the proprietary Korn Ferry Intelligence Cloud platform. With access to six billion data points and
fortified by our established success methodology, this platform drives a range of Digital Performance
Management Tools. Through these tools, our consultants can analyze business data, benchmark against
industry best practices, and deliver personalized recommendations. Additionally, our clients and their
employees can independently utilize these digital tools to identify, implement, and maintain performance
enhancements at scale. Our Digital products include:
•
•
•
•
•
•
KF Assess: Puts the right people, with the right skills in place to deliver.
KF Architect: Streamlines the way jobs are designed, organized and evaluated.
KF Listen: Provides insight to understand and improve the employee experience.
KF Sell: Creates a consistent, repeatable sales strategy to maximize sales effectiveness.
KF Pay: Compares and develops the best pay structures to motivate people to perform at their
best.
KF Career for Tech: Upskill, reskill, develop and deploy an optimized technology workforce.
Summary of financial fiscal 2023 highlights:
•
•
•
Fee revenue was $354.7 million, an increase of 2.0% compared to fiscal 2022, representing 13%
of total fee revenue.
Subscription and License fee revenue was $119.7 million, an increase of 10% compared to fiscal
2022.
Adjusted EBITDA and Adjusted EBITDA margin were $97.5 million and 27.5%, respectively.
Client Base—During fiscal 2023, the Digital segment partnered with over 8,300 clients across the globe, and
34% of Digital’s fiscal 2023 fee revenue was referred from Korn Ferry’s other lines of business, primarily
Consulting. Our clients come from the private, public and not-for-profit sectors, across every major industry
and represent diverse business challenges.
Competition—Again, competition is fragmented in this sector. We compete with specialist suppliers, and
boutique and large consulting companies in each solution area such as AON, Mercer, Willis Towers Watson,
SHL, Fuel 50, SkillSoft, Criteria, Predictive Index, Prevue Hire and Textlio. One of our advantages is linking our
data, IP and our technology platform across our solutions. This allows us to give organizations an end-to-end
view of talent.
3.
Executive Search helps organizations recruit board-level, chief executive, and other C-suite/senior executive
and general management talent to deliver lasting impact. Our approach to placing talent brings together our
research-based IP, proprietary assessments and behavioral interviewing with our practical experience to
determine the ideal organizational fit. Salary benchmarking then helps us build appropriate frameworks for
compensation and attraction. This business is managed and reported on a geographic basis and represents
four of the Company’s reportable segments (Executive Search North America, Executive Search Europe, the
Middle East and Africa ("EMEA"), Executive Search Asia Pacific ("APAC") and Executive Search Latin
America).
4
Summary of financial fiscal 2023 highlights:
•
•
•
Fee revenue was $875.8 million, a decrease of 6% compared to fiscal 2022, representing 31% of
total fee revenue.
Adjusted EBITDA and Adjusted EBITDA margin were $205.8 million and 23.5%, respectively.*
In fiscal 2023, we opened more than 6,300 new engagements with an average of 594
consultants.
*Executive Search Adjusted EBITDA and Executive Search Adjusted EBITDA margin are non-
GAAP financial measures and have limitations as analytical tools. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations for a discussion of why
management believes the presentation of these non-GAAP financial measures provide
meaningful supplemental information regarding Korn Ferry's performance.
Consultants are organized in six broad industry groups and bring an in-depth understanding of the market
conditions and strategic management issues clients face within their industries and geographies. In addition,
we regularly look to expand our specialized expertise through internal development and strategic hiring in
targeted growth areas.
Functional Expertise — We also have organized centers of functional expertise. This helps our teams
comprehensively grasp the specific requirements and nuances involved in the role itself. These partners bring
a deep understanding of the functional dynamics–from strategy through to execution-enabling them to identify
and place candidates who possess the necessary skills, knowledge, and experience to excel in the role.
Percentage of Fiscal 2023 Assignments Opened by Functional Expertise
Board Level/CEO/CFO/Senior Executive and General Management
Finance and Control
Information Systems
Marketing and Sales
Manufacturing/Engineering/Research and Development/Technology
Human Resources and Administration
78 %
7 %
4 %
4 %
4 %
3 %
Client Base—Our more than 4,000 Executive Search engagement clients in fiscal 2023 include many of the
world’s largest and most prestigious public and private companies.
Competition—Our Executive Search line of business competes with specialist global executive search firms,
such as Egon Zehnder, Heidrick & Struggles International, Inc., Russell Reynolds Associates and Spencer
Stuart. We also compete with smaller boutique firms specializing in regional, industry, or functional searches.
We believe our brand name, differentiated business model, systematic approach to client service, innovative
technology, unique IP, global network, prestigious clientele, strong specialty practices and high-caliber
colleagues are recognized worldwide. We also believe our long-term incentive compensation arrangements
and other executive benefits distinguish us from most of our competitors and are essential in attracting and
retaining our top consultants.
4.
Professional Search & Interim delivers enterprise talent acquisition solutions for professional level middle
and upper management. The Company helps clients source high-quality candidates at speed and scale
globally, covering single-hire to multi-hire permanent placements and interim contractors (that are focused on
senior executive, information technology ("IT"), Finance & Accounting and HR roles). During fiscal 2023, we
acquired Infinity Consulting Solutions, a provider of IT interim talent. We also acquired Salo LLC, a provider of
finance, accounting and HR interim talent.
Summary of financial fiscal 2023 highlights:
•
•
•
Fee revenue was $503.4 million, an increase of 69% compared to fiscal 2022, representing 18%
of total fee revenue.
Average bill rates increased by 26% to $115 per hour in the last quarter of fiscal 2023 from $91
per hour as of January 31, 2022, which was the quarter we acquired our first interim business.
Average bill rates represent fee revenue from interim services divided by the number of hours
worked by consultants providing those services.
Adjusted EBITDA and Adjusted EBITDA margin were $110.9 million and 22.0%, respectively.
Client Base—During fiscal 2023, the Professional Search & Interim segment partnered with more than 4,000
clients across the globe, and 32% of Professional Search & Interim’s fiscal 2023 fee revenue was referred from
Korn Ferry’s other lines of business.
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Competition—We primarily compete for Professional Search & Interim business with regional contingency and
large national retained recruitment firms such as Robert Half, Michael Page, Harvey Nash, Robert Walters and
BTG. We believe our competitive advantage is distinct. We are strategic, collaborating with clients to hire best-
fit candidates using our assessment IP, proprietary technology and professional recruiters. Our Talent Delivery
Centers provide our teams with increased scalability, multilingual capabilities, global reach and functional
specialization. We also work under the One Korn Ferry umbrella to help clients plan for their broader talent
acquisition needs as part of their business strategy planning.
5.
RPO offers scalable recruitment outsourcing solutions leveraging customized technology and talent insights.
The Company's scalable solutions, built on science and powered by best-in-class technology and consulting
expertise, enable the Company to act as a strategic partner in clients’ quest for superior recruitment outcomes
and better candidate fit.
Summary of financial fiscal 2023 highlights:
•
•
Fee revenue was $424.6 million, an increase of 8% compared to fiscal 2022, representing 15%
of total fee revenue.
Adjusted EBITDA and Adjusted EBITDA margin were $52.6 million and 12.4%, respectively.
Client Base—During fiscal 2023, the RPO segment partnered with more than 300 clients across the globe, and
54% of RPO fiscal 2023 fee revenue was referred from Korn Ferry’s other lines of business.
Competition—We primarily compete for RPO business with other global RPO providers such as Cielo,
Alexander Mann Solutions, IBM, Allegis, Kelly Services and Randstad.
Finally, our corporate center manages finance, legal, technology/IT, HR, marketing, and our research arm, the Korn Ferry
Institute.
We help clients in four geographic markets: North America, Latin America, EMEA, and APAC. Our geographic markets bring
together capabilities from across the organization—infusing industry and functional expertise and skills—to deliver value to
our partners.
We operate in 108 offices in 53 countries, helping us deliver our solutions globally, wherever our clients do business. We
continue our commitment to diversity and inclusion, hiring, promoting, and extending opportunities to women and
underrepresented groups. As of April 30, 2023, 70% of our workforce in the U.S. is female or from an underrepresented
group. Broken down further, 62% of our workforce in the U.S. is female, and 64% of our global workforce is female. Our
global age demographic is 53% Millennials (ages 26-41) and 8% Gen Z/Centennials (ages 25 and below). As of April 30,
2023, we had 10,697 full-time employees:
Consulting
Digital
Executive Search
Professional Search & Interim
RPO
Corporate
Total
Consultants
and execution
staff1
Support staff2
Total
employees
1,853
347
602
498
180
—
3,480
363
1,077
1,218
591
3,750
218
7,217
2,216
1,424
1,820
1,089
3,930
218
10,697
1 Consultants and execution staff, primarily responsible for originating client services
2 Support staff includes associates, researchers, administrative, and support staff
Business Challenges We Solve
Our judgment and expertise have been built from decades of experience and insight into the business challenges
companies are grappling with across industries. We work to understand the relevant macro trends impacting society and the
future of work. After the reopening that followed the global pandemic, it is evident that the world of work has permanently
changed and with the emergence of technologies like artificial intelligence ("AI"), the evolution continues. We support our
clients amid a time of enormous transition and change, with these specific business challenges:
•
•
•
Transforming businesses while delivering robust performance.
Solving leadership challenges arising from the new landscape of hybrid and remote working.
Delivering for people, planet, and profit, and assisting with ESG and other corporate strategic initiatives.
6
•
•
•
•
•
Finding the right talent in a dynamic and dislocated labor market.
Engaging and motivating employees so companies can retain and reward their talent.
Supporting the work-scape transition from a place of work to collaboration spaces.
Building work environments that are inclusive and free from bias.
Engaging and Reward to retain top talent.
Our Proprietary Data
We manage and leverage more than six billion data points, including:
•
•
And we hold:
Over 98 million assessments.
Engagement data on approximately 33 million employees.
•
•
•
•
•
Rewards data on more than 30 million people covering some 30,000 organizations.
More than 10,000 individual success profiles covering over 30,000 job titles.
Organizational benchmark data on more than 12,000 entities.
Culture surveys on approximately 600 entities and 7.2 million respondents.
Pay policy and practice data on more than 150 countries.
Innovation & Intellectual Property
Korn Ferry is dedicated to developing leading-edge services and leveraging innovation. We have made investments in
technology, learning platforms, virtual coaching, individual learning journeys, data insights, and intellectual property that
permeates all our solutions. With these investments, we are transforming how clients address their talent management
needs. We have evolved from a mono-line business to a multi-faceted consultancy, giving our consultants more
opportunities to engage with clients. The expansion of our business into larger markets offers higher growth potential and
more durable and visible revenue streams.
The Korn Ferry Institute
The Korn Ferry Institute is our research and analytics arm. The Korn Ferry Institute develops robust research, innovative IP,
and advanced analytics to enable Korn Ferry employees to partner with people and organizations to activate their potential
and succeed.
We have built the Korn Ferry Institute on three core pillars:
1.
2.
3.
Robust Research and Thought Leadership to anticipate and innovate: We explore trends and define
leadership and human and organizational performance for a fast-changing economy. Some project examples
from fiscal 2023 include research around:
•
•
•
•
Purpose
ESG
Neuroscience
Gen Z
Differentiated IP development supported by leading-edge science and enablement: We develop and
measure what is required for success at work in the new economy. Examples from fiscal 2023 include IP
around:
•
•
•
•
Inclusive Language and Leadership
Learning Agility
Career Mobility
Assessments and Interactive Feedback
Client Advanced Analytics and Data Management to generate insights: We integrate and build upon our
datasets and external data using advanced modeling and AI. This allows us to produce predictive insights and
deliver demonstrable client impact. During fiscal 2023, we supported the following:
•
On-demand Assessment Analytics
7
•
•
Demographics and Job Factors
Psychometrics
In the fiscal year ahead, we intend to continue innovating to drive even greater business and societal impact to:
•
•
Provide research and modeling on the future of work, our solution areas, and industries to support growth and
help our science, research and IP remain innovative and relevant.
Innovate and refine knowledge to strengthen IP, educate colleagues, expand analytics capabilities, and
maximize impact across solutions and markets.
Global Delivery Capability
We believe a key differentiator for us is our global delivery capability. This allows us to support the varied parts of our
business to give clients value-added services and solutions across the globe. We believe we can bring the right people from
anywhere in the world to our clients at the right time both in physical and virtual working environments, which is a capability
that is particularly crucial as business needs and conditions continue to change rapidly.
Competition
Korn Ferry operates in a rapidly changing global marketplace with a diverse range of organizations that offer services and
solutions like those we offer. However, we believe no other company provides the same full range of services, uniquely
positioning us for success in this highly fragmented, talent management landscape.
Our Market and Approach
Industry Recognition
Our company culture and excellent work within the industry are widely recognized. Some highlights from fiscal 2023 include
global industry awards and accolades in recognition of performance and achievements:
•
•
•
•
•
•
•
•
•
Named America's Number One Executive Recruiter Firm 2023, Forbes
Named among the top 20 on Training Industries’ 2023 Top Sales Training & Enablement Companies
Named in America's Best Management Consulting Firms list in 2023, Forbes
Leader level Carbon Disclosure Project ("CDP") Rating for 2022 response to climate change questionnaire
Gold Medal for Sustainability rating from EcoVadis 2022
Gold HIRE Vets Medallion Award 2022, US Department of Labor
Recognized by Seramount (formerly Working Mother Media) in the best Companies for Parents list 2022, in
the Best Companies for Dads list 2022, and as a Top Company in the Executive Women list 2022
Top Global RPO Provider, RPO Baker's Dozen List 2022, HRO Today
Recognized as a Leader in Recruitment Process Outsourcing in Everest Group's PEAK Matrix Assessment
2022
Our Go-To-Market Approach
Our go-to-market strategy brings together Korn Ferry’s core solutions to drive more integrated, scalable client relationships.
Our goal is to drive topline synergies by increasing growth in the crossline of business referrals. This has been successful as
during fiscal 2023, approximately 80% of revenue came from clients using multiple lines of our business, consistent with
fiscal 2022.
We intend to continue evolving integrated solutions along industry lines to drive cross-geography and cross-solution
referrals. Our Marquee and Regional Accounts program is a pillar of our growth strategy, which now comprises more than
one-third of our revenue, yet only 2% of our clients. Its success has been realized by using our own IP and by following a
disciplined approach to account planning and management with the addition of Global Account Leaders, resulting in more
enduring relationships with clients. We believe building long-term client relationships of scale delivers less cyclical, more
resilient revenue and new business through structured, programmatic account planning and strategic investments in account
management talent.
Elevating our Brand
Collaboration between sales, marketing, research and business teams has enabled wider recognition for Korn Ferry in the
market and a deeper connection with our customers through our thought leadership and the sharing of timely, news-driven
content designed to inspire and challenge conventional points of view around workplace topics.
8
The provocation we put out into the world is to Be More Than. Be More Than is about identifying and unleashing potential.
Bring the right opportunity, to the right person, at the right time and it will change their world. Get people focused, aligned,
believing and working together and it can change the world.
The principles behind Be More Than guide our thinking and behavior and represent our commitment to our clients and to
each other. We help unleash potential in people to enable thriving, high-performing teams that collectively power sustainable
growth and transform businesses.
Our People
Culture and Workforce
Our culture has evolved tremendously over the years with a team spirit of working together across different offices, regions,
and practices. We strive to foster a supportive, respectful culture where everyone feels valued for their contribution, can do
their best work and exceed their potential. Our approach to talent acquisition, development, recognition, engagement and
benefits are designed to support this approach. Our priority is to hire without bias and provide under-represented talent with
equal opportunity across the firm. We work hard to build an environment of recognition by acknowledging others and
appreciating their contributions and achievements. Our global talent promotion process recognizes colleagues for
exceptional dedication and service to clients, embracing our firm's purpose and values, outstanding collaboration and
stretching to meet expectations. We believe diversity drives innovation and connects us to our customers and communities.
We are committed to building strong teams of people with diverse experiences, backgrounds, and perspectives.
Our Beliefs and Behaviors
Our culture starts with our values of Inclusion, Honesty, Knowledge, and Performance. Our values set the standard for what
we expect of all our people. They also reflect the experience we want our clients to have when they work with us. We seek
to embrace people with different points of view. We actively help our colleagues grow and develop with mentoring and
support. We strive to learn, grow, to be better today than we were yesterday, and always do our best for our clients,
colleagues, and shareholders.
As a global corporation, our commitment is to act ethically, which begins with each of us. This thinking is embedded in our
core values and guides how we work together and with others. We strongly believe in a radically human approach, striving
for empathy, honesty and authenticity across our interactions.
Developing and Rewarding Our People
We focus on making Korn Ferry a firm that energizes, develops, rewards and empowers people to pursue their passions and
help our business succeed. Our global talent promotion process recognizes colleagues for exceptional dedication and
service to clients. We run promotion cycles twice a year to allow us to appreciate the contribution of colleagues more
frequently. In fiscal 2023, we promoted over 1,200 people in our five lines of business and Corporate.
We offer competitive benefits across the globe customized to each country we operate in based on market prevalence and
cultural relevance. The Korn Ferry Cares benefits strategy focuses on keeping our colleagues and their families healthy –
physically, emotionally, financially, and socially. Our progressive benefit offerings in the U.S. helped us earn top recognitions
by Seramount (formerly Working Mother Media) as the best company for Parents 2022, Top Company for Dads 2022, Top
Company for Female Professionals 2022, and as one of the Human Rights Campaign’s Best Places to Work for LGBTQ
Equality 2022.
We believe in teaching and mentoring to support our colleagues’ career growth and success. These efforts have fostered
stability and expertise in our workforce. Development happens broadly throughout the organization, from our formal
mentoring program to direct training on our learning management platform, iAcademy. We also champion a range of career
and leadership programs, such as our Mosaic program for diverse high-potentials, Leadership U for Korn Ferry, and
Leadership U PLUS for Korn Ferry colleagues, an internal leadership development program. We use our Korn Ferry
Advance platform, used externally by clients for career coaching and career development, as an internal development
program platform.
We run a global colleague advisory council that offers feedback to senior leadership on the colleague experience within Korn
Ferry. Also, our internal employee engagement program, the Korn Ferry Founder Awards, recognizes and celebrates
exceptional performance.
Employee Well-being
The well-being of our employees is a focus. We run a series of initiatives to support employee well-being and instill an
organizational culture of health, including an Employee Assistance program, mental health awareness campaigns, well-
being webinars, flexible work schedules and parental support for distance learning.
Our employee safety
We are committed to creating a place where people can be successful professionally and personally. In response to the
pandemic, we developed and implemented new practices designed to prioritize the health and safety of our employees and
clients.
9
Available Information
We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange
Commission (the "SEC"), according to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our reports,
proxy statements, and other documents filed electronically with the SEC are available at the website maintained by the SEC
at https://www.sec.gov.
We also make available, free of charge on the Investor Relations portion of our website at http://ir.kornferry.com, those
annual, quarterly, and current reports, and, if applicable, amendments to those reports, filed or furnished under Section 13(a)
or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such reports with, or furnish them
to, the SEC at www.sec.gov.
Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters of the Audit Committee,
Compensation and Personnel Committee, and Nominating and Corporate Governance Committee of our Board of Directors
are also posted on the Investor Relations portion of our website at http://ir.kornferry.com. Stockholders may request copies
of these documents by writing to our Corporate Secretary at 1900 Avenue of the Stars, Suite 1500, Los Angeles, California
90067.
In addition, we make available on the Investor Relations portion of our website at http://ir.kornferry.com press releases and
related earnings presentations and other essential information, which we encourage you to review.
Item 1A. Risk Factors
The discussion below describes the material factors, events, and uncertainties that make an investment in our securities
risky, and these risk factors should be considered carefully together with all other information in this Annual Report, including
the financial statements and notes thereto. It does not address all of the risks that we face, and additional risks not presently
known to us or that we currently deem immaterial may also arise and impair our business operations. Our business, financial
condition or results of operations could be materially adversely affected by the occurrence of any of these risks.
Risks Related to Our Business
Our inability to successfully recover should we experience a disaster or other business continuity problem could
cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
Should we experience a disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack,
security breach, power loss, telecommunications failure or other natural or man-made disaster, our continued success will
depend, in part, on the availability of our personnel, our office facilities, and the proper functioning of our computer,
telecommunication and other related systems and operations. In such an event, we could experience near-term operational
challenges with regard to particular areas of our operations. In particular, our ability to recover from any disaster or other
business continuity problem will depend on our ability to protect our technology infrastructure against damage from business
continuity events that could have a significant disruptive effect on our operations. For example, much of our corporate staff
are based in California, which has a high level of risk from wildfires and earthquakes. The impacts of climate change present
notable risks, including damage to assets and technology caused by extreme weather events linked to climate change and
may otherwise heighten or exacerbate the occurrence of such weather events. We could potentially lose client data or
experience material adverse interruptions to our operations or delivery of services to our clients in a disaster. A disaster on a
significant scale or affecting certain of our key operating areas within or across regions, or our inability to successfully
recover should we experience a disaster, pandemic or other business continuity problem, could materially interrupt our
business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm,
damaged client relationships or legal liability.
We are limited in our ability to recruit candidates from certain of our clients due to off-limit agreements with those
clients and for client relation and marketing purposes. Such limitations could harm our business.
Either by agreement with clients, or for client relations or marketing purposes, we are required to or elect to refrain from, for
a specified period of time, recruiting candidates from a client when conducting searches on behalf of other clients. These off-
limit agreements can cause us to lose search opportunities to our competition. The duration and scope of the off-limit
agreement, including whether it covers all operations of the client and its affiliates or only certain divisions of a client,
generally are subject to negotiation or internal policies and may depend on factors such as the scope, size and complexity of
the client’s business, the length of the client relationship and the frequency with which we have been engaged to perform
executive and professional searches for the client. We cannot ensure that off-limit agreements will not impede our growth or
our ability to attract and serve new clients, or otherwise harm our business.
We face significant competition. Competition in our industries could result in lost market share, reduced demand
for our services, and/or require us to charge lower prices for our services, which could adversely affect our
operating results and future growth.
We continue to face significant competition to each of our services and product offerings. The human resource consulting
market has been traditionally fragmented and a number of large consulting firms, such as McKinsey, Willis Towers Watson
and Deloitte have built businesses in human resource consulting to serve these needs. Our consulting business line has and
10
continues to face competition from human resource consulting businesses. Many of these competitors are significantly
larger than Korn Ferry and have considerable resources at their disposal, allowing for potentially significant investment to
grow their human resource consulting business. Digital products in the human resource market have been traditionally
fragmented and a number of firms such as AON, Mercer, Willis Towers Watson, SHL, Fuel 50, SkillSoft, Criteria, Predictive
Index, Prevue Hire and Textio offer competitive products. Competitors in the digital marketplace are a combination of large,
well-capitalized firms and niche players who have received multiple rounds of private financing. Increased competition,
whether as a result of professional and social networking website providers, traditional executive search firms, sole
proprietors and in-house human resource professionals (as noted above) or larger consulting firms building human
resources consulting businesses, may lead to pricing pressures that could negatively impact our business. For example,
increased competition could require us to charge lower prices, and/or cause us to lose market share, each of which could
reduce our fee revenue.
Our executive search services face competition from both traditional and non-traditional competitors that provide job
placement services, including other large global executive search firms, smaller specialty firms and web-based firms. We
also face increased competition from sole proprietors and in-house human resource professionals whose ability to provide
job placement services has been enhanced by professional profiles made available on the internet and enhanced social
media-based search tools. The continued growth of the shared economy and related freelancing platform sites may also
negatively impact demand for our services by allowing employers seeking services to connect with employees in real time
and without any significant cost. Traditional executive search competitors include Egon Zehnder, Heidrick & Struggles
International, Inc., Russell Reynolds Associates and Spencer Stuart. In each of our markets, one or more of our competitors
may possess greater resources, greater name recognition, lower overhead or other costs and longer operating histories than
we do, which may give them an advantage in obtaining future clients, capitalizing on new technology and attracting qualified
professionals in these markets. Additionally, specialty firms can focus on regional or functional markets or on particular
industries and executive search firms that have a smaller client base are subject to fewer off-limits arrangements. There are
no extensive barriers to entry into the executive search industry and new recruiting firms continue to enter the market.
We believe the continuing development and increased availability of information technology will continue to attract new
competitors, especially web-enabled professional and social networking website providers, and these providers may be
facilitating a company’s ability to insource their recruiting capabilities. Competitors in these fields include SmashFly, iCIMS,
Yello, Indeed, Google for Jobs and Jobvite. As these providers continue to evolve, they may develop offerings similar to or
more expansive than ours, thereby increasing competition for our services or more broadly causing disruption in the
executive search industry. Further, as technology continues to develop and the shared economy continues to grow, we
expect that the use of freelancing platform sites will become more prevalent. As a result, companies may turn to such sites
for their talent needs, which could negatively impact demand for the services we offer.
Our RPO services primarily compete for business with other RPO providers such as Cielo, Alexander Mann Solutions, IBM,
Allegis, Kelly Services and Randstad while Professional Search & Interim services compete for mid-level professional
search assignments with regional contingency recruitment firms and large national retained recruitment firms such as Robert
Half, Michael Page, Harvey Nash, Robert Walters, TekSystems and BTG. In addition, some organizations have developed or
may develop internal solutions to address talent acquisition that may be competitive with our solutions. This is a highly
competitive and developing industry with numerous specialists. To compete successfully and achieve our growth targets for
our talent acquisition business, we must continue to support and develop assessment and analytics solutions, maintain and
grow our proprietary database, deliver demonstrable return on investment to clients, support our products and services
globally, and continue to provide consulting and training to support our assessment products. Our failure to compete
effectively could adversely affect our operating results and future growth.
Failure to attract and retain qualified and experienced consultants could result in a loss of clients which in turn
could cause a decline in our revenue and harm to our business.
We compete with other executive, professional search and interim and consulting firms for qualified and experienced
consultants. These other firms may be able to offer greater bonuses, incentives or compensation and benefits or more
attractive lifestyle choices, career paths, office cultures, or geographic locations than we do. Competition for these
consultants typically increases during periods of wage inflation, labor constraints, and/or low unemployment, such as the
environment experienced in calendar year 2022, and can result in material increases to our costs and stock usage under
authorized employee stock plans, among other impacts.
Attracting and retaining consultants in our industry is particularly important because, generally, a small number of
consultants have primary responsibility for a client relationship. Because client responsibility is so concentrated, the loss of
key consultants may lead to the loss of client relationships. In fiscal 2023, our top six consultants (Executive Search and
Consulting) generated business equal to approximately 2% of our total fee revenues. Furthermore, our top ten consultants
(Executive Search and Consulting) generated business equal to approximately 6% of our total fee revenues. This risk is
heightened due to the general portability of a consultant’s business: consultants have in the past, and will in the future,
terminate their employment with our Company. Any decrease in the quality of our reputation, reduction in our compensation
levels relative to our peers or modifications of our compensation program, whether as a result of insufficient revenue, a
decline in the market price of our common stock or for any other reason, could impair our ability to retain existing consultants
or attract additional qualified consultants with the requisite experience, skills and established client relationships. Our failure
11
to retain our most productive consultants, whether in Executive Search, Consulting, Digital, Professional Search & Interim or
RPO, or maintain the quality of service to which our clients are accustomed, as well as the ability of a departing consultant to
move business to his or her new employer, could result in a loss of clients, which could in turn cause our fee revenue to
decline and our business to be harmed. We may also lose clients if the departing consultant has widespread name
recognition or a reputation as a specialist in his or her line of business in a specific industry or management function. We
could also lose additional consultants if they choose to join the departing consultant at another executive search or
consulting firm. Failing to limit departing consultants from moving business or recruiting our consultants to a competitor
could adversely affect our business, financial condition and results of operations.
We are working to advance culture change through the continued implementation of diversity, equity and inclusion ("DE&I")
initiatives throughout our organization and the shift to a hybrid work environment. If we do not or are perceived not to
successfully implement these initiatives, our ability to recruit, attract and retain talent may be adversely impacted and shifts
in perspective and expectations about social issues and priorities surrounding DE&I may occur at a faster pace than we are
capable of managing effectively. If we are unable to identify, attract and retain sufficient talent in key positions, it may prevent
us from achieving our strategic vision, disrupt our business, impact revenues, increase costs, damage employee morale and
affect the quality and continuity of client service. In addition, risks associated with our recent reduction in headcount may be
exacerbated if we are unable to retain qualified personnel.
We are highly dependent on the continued services of our small team of executives.
We are dependent upon the efforts and services of our relatively small executive team. The loss for any reason, including
retirement of any one of our key executives, could have an adverse effect on our operations and our plans for executive
succession may not sufficiently mitigate such losses.
Failing to maintain our professional reputation and the goodwill associated with our brand name could seriously
harm our business.
We depend on our overall reputation and brand name recognition to secure new engagements and to hire qualified
professionals. Our success also depends on the individual reputations of our professionals. We obtain a majority of our new
engagements from existing clients or from referrals by those clients. Any client who is dissatisfied with our services can
adversely affect our ability to secure new engagements. If any factor, including poor performance or negative publicity,
whether or not true, hurts our reputation, we may experience difficulties in competing successfully for both new
engagements and qualified consultants, which could seriously harm our business.
As we develop new services, clients and practices, enter new lines of business, and focus more of our business on
providing a full range of client solutions, the demands on our business and our operating and legal risks may
increase.
As part of our corporate strategy, we are attempting to leverage our research and consulting services to sell a full range of
services across the life cycle of a policy, program, project or initiative, and we are regularly searching for ways to provide
new services to clients, such as our recent entry into the Interim business and strategic acquisitions. This strategy, even if
effectively executed, may prove insufficient in light of changes in market conditions, workforce trends, technology,
competitive pressures or other external factors. In addition, we plan to extend our services to new clients and into new lines
of business and geographic locations. As we focus on developing new services, clients, practice areas and lines of business;
open new offices; acquire or dispose of business; and engage in business in new geographic locations, our operations are
exposed to additional as well as enhanced risks.
In particular, our growth efforts place substantial additional demands on our management and staff, as well as on our
information, financial, administrative and operational systems. We may not be able to manage these demands successfully.
Growth may require increased recruiting efforts, opening new offices, increased business development, selling, marketing
and other actions that are expensive and entail increased risk. We may need to invest more in our people and systems,
controls, compliance efforts, policies and procedures than we anticipate. Therefore, even if we do grow, the demands on our
people and systems, controls, compliance efforts, policies and procedures may exceed the benefits of such growth, and our
operating results may suffer, at least in the short-term, and perhaps in the long-term.
Efforts involving a different focus and/or new services, clients, practice areas, lines of business, offices and geographic
locations entail inherent risks associated with our inexperience and competition from mature participants in those areas. Our
inexperience may result in costly decisions that could harm our profit and operating results. In particular, new or improved
services often relate to the development, implementation and improvement of critical infrastructure or operating systems that
our clients may view as “mission critical,” and if we fail to satisfy the needs of our clients in providing these services, our
clients could incur significant costs and losses for which they could seek compensation from us. As our business continues
to evolve and we provide a wider range of services, we will become increasingly dependent upon our employees,
particularly those operating in business environments less familiar to us. Failure to identify, hire, train and retain talented
employees who share our values could have a negative effect on our reputation and our business.
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We are subject to potential legal liability from clients, employees, candidates for employment, stockholders and
others. Insurance coverage may not be available to cover all of our potential liability and available coverage may
not be sufficient to cover all claims that we may incur.
We are exposed to potential claims with respect to the executive search process and our consulting services, among
numerous other matters. For example, a client could assert a claim for matters such as breach of an off-limit agreement or
recommending a candidate who subsequently proves to be unsuitable for the position filled. Further, the current employer of
a candidate whom we placed could file a claim against us alleging interference with an employment contract; a candidate
could assert an action against us for failure to maintain the confidentiality of the candidate’s employment search; and a
candidate or employee could assert an action against us for alleged discrimination, violations of labor and employment law
or other matters. Also, in various countries, we are subject to data protection, employment and other laws impacting the
processing of candidate information and other regulatory requirements that could give rise to liabilities/claims. Client
dissatisfaction with the consulting services provided by our consultants may also lead to claims against us.
Additionally, as part of our consulting services, we often send a team of leadership consultants to our clients’ workplaces.
Such consultants generally have access to client information systems and confidential information. An inherent risk of such
activity includes possible claims of misuse or misappropriation of client IP, confidential information, funds or other property,
as well as harassment, criminal activity, torts, or other claims. Such claims may result in negative publicity, injunctive relief,
criminal investigations and/or charges, payment by us of monetary damages or fines, or other material adverse effects on
our business.
From time to time, we may also be subject to legal actions or claims brought by our stockholders, including securities,
derivative and class actions, for a variety of matters related to our operations, such as significant business transactions,
cybersecurity incidents, volatility in our stock, and our responses to stockholder activism, among others. Such actions or
claims and their resolution may result in defense costs, as well as settlements, fines or judgments against us, some of which
are not, or cannot be, covered by insurance. The payment of any such costs, settlements, fines or judgments that are not
insured could have a material adverse effect on our business. In addition, such matters may affect the availability or cost of
some of our insurance coverage, which could adversely impact our results of operations and expose us to increased risks
that would be uninsured.
We cannot ensure that our insurance will cover all claims or that insurance coverage will be available at economically
acceptable rates. Our ability to obtain insurance, its coverage levels, deductibles and premiums, are all dependent on
market factors, our loss history and insurers’ perception of our overall risk profile. Our insurance may also require us to meet
a deductible. Significant uninsured liabilities could have a material adverse effect on our business, financial condition and
results of operations.
We are subject to numerous and varied government regulations across the jurisdictions in which we operate.
Our business is subject to various federal, state, local, and foreign laws and regulations that are complex, change frequently
and may become more stringent over time. Future legislation, regulatory changes or policy shifts under the current U.S.
administration or other governments could impact our business. Our failure to comply with applicable laws and regulations
could restrict our ability to provide certain services or result in the imposition of fines and penalties, substantial regulatory
and compliance costs, litigation expense, adverse publicity, and loss of revenue. We incur, and expect to continue to incur,
significant expenses in our attempt to comply with these laws, and our businesses are also subject to an increasing degree
of compliance oversight by regulators and by our clients. In addition, our Digital services and increasing use of technology in
our business expose us to data privacy and cybersecurity laws and regulations that vary and are evolving across
jurisdictions. These and other laws and regulations, as well as laws and regulations in the various states or in other
countries, could limit our ability to pursue business opportunities we might otherwise consider engaging in, impose additional
costs or restrictions on us, result in significant loss of revenue, impact the value of assets we hold, or otherwise significantly
adversely affect our business. Any failure by us to comply with applicable laws or regulations could also result in significant
liability to us from private legal actions, or may result in the cessation of our operations or portions of our operations or
impositions of fines and restrictions on our ability to carry on or expand our operations. Our operations could also be
negatively affected by changes to laws and regulations and enhanced regulatory oversight of our clients and us. These
changes may compel us to change our prices, may restrict our ability to implement price increases, and may limit the
manner in which we conduct our business or otherwise may have a negative impact on our ability to generate revenues,
earnings, and cash flows. If we are unable to adapt our products and services to conform to the new laws and regulations, or
if these laws and regulations have a negative impact on our clients, we may experience client losses or increased operating
costs, and our business and results of operations could be negatively affected.
Our business and operations are impacted by developing laws and regulations, as well as evolving investor and
customer expectations with regard to, corporate responsibility matters and reporting, which expose us to
numerous risks.
We are subject to evolving local, state, federal and/or international laws, regulations, and expectations regarding corporate
responsibility matters, including sustainability, the environment, climate change, human capital management, DE&I,
procurement, philanthropy, data privacy and cybersecurity, human rights, business risks and opportunities, including shifts in
market preferences for reporting, more sustainable or socially responsible products and services, and other actions. These
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requirements, expectations, and/or frameworks, which can include assessment and ratings published by third-party firms,
are not synchronized and vary by stakeholder, industry, and geography; as a result, they may: increase the time and cost of
our efforts to monitor and comply with those obligations; limit the extent, frequency, and modality with which our consultants
travel; impact our business opportunities, supplier choices and reputation; and expose us to heightened scrutiny, liability, and
risks that could negatively affect us. We report on our aspirations, targets, and initiatives related to corporate responsibility
matters (both directly and in response to third-party inquiries). These efforts have also, and may in the future include,
reporting intended to address certain third-party frameworks, such as the recommendations of the Sustainability Accounting
Standards Board, the Task Force for Climate-Related Financial Disclosures and other standards or material assessments
related to corporate responsibility matters. Our ability to achieve our corporate responsibility aspirations which may change
or to meet these evolving expectations is not guaranteed and is subject to numerous risks, including the existence, cost, and
availability of certain technology, methodologies, and processes, the acquisition and integration of new entities, and trends in
demand. Failing to accurately report, progress on, or meet any such aspirations or expectations (including a perceived
failure to do so) on a timely basis or at all could negatively affect our business, growth, results of operations, and reputation.
Meeting or exceeding such aspirations or expectations also may not result in the benefits initially anticipated.
Within our own operations, we face additional costs: from rising energy costs, which make it more expensive to power our
corporate offices; and efforts to mitigate or reduce our operations’ impacts from or on the environment, such as a shift to
cloud technology or a leasing preference for buildings that are LEED-certified. We have also developed and offer corporate
responsibility services and products designed to address customer demand for human capital management, DE&I, and
sustainability matters within their own organizations and workforce, the success of which depends on many factors and may
not be fully realized.
Risks Related to Our Profitability
We may not be able to align our cost structure with our revenue level, which in turn may require additional
financing in the future that may not be available at all or may be available only on unfavorable terms.
Our efforts to align our cost structure with the current realities of our markets may not be successful. When actual or
projected fee revenues are negatively impacted by weakening customer demand, we have and may again find it necessary
to take cost cutting measures so that we can minimize the impact on our profitability, such as the restructuring recently
initiated in the second half of fiscal 2023. Failing to maintain a balance between our cost structure and our revenue could
adversely affect our business, financial condition, and results of operations and lead to negative cash flows, which in turn
might require us to obtain additional financing to meet our capital needs. If we are unable to secure such additional financing
on favorable terms, or at all, our ability to fund our operations could be impaired, which could have a material adverse effect
on our results of operations.
Our financial results could suffer if we are unable to achieve or maintain adequate utilization and suitable billing
rates for our consultants.
Our profitability depends, to a large extent, on the utilization and billing rates of our professionals. Utilization of our
professionals is affected by a number of factors, including: the number and size of client engagements; the timing of the
commencement, completion and termination of engagements (for example, the commencement or termination of multiple
RPO engagements could have a significant impact on our business, including significant fluctuations in our fee revenue,
since these types of engagements are generally larger, in terms of both staffing and fee revenue generated, than our other
engagements); our ability to transition our consultants efficiently from completed engagements to new engagements; the
hiring of additional consultants because there is generally a transition period for new consultants that results in a temporary
drop in our utilization rate; unanticipated changes in the scope of client engagements; our ability to forecast demand for our
services and thereby maintain an appropriate level of consultants; and conditions affecting the industries in which we
practice, as well as general economic conditions.
The billing rates of our consultants that we are able to charge are also affected by a number of factors, including: our clients’
perception of our ability to add value through our services; the market demand for the services we provide, which may vary
globally or within particular industries that we serve; an increase in the number of clients in the government sector in the
industries we serve; the introduction of new services by us or our competitors; our competition and the pricing policies of our
competitors; and current economic conditions.
If we are unable to achieve and maintain adequate overall utilization, as well as maintain or increase the billing rates for our
consultants, our financial results could materially suffer. In addition, our consultants oftentimes perform services at the
physical locations of our clients. Natural disasters, pandemics, disruptions to travel and transportation or problems with
communications systems negatively impact our ability to perform services for, and interact with, our clients at their physical
locations, which could have an adverse effect on our business and results of operations.
The profitability of our fixed-fee engagements with clients may not meet our expectations if we underestimate the
cost of these engagements when pricing them.
When making proposals for fixed-fee engagements, we estimate the costs and timing for completing the engagements and
these estimates may not be accurate. Any increased or unexpected costs or unanticipated delays in connection with the
performance of fixed-fee engagements, including delays caused by factors outside our control, could make these contracts
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less profitable or unprofitable, which would have an adverse effect on our profit margin. Clients may also delay or cancel
engagements, which could cause expected revenues to be realized at a later time or not at all. For the years ended 2023,
2022, and 2021, fixed-fee engagements represented 23%, 22%, and 26% of our revenues, respectively.
Inflationary pressure has and may continue to adversely impact our profitability.
Demand for our services is affected by global economic conditions and the general level of economic activity in the
geographic regions in which we operate. During periods of slowed economic activity, many companies hire fewer permanent
employees, and our business, financial condition and results of operations may be adversely affected. If unfavorable
changes in regional or global economic conditions occur, our business, financial condition and results of operations could
suffer. Accelerated and pronounced economic pressures, such as the recent inflationary cost pressures and rise in interest
rates, as well as geopolitical uncertainty, has and may continue to negatively impact our expense base by increasing our
operating costs, including labor, borrowing, and other costs of doing business. Continued inflationary pressures may result in
increases in operating costs that we may not be able to fully offset by raising prices for our services because if we do our
clients may choose to reduce their business with us, which may reduce our operating margin.
Risks Related to Accounting and Taxation
Foreign currency exchange rate risks affect our results of operations.
A material portion of our revenue and expenses are generated by our operations in foreign countries, and we expect that our
foreign operations will account for a material portion of our revenue and expenses in the future. Most of our international
expenses and revenue are denominated in foreign currencies. As a result, our financial results are affected by changes in
foreign currency exchange rates or weak economic conditions in foreign markets in which we have operations, among other
factors. Fluctuations in the value of those currencies in relation to the U.S. dollar have caused and will continue to cause
dollar-translated amounts to vary from one period to another. Such variations expose us to both adverse as well as
beneficial movements in currency exchange rates. Given the volatility of exchange rates, we are not always able to manage
effectively our currency translation or transaction risks, which has and may continue to adversely affect our financial
condition and results of operations.
We have deferred tax assets that we may not be able to use under certain circumstances.
If we are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant change in the
time period within which the underlying temporary differences become taxable or deductible, we could be required to
increase our valuation allowances against our deferred tax assets. This would result in an increase in our effective tax rate,
and an adverse effect on our future operating results. In addition, changes in statutory tax rates may also change our
deferred tax assets or liability balances, with either a favorable or unfavorable impact on our effective tax rate. Our deferred
tax assets may also be impacted by new legislation or regulation.
Risks Related to Our Financing/Indebtedness
Our level indebtedness could adversely affect our financial condition, our ability to operate our business, react to
changes in the economy or our industry, prevent us from fulfilling our obligations under our indebtedness and
could divert our cash flow from operations for debt payments.
As of April 30, 2023, we had approximately $400.0 million in total indebtedness outstanding, $645.4 million of availability
under our $650.0 million five-year senior secured revolving credit facility (the “Revolver”) and $500 million of availability
under our $500.0 million five-year senior secured delayed draw term loan facility that expired on June 24, 2023 (“Delayed
Draw Facility”), both provided for under our Credit Agreement, as amended on June 24, 2022 (the “Amended Credit
Agreement”) that we entered into with a syndicate of banks and Bank of America, National Association as administrative
agent. Subject to the limits contained in the Amended Credit Agreement that govern our Revolver and the indenture
governing our $400.0 million principal amount of the 4.625% Senior Unsecured Notes due 2027 (the “Notes”), we may be
able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or
acquisition, or for other purposes. If we do so, the risks related to our debt could increase.
Specifically, our level of debt could have important consequences to us, including the following: it may be difficult for us to
satisfy our obligations, including debt service requirements under our outstanding debt; our ability to obtain additional
financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate
purposes may be impaired; requiring a substantial portion of cash flow from operations to be dedicated to the payment of
principal and interest on our indebtedness, including the Notes, therefore reducing our ability to use our cash flow to fund
our operations, capital expenditures, future business opportunities and other purposes; we are more vulnerable to economic
downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry is
more limited; our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our
competitors, may be compromised due to our high level of debt and the restrictive covenants in the Amended Credit
Agreement and the indenture governing our Notes; our ability to borrow additional funds or to refinance debt may be limited;
and it may cause potential or existing customers to not contract with us due to concerns over our ability to meet our financial
obligations, such as insuring against our professional liability risks, under such contracts.
Furthermore, our debt under our Revolver bears interest at variable rates.
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Despite our indebtedness levels, we and our subsidiaries may still incur substantially more debt, which could
further exacerbate the risks associated with our substantial leverage.
We and our subsidiaries may incur substantial additional indebtedness in the future. The Amended Credit Agreement and
the indenture governing our Notes contain restrictions on the incurrence of additional indebtedness, but these restrictions
are subject to several qualifications and exceptions, and the indebtedness that may be incurred in compliance with these
restrictions could be substantial. If we incur additional debt, the risks associated with our leverage, including those described
above, would increase. Further, the restrictions in the indenture governing the Notes and the Amended Credit Agreement will
not prevent us from incurring obligations, such as trade payables, that do not constitute indebtedness as defined in such
debt instruments. As of April 30, 2023, we had $645.4 million of availability to incur additional secured indebtedness under
our Revolver and $500 million of availability to incur additional secured indebtedness under our Delayed Draw Facility that
expired on June 24, 2023.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service
obligations to increase significantly.
Interest rates fluctuate. As a result, interest rates on the Revolver or other variable rate debt offerings could be higher or
lower than current levels. When interest rates increase, our debt service obligations on our variable rate indebtedness, if
any, would increase even though the amount borrowed remained the same, and our net income and cash flows, including
cash available for servicing our indebtedness, would correspondingly decrease.
We may be unable to service our indebtedness.
Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial
and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and
other factors, all of which are beyond our control, including the availability of financing in the international banking and
capital markets. Lower total revenue generally will reduce our cash flow. We cannot assure you that our business will
generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to
enable us to service our debt, to refinance our debt or to fund our other liquidity needs.
If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or
refinance all or a portion of our debt, which could cause us to default on our debt obligations and impair our liquidity. Our
ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at
such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more
onerous covenants that could further restrict our business operations.
Moreover, in the event of a default, the holders of our indebtedness, including the Notes, could elect to declare all the funds
borrowed to be due and payable, together with accrued and unpaid interest, if any. The lenders under the Revolver could
also elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings
against their collateral, and we could be forced into bankruptcy or liquidation. If we breach our covenants under the
Revolver, we would be in default thereunder. The lenders could exercise their rights, as described above, and we could be
forced into bankruptcy or liquidation.
The agreements governing our debt impose significant operating and financial restrictions on us and our
subsidiaries, which may prevent us from capitalizing on business opportunities.
The Amended Credit Agreement and the indenture governing the Notes impose significant operating and financial
restrictions on us. These restrictions limit our ability and the ability of our subsidiaries to, among other things: incur or
guarantee additional debt or issue capital stock; pay dividends and make other distributions on, or redeem or repurchase,
capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; merge or consolidate; enter
into agreements that restrict the ability of subsidiaries to make dividends, distributions or other payments to us or the
guarantors; in the case of the indenture governing our Notes, designate restricted subsidiaries as unrestricted subsidiaries;
and transfer or sell assets.
We and our subsidiaries are subject to covenants, representations and warranties in respect of the Revolver, including
financial covenants as defined in the Amended Credit Agreement. See “Note 11 –Long-Term Debt” of our notes to our
consolidated financial statements included in this Annual Report on Form 10-K.
As a result of these restrictions, we are limited as to how we conduct our business, and we may be unable to raise additional
debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future
indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain
compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders
and/or amend the covenants.
Our failure to comply with the restrictive covenants described above and/or the terms of any future indebtedness from time
to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these
borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance
these borrowings, our results of operations and financial condition could be adversely affected.
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A decline in our operating results or available cash could cause us to experience difficulties in complying with
covenants contained in more than one agreement, which could result in our bankruptcy or liquidation.
If we sustain a decline in our operating results or available cash, we could experience difficulties in complying with the
financial covenants contained in the Amended Credit Agreement. The failure to comply with such covenants could result in
an event of default under the Revolver and by reason of cross-acceleration or cross-default provisions, other indebtedness
may then become immediately due and payable. In addition, should an event of default occur, the lenders under our
Revolver could elect to terminate their commitments thereunder, cease making loans and institute foreclosure proceedings
against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in
the future need to obtain waivers from the lenders under our Revolver to avoid being in default. If we breach our covenants
under our Revolver and seek a waiver, we may not be able to obtain a waiver from the lenders thereunder. If this occurs, we
would be in default under our Revolver, the lenders could exercise their rights, as described above, and we could be forced
into bankruptcy or liquidation.
Risks Related to Technology, Cybersecurity and Intellectual Property
Technological advances may significantly disrupt the labor market and weaken demand for human capital at a
rapid rate.
Our success is directly dependent on our customers’ demands for talent. As technology continues to evolve, more tasks
currently performed by people have been and may continue to be replaced by automation, robotics, machine learning,
artificial intelligence and other technological advances outside of our control. The human resource industry has been and
continues to be impacted by significant technological changes, enabling companies to offer services competitive with ours.
Many of those technological changes may (i) reduce demand for our services, (ii) enable the development of competitive
products or services, or (iii) enable our current customers to reduce or bypass the use of our services, particularly in lower-
skill job categories. Additionally, rapid changes in AI and generative AI which involves the use of advanced algorithms and
machine learning techniques to create content, generate ideas, or simulate human-like behaviors and block chain-based
technology are increasing the competitiveness landscape. We may not be successful in anticipating or responding to these
changes and demand for our services could be further reduced by advanced technologies being deployed by our
competitors. Technological developments such as these may materially affect the cost and use of technology by our clients
and demand for our services, and if we do not sufficiently invest in new technology and industry developments, or if we do
not make the right strategic investments to respond to these developments and successfully drive innovation, our services
and solutions, our ability to generate demand for our services, attract and retain clients, and our ability to develop and
achieve a competitive advantage and continue to grow could be negatively affected. If we are unable to keep pace with the
industry changes this could result in an impairment of goodwill or other intangible assets and would have a negative impact
on our profitability and operating results. In some cases, we depend on key vendors and partners to provide technology and
other support. If these third parties fail to perform their obligations or cease to work with us, our ability to execute on our
strategic initiatives could be adversely affected.
We have invested in specialized technology and other IP for which we may fail to fully recover our investment, or
which may become obsolete.
We have invested in developing specialized technology and IP, including proprietary systems, processes and
methodologies, such as Korn Ferry Advance and Talent Hub, that we believe provide us a competitive advantage in serving
our current clients and winning new engagements. Many of our service and product offerings rely on specialized technology
or IP that is subject to rapid change, and to the extent that this technology and IP is rendered obsolete and of no further use
to us or our clients, our ability to continue offering these services, and grow our revenues, has been and may continue to be
adversely affected. There is no assurance that we will be able to develop new, innovative or improved technology or IP or
that our technology and IP will effectively compete with the IP developed by our competitors. If we are unable to develop
new technology and IP or if our competitors develop better technology or IP, our revenues and results of operations could be
adversely affected.
We rely heavily on our information systems, and if we lose that technology, or fail to further develop our
technology, our business could be harmed.
Our success depends in large part upon our ability to store, retrieve, process, manage and protect substantial amounts of
information. Our information systems are subject to the risk of failure, obsolescence and inadequacy. To achieve our
strategic objectives and to remain competitive, we must continue to develop and enhance our information systems. This may
require the acquisition of equipment and software and the development of new proprietary software, either internally or
through independent consultants. If we are unable to design, develop, implement and utilize, in a cost-effective manner,
information systems that provide the capabilities necessary for us to compete effectively, or for any reason any interruption
or loss of our information processing capabilities occurs, this could harm our business, results of operations and financial
condition. We cannot be sure that our current insurance against the effects of a disaster regarding our information
technology or our disaster recovery procedures will continue to be available at reasonable prices, cover all our losses or
compensate us for the possible loss of clients occurring during any period that we are unable to provide business services.
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We are subject to risk as it relates to software that we license from third parties.
We license software from third parties, much of which is integral to our systems and our business. The licenses are
generally terminable if we breach our obligations under the license agreements. If any of these relationships were
terminated or if any of these parties were to cease doing business or cease to support the applications we currently utilize,
we may be forced to spend significant time and money to replace the licensed software. However, we cannot assure you
that the necessary replacements will be available on reasonable terms, if at all.
We are dependent on third parties for the execution of certain critical functions.
We do not maintain all of our technology infrastructure, and we have outsourced certain other critical applications or
business processes to external providers, including cloud-based services. The failure or inability to perform on the part of
one or more of these critical suppliers or partners have caused, and could in the future cause significant disruptions and
increased costs. We are also dependent on security measures that some of our third-party vendors and customers are
taking to protect their own systems and infrastructures. If our third-party vendors do not maintain adequate security
measures, do not require their sub-contractors to maintain adequate security measures, do not perform as anticipated and in
accordance with contractual requirements, or become targets of cyber-attacks, we may experience operational difficulties
and increased costs, which could materially and adversely affect our business.
Cyber security vulnerabilities and incidents have and may again lead to the improper disclosure of information
obtained from our clients, candidates and employees, which could result in liability and harm to our reputation.
We use information technology and other computer resources to carry out operational and marketing activities and to
maintain our business records. We rely on information technology systems to process, transmit, and store electronic
information and to communicate among our locations around the world and with our clients, partners, and employees. The
breadth and complexity of this infrastructure increases the risk of security incidents resulting in the unauthorized disclosure
of sensitive or confidential information and other adverse consequences that could have a material adverse impact on our
business and results of operations. Our reliance on trained professionals to configure and operate this infrastructure creates
the potential for human error, leading to potential exposure of sensitive or confidential information.
Our systems and networks and the vendors who provide us services are vulnerable to incidents, including physical and
electronic break-ins, attacks by hackers, computer viruses, malware, worms, router disruption, sabotage or espionage,
ransomware attacks, supply chain attacks, disruptions from unauthorized access and tampering (including through social
engineering such as phishing attacks), employee error and misconduct, impersonation of authorized users and coordinated
denial-of-service attacks. For example, in the past we have experienced cyber security incidents resulting from unauthorized
access to our systems, which to date have not had a material impact on our business or results of operations; however,
there is no assurance that such impacts will not be material in the future. We expect cybersecurity incidents to continue to
occur in the future.
The continued occurrence of high-profile data breaches against various entities and organizations provides evidence of an
external environment that is increasingly hostile to information security. This environment demands that we regularly improve
our design and coordination of security controls across our business groups and geographies in order to protect information
that we develop or that is obtained from our clients, candidates and employees. Despite these efforts, given the ongoing and
increasingly sophisticated attempts to access the information of entities, our security controls over this information, our
training of employees, and other practices we follow have not and may not prevent the improper disclosure of such
information. Our efforts and the costs incurred to bolster our security against attacks cannot provide absolute assurance that
future data breaches will not occur. We depend on our overall reputation and brand name recognition to secure new
engagements. Perceptions that we do not adequately protect the privacy of information could inhibit attaining new
engagements, qualified consultants and could potentially damage currently existing client relationships.
Data security, data privacy and data protection laws, such as the European Union General Data Protection
Regulation (“GDPR”), and other evolving regulations and cross-border data transfer restrictions, may limit the use
of our services, increase our costs and adversely affect our business.
We are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect client, colleague, supplier
and company data, such as the GDPR, which requires companies to meet stringent requirements regarding the handling of
personal data, including its use, protection and transfer and the ability of persons whose data is stored to correct or delete
such data about themselves. Complying with the enhanced obligations imposed by the GDPR has resulted and may
continue to result in additional costs to our business and has required and may further require us to amend certain of our
business practices. Failure to meet the GDPR requirements could result in significant penalties, including fines up to 4% of
annual worldwide revenue. The GDPR also confers a private right of action on certain individuals and associations.
Laws and regulations in this area are evolving and generally becoming more stringent. For example, the New York State
Department of Financial Services has issued cybersecurity regulations that outline a variety of required security measures
for protection of data. Some U.S. states, including California and Virginia, have also enacted cybersecurity laws requiring
certain security measures of regulated entities that are broadly similar to GDPR requirements, such as the California
Consumer Privacy Act, California Privacy Rights Act and Virginia Consumer Data Protection Act. New privacy laws in
Colorado will take effect in calendar year 2023, and we expect that other states will continue to adopt legislation in this area.
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As these laws continue to evolve, we may be required to make changes to our services, solutions and/or products so as to
enable the Company and/or our clients to meet the new legal requirements, including by taking on more onerous obligations
in our contracts, limiting our storage, transfer and processing of data and, in some cases, limiting our service and/or solution
offerings in certain locations. Changes in these laws, or the interpretation and application thereof, may also increase our
potential exposure through significantly higher potential penalties for non-compliance. The costs of compliance with, and
other burdens imposed by, such laws and regulations and client demand in this area may limit the use of, or demand for, our
services, solutions and/or products, make it more difficult and costly to meet client expectations, or lead to significant fines,
penalties or liabilities for noncompliance, any of which could adversely affect our business, financial condition, and results of
operations.
In addition, due to the uncertainty and potentially conflicting interpretations of these laws, it is possible that such laws and
regulations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict
with other rules or our practices. Any failure or perceived failure by us to comply with applicable laws or satisfactorily protect
personal information could result in governmental enforcement actions, litigation, or negative publicity, any of which could
inhibit sales of our services, solutions and/or products.
Further, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy
violations continue to increase. It is possible that future enactment of more restrictive laws, rules or regulations and/or future
enforcement actions or investigations could have an adverse impact on us through increased costs or restrictions on our
businesses and noncompliance could result in regulatory penalties and significant legal liability.
Social media platforms present risks and challenges that can cause damage to our brand and reputation.
The inappropriate and/or unauthorized use of social media platforms, including blogs, social media websites and other forms
of Internet-based communications, which allow individuals access to a broad audience of consumers and other interested
persons by our clients or employees could increase our costs, cause damage to our brand, lead to litigation or result in
information leakage, including the improper collection and/or dissemination of personally identifiable information of
candidates and clients. In addition, negative or inaccurate posts or comments about us on any social networking platforms
could damage our reputation, brand image and goodwill.
Risks Related to Acquisitions
Acquisitions, or our inability to effect acquisitions, may have an adverse effect on our business.
We have completed several strategic acquisitions of businesses in the last several years, including our acquisition of The
Lucas Group and Patina Solutions Group, Inc. in fiscal 2022 and Infinity Consulting Solutions and Salo LLC in fiscal 2023.
Targeted acquisitions have been and continue to be part of our growth strategy, and we may in the future selectively acquire
businesses that are complementary to our existing service offerings. However, we cannot be certain that we will be able to
continue to identify appropriate acquisition candidates or acquire them on satisfactory terms. Our ability to consummate
such acquisitions on satisfactory terms will depend on the extent to which acquisition opportunities become available; our
success in bidding for the opportunities that do become available; negotiating terms that we believe are reasonable; and
regulatory approval, if required.
Our ability to make strategic acquisitions may also be conditioned on our ability to fund such acquisitions through the
incurrence of debt or the issuance of equity. Our Amended Credit Agreement limits us from consummating acquisitions
unless we are in pro forma compliance with our financial covenants, and certain other conditions are met. If we are required
to incur substantial indebtedness in connection with an acquisition, and the results of the acquisition are not favorable, the
increased indebtedness could decrease the value of our equity. In addition, if we need to issue additional equity to
consummate an acquisition, doing so would cause dilution to existing stockholders.
If we are unable to make strategic acquisitions, or the acquisitions we do make are not on terms favorable to us or not
effected in a timely manner, it may impede the growth of our business, which could adversely impact our profitability and our
stock price.
As a result of our acquisitions, we have substantial amounts of goodwill and intangible assets, and changes in
business conditions could cause these assets to become impaired, requiring write-downs that would adversely
affect our operating results.
All of our acquisitions have been accounted for as purchases and involved purchase prices well in excess of tangible asset
values, resulting in the creation of a significant amount of goodwill and other intangible assets. As of April 30, 2023, goodwill
and purchased intangibles accounted for approximately 25% and 3%, respectively, of our total assets. We review goodwill
and intangible assets annually (or more frequently, if impairment indicators arise) for impairment. Future events or changes
in circumstances that result in an impairment of goodwill or other intangible assets would have a negative impact on our
profitability and operating results.
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An impairment in the carrying value of goodwill and other intangible assets could negatively impact our
consolidated results of operations and net worth.
Goodwill is initially recorded as the excess of amounts paid over the fair value of net assets acquired. While goodwill is not
amortized, it is reviewed for impairment at least annually or more frequently, if impairment indicators are present. In
assessing the carrying value of goodwill, we make qualitative and quantitative assumptions and estimates about revenues,
operating margins, growth rates and discount rates based on our business plans, economic projections, anticipated future
cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in
applying these factors. Goodwill valuations have been calculated using an income approach based on the present value of
future cash flows of each reporting unit and a market approach. We could be required to evaluate the carrying value of
goodwill prior to the annual assessment if we experience unexpected, significant declines in operating results or sustained
market capitalization declines. These types of events and the resulting analyses could result in goodwill impairment charges
in the future and therefore impact the value of assets we hold, or otherwise significantly adversely affect our business, which
could limit our financial flexibility and liquidity.
Risks Related to Global Operations
We are a cyclical company whose performance is tied to local and global economic conditions.
Demand for our services is affected by global economic conditions, including recessions, inflation, interest rates, tax rates
and economic uncertainty, and the general level of economic activity in the geographic regions and industries in which we
operate. When conditions in the global economy, including the credit markets, deteriorate, or economic activity slows, many
companies hire fewer permanent employees and some companies, as a cost-saving measure, choose to rely on their own
human resources departments rather than third-party search firms to find talent, and under these conditions, companies
have cut back on human resource initiatives, all of which negatively affects our financial condition and results of operations.
We also experience more competitive pricing pressure during periods of economic decline. If the geopolitical uncertainties
result in a reduction in business confidence, when the national or global economy or credit market conditions in general
deteriorate, the unemployment rate increases or any changes occur in U.S. trade policy (including any increases in tariffs
that result in a trade war), such uncertainty or changes put negative pressure on demand for our services and our pricing,
resulting in lower cash flows and a negative effect on our business, financial condition and results of operations. In addition,
some of our clients experience reduced access to credit and lower revenues, resulting in their inability to meet their payment
obligations to us.
We face risks associated with social and political instability, legal requirements and economic conditions in our
international operations.
We operate in 53 countries and, during the year ended April 30, 2023, generated 45% of our fee revenue from operations
outside of the U.S. We are exposed to the risk of changes in social, political, legal and economic conditions inherent in
international operations. Examples of risks inherent in transacting business worldwide that we are exposed to include:
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changes in and compliance with applicable laws and regulatory requirements, including U.S. laws affecting the
activities of U.S. companies abroad, including the Foreign Corrupt Practices Act of 1977 and sanctions
programs administered by the U.S. Department of the Treasury Office of Foreign Assets Control, and similar
foreign laws such as the U.K. Bribery Act, as well as the fact that many countries have legal systems, local
laws and trade practices that are unsettled and evolving, and/or commercial laws that are vague and/or
inconsistently applied;
difficulties in staffing and managing global operations, which could impact our ability to maintain an effective
system of internal control;
difficulties in building and maintaining a competitive presence in existing and new markets;
social, economic and political instability, including the repercussions of the ongoing conflict between Russia
and Ukraine and the cessation of our business in Russia;
differences in cultures and business practices;
statutory equity requirements;
differences in accounting and reporting requirements;
repatriation controls;
differences in labor and market conditions;
potential adverse tax consequences;
multiple regulations concerning immigration, pay rates, benefits, vacation, statutory holiday pay, workers’
compensation, union membership, termination pay, the termination of employment, and other employment
laws; and
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the introduction of greater uncertainty with respect to trade policies, tariffs, disputes or disruptions, the
termination or suspension of treaties, boycotts and government regulation affecting trade between the U.S.
and other countries.
One or more of these factors has and may in the future harm our business, financial condition or results of operations.
Risks Related to Our Dividend Policy
You may not receive the level of dividends provided for in the dividend policy our Board of Directors has adopted
or any dividends at all.
We are not obligated to pay dividends on our common stock. Despite our history of paying dividends, the declaration and
payment of all future dividends to holders of our common stock are subject to the discretion of our Board of Directors, which
may amend, revoke or suspend our dividend policy at any time and for any reason, including earnings, capital requirements,
financial conditions and other factors our Board of Directors may deem relevant. The terms of our indebtedness may also
restrict us from paying cash dividends on our common stock under certain circumstances. See below “—Our ability to pay
dividends is restricted by agreements governing our debt, including our Amended Credit Agreement and indenture governing
our Notes, and by Delaware law.”
Over time, our capital and other cash needs may change significantly from our current needs, which could affect whether we
pay dividends and the level of any dividends we may pay in the future. If we were to use borrowings under our Revolver to
fund our payment of dividends, we would have less cash and/or borrowing capacity available for future dividends and other
purposes, which could negatively affect our financial condition, our results of operations, our liquidity and our ability to
maintain and expand our business. Accordingly, you may not receive dividends in the intended amounts, or at all. Any
reduction or elimination of dividends may negatively affect the market price of our common stock.
Our ability to pay dividends is restricted by agreements governing our debt, including our Amended Credit
Agreement and indenture governing our Notes, and by Delaware law.
Both our Amended Credit Agreement and the indenture governing our Notes restrict our ability to pay dividends. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources,” where we describe the terms of our indebtedness, including provisions limiting our ability to declare and pay
dividends. As a result of such restrictions, we may be limited in our ability to pay dividends unless we redeem our Notes and
amend our Amended Credit Agreement or otherwise obtain a waiver from our lenders. In addition, as a result of general
economic conditions, conditions in the lending markets, the results of our business or for any other reason, we may elect or
be required to amend or refinance our Revolver, at or prior to maturity, or enter into additional agreements for indebtedness.
Any such amendment, refinancing or additional agreement may contain covenants that could limit in a significant manner or
entirely our ability to pay dividends to you. Additionally, under the Delaware General Corporation Law (“DGCL”), our Board of
Directors may not authorize payment of a dividend unless it is either paid out of surplus, as calculated in accordance with
the DGCL, or if we do not have a surplus, out of net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. If, as a result of these restrictions, we are required to reduce or eliminate the payment of dividends, a
decline in the market price or liquidity, or both, of our common stock could result. This may in turn result in losses by you.
Our dividend policy may limit our ability to pursue growth opportunities.
If we pay dividends at the level currently anticipated under our dividend policy, we may not retain a sufficient amount of cash
to finance growth opportunities, meet any large unanticipated liquidity requirements or fund our operations in the event of a
significant business downturn. In addition, because a portion of cash available will be distributed to holders of our common
stock under our dividend policy, our ability to pursue any material expansion of our business, including through acquisitions,
increased capital spending or other increases of our expenditures, will depend more than it otherwise would on our ability to
obtain third party financing. We cannot assure you that such financing will be available to us at all, or at an acceptable cost.
If we are unable to take timely advantage of growth opportunities, our future financial condition and competitive position may
be harmed, which in turn may adversely affect the market price of our common stock.
Risks Related to Our Stockholders
We have provisions that make an acquisition of us more difficult and expensive.
Anti-takeover provisions in our Certificate of Incorporation, our Bylaws and under Delaware law make it more difficult and
expensive for us to be acquired in a transaction that is not approved by our Board of Directors. Some of the provisions in our
Certificate of Incorporation and Bylaws include: limitations on stockholder actions; advance notification requirements for
director nominations and actions to be taken at stockholder meetings; and the ability to issue one or more series of preferred
stock by action of our Board of Directors.
These provisions could discourage an acquisition attempt or other transaction in which stockholders could receive a
premium over the current market price for the common stock.
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General Risk Factors
Failing to retain our executive officers and key personnel or integrate new members of our senior management who
are critical to our business may prevent us from successfully managing our business in the future.
Our future success depends upon the continued service of our executive officers and other key management personnel.
Competition for qualified personnel is intense, and we may compete with other companies that have greater financial and
other resources than we do. If we lose the services of one or more of our executives or key employees, or if one or more of
them decides to join a competitor or otherwise compete directly or indirectly with us, or if we are unable to integrate new
members of our senior management who are critical to our business, we may not be able to successfully manage our
business or achieve our business objectives.
Changes in our accounting estimates and assumptions and other financial reporting standards could negatively
affect our financial position and results of operations.
We prepare our consolidated financial statements in accordance with U.S. GAAP. These accounting principles require us to
make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of our financial statements. We are also required to make certain judgments that affect the
reported amounts of revenues and expenses during each reporting period. We periodically evaluate our estimates and
assumptions, including those relating to revenue recognition, restructuring, deferred compensation, goodwill and other
intangible assets, contingent consideration, annual performance-related bonuses, allowance for doubtful accounts, share-
based payments and deferred income taxes. Actual results could differ from the estimates we make based on historical
experience and various assumptions believed to be reasonable based on specific circumstances, and changes in
accounting standards could have an adverse impact on our future financial position and results of operations.
Unfavorable tax laws, tax law changes and tax authority rulings may adversely affect results.
We are subject to income taxes in the U.S. and in various foreign jurisdictions. Domestic and international tax liabilities are
subject to the allocation of income among various tax jurisdictions. Our effective tax rate could be adversely affected by
changes in the mix of earnings among countries with differing statutory tax rates or changes in tax laws. The amount of our
income taxes and other taxes are subject to audits by U.S. federal, state and local tax authorities and by non-U.S.
authorities. If these audits result in assessments different from estimated amounts recorded, future financial results may
include unfavorable tax adjustments.
Future changes in tax laws, treaties or regulations, and their interpretations or enforcement, may be unpredictable,
particularly as taxing jurisdictions face an increasing number of political, budgetary and other fiscal challenges. Tax rates in
the jurisdictions in which we operate may change as a result of macroeconomic and other factors outside of our control,
making it increasingly difficult for multinational corporations like ourselves to operate with certainty about taxation in many
jurisdictions.
As a result, we have been and may again be materially adversely affected by future changes in tax law or policy (or in their
interpretation or enforcement) in the jurisdictions where we operate, including the U.S., which could have a material adverse
effect on our business, cash flow, results of operations, financial condition, as well as our effective income tax rate.
Limited protection of our IP could harm our business, and we face the risk that our services or products may
infringe upon the IP rights of others.
We cannot guarantee that trade secrets, trademark and copyright law protections are adequate to deter misappropriation of
our IP (which has become an important part of our business). Existing laws of some countries in which we provide services
or products may offer only limited protection of our IP rights. Redressing infringements may consume significant
management time and financial resources. Also, we cannot detect all unauthorized use of our IP and take the necessary
steps to enforce our rights, which may have a material adverse impact on our business, financial condition or results of
operations. We cannot be sure that our services and products, or the products of others that we offer to our clients, do not
infringe on the IP rights of third parties, and we may have infringement claims asserted against us or our clients. These
claims may harm our reputation, result in financial liability and prevent us from offering some services or products.
We may not be able to successfully integrate or realize the expected benefits from our acquisitions.
Our future success depends in part on our ability to complete the integration of acquisition targets successfully into our
operations. The process of integrating an acquired business subjects us to a number of risks, including:
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diversion of management attention;
amortization of intangible assets, adversely affecting our reported results of operations;
inability to retain and/or integrate the management, key personnel and other employees of the acquired
business;
inability to properly integrate businesses resulting in operating inefficiencies;
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inability to establish uniform standards, disclosure controls and procedures, internal control over financial
reporting and other systems, procedures and policies in a timely manner;
inability to retain the acquired company’s clients;
exposure to legal claims for activities of the acquired business prior to acquisition; and
incurrence of additional expenses in connection with the integration process.
If our acquisitions are not successfully integrated, our business, financial condition and results of operations, as well as our
professional reputation, could be materially adversely affected.
Further, we cannot assure you that acquisitions will result in the financial, operational or other benefits that we anticipate.
Some acquisitions may not be immediately accretive to earnings and some expansion may result in significant expenditures.
Businesses we acquire may have liabilities or adverse operating issues that could harm our operating results.
Businesses we acquire may have liabilities or adverse operating issues, or both, that we either fail to discover through due
diligence or underestimate prior to the consummation of the acquisition. These liabilities and/or issues may include the
acquired business’ failure to comply with, or other violations of, applicable laws, rules or regulations or contractual or other
obligations or liabilities. As the successor owner, we may be financially responsible for, and may suffer harm to our
reputation or otherwise be adversely affected by, such liabilities and/or issues. An acquired business also may have
problems with internal controls over financial reporting, which could in turn cause us to have significant deficiencies or
material weaknesses in our own internal controls over financial reporting. These and any other costs, liabilities, issues, and/
or disruptions associated with any past or future acquisitions, and the related integration, could harm our operating results.
We may be subject to the actions of activist stockholders, which could disrupt our business.
We value constructive input from investors and regularly engage in dialogue with our stockholders regarding strategy and
performance. Activist stockholders who disagree with the composition of the Board of Directors, our strategy or the way the
Company is managed may seek to effect change through various strategies and channels, such as through commencing a
proxy contest, making public statements critical of our performance or business or engaging in other similar activities.
Responding to stockholder activism can be costly and time-consuming, disrupt our operations, and divert the attention of
management and our employees from our strategic initiatives. Activist campaigns can create perceived uncertainties as to
our future direction, strategy, or leadership and may result in the loss of potential business opportunities, harm our ability to
attract new employees, investors, and customers, and cause our stock price to experience periods of volatility or stagnation.
We face various risks related to health epidemics, pandemics, and similar outbreaks that negatively impact our
operations and financial performance and those of the clients we serve. The ultimate magnitude of any future
pandemics or similar outbreaks depends on numerous factors, the full extent of which we may not be capable of
predicting.
Our business and financial results have been, and could be in the future, adversely affected by health epidemics,
pandemics, and similar outbreaks. Pandemics can cause a global slowdown in economic activity, a decrease in demand for
a broad variety of goods and services, disruptions in global supply chains, and significant volatility and disruption of financial
markets. Because the severity, magnitude and duration of a pandemic and its economic consequences are uncertain and
vary by region, its full impact on our operations and financial performance is uncertain and difficult to predict. Further, a
pandemic’s ultimate impact depends in part on many factors not within our control, including (1) restrictive governmental and
business actions (including travel restrictions, vaccine mandates, testing requirements, and other workforce limitations), (2)
economic stimulus, funding and relief programs and other governmental economic responses, (3) the effectiveness of
governmental actions, (4) economic uncertainty in key global markets and financial market volatility, (5) levels of economic
contraction or growth, (6) the impact of the pandemic on health and safety and (7) the availability and effectiveness of
vaccines and booster shots.
In addition, pandemics can subject our operations and financial performance to a number of risks, including operational
challenges, such as heightened attention to employee health and safety, workplace disruptions or shutdowns, cybersecurity
risks, supplier disruptions or delays, and travel restrictions, as well as client-related risks, as clients may experience similar
disruptions, fluctuations, and restrictions that may impact our ability to provide products and services to our clients (or for
clients to pay for such products and services) and may reduce demand for our products and services.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our corporate office is in Los Angeles, California. We lease our corporate office as well as an additional 107 offices through
which we conduct business that are located in North America, EMEA, Asia Pacific and Latin America, all of which are used
by all of our business segments. As of April 30, 2023, we leased an aggregate of approximately 1.1 million square feet of
office space. The leases generally have remaining terms of 1 to 9 years and contain customary terms and conditions. We
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believe that our facilities are adequate for our current needs, and we do not anticipate any significant difficulty replacing such
facilities or locating additional facilities to accommodate any future growth.
Item 3. Legal Proceedings
From time to time, we are involved in litigation both as a plaintiff and a defendant, relating to claims arising out of our
operations. As of the date of this report, we are not engaged in any legal proceedings that are expected, individually or in the
aggregate, to have a material adverse effect on our business, financial condition or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
Information about our Executive Officers
Name
Gary D. Burnison
Robert P. Rozek
Mark Arian
Byrne Mulrooney
Michael Distefano
Age as of April
30, 2023
Position
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President and Chief Executive Officer
Executive Vice President, Chief Financial Officer and Chief Corporate Officer
Chief Executive Officer, Consulting
Chief Executive Officer, RPO & Digital
Chief Executive Officer, Professional Search & Interim
Our executive officers serve at the discretion of our Board of Directors. There is no family relationship between any
executive officer or director. The following information sets forth the business experience for at least the past five years for
each of our executive officers.
Gary D. Burnison has been President and Chief Executive Officer of the Company since July 2007. He was the Executive
Vice President and Chief Financial Officer of the Company from March 2002 until June 30, 2007, and Chief Operating
Officer from October 2003 until June 30, 2007. Prior to joining Korn Ferry, Mr. Burnison was Principal and Chief Financial
Officer of Guidance Solutions, a privately held consulting firm, from 1999 to 2001. Prior to that, he served as an executive
officer and a member of the board of directors of Jefferies and Company, Inc., the principal operating subsidiary of Jefferies
Group, Inc. from 1995 to 1999. Earlier, Mr. Burnison was a Partner at KPMG Peat Marwick. Mr. Burnison earned a
bachelor’s degree in business administration from the University of Southern California.
Robert P. Rozek joined the Company in February 2012 as our Executive Vice President and Chief Financial Officer and, in
December 2015, also became our Chief Corporate Officer. Prior to joining Korn Ferry, he served as Executive Vice President
and Chief Financial Officer of Cushman & Wakefield, Inc., a privately held commercial real estate services firm, from June
2008 to February 2012. Prior to joining Cushman & Wakefield, Inc., Mr. Rozek served as Senior Vice President and Chief
Financial Officer of Las Vegas Sands Corp., a leading global developer of destination properties (integrated resorts) that
feature premium accommodations, world-class gaming and entertainment, convention and exhibition facilities and many
other amenities, from 2006 to 2008. Prior to that, Mr. Rozek held senior leadership positions at Eastman Kodak, and spent
five years as a Partner with PricewaterhouseCoopers LLP. Mr. Rozek is a graduate of Canisius College in New York with a
bachelor’s degree in accounting.
Mark Arian joined the Company as Chief Executive Officer of Korn Ferry’s Advisory segment in April 2017 and is now the
Chief Executive Officer of Consulting. Prior to Korn Ferry, Mr. Arian served as a Managing Principal at Ernst & Young LLP, a
multinational professional services firm that provides audit, tax, business risk, technology and security risk services, and
human capital services worldwide, from March 2014 until March of 2017. In that capacity, he led the People Advisory
Services—Financial Services Sector, and his responsibilities included commercial, people and key account leadership.
Between 2008 and 2014, Mr. Arian held various leadership positions at AON and AON Hewitt, a provider of insurance,
reinsurance, human capital and management consulting services, serving as an Executive Vice President and leading its
strategic Mergers and Acquisitions (“M&A”) and business transformation offering globally. Mr. Arian has also held various
leadership positions at Towers Perrin (now Wills Towers Watson) including serving as the Global M&A and Global Change
Management leader, and Hewitt Associates, where Mr. Arian built and led the Corporate Restructuring and Change Practice.
Mr. Arian is a graduate of Duke University and holds a juris doctorate from Columbia University.
Byrne Mulrooney joined the Company in April 2010 as Chief Executive Officer of RPO & Professional Search and in March
2017 also became the Chief Executive Officer of Digital. He is now the Chief Executive Officer of RPO and Digital. Prior to
joining Korn Ferry, he was President and Chief Operating Officer of Flynn Transportation Services, a third-party logistics
company, from 2007 to 2010. Prior to that, he led Spherion’s workforce solutions business in North America, which provides
workforce solutions in professional services and general staffing, including recruitment process outsourcing and managed
services, from 2003 to 2007. Mr. Mulrooney held executive positions for almost 20 years at EDS and IBM in client services,
sales, marketing and operations. Mr. Mulrooney is a graduate of Villanova University in Pennsylvania. He holds a master’s
degree in management from Northwestern University’s J.L. Kellogg Graduate School of Management.
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Michael Distefano has been the Chief Executive Officer of Professional Search & Interim and President of Search Innovation
and Delivery Team since December 2020. Mr. Distefano joined the Company over 20 years ago in March of 2001 and
served in various capacities since that time, including President of Korn Ferry Asia Pacific from May 2018 until April 2021
and prior to that as the Chief Marketing Officer from 2007 to 2021 and President of the Korn Ferry Institute. Prior to Korn
Ferry, Mr. Distefano held leadership positions at GetSmart.com and Benefits Consulting, Inc. Mr. Distefano is a graduate of
Bloomsburg University of Pennsylvania.
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PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol KFY. On June 22, 2023, there were
approximately 38,078 stockholders of record of the Company’s common stock.
Performance Graph
We have presented below a graph comparing the cumulative total stockholder return of the Company’s shares with the
cumulative total stockholder return on (1) the Standard & Poor’s 500 Stock Index and (2) the company-established peer
group. Cumulative total return for each of the periods shown in the performance graph is measured assuming an initial
investment of $100 on April 30, 2018 and the reinvestment of any dividends paid by the Company and any company in the
peer group on the date the dividends were paid.
Our peer group is comprised of a broad number of publicly traded companies, which are principally or in significant part
involved in professional services. The peer group is comprised of the following 11 companies: ASGN Inc. (ASGN), Cushman
& Wakefield Plc. (CWK), FTI Consulting Inc. (FCN), Heidrick & Struggles International Inc. (HSII), Huron Consulting Group
Inc. (HURN), ICF International Inc. (ICFI), Insperity Inc. (NSP), Jones Lang Lasalle Inc. (JLL), ManpowerGroup Inc. (MAN),
PageGroup Plc. (MPGPF) and Robert Half International Inc. (RHI). We believe this group of professional services firms is
reflective of similar sized companies in terms of our market capitalization, with significant global exposure that mirrors our
global footprint and therefore provides a meaningful comparison of stock performance. The returns of each company have
been weighted according to their respective stock market capitalization at the beginning of each measurement period for
purposes of arriving at a peer group average.
The stock price performance depicted in this graph is not necessarily indicative of future price performance. This graph will
not be deemed to be incorporated by reference by any general statement incorporating this Annual Report on Form 10-K
into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we
specifically incorporate this information by reference and shall not otherwise be deemed soliciting material or deemed filed
under the Securities Act of 1933 or the Securities Exchange Act of 1934.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
(*)
Among Korn Ferry, the S&P 500 Index, and a Peer Group
Copyright© 2023 Standard & Poor's, a division of S&P Global. All rights reserved.
_______________________________
(*)
$100 invested on April 30, 2018 in stock or index, including reinvestment of dividends. Fiscal year ended April 30, 2023.
Capital Allocation Approach
The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s long-term
priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and derivative
products and services, and the investment in synergistic, accretive M&A transactions that are expected to earn a return
superior to the Company's cost of capital. Next, the Company’s capital allocation approach contemplates the return of a
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Korn FerryS&P 500Peer Group4/187/1810/181/194/197/1910/191/204/207/2010/201/214/217/2110/211/224/227/2210/221/234/23$0$50$100$150$200$250$300
portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to the factors discussed below
under “Dividends” and in more detail in the “Risk Factors” section of this Annual Report on Form 10-K. Additionally, the
Company considers share repurchases on an opportunistic basis and subject to the terms of our indebtedness, as well as
using excess cash to repay the Notes. See Note 11— Long Term Debt for a description of the Amended Credit Agreement
and indenture governing the Notes.
Dividends
On December 8, 2014, the Board of Directors adopted a dividend policy to distribute to our stockholders a regular quarterly
cash dividend of $0.10 per share. Every quarter since the adoption of the dividend policy, the Company has declared a
quarterly dividend. On June 21, 2021 and 2022, the Board of Directors increased the quarterly dividend to $0.12 per share
and $0.15 per share, respectively. On June 26, 2023, the Board of Directors of the Company approved an increase of 20%
in our quarterly dividend, which increased the quarterly dividend to $0.18 per share.
The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board of
Directors and will depend upon many factors, including the Company’s earnings, capital requirements, financial conditions,
the terms of the Company’s indebtedness and other factors that the Board of Directors may deem to be relevant. The Board
of Directors may, however, amend, revoke or suspend the dividend policy at any time and for any reason.
Stock Repurchase Program
On June 21, 2022, the Board of Directors approved an increase in the Company’s stock repurchase program of
approximately $300 million, which brought our available capacity to repurchase shares in the open market or privately
negotiated transactions to $318 million. Common stock may be repurchased from time to time in open market or privately
negotiated transactions at the Company’s discretion subject to market conditions and other factors. The Company
repurchased approximately $93.9 million, $98.8 million and $30.4 million of the Company’s common stock during fiscal
2023, 2022 and 2021, respectively. Any decision to execute on our stock repurchase program will depend on our earnings,
capital requirements, financial condition and other factors considered relevant by our Board of Directors. The Amended
Credit Agreement permits us to pay dividends to our stockholders and make share repurchases so long as there is no
default under the Amended Credit Agreement, the Company’s total funded debt to adjusted EBITDA ratio (as set forth in the
Amended Credit Agreement, the “consolidated net leverage ratio”) is no greater than 5.00 to 1.00, and we are in pro forma
compliance with our financial covenant. Furthermore, our Notes allow the Company to pay $25.0 million of dividends per
fiscal year with no restrictions plus an unlimited amount of dividends so long as the Company’s consolidated total leverage
ratio is not greater than 3.50 to 1.00 and the Company is not in default under the indenture governing the Notes.
Issuer Purchases of Equity Securities
The following table summarizes common stock repurchased by us during the fourth quarter of fiscal 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)
February 1, 2023 - February 28, 2023
March 1, 2023 - March 31, 2023
April 1, 2023 - April 30, 2023
Total
95,000 $
76,699 $
85,000 $
256,699 $
56.35
53.09
48.12
52.65
95,000
$243.3 million
75,000
$239.3 million
85,000
$235.2 million
255,000
_______________________________
(1)
Represents withholding of 1,699 shares to cover taxes on vested restricted shares, in addition to shares purchased as part of a
publicly announced program.
(2)
On June 21, 2022, our Board of Directors approved an increase to the share repurchase program of $300 million. The shares can be
repurchased in open market transactions or privately negotiated transactions at the Company's discretion. The share repurchase
program has no expiration date. We repurchased approximately $13.4 million of the Company's common stock under the program
during the fourth quarter of fiscal 2023.
Item 6. Reserved
27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K 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, including the timing and anticipated impacts of our restructuring plans and business strategy,
are also forward-looking statements. 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 global and local political and or economic developments in or affecting
countries where we have operations, such as inflation, 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,
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, 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 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, 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, including Infinity Consulting Solutions ("ICS") and Salo LLC ("Salo"), resulting organizational changes, our
indebtedness, the ultimate magnitude and duration 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, and the matters disclosed under
the heading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A included in this Annual Report on
Form 10-K. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-
looking statements included in this Annual Report on Form 10-K are made only as of the date of this Annual Report on Form
10-K and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or
circumstances.
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 Annual Report on Form
10-K. 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
Korn Ferry (referred to herein as the “Company” or in the first-person notations “we,” “our,” and “us”) is a global
organizational consulting firm. We help clients synchronize strategy, operations and talent to drive superior business
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.
We are pursuing a strategy to help Korn Ferry focus on clients and collaborate intensively across the organization. This
approach is intended to build on the best of our past and give us a clear path to the future with focused initiatives to increase
our client and commercial impact. Korn Ferry is transforming how clients address their talent management needs. We have
evolved from a mono-line business to a multi-faceted consultancy business, giving our consultants more frequent and
expanded opportunities to engage with clients.
Our eight reportable segments operate through the following five lines of business:
1.
Consulting aligns organizational 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. We enable this work with a comprehensive set of Digital
Performance Management Tools, based on some of our world’s leading lP and data. The Consulting teams
employ an integrated approach across core solutions, each one intended to strengthen our work and thinking
in the next, to help clients execute their strategy in a digitally enabled world.
28
2.
3.
4.
5.
Digital develops technology-enabled Performance Management Tools that empower our clients. Our digital
products give clients direct access to our proprietary data, client data and analytics to deliver clear insights with
the training tools needed to align organizational structure with business strategy.
Executive Search helps organizations recruit board level, chief executive and other senior executive and
general management talent to deliver lasting impact. Our approach to placing talent brings together research-
based IP, proprietary assessments, and behavioral interviewing with our practical experience to determine the
ideal organizational fit. Salary benchmarking then builds appropriate frameworks for compensation and
retention. This business is managed and reported on a geographic basis and represents four of the Company’s
reportable segments (Executive Search North America, Executive Search Europe, the Middle East and Africa
("EMEA"), Executive Search Asia Pacific ("APAC"), and Executive Search Latin America).
Professional Search & Interim delivers enterprise talent acquisition solutions for professional level middle
and upper management. We help clients source high-quality candidates at speed and scale globally, covering
single-hire to multi-hire permanent placements and interim contractors.
Recruitment Process Outsourcing ("RPO") offers scalable recruitment outsourcing solutions leveraging
customized technology and talent insights. Our scalable solutions, built on science and powered by best-in-
class technology and consulting expertise, enable us to act as a strategic partner in clients’ quest for superior
recruitment outcomes and better candidate fit.
Professional Search & Interim and RPO were formerly referred to, and reported together, as Korn Ferry RPO & Professional
Search (“RPO & Professional Search”). We have recently acquired companies that have added critical mass to our
Professional Search and Interim operations. These acquisitions provided us the opportunity to reassess how we managed
our RPO & Professional Search segment. Therefore, beginning in fiscal 2023, we separated RPO & Professional Search
into two segments to align with the Company’s strategy and the decisions of the Company’s chief operating decision maker,
who began to regularly make separate resource allocation decisions and assess performance separately between our
Professional Search & Interim business and RPO business.
Highlights of our performance in fiscal 2023 include:
▪
▪
▪
▪
Approximately 78% of the executive searches we performed in fiscal 2023 were for board level, chief executive and
other senior executive and general management positions. Our more than 4,000 search engagement clients in fiscal
2023 included many of the world’s largest and most prestigious public and private companies.
We have built strong client loyalty, with nearly 80% of the assignments performed during fiscal 2023 having been on
behalf of clients for whom we had conducted assignments in the previous three fiscal years.
Approximately 80% of our revenues were generated from clients that have utilized multiple lines of our business.
In fiscal 2023, we acquired ICS, a provider of senior-level IT interim professional solutions with additional expertise in
the areas of compliance and legal, accounting and finance, and human resources. We also recently acquired Salo, a
leading provider of finance, accounting and human resources ("HR") interim talent.
Performance Highlights
On August 1, 2022, we completed the acquisition of ICS for $99.3 million, net of cash acquired. ICS is a highly regarded
provider of senior-level IT interim professional solutions with additional expertise in the areas of compliance and legal,
accounting and finance, and HR.
On February 1, 2023, we completed the acquisition of Salo for $155.4 million, net of cash acquired. Salo is a leading
provider of finance, accounting and HR interim talent, with a strong focus on serving organizations in healthcare, among
other industries.
The above acquisitions echo the commitment to scale our solutions, further increase the focus at the intersection of talent
and strategy-wherever and however the needs of organizations evolve-and present real, tangible opportunity for us and our
clients looking for the right talent, who are highly agile, with specialized skills and expertise, to help them drive superior
performance, including on an interim basis. We believe the addition of these acquisitions to our broader talent acquisition
portfolio–spanning Executive Search, RPO, Professional Search and Interim services–has accelerated our ability to capture
additional shares of this significant market. All of the acquisitions in fiscal 2023 are included in the Professional Search &
Interim segment.
In light of the Company’s evolution to an organization that is selling larger integrated solutions in a world where there are
shifts in global trade lanes and persistent inflationary pressures, on January 11, 2023, the Company initiated a plan (the
“Plan”) intended to realign its workforce with its business needs and objectives, namely, to invest in areas of potential growth
and implement reductions where there was excess capacity. The Plan resulted in the reduction of the Company's annualized
cost base by approximately $45.0 million to $55.0 million (after taking into account new hires in connection with the
rebalancing of the Company's workforce). The Plan consisted of severance and related employee benefits payments and
lease termination costs. In fiscal 2023, the Company recorded $42.6 million in restructuring charges, net, and $5.5 million
and $4.4 million in impairment of right-of-use asset and fixed assets, respectively, as a result of implementing the Plan.
29
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 impairments charges). For fiscal 2023,
Adjusted EBITDA excluded $42.6 million of restructuring charges, net, $14.9 million of integration/acquisition costs, $5.5
million impairment of right-of-use assets and $4.4 million impairment of fixed assets. For fiscal 2022, Adjusted EBITDA
excluded $7.9 million of integration/acquisition costs, $7.4 million impairment of right-of-use assets and $1.9 million
impairment of fixed assets. For fiscal 2021, Adjusted EBITDA excluded $30.7 million of restructuring charges, net and $0.7
million of integration/acquisition costs.
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 United States (“U.S.”) generally accepted accounting principles (“GAAP”) and should not be
considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. In addition, they
may not necessarily be comparable to non-GAAP performance measures that may be presented by other companies.
Management believes the presentation of these non-GAAP financial measures provides meaningful supplemental
information regarding Korn Ferry’s performance by excluding certain charges, items of income and other items that may not
be indicative of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitates
comparisons to Korn Ferry’s historical performance and the identification of operating trends that may otherwise be distorted
by the factors discussed above. Korn Ferry includes these non-GAAP financial measures because management believes it
is 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. The accounting policies for
the reportable segments are the same as those described in the summary of significant accounting policies in the
accompanying consolidated financial statements, except that the above noted items are excluded to arrive at Adjusted
EBITDA. Management further believes that 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.
Fee revenue was $2,835.4 million during fiscal 2023, an increase of $208.7 million, or 8%, compared to $2,626.7 million in
fiscal 2022, with increases in fee revenue in all lines of business with the exception of Executive Search. Professional
Search & Interim had the largest increase in fee revenue when compared to fiscal 2022. The acquisition of companies in the
Professional Search & Interim segment was a significant factor in the year-over-year increase in fee revenue. Exchange
rates unfavorably impacted fee revenue by $96.8 million, or 4%, during fiscal 2023 compared to fiscal 2022. Net income
attributable to Korn Ferry decreased by $116.9 million during fiscal 2023 to $209.5 million from $326.4 million in fiscal 2022.
Adjusted EBITDA was $457.3 million, a decrease of $81.6 million during fiscal 2023, from Adjusted EBITDA of $538.9 million
in fiscal 2022. During fiscal 2023, the Executive Search, Professional Search & Interim, Consulting, Digital, and RPO lines of
business contributed Adjusted EBITDA of $205.8 million, $110.9 million, $108.5 million, $97.5 million and $52.6 million,
respectively, offset by Corporate expenses net of other income of $118.0 million.
Our cash, cash equivalents and marketable securities decreased by $143.2 million to $1,067.9 million at April 30, 2023,
compared to $1,211.1 million at April 30, 2022. This decrease was mainly due to the acquisitions of ICS and Salo, retention
payments, capital expenditures, stock repurchases and dividends paid to stockholders during fiscal 2023. As of April 30,
2023, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a
cost value of $187.0 million and a fair value of $187.8 million. Our vested obligations for which these assets were held in
trust totaled $172.2 million as of April 30, 2023 and our unvested obligations totaled $21.9 million.
Our working capital decreased by $113.3 million to $662.4 million in fiscal 2023, as compared to $775.7 million at April 30,
2022. We believe that cash on hand and funds from operations and other forms of liquidity will be sufficient to meet our
anticipated working capital, capital expenditures, general corporate requirements, repayment of our debt obligations and
dividend payments under our dividend policy in the next 12 months. We had a total of $1,145.4 million available under the
Credit Facilities (defined in Liquidity and Capital Resources) and a total of $645.3 million available under the previous credit
facilities after $4.6 million and $4.7 million of standby letters of credit issued as of April 30, 2023 and 2022, respectively. Of
the amount available under the Credit Facilities, $500.0 million is under the Delayed Draw Facility that expired on June 24,
2023 and is no longer available as a source of liquidity. We had a total of $11.5 million and $10.0 million of standby letters of
credits with other financial institutions as of April 30, 2023 and 2022, respectively.
Critical Accounting Policies
The following discussion and analysis of our financial condition and results of operations are based on our consolidated
financial statements. Preparation of our periodic filings requires us to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from
those estimates and assumptions and changes in the estimates are reported in current operations as new information is
learned or upon the amounts becoming fixed and determinable. In preparing our consolidated financial statements and
accounting for the underlying transactions and balances, we apply our accounting policies as disclosed in the notes to our
30
consolidated financial statements. We consider the policies discussed below as critical to an understanding of our
consolidated financial statements because their application places the most significant demands on management’s
judgment and estimates. Specific risks for these critical accounting policies are described in the following paragraphs. Senior
management has discussed the development, selection and key assumptions of the critical accounting estimates with the
Audit Committee of the Board of Directors.
Revenue Recognition. Substantially all fee revenue is derived from talent and organizational consulting services and digital
sales, stand-alone or as part of a solution, fees for professional services related to executive and professional recruitment
performed on a retained basis, interim services and RPO, either stand-alone or as part of a solution.
Revenue is recognized when control of the goods and services is transferred to the customer in an amount that reflects the
consideration that we expect to be entitled to in exchange for those goods and services. Revenue contracts with customers
are evaluated based on the five-step model outlined in Accounting Standard Codification (“ASC”) 606 ("ASC 606"), Revenue
from Contracts with Customers: 1) identify the contract with a customer; 2) identify the performance obligation(s) in the
contract; 3) determine the transaction price; 4) allocate the transaction price to the separate performance obligation(s); and
5) recognize revenue when (or as) each performance obligation is satisfied.
Consulting fee revenue is primarily recognized as services are rendered, measured by total hours incurred as a percentage
of total estimated hours at completion. It is possible that updated estimates for consulting engagements may vary from initial
estimates with such updates being recognized in the period of determination. Depending on the timing of billings and
services rendered, we accrue or defer revenue as appropriate.
Digital revenue is generated from IP platforms enabling large-scale, technology-based talent programs for pay, talent
development, engagement, and assessment and is consumed directly by an end user or indirectly through a consulting
engagement. Revenue is recognized as services are delivered and we have a legally enforceable right to payment. Revenue
also comes from the sale of our proprietary IP subscriptions, which are considered symbolic IP due to the dynamic nature of
the content. As a result, revenue is recognized over the term of the contract. Functional IP licenses grant customers the right
to use IP content via the delivery of a flat file. Because the IP content license has significant stand-alone functionality,
revenue is recognized upon delivery and when an enforceable right to payment exists. Revenue for tangible and digital
products sold by the Company, such as books and digital files, is recognized when these products are shipped.
Fee revenue from executive and professional search activities is generally one-third of the estimated first-year cash
compensation of the placed candidate, plus a percentage of the fee to cover indirect engagement-related expenses. In
addition to the search retainer, an uptick fee is billed when the actual compensation awarded by the client for a placement is
higher than the estimated compensation. In the aggregate, upticks have been a relatively consistent percentage of the
original estimated fee; therefore, we estimate upticks using the expected value method based on historical data on a
portfolio basis. In a standard search engagement, there is one performance obligation, which is the promise to undertake a
search. We generally recognize such revenue over the course of a search and when we are legally entitled to payment as
outlined in the billing terms of the contract. Any revenues associated with services that are provided on a contingent basis
are recognized once the contingency is resolved, as this is when control is transferred to the customer. These assumptions
determine the timing of revenue recognition for the reported period. In addition to talent acquisition for permanent placement
roles, the Professional Search & Interim segment also offers recruitment services for interim roles. Interim roles are short
term in duration, generally less than 12 months. Generally, each interim role is a separate performance obligation. We
recognize fee revenue over the duration that the interim resources’ services are provided which also aligns to the contracted
invoicing plan and enforceable right to payment.
RPO fee revenue is generated through two distinct phases: 1) the implementation phase and 2) the post-implementation
recruitment phase. The fees associated with the implementation phase are recognized over the period that the related
implementation services are provided. The post-implementation recruitment phase represents end-to-end recruiting services
to clients for which there are both fixed and variable fees, which are recognized over the period that the related recruiting
services are performed.
Annual Performance-Related Bonuses. Each quarter, management makes its best estimate of its annual performance-
related bonuses, which requires management to, among other things, project annual consultant productivity (as measured
by engagement fees billed and collected by Executive Search and Professional Search consultants and revenue and other
performance/profitability metrics for Consulting, Digital, Interim and RPO consultants), the level of engagements referred by
a consultant in one line of business to a different line of business, our performance, including profitability, competitive forces
and future economic conditions and their impact on our results. At the end of each fiscal year, annual performance-related
bonuses take into account final individual consultant productivity (including referred work), Company/line of business results,
including profitability, the achievement of strategic objectives, the results of individual performance appraisals and the
current economic landscape. Accordingly, each quarter we reevaluate the assumptions used to estimate annual
performance-related bonus liability and adjust the carrying amount of the liability recorded on the consolidated balance
sheets and report any changes in the estimate in current operations. Because annual performance-based bonuses are
communicated and paid only after we report our full fiscal year results, actual performance-based bonus payments may
differ from the prior year’s estimate. Such changes in the bonus estimate historically have been immaterial and are recorded
in current operations in the period in which they are determined.
31
Deferred Compensation. Estimating deferred compensation requires assumptions regarding the timing and probability of
payments of benefits to participants and the discount rate. Changes in these assumptions could significantly impact the
liability and related cost on our consolidated balance sheets and statements of income, respectively. For certain deferred
compensation plans, management engages an independent actuary to periodically review these assumptions in order to
confirm that they reflect the population and economics of our deferred compensation plans in all material respects and to
assist us in estimating our deferred compensation liability and the related cost. The actuarial assumptions we use may differ
from actual results due to changing market conditions or changes in the participant population. These differences could have
a significant impact on our deferred compensation liability and the related cost.
Carrying Values. Valuations are required under GAAP to determine the carrying value of various assets. Our most significant
assets for which management is required to prepare valuations are carrying value of receivables, goodwill, other intangible
assets, share-based payments, leases and recoverability of deferred income taxes. Management must identify whether
events have occurred that may impact the carrying value of these assets and make assumptions regarding future events,
such as cash flows and profitability. Differences between the assumptions used to prepare these valuations and actual
results could materially impact the carrying amount of these assets and our operating results.
Of the assets mentioned above, goodwill is the largest asset requiring a valuation. Fair value of goodwill for purposes of the
goodwill impairment test when performing the quantitative test is determined utilizing (1) a discounted cash flow analysis
based on forecasted cash flows (including estimated underlying revenue and operating income growth rates) discounted
using an estimated weighted-average cost of capital for market participants and (2) a market approach, utilizing observable
market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public
or private transaction (to the extent available). We also reconcile the results of these analyses to its market capitalization. If
the carrying amount of a reporting unit exceeds its estimated fair value, goodwill is considered potentially impaired and
further tests are performed to measure the amount of impairment loss, if any.
We perform an annual impairment test each year as of January 31, or more frequently if impairment indicators arise. The
qualitative test performed as of January 31, 2023 did not indicate any impairment, and therefore there was no need to
perform a quantitative test. While historical performance and current expectations have resulted in fair values of goodwill in
excess of carrying values, if our assumptions are not realized, it is possible that in the future an impairment charge may
need to be recorded. However, it is not possible at this time to determine if an impairment charge would result or if such a
charge would be material. Fair value determinations require considerable judgment and are sensitive to changes in
underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for
purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. As of our testing date,
there were no indicators of impairments that required us to perform a quantitative test and as a result, no impairment charge
was recognized. There was no indication of potential impairment through April 30, 2023 that would have required further
testing.
Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions
and ultimately impact the estimated fair value of the reporting units may include such items as follows:
▪
▪
▪
▪
▪
▪
A prolonged downturn in the business environment in which the reporting units operate including a longer than
anticipated public health crisis;
An economic climate that significantly differs from our future profitability assumptions in timing or degree;
The deterioration of the labor markets;
Volatility in equity and debt markets;
Competition and disruption in our core business; and
Technological advances such as artificial intelligence that impact labor markets and can diminish the value of
our IP.
32
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)
Fee revenue
Reimbursed out-of-pocket engagement expenses
Total revenue
Compensation and benefits
General and administrative expenses
Reimbursed expenses
Cost of services
Depreciation and amortization
Restructuring charges, net
Operating income
Net income
Net income attributable to Korn Ferry
Year Ended April 30,
2023
2022
2021
100.0 %
100.0 %
100.0 %
1.0
101.0
67.1
9.5
1.0
8.4
2.4
1.5
11.2
7.5 %
7.4 %
0.6
100.6
66.3
9.0
0.6
4.4
2.4
—
17.9
12.6 %
12.4 %
0.5
100.5
71.7
10.6
0.5
4.0
3.4
1.7
8.6
6.4 %
6.3 %
The operating results for fiscal 2022 and 2021 have been revised to conform to the new segment reporting.
The following tables summarize the results of our operations:
(Numbers may not total exactly due to rounding)
Fee revenue
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Total Executive Search
Professional Search & Interim
RPO
Year Ended April 30,
2023
2022
2021
Dollars
%
Dollars
%
Dollars
%
(dollars in thousands)
$ 677,001
23.9 % $ 650,204
24.8 % $ 515,844
354,651
12.5
349,025
13.3
287,306
562,139
187,014
95,598
31,047
875,798
503,395
424,563
19.8
6.6
3.4
1.1
30.9
17.7
15.0
605,704
182,192
118,596
29,069
935,561
297,096
394,832
23.1
6.9
4.5
1.1
35.6
11.3
15.0
397,275
138,954
83,306
17,500
637,035
130,831
239,031
28.5 %
15.9
21.9
7.7
4.6
1.0
35.2
7.2
13.2
Total fee revenue
2,835,408
100.0 % 2,626,718
100.0 % 1,810,047
100.0 %
Reimbursed out-of-pocket engagement expense
28,428
Total revenue
$ 2,863,836
16,737
$ 2,643,455
9,899
$ 1,819,946
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.
33
Fee revenue
Total revenue
Net income attributable to Korn Ferry
Net income attributable to noncontrolling interest
Other (income) loss, net
Interest expense, net
Income tax provision
Operating income
Depreciation and amortization
Other income (loss), net
Integration/acquisition costs
Impairment of fixed assets
Impairment of right of use assets
Restructuring charges, net
Adjusted EBITDA
Adjusted EBITDA margin
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Total Executive Search
Professional Search & Interim
RPO
Corporate
Consolidated
Year Ended April 30,
2023
2022
2021
Consolidated
(in thousands)
2,835,408
2,863,836
$
$
2,626,718
2,643,455
$
$
1,810,047
1,819,946
209,529
$
326,360
$
114,454
$
$
$
3,525
(5,261)
25,864
82,683
316,340
68,335
5,261
14,922
4,375
5,471
42,573
4,485
11,880
25,293
102,056
470,074
63,521
(11,880)
7,906
1,915
7,392
—
1,108
(37,194)
29,278
48,138
155,784
61,845
37,194
737
—
—
30,732
$
457,277
$
538,928
$
286,292
16.1 %
20.5 %
15.8 %
Year Ended April 30, 2023
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA
margin
(dollars in thousands)
$
677,001 $
686,979 $
354,651
354,967
108,502
97,458
140,850
31,380
24,222
9,370
205,822
110,879
52,588
16.0 %
27.5 %
25.1 %
16.8 %
25.3 %
30.2 %
23.5 %
22.0 %
12.4 %
562,139
187,014
95,598
31,047
875,798
503,395
424,563
—
568,212
188,114
95,956
31,054
883,336
507,058
431,496
—
(117,972)
$
2,835,408 $
2,863,836 $
457,277
16.1 %
34
Year Ended April 30, 2022
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA
margin
(dollars in thousands)
$
650,204 $
654,199 $
349,025
349,437
116,108
110,050
181,615
31,804
35,105
9,089
257,613
106,015
59,126
17.9 %
31.5 %
30.0 %
17.5 %
29.6 %
31.3 %
27.5 %
35.7 %
15.0 %
605,704
182,192
118,596
29,069
935,561
297,096
394,832
—
609,258
182,866
118,705
29,079
939,908
297,974
401,937
—
(109,984)
$
2,626,718 $
2,643,455 $
538,928
20.5 %
Year Ended April 30, 2021
Fee revenue
Total revenue
Adjusted EBITDA
Adjusted EBITDA
margin
(dollars in thousands)
$
515,844 $
517,046 $
287,306
287,780
397,275
138,954
83,306
17,500
637,035
130,831
239,031
—
399,104
139,213
83,463
17,500
639,280
131,080
244,760
—
$
1,810,047 $
1,819,946 $
81,522
86,095
98,099
11,742
16,676
1,289
127,806
36,934
32,477
(78,542)
286,292
15.8 %
30.0 %
24.7 %
8.5 %
20.0 %
7.4 %
20.1 %
28.2 %
13.6 %
15.8 %
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Total Executive Search
Professional Search & Interim
RPO
Corporate
Consolidated
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Total Executive Search
Professional Search & Interim
RPO
Corporate
Consolidated
Fiscal 2023 Compared to Fiscal 2022
Fee Revenue
Fee Revenue. Fee revenue increased by $208.7 million, or 8.0%, to $2,835.4 million in fiscal 2023 compared to $2,626.7
million in fiscal 2022. Exchange rates unfavorably impacted fee revenue by $96.8 million, or 4%, in fiscal 2023 compared to
fiscal 2022. Fee revenue increased in all lines of business except in Executive Search which saw a decline in fee revenue
compared to fiscal 2022 primarily due to a decline in demand for our products and services caused by the slowdown in the
global economy. The acquisitions of The Lucas Group, Patina Solutions Group ("Patina"), ICS and Salo (the "Acquired
Companies") were a significant factor in the increase in fee revenue compared to fiscal 2022.
Consulting. Consulting reported fee revenue of $677.0 million in fiscal 2023, an increase of $26.8 million, or 4%, compared
to $650.2 million in fiscal 2022. The increase in fee revenue was mainly driven by an increase in demand for workforce
transformation, organization design, and senior leadership development delivered through our Organization Strategy,
Leadership Development, Total Rewards and Assessment & Succession solutions, as clients aligned their structures to new
market opportunities and addressed compensation and retention issues. Exchange rates unfavorably impacted fee revenue
by $27.8 million, or 4%, compared to fiscal 2022.
Digital. Digital reported fee revenue of $354.7 million in fiscal 2023, an increase of $5.7 million, or 2%, compared to $349.0
million in fiscal 2022. The increase in fee revenue was primarily driven by increasing demand for Development offerings as
companies invest in sales effectiveness tools and training content to build their commercial teams' capabilities to maximize
35
revenue growth, as well as in analytics on Total Rewards trends used to aid in retention and staffing decisions. Exchange
rates unfavorably impacted fee revenue by $18.8 million, or 5%, compared to fiscal 2022.
Executive Search North America. Executive Search North America reported fee revenue of $562.1 million in fiscal 2023, a
decrease of $43.6 million, or 7%, compared to $605.7 million in fiscal 2022. Exchange rates unfavorably impacted fee
revenue by $2.2 million in fiscal 2023 compared to fiscal 2022. North America’s fee revenue decreased due to a 14%
decrease in the number of engagements billed, partially offset by an 8% increase in the weighted-average fees billed per
engagement (calculated using local currency) in fiscal 2023 compared to fiscal 2022.
Executive Search EMEA. Executive Search EMEA reported fee revenue of $187.0 million in fiscal 2023, an increase of $4.8
million, or 3%, compared to $182.2 million in fiscal 2022. Exchange rates unfavorably impacted fee revenue by $15.6 million,
or 9%, in fiscal 2023 compared to fiscal 2022. The increase in fee revenue was primarily due to a 10% increase in the
weighted-average fees billed per engagement (calculated using local currency) and a 2% increase in the number of
engagements billed in fiscal 2023 compared to fiscal 2022. The performance in the United Arab Emirates, Switzerland,
Denmark, Netherlands and Germany were the primary contributors to the increase in fee revenue in fiscal 2023 compared to
fiscal 2022, partially offset by a decrease in fee revenue in France, Russia and Italy.
Executive Search Asia Pacific. Executive Search Asia Pacific reported fee revenue of $95.6 million in fiscal 2023, a
decrease of $23.0 million, or 19%, compared to $118.6 million in fiscal 2022. Exchange rates unfavorably impacted fee
revenue by $7.9 million, or 7%, in fiscal 2023 compared to fiscal 2022. The decrease in fee revenue was due to a 16%
decrease in the number of engagements billed, partially offset by a 2% increase in the weighted-average fees billed per
engagement (calculated using local currency) in fiscal 2023 compared to fiscal 2022. The performance in China, Japan,
Australia, India and Korea were the primary contributors to the decrease in fee revenue in fiscal 2023 compared to fiscal
2022, partially offset by an increase in fee revenue in Malaysia.
Executive Search Latin America. Executive Search Latin America reported fee revenue of $31.0 million in fiscal 2023, an
increase of $1.9 million, or 7%, compared to $29.1 million in fiscal 2022. Exchange rates were relatively flat in fiscal 2023
compared to fiscal 2022. The increase in fee revenue was due to a 9% increase in the weighted-average fees billed per
engagement (calculated using local currency), partially offset by a decrease of 2% in the number of engagements billed in
fiscal 2023 compared to fiscal 2022. The performance in Mexico and Brazil were the primary contributors to the increase in
fee revenue in fiscal 2023 compared to fiscal 2022, partially offset by a decrease in fee revenue in Colombia.
Professional Search & Interim. Professional Search & Interim reported fee revenue of $503.4 million in fiscal 2023, an
increase of $206.3 million, or 69%, compared to $297.1 million in fiscal 2022. Exchange rates unfavorably impacted fee
revenue by $7.4 million, or 2%, in fiscal 2023 compared to fiscal 2022. The increase in fee revenue was driven by an
increase in both interim and professional search fee revenue of $188.1 million and $18.2 million, respectively, which was
primarily due to the acquisitions of the Acquired Companies.
RPO. RPO reported fee revenue of $424.6 million in fiscal 2023, an increase of $29.8 million, or 8%, compared to $394.8
million in fiscal 2022. Exchange rates unfavorably impacted fee revenue by $17.1 million, or 4%, in fiscal 2023 compared to
fiscal 2022. The increase in fee revenue was due to wider adoption of RPO services in the market in combination with our
differentiated solutions.
Compensation and Benefits
Compensation and benefits expense increased by $159.7 million, or 9%, to $1,901.2 million in fiscal 2023 from $1,741.5
million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by $53.6 million, or 3%, in fiscal 2023
compared to fiscal 2022. The increase in compensation and benefits expense was primarily due to increases in salaries and
related payroll taxes of $147.7 million and employer insurance of $15.3 million. These increases were due to the increase in
fee revenue overall which resulted in an increase in average headcount of 15% in fiscal 2023 compared to fiscal 2022, and
wage inflation. Also contributing to higher compensation and benefits expense were increases in commission expense of
$20.2 million due to higher fee revenue, $18.7 million more in deferred compensation expenses as a result of increases in
the fair value of participants’ accounts in fiscal 2023 compared to fiscal 2022 and higher integration/acquisition costs of $6.4
million. This increase was partially offset by decreases in performance-related bonus expense of $38.2 million and $8.9
million in amortization of long-term incentive awards. Compensation and benefits expense, as a percentage of fee revenue,
increased to 67% in fiscal 2023 from 66% in fiscal 2022.
Consulting compensation and benefits expense increased by $27.6 million, or 6%, to $478.5 million in fiscal 2023 from
$450.9 million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by $16.5 million, or 4%, in fiscal
2023 compared to fiscal 2022. The increase in compensation and benefits expense was primarily due to increases in
salaries and related payroll taxes of $22.2 million and employer insurance of $2.5 million. These increases were due to the
segment's revenue growth coupled which resulted in an increase in average headcount of 7% in fiscal 2023 compared to
fiscal 2022, and wage inflation. Also contributing to higher compensation and benefits expense was an increase in deferred
compensation expense of $2.6 million in fiscal 2023 compared to fiscal 2022. Consulting compensation and benefits
expense, as a percentage of fee revenue, increased to 71% in fiscal 2023 from 69% in fiscal 2022.
Digital compensation and benefits expense increased by $11.3 million, or 6%, to $189.1 million in fiscal 2023 from $177.8
million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by $7.5 million, or 4%, in fiscal 2023
36
compared to fiscal 2022. The increase in compensation and benefits expense was primarily due to an increase in salaries
and related payroll taxes of $13.8 million due to a 9% increase in average headcount in fiscal 2023 compared to fiscal 2022
and wage inflation. The increase was partially offset by a decrease in performance-related bonus expense of $3.0 million.
Digital compensation and benefits expense, as a percentage of fee revenue, increased to 53% in fiscal 2023 from 51% in
fiscal 2022.
Executive Search North America compensation and benefits expense increased by $9.0 million, or 2%, to $386.1 million in
fiscal 2023 compared to $377.1 million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by
$1.0 million in fiscal 2023 compared to fiscal 2022. The increase in compensation and benefits expense was primarily due to
higher salaries and related payroll taxes of $12.4 million and an increase in employer insurance of $1.6 million. These
increases were due to an increase in average headcount of 10% in fiscal 2023 compared to fiscal 2022 and wage inflation.
Also contributing to the increase in compensation and benefits expense was an increase in deferred compensation expense
of $12.4 million due to an increase in the fair market value of participants' accounts in fiscal 2023 compared to fiscal 2022.
The increase was partially offset by lower performance-related bonus expense of $12.4 million as a result of lower fee
revenue and a decrease in the amortization of long-term incentive awards of $4.9 million. Executive Search North America
compensation and benefits expense, as a percentage of fee revenue, increased to 69% in fiscal 2023 from 62% in fiscal
2022.
Executive Search EMEA compensation and benefits expense increased by $7.4 million, or 6%, to $140.5 million in fiscal
2023 compared to $133.1 million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by $8.2
million, or 6%, in fiscal 2023 compared to fiscal 2022. The increase in compensation and benefits expense was primarily due
to higher performance-related bonus expense of $4.5 million, salaries and related payroll taxes of $2.5 million and
amortization of long-term incentive awards of $1.1 million in fiscal 2023 compared to fiscal 2022. These increases were due
to the Executive search EMEA segment's revenue growth combined with an increase in average headcount of 11% in fiscal
2023 compared to fiscal 2022. Executive Search EMEA compensation and benefits expense, as a percentage of fee
revenue, increased to 75% in fiscal 2023 from 73% in fiscal 2022.
Executive Search Asia Pacific compensation and benefits expense decreased by $10.4 million, or 14%, to $61.9 million in
fiscal 2023 compared to $72.3 million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by $4.3
million, or 6%, in fiscal 2023 compared to fiscal 2022. The decrease in compensation and benefits expense was primarily
due to a decrease in performance-related bonus expense of $8.3 million in fiscal 2023 compared to fiscal 2022 due to lower
segment fee revenue. Executive Search Asia Pacific compensation and benefits expense, as a percentage of fee revenue,
increased to 65% in fiscal 2023 from 61% in fiscal 2022.
Executive Search Latin America compensation and benefits expense increased by $2.0 million, or 11%, to $20.4 million in
fiscal 2023 compared to $18.4 million in fiscal 2022. Exchange rates unfavorably impacted compensation and benefits by
$0.1 million, in fiscal 2023 compared to fiscal 2022. The increase in compensation and benefits expense was primarily due
to an increase in salaries and related payroll taxes as a result of the segment’s fee revenue growth with an increase in
average headcount of 8% in fiscal 2023 compared to fiscal 2022. Executive Search Latin America compensation and
benefits expense, as percentage of fee revenue, increased to 66% in fiscal 2023 from 63% in fiscal 2022.
Professional Search & Interim compensation and benefits expense increased by $74.5 million, or 50%, to $223.3 million in
fiscal 2023 compared to $148.8 million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by
$2.9 million, or 2%, in fiscal 2023 compared to fiscal 2022. The increase in compensation and benefits expense was
primarily due to higher salaries and related payroll taxes of $52.0 million, commission expense of $18.0 million, employee
insurance of $3.9 million and integration/acquisition costs of $6.4 million due to the acquisitions of the Acquired Companies,
which resulted in a 55% increase in the average headcount in fiscal 2023 compared to fiscal 2022. This increase was
partially offset by a decrease of $8.0 million in performance-related bonus expense. Professional Search & Interim
compensation and benefits expense, as a percentage of fee revenue, decreased to 44% in fiscal 2023 from 50% in fiscal
2022.
RPO compensation and benefits expense increased by $35.8 million, or 12%, to $339.0 million in fiscal 2023 from $303.2
million in fiscal 2022. Exchange rates favorably impacted compensation and benefits by $13.1 million, or 4%, in fiscal 2023
compared to fiscal 2022. The increase in compensation and benefits expense was primarily due to higher salaries and
related payroll taxes of $42.1 million and employer insurance of $6.1 million as a result of the segment's fee revenue growth
combined with an increase in average headcount of 18% in fiscal 2023 compared to fiscal 2022. Also contributing to the
higher compensation and benefits expense was the increase in severance expense of $3.2 million. This increase was
partially offset by decreases in performance-related bonus expense of $12.6 million and in the use of outside contractors of
$5.4 million. RPO compensation and benefits expense, as a percentage of fee revenue, increased to 80% in fiscal 2023
from 77% in fiscal 2022.
Corporate compensation and benefits expense increased by $2.7 million, or 5%, to $62.4 million in fiscal 2023 from $59.7
million in fiscal 2022. The increase in compensation and benefits expense was primarily driven by higher salaries and
related payroll taxes of $4.5 million due to an increase in average headcount of 13% in fiscal 2023 compared to fiscal 2022,
and to a lesser extent to an increase in stock-based compensation expense of $2.3 million and the use of outside
contractors of $1.3 million. Also contributing to the increase in compensation and benefits expense was an increase in
deferred compensation expense of $1.1 million due to increases in the fair value of participants' accounts. The increase was
37
partially offset by an increase in the cash surrender value ("CSV") of company-owned life insurance ("COLI") of $4.8 million
as a result of increased death benefits, and a decrease in the amortization of long-term incentive awards of $1.2 million in
fiscal 2023 compared to fiscal 2022.
General and Administrative Expenses
General and administrative expenses increased by $31.2 million, or 13%, to $268.5 million in fiscal 2023 compared to
$237.3 million in fiscal 2022. Exchange rates favorably impacted general and administrative expenses by $12.5 million, or
5%, in fiscal 2023 compared to fiscal 2022. The increase in general and administrative expenses was primarily due to higher
marketing and business development expenses of $15.9 million and an increase in computer software licenses expense of
$9.0 million, which contributed to the increase in fee revenue in fiscal 2023 compared to fiscal 2022, as well as an increase
in legal and other professional fees of $6.7 million. General and administrative expenses, as a percentage of fee revenue,
was 9% in both fiscal 2023 and fiscal 2022.
Consulting general and administrative expenses increased by $6.4 million, or 12%, to $57.9 million in fiscal 2023 compared
to $51.5 million in fiscal 2022. The increase in general and administrative expenses was primarily due to increases in
impairment charges of $3.1 million associated with the reduction of the Company’s real estate footprint and marketing and
business development expenses of $2.1 million related to fee revenue growth. Also contributing to the increase in general
and administrative expenses was an increase in foreign exchange losses of $2.0 million in fiscal 2023 compared to fiscal
2022. Consulting general and administrative expenses, as a percentage of fee revenue, increased to 9% in fiscal 2023 from
8% in fiscal 2022.
Digital general and administrative expenses increased by $9.6 million, or 31%, to $40.6 million in fiscal 2023 compared to
$31.0 million in fiscal 2022. The increase in general and administrative expenses was primarily due to higher computer
software licenses expense of $3.2 million and an increase in marketing and business development expenses of $3.1 million.
Also contributing to the increase in general and administrative expense was an increase in impairment charges of $1.7
million associated with the reduction of the Company's real estate footprint and an increase in foreign exchange losses of
$1.5 million in fiscal 2023 compared to fiscal 2022. Digital general and administrative expenses, as a percentage of fee
revenue, increased to 11% in fiscal 2023 from 9% in fiscal 2022.
Executive Search North America general and administrative expenses increased by $1.6 million, or 5%, to $32.4 million in
fiscal 2023 from $30.8 million in fiscal 2022. The increase in general and administrative expenses was primarily due to an
increase in marketing and business development expenses of $2.1 million, partially offset by foreign exchange gains of $0.2
million in fiscal 2023 compared to foreign exchange losses of $0.4 million in fiscal 2022. Executive Search North America
general and administrative expenses, as a percentage of fee revenue, increased to 6% in fiscal 2023 from 5% in fiscal 2022.
Executive Search EMEA general and administrative expenses decreased by $3.3 million, or 18%, to $14.7 million in fiscal
2023 from $18.0 million in fiscal 2022. The decrease in general and administrative expenses was primarily due to a
decrease in premise and office expense of $3.3 million due to impairment charges recorded in fiscal 2022 and as a result of
the reduction of the Company's real estate footprint. Also contributing to the decrease is the impact of foreign currency with
foreign currency gains of $0.3 million in fiscal 2023 compared to foreign exchange losses of $0.7 million in fiscal 2022. This
decrease was partially offset by an increase in marketing and business development expense of $1.0 million related to fee
revenue growth in fiscal 2023 compared to fiscal 2022. Executive Search EMEA general and administrative expenses, as a
percentage of fee revenue, decreased to 8% in fiscal 2023 from 10% in fiscal 2022.
Executive Search Asia Pacific general and administrative expenses decreased by $1.3 million, or 12%, to $9.7 million in
fiscal 2023 from $11.0 million in fiscal 2022. The decrease in general and administrative expenses was primarily due to
decreases in bad debt expense of $0.7 million and premise and office expense of $0.6 million in fiscal 2023 compared to
fiscal 2022. Executive Search Asia Pacific general and administrative expenses, as a percentage of fee revenue, increased
to 10% in fiscal 2023 from 9% in fiscal 2022.
Executive Search Latin America general and administrative expenses increased by $0.5 million, or 56%, to $1.4 million in
fiscal 2023 from $0.9 million in fiscal 2022. The increase in general and administrative expenses was primarily due to a gain
recorded in fiscal 2022 due to the termination of a lease agreement in Mexico, thereby increasing premise and office
expense by $1.7 million, partially offset by an increase in foreign exchange gains of $0.8 million in fiscal 2023 compared to
fiscal 2022. Executive Search Latin America general and administrative expenses, as a percentage of fee revenue,
increased to 4% in fiscal 2023 from 3% in fiscal 2022.
Professional Search & Interim general and administrative expenses increased by $10.1 million, or 50%, to $30.3 million in
fiscal 2023 from $20.2 million in fiscal 2022. The increase in general and administrative expenses was primarily due to
increases in bad debt expense of $5.4 million, marketing and business development expenses of $2.4 million, premise and
office expense of $1.3 million and integration/acquisition costs of $0.8 million in fiscal 2023 compared to fiscal 2022.
Professional Search & Interim general and administrative expenses, as a percentage of fee revenue, decreased to 6% in
fiscal 2023 from 7% in fiscal 2022.
RPO general and administrative expenses increased by $0.9 million, or 4%, to $21.3 million in fiscal 2023 from $20.4 million
in fiscal 2022. The increase in general and administrative expenses was primarily due to increases in marketing and
business development expenses of $1.0 million, legal and other professional fees of $0.4 million, as well as a foreign
38
exchange losses of $1.2 million in fiscal 2023 as opposed to foreign exchange gains of $0.8 million in fiscal 2022. This
increase was partially offset by a lower bad debt expense of $2.5 million in fiscal 2023 compared to fiscal 2022. RPO
general and administrative expenses, as a percentage of fee revenue, was 5% in both fiscal 2023 and fiscal 2022.
Corporate general and administrative expenses increased by $6.6 million, or 12%, to $60.1 million in fiscal 2023 compared
to $53.5 million in fiscal 2022. The increase in general and administrative expenses was primarily due to increases in legal
and other professional fees of $3.9 million, marketing and business development expenses of $3.8 million, as well as
premise and office expense of $2.7 million, partially offset by an increase in foreign exchange gains of $2.3 million in fiscal
2023 compared to fiscal 2022.
Cost of Services Expense
Cost of services expense consists of contractor and product costs related to the delivery of various services and products
through Consulting, Digital, Professional Search & Interim and RPO. Cost of services expense was $238.5 million in fiscal
2023, an increase of $124.1 million, or 108%, compared to $114.4 million in fiscal 2022. Professional Search & Interim
accounts for $122.9 million of the increase primarily due to the acquisitions of the Acquired Companies which, includes a
significant amount of interim business as part of the services they perform which has higher cost of services expense
compared to other services Korn Ferry provides. As the interim business becomes an increasing portion of our fee revenue,
we expect cost of services expense to continue to increase in future periods. The rest of the increase was from the
Consulting segment driven by the increase in fee revenue in the segment. Cost of services expense, as a percentage of fee
revenue, increased to 8% in fiscal 2023 from 4% in fiscal 2022 due to the acquisition of the Acquired Companies.
Depreciation and Amortization Expenses
Depreciation and amortization expenses were $68.3 million in fiscal 2023, an increase of $4.8 million, or 8%, compared to
$63.5 million in fiscal 2022. The increase was primarily due to the amortization of intangible assets due to the acquisition of
the Acquired Companies.
Restructuring Charges, Net
In fiscal 2023, we implemented the Plan to realign our workforce with our business needs and objectives. As a result, we
recorded restructuring charges, net of $42.6 million during fiscal 2023. There were no restructuring charges, net in fiscal
2022.
Net Income Attributable to Korn Ferry
Net income attributable to Korn Ferry decreased by $116.9 million, to $209.5 million in fiscal 2023 compared to $326.4
million in fiscal 2022. The decrease in net income attributable to Korn Ferry was driven by increases in compensation and
benefits expense, cost of services expense, general and administrative expenses, and restructuring charges, net in fiscal
2023 compared to fiscal 2022. This decrease was partially offset by an increase in fee revenue, lower income tax provision
and an increase in other income (loss), net in fiscal 2023 compared to fiscal 2022. Net income attributable to Korn Ferry, as
a percentage of fee revenue, was 7% and 12% in fiscal 2023 and 2022, respectively.
Adjusted EBITDA
Adjusted EBITDA a decrease of $81.6 million to $457.3 million in fiscal 2023 compared to $538.9 million in fiscal 2022. The
decrease in Adjusted EBITDA was driven by increases in compensation and benefits expense (excluding integration/
acquisition costs), cost of services expense, and general and administrative expenses (excluding integration/acquisition
costs and impairment charges), partially offset by increases in fee revenue and other income (loss), net in fiscal 2023
compared to fiscal 2022. Adjusted EBITDA, as a percentage of fee revenue, was 16% in fiscal 2023 compared to 21% in
fiscal 2022. Adjusted EBITDA margin decreased primarily due to a change in fee revenue mix, with a decrease in fee
revenue in Executive Search and Permanent Placement, which have higher margins, and being replaced with fee revenue in
Interim that has lower margins, but is more resilient to economic factors and in line with our strategy
Consulting Adjusted EBITDA was $108.5 million in fiscal 2023, a decrease of $7.6 million, or 7%, compared to $116.1 million
in fiscal 2022. The decrease in Adjusted EBITDA was driven by increases in compensation and benefits expense, general
and administrative expenses (excluding impairment charges), and cost of services expense, partially offset by an increase in
fee revenue in fiscal 2023 compared to fiscal 2022. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 16%
in fiscal 2023 compared to 18% in fiscal 2022.
Digital Adjusted EBITDA was $97.5 million in fiscal 2023, a decrease of $12.6 million, or 11%, compared to $110.1 million in
fiscal 2022. The decrease in Adjusted EBITDA was mainly driven by increases in compensation and benefits expense and
general and administrative expenses (excluding impairment charges), partially offset by an increase in fee revenue in fiscal
2023 compared to fiscal 2022. Digital Adjusted EBITDA, as a percentage of fee revenue, was 27% in fiscal 2023 compared
to 32% in fiscal 2022.
Executive Search North America Adjusted EBITDA decreased by $40.7 million, or 22%, to $140.9 million in fiscal 2023
compared to $181.6 million in fiscal 2022. The decrease in Adjusted EBITDA was primarily driven by lower fee revenue in
the segment, coupled with increases in compensation and benefits expense and general and administrative expenses,
39
partially offset by an increase in other income (loss), net in fiscal 2023 compared to fiscal 2022. Executive Search North
America Adjusted EBITDA, as a percentage of fee revenue, was 25% in fiscal 2023 compared to 30% in fiscal 2022.
Executive Search EMEA Adjusted EBITDA decreased by $0.4 million, or 1%, to $31.4 million in fiscal 2023 compared to
$31.8 million in fiscal 2022. The decrease in Adjusted EBITDA was driven by an increase in compensation and benefits
expense, partially offset by higher fee revenue in the segment and a decrease in general and administrative expenses
(excluding impairment charges). Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 17% in
both fiscal 2023 and fiscal 2022.
Executive Search Asia Pacific Adjusted EBITDA decreased by $10.9 million, or 31%, to $24.2 million in fiscal 2023
compared to $35.1 million in fiscal 2022. The decrease in Adjusted EBITDA was primarily driven by lower fee revenue in the
segment, partially offset by decreases in the compensation and benefits expense and general and administrative expenses
in fiscal 2023 compared to fiscal 2022. Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue,
was 25% in fiscal 2023 compared to 30% in fiscal 2022.
Executive Search Latin America Adjusted EBITDA increased by $0.3 million, or 3%, to $9.4 million in fiscal 2023 compared
to $9.1 million in fiscal 2022. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment and an
increase in other income (loss), net, partially offset by an increase in compensation and benefits expense in fiscal 2023
compared to fiscal 2022. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, was 30% in
fiscal 2023 compared to 31% in fiscal 2022.
Professional Search & Interim Adjusted EBITDA was $110.9 million in fiscal 2023, an increase of $4.9 million, or 5%,
compared to $106.0 million in fiscal 2022. The increase in Adjusted EBITDA was mainly driven by higher fee revenue in the
segment as a result of the acquisition of the Acquired Companies, partially offset by increases in cost of services expense,
compensation and benefits expense (excluding integration/acquisition costs) and general and administrative expenses
(excluding impairment charges and integration/acquisition costs) in fiscal 2023 compared to fiscal 2022. Professional Search
& Interim Adjusted EBITDA, as a percentage of fee revenue, was 22% in fiscal 2023 compared to 36% in fiscal 2022.
RPO Adjusted EBITDA was $52.6 million in fiscal 2023, a decrease of $6.5 million, or 11%, compared to $59.1 million in
fiscal 2022. The decrease in Adjusted EBITDA was mainly driven by increases in compensation and benefits expense and
general and administrative expenses (excluding impairment charges), partially offset by higher fee revenue in the segment
in fiscal 2023 compared to fiscal 2022. RPO Adjusted EBITDA, as a percentage of fee revenue, was 12% in fiscal 2023
compared to 15% in fiscal 2022.
Other Income (Loss), Net
Other income, net was $5.3 million in fiscal 2023 compared to other loss, net of $11.9 million in fiscal 2022. The difference
was primarily due to gains from the fair value of our marketable securities in fiscal 2023 compared to losses in fiscal 2022.
Interest Expense, Net
Interest expense, net primarily relates to our Notes issued in December 2019, borrowings under our COLI policies and
interest cost related to our deferred compensation plans, which are partially offset by interest earned on cash and cash
equivalent balances. Interest expense, net was $25.9 million in fiscal 2023 compared to $25.3 million in fiscal 2022.
Income Tax Provision
The provision for income tax was $82.7 million in fiscal 2023 compared to $102.1 million in fiscal 2022. This reflects a 28%
effective tax rate for fiscal 2023 compared to a 24% effective tax rate for fiscal 2022. In addition to the impact of U.S. state
income taxes and jurisdictional mix of earnings, which generally create variability in our effective tax rate over time, the
higher effective tax rate in fiscal 2023 was affected by a tax expense recorded for withholding taxes that are not eligible for
credit. The fiscal 2022 effective tax rate was lower due to a tax benefit recorded in connection with tax credits for eligible
research and development expenditures incurred in fiscal 2022 and the four immediately preceding fiscal years.
Net Income Attributable to Noncontrolling Interest
Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to
shares of such subsidiary not held by Korn Ferry that are included in the consolidated results of income. Net income
attributable to noncontrolling interest was $3.5 million and $4.5 million in fiscal 2023 and fiscal 2022, respectively.
Fiscal 2022 compared to Fiscal 2021
During fiscal 2023, the Company changed the composition of its global segments. The Professional Search & Interim
segment and RPO segment were previously included in the RPO & Professional Search segment. Segment data for fiscal
2022 and 2021 have been recast to reflect the division of the RPO & Professional Search segment into the Professional
Search & Interim and RPO segments.
Fee Revenue
Fee Revenue. Fee revenue increased by $816.7 million, or 45.1%, to $2,626.7 million in fiscal 2022 compared to $1,810.0
million in fiscal 2021. Exchange rates unfavorably impacted fee revenue by $2.8 million, in fiscal 2022 compared to fiscal
2021. The higher fee revenue was attributable to increases in all lines of business primarily due to an increase in new
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business driven by the increased relevance of the Company’s solutions and the acquisition of The Lucas Group that closed
on November 1 2021 and Patina that closed on April 1, 2022 ("Acquired Companies in fiscal 2022") in the Professional
Search & Interim segment. Further, the coronavirus pandemic ("COVID-19") adversely impacted demand for the Company’s
services on a worldwide basis in fiscal 2021.
Consulting. Consulting reported fee revenue of $650.2 million in fiscal 2022, an increase of $134.4 million, or 26%,
compared to $515.8 million in fiscal 2021. The increase in fee revenue was partially driven by our Organizational Strategy
work in organization and job redesign, people strategy and culture transformation. In addition, our diversity, equity &
inclusion (“DE&I”) business remained strong in fiscal 2022 as we helped clients move the needle on their diversity efforts.
Also, greater expectations for organizations to be a force for good in society more broadly has been increasing demand for
our environmental and social governance (“ESG”) and sustainability offerings. Leadership Development continues to focus
on the importance of increasing employee engagement through coaching and structured leadership workshops. Assessment
and Succession increased as clients rely on Korn Ferry’s robust data, science and IP to fuel leadership and scaled
workforce transformations. Finally, growth in Total Rewards was fueled by global compensation and retention challenges
associated with labor market dislocation; merger & acquisition and IPO activity; and increased focus on executive pay and
governance issues, all of which increased pressure to offer higher and more competitive compensation. Exchange rates
unfavorably impacted fee revenue by $2.8 million, or 1%, compared to fiscal 2021.
Digital. Digital reported fee revenue of $349.0 million in fiscal 2022, an increase of $61.7 million, or 21%, compared to
$287.3 million in fiscal 2021. The increase in fee revenue was primarily due to Professional Development where we targeted
new offerings and partnerships in fiscal 2022 to meet the growing need of companies focusing on sales effectiveness. We
had double digit increases in fee revenue across our other solutions focusing on assessment, total rewards and
organizational strategy as companies focused on retaining and rewarding key talent to reduce levels of attrition from
dislocation in the labor markets. Exchange rates unfavorably impacted fee revenue by $1.8 million, or 1%, compared to
fiscal 2021.
Executive Search North America. Executive Search North America reported fee revenue of $605.7 million in fiscal 2022, an
increase of $208.4 million, or 52%, compared to $397.3 million in fiscal 2021. Exchange rates favorably impacted fee
revenue by $1.3 million in fiscal 2022 compared to fiscal 2021. North America’s fee revenue was higher due to a 35%
increase in the number of engagements billed and a 12% increase in the weighted-average fees billed per engagement
(calculated using local currency) in fiscal 2022 compared to fiscal 2021.
Executive Search EMEA. Executive Search EMEA reported fee revenue of $182.2 million in fiscal 2022, an increase of
$43.2 million, or 31%, compared to $139.0 million in fiscal 2021. Exchange rates unfavorably impacted fee revenue by $0.5
million in fiscal 2022 compared to fiscal 2021. The increase in fee revenue was due to a 15% increase in the number of
engagements billed and a 14% increase in the weighted-average fees billed per engagement (calculated using local
currency) in fiscal 2022 compared to fiscal 2021. The performance in the United Kingdom, France, the United Arab Emirates
and Belgium were the primary contributors to the increase in fee revenue in fiscal 2022 compared to fiscal 2021, driving
$31.0 million of increased revenue.
Executive Search Asia Pacific. Executive Search Asia Pacific reported fee revenue of $118.6 million in fiscal 2022, an
increase of $35.3 million, or 42%, compared to $83.3 million in fiscal 2021. Exchange rates favorably impacted fee revenue
by $0.6 million, or 1%, in fiscal 2022 compared to fiscal 2021. The increase in fee revenue was due to a 27% increase in the
number of engagements billed and an 11% increase in the weighted-average fees billed per engagement (calculated using
local currency) in fiscal 2022 compared to fiscal 2021. The performance in Australia, India, China and Singapore were the
primary contributors to the increase in fee revenue in fiscal 2022 compared to fiscal 2021, contributing $28.8 million of
increased fee revenue.
Executive Search Latin America. Executive Search Latin America reported fee revenue of $29.1 million in fiscal 2022, an
increase of $11.6 million, or 66%, compared to $17.5 million in fiscal 2021. Exchange rates favorably impacted fee revenue
by $0.2 million, or 1%, in fiscal 2022 compared to fiscal 2021. The increase in fee revenue was due to a 34% increase in the
number of engagements billed and a 22% increase in the weighted-average fees billed per engagement (calculated using
local currency) in fiscal 2022 compared to fiscal 2021. The performance in Mexico, Brazil and Chile were the primary
contributors to the increase in fee revenue in fiscal 2022 compared to fiscal 2021, driving $9.4 million of increased revenue.
Professional Search & Interim. Professional Search & Interim reported fee revenue of $297.1 million in fiscal 2022, an
increase of $166.3 million, or 127%, compared to $130.8 million in fiscal 2021. Exchange rates favorably impacted fee
revenue by $0.3 million compared to fiscal 2021. The increase in Professional Search & Interim fee revenue was due to an
86% increase in engagements billed and a 21% increase in the weighted-average fees billed per engagement in fiscal 2022
compared to fiscal 2021. The increase in Professional Search fee revenue was also due to the acquisition of the Acquired
Companies in fiscal 2022, which contributed $69.3 million and $4.1 million of fee revenue, respectively.
RPO. RPO reported fee revenue of $394.8 million in fiscal 2022, an increase of $155.8 million, or 65%, compared to $239.0
million in fiscal 2021. Exchange rates unfavorably impacted fee revenue by $0.1 million compared to fiscal 2021. The
increase in fee revenue was due to the wider adoption of RPO services in the market.
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Compensation and Benefits
Compensation and benefits expense increased $443.6 million, or 34% to $1,741.5 million in fiscal 2022 from $1,297.9
million in fiscal 2021. Exchange rates favorably impacted compensation and benefits by $0.3 million in fiscal 2022 compared
to fiscal 2021. The increase in compensation and benefits expense was primarily due to increases in salaries and related
payroll taxes of $230.4 million, performance-related bonus expense of $160.3 million, amortization of long-term incentive
awards of $16.4 million, employer insurance of $13.8 million and the use of outside contractors of $9.3 million. These
increases were due to the increase in fee revenue combined with increases in overall profitability and average headcount.
Also contributing to higher compensation and benefits expense was an increase in commission expense of $28.5 million due
to the Acquired Companies in fiscal 2022, partially offset by a decrease in deferred compensation expenses of $30.7 million
as a result of decreases in the fair value of participants’ accounts in fiscal 2022 compared to fiscal 2021. Compensation and
benefits expense, as a percentage of fee revenue, decreased to 66% in fiscal 2022 from 72% in fiscal 2021.
Consulting compensation and benefits expense increased by $90.5 million, or 25%, to $450.9 million in fiscal 2022 from
$360.4 million in fiscal 2021. Exchange rates favorably impacted compensation and benefits by $1.2 million in fiscal 2022
compared to fiscal 2021. The increase in compensation and benefits expense was primarily due to increases in salaries and
related payroll taxes of $48.9 million, performance-related bonus expense of $24.5 million, amortization of long-term
incentive awards of $5.0 million and employer insurance of $2.7 million due to an increase in fee revenue combined with
increases in overall profitability and average headcount in fiscal 2022 compared to fiscal 2021. Consulting compensation
and benefits expense, as a percentage of fee revenue, decreased to 69% in fiscal 2022 from 70% in fiscal 2021.
Digital compensation and benefits expense increased by $31.1 million, or 21%, to $177.8 million in fiscal 2022 from $146.7
million in fiscal 2021. The impact of exchange rates was essentially flat in fiscal 2022 compared to fiscal 2021. The increase
in compensation and benefits expense was primarily due to increases in performance-related bonus expense of $11.4
million, salaries and related payroll taxes of $7.9 million and commission expenses of $5.8 million in fiscal 2022 compared to
fiscal 2021 as a result of an increase in fee revenue combined with increases in overall profitability and average headcount.
Digital compensation and benefits expense, as a percentage of fee revenue, was 51% in both fiscal 2022 and fiscal 2021.
Executive Search North America compensation and benefits expense increased by $77.6 million, or 26%, to $377.1 million
in fiscal 2022 compared to $299.5 million in fiscal 2021. Exchange rates unfavorably impacted compensation and benefits
by $0.7 million in fiscal 2022 compared to fiscal 2021. The increase was primarily due to increases in performance-related
bonus expense of $82.6 million and salaries and related payroll taxes of $24.6 million due to the increase in fee revenue
combined with increases in overall profitability and average headcount in fiscal 2022 compared to fiscal 2021. The increases
in compensation and benefits expense was partially offset by a decrease in the amounts owed under certain deferred
compensation and retirement plans of $35.4 million due to a decrease in the fair market value of the participants accounts in
fiscal 2022 compared to fiscal 2021. Executive Search North America compensation and benefits expense, as a percentage
of fee revenue, decreased to 62% in fiscal 2022 from 75% in fiscal 2021.
Executive Search EMEA compensation and benefits expense increased by $22.0 million, or 20%, to $133.1 million in fiscal
2022 compared to $111.1 million in fiscal 2021. Exchange rates favorably impacted compensation and benefits by $0.5
million in fiscal 2022 compared to fiscal 2021. The increase was primarily due to higher salaries and related payroll taxes of
$12.6 million and performance-related bonus expense of $8.2 million in fiscal 2022 compared to fiscal 2021 due to the
increase in fee revenue combined with an increase in overall profitability. Executive Search EMEA compensation and
benefits expense, as a percentage of fee revenue, decreased to 73% in fiscal 2022 from 80% in fiscal 2021.
Executive Search Asia Pacific compensation and benefits expense increased by $14.0 million, or 24%, to $72.3 million in
fiscal 2022 compared to $58.3 million in fiscal 2021. Exchange rates unfavorably impacted compensation and benefits by
$0.4 million, or 1%, in fiscal 2022 compared to fiscal 2021. The increase was primarily due to increases in performance-
related bonus expense of $10.2 million and salaries and related payroll taxes of $6.2 million in fiscal 2022 compared to fiscal
2021 due to an increase in fee revenue combined with an increase overall profitability. Executive Search Asia Pacific
compensation and benefits expense, as a percentage of fee revenue, decreased to 61% in fiscal 2022 from 70% in fiscal
2021.
Executive Search Latin America compensation and benefits expense increased by $4.3 million, or 30%, to $18.4 million in
fiscal 2022 compared to $14.1 million in fiscal 2021. Exchange rates unfavorably impacted compensation and benefits by
$0.3 million, or 2%, in fiscal 2022 compared to fiscal 2021. The increase was primarily due to higher salaries and related
payroll taxes of $2.0 million and performance-related bonus expense of $1.4 million in fiscal 2022 compared to fiscal 2021
due to an increase in fee revenue combined with an increase in overall profitability. Executive Search Latin America
compensation and benefits expense, as a percentage of fee revenue, decreased to 63% in fiscal 2022 from 80% in fiscal
2021.
Professional Search & Interim compensation and benefits expense increased by $63.0 million, or 73%, to $148.8 million in
fiscal 2022 from $85.8 million in fiscal 2021. The impact of exchange rates was essentially flat in fiscal 2022 compared to
fiscal 2021. The increase was due to higher salaries and related payroll taxes of $23.0 million, performance-related bonus of
$14.7 million, employer insurance of $2.7 million and the use of outside contractors of $0.8 million due to the increase in fee
revenue combined with increases in overall profitability and average headcount in fiscal 2022 compared to fiscal 2021. Also
contributing to the increase in compensation and benefits was an increase in commission expenses of $22.7 million and
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integration and acquisition costs of $1.9 million driven by the acquisition of the Acquired Companies in fiscal 2022.
Professional Search & Interim compensation and benefits expense, as a percentage of fee revenue, decreased to 50% in
fiscal 2022 from 66% in fiscal 2021.
RPO compensation and benefits expense increased by $124.3 million, or $69%, to $303.2 million in fiscal 2022 from $178.9
million in fiscal 2021. The impact of exchange rates was essentially flat in fiscal 2022 compared to fiscal 2021. The increase
was primarily due to higher salaries and related payroll taxes of $99.1 million, employer insurance of $5.7 million and the
use of outside contractors of $4.2 million due to increases in revenue and average headcount in fiscal 2022 compared to
fiscal 2021. RPO compensation and benefits expense, as a percentage of fee revenue, increased to 77% in fiscal 2022 from
75% in fiscal 2021.
Corporate compensation and benefits expense increased by $16.5 million, or 38%, to $59.7 million in fiscal 2022 from $43.2
million in fiscal 2021. The increase of $7.2 million was due to the changes in CSV of the COLI contracts due to lower death
benefits recognized in fiscal 2022 compared to fiscal 2021. Also contributing to the increase was higher salaries and related
payroll taxes of $6.0 million and performance-related bonus expense of $4.2 million due to an increase in consolidated fee
revenue, combined with increases in overall profitability and average headcount in fiscal 2022 compared to fiscal 2021.
General and Administrative Expenses
General and administrative expenses increased $45.5 million, or 24%, to $237.3 million in fiscal 2022 compared to $191.8
million in fiscal 2021. Exchange rates favorably impacted general and administrative expenses by $0.9 million in fiscal 2022
compared to fiscal 2021. The increase in general and administrative expenses was primarily due to higher marketing and
business development expenses of $14.0 million, which contributed to the increase in fee revenue and new business in
fiscal 2022, as well as an increase in premise and office expense of $6.9 million, bad debt expense of $5.8 million and legal
and other professional fees of $5.3 million. In addition, the Company recorded impairment charges associated with the
reduction of the Company’s real estate footprint of $9.3 million and integration and acquisition costs of $6.0 million incurred
with the acquisition of the Acquired Companies in fiscal 2022. General and administrative expenses, as a percentage of fee
revenue, decreased to 9% in fiscal 2022 from 11% in fiscal 2021.
Consulting general and administrative expenses increased by $2.9 million, or 6%, to $51.5 million in fiscal 2022 compared to
$48.6 million in fiscal 2021. The increase in general and administrative expenses was primarily due to impairment charges
associated with the reduction of the Company’s real estate footprint of $2.8 million in fiscal 2022. Consulting general and
administrative expenses, as a percentage of fee revenue, decreased to 8% in fiscal 2022 from 9% in fiscal 2021.
Digital general and administrative expenses increased by $1.9 million, or 7%, to $31.0 million in fiscal 2022 compared to
$29.1 million in fiscal 2021. The increase in general and administrative expenses was primarily due to impairment charges
associated with the reduction of the Company’s real estate footprint of $1.5 million in fiscal 2022. Digital general and
administrative expenses, as a percentage of fee revenue, decreased to 9% in fiscal 2022 from 10% in fiscal 2021.
Executive Search North America general and administrative expenses increased by $3.9 million, or 14%, to $30.8 million in
fiscal 2022 from $26.9 million in fiscal 2021. The increase in general and administrative expenses was primarily due to
increases in business development expenses of $2.4 million and bad debt expense of $0.7 million. Executive Search North
America general and administrative expenses, as a percentage of fee revenue, was 5% in fiscal 2022 compared to 7% in
fiscal 2021.
Executive Search EMEA general and administrative expenses increased by $2.0 million, or 13%, to $18.0 million in fiscal
2022 from $16.0 million in fiscal 2021. The increase in general and administrative expenses was primarily due to impairment
charges associated with the reduction of the Company’s real estate footprint of $1.1 million and the impact of foreign
currency with foreign exchange losses of $0.7 million in fiscal 2022 compared to foreign currency gains of $0.3 million in
fiscal 2021. Executive Search EMEA general and administrative expenses, as a percentage of fee revenue was 10% in
fiscal 2022 compared to 12% in fiscal 2021.
Executive Search Asia Pacific general and administrative expenses increased by $2.4 million, or 28%, to $11.0 million in
fiscal 2022 from $8.6 million in fiscal 2021. The increase in general and administrative expenses was primarily due to higher
bad debt expense of $1.0 million in fiscal 2022 compared to fiscal 2021. Executive Search Asia Pacific general and
administrative expenses, as a percentage of fee revenue, was 9% in fiscal 2022 compared to 10% in fiscal 2021.
Executive Search Latin America general and administrative expenses decreased by $1.3 million, or 59%, to $0.9 million in
fiscal 2022 from $2.2 million in fiscal 2021. The decrease in general and administrative expenses was primarily due to lower
premise and office expenses of $1.4 million in fiscal 2022 compared to fiscal 2021. Executive Search Latin America general
and administrative expenses, as a percentage of fee revenue, was 3% in fiscal 2022 compared to 12% in fiscal 2021.
Professional Search & Interim general and administrative expenses increased by $12.2 million, or 153%, to $20.2 million in
fiscal 2022 from $8.0 million in fiscal 2021. The increase in general and administrative expenses was primarily due to an
increase in premise and office expense of $4.4 million, impairment charges associated with the reduction of the Company's
real estate footprint of $2.3 million, higher bad debt expense of $2.1 million, and integration and acquisition costs of $1.8
million. Professional Search & Interim general and administrative expenses, as a percentage of revenue, was 7% in fiscal
2022 compared to 6% in fiscal 2021.
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RPO general and administrative expenses increased by $3.6 million, or 21%, to $20.4 million in fiscal 2022 from $16.8
million in fiscal 2021. The increase was primarily due to higher bad debt expense of $1.6 million, and impairment charges
associated with the reduction of the Company's real estate footprint of $1.6 million. RPO general administrative expenses,
as a percentage of revenue, was 5% in fiscal 2022 compared to 7% in fiscal 2021.
Corporate general and administrative expenses increased by $18.0 million, or 51%, to $53.5 million in fiscal 2022 compared
to $35.5 million in fiscal 2021. The increase in general and administrative expenses was primarily due to higher marketing
expense of $7.2 million, integration and acquisition costs of $4.2 million due to the acquisition of the Acquired Companies in
fiscal 2022, legal and other professional fees of $3.8 million and an increase of $1.5 million in charitable contributions in
fiscal 2022 compared to fiscal 2021.
Cost of Services Expense
Cost of services expense consists primarily of contractor and product costs related to the delivery of various services and
products, primarily in Professional Search & Interim, Consulting, Digital and RPO. Cost of services expense was $114.4
million in fiscal 2022 compared to $72.0 million in fiscal 2021. The increase was due to an increase in fee revenue and the
acquisition of the Acquired Companies in fiscal 2022. Cost of services expense, as a percentage of fee revenue, was 4% in
both fiscal 2022 and fiscal 2021.
Depreciation and Amortization Expenses
Depreciation and amortization expenses were $63.5 million in fiscal 2022, an increase of $1.7 million, or 3%, compared to
$61.8 million in fiscal 2021. The increase was primarily due to technology investments made in the current and prior year in
software for our Digital business and the Acquired Companies in fiscal 2022 in the Professional Search & Interim segment.
Restructuring Charges, Net
There were no restructuring charges, net during fiscal 2022. In April 2020, we implemented a restructuring plan in response
to the uncertainty caused by COVID-19 that resulted in reductions in our workforce in the fourth quarter of fiscal 2020. We
continued the implementation of this plan in fiscal 2021 and as a result recorded restructuring charges, net of $30.7 million
of severance costs in fiscal 2021.
Net Income Attributable to Korn Ferry
Net income attributable to Korn Ferry increased by $211.9 million to $326.4 million in fiscal 2022 compared to $114.5 million
in fiscal 2021. The increase in net income attributable to Korn Ferry was driven by the increase in fee revenue of $816.7
million, which was driven by the factors discussed above, and restructuring charges, net of $30.7 million incurred in fiscal
2021. This was partially offset by increases in compensation and benefits expense of $443.6 million, cost of services
expense of $42.4 million associated with the higher levels of business demand, a higher income tax provision of $54.0
million and general and an increase in administrative expenses of $45.5 million. The rest of the change is due to other loss,
net of $11.9 million in fiscal 2022 compared to other income, net of $37.2 million in fiscal 2021. Net income attributable to
Korn Ferry, as a percentage of fee revenue, was 12% in fiscal 2022 as compared to 6% in fiscal 2021.
Adjusted EBITDA
Adjusted EBITDA increased by $252.6 million to $538.9 million in fiscal 2022 compared to $286.3 million in fiscal 2021. The
increase in Adjusted EBITDA was driven by the increase in fee revenue, partially offset by increases in compensation and
benefits expense (excluding integration/acquisition costs), cost of services expense, and general and administrative
expenses (excluding integration/acquisition costs and impairment charges). Adjusted EBITDA, as a percentage of fee
revenue, was 21% and 16% in fiscal 2022 and 2021.
Consulting Adjusted EBITDA was $116.1 million in fiscal 2022, an increase of $34.6 million, or 42%, compared to $81.5
million in fiscal 2021. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment, as well as cost
savings realized from work being conducted virtually. These changes were partially offset by increases in compensation and
benefits expense and cost of services expense. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 18% in
fiscal 2022 compared to 16% in fiscal 2021.
Digital Adjusted EBITDA was $110.1 million in fiscal 2022, an increase of $24.0 million, or 28%, compared to $86.1 million in
fiscal 2021. The increase in Adjusted EBITDA was mainly driven by the increase in fee revenue in the segment, as well as
cost savings realized from work being conducted virtually. These changes were partially offset by increases in compensation
and benefits expense (excluding integration/acquisition costs) and cost of services expense in fiscal 2022 compared to fiscal
2021. Digital Adjusted EBITDA, as a percentage of fee revenue, was 32% in fiscal 2022 as compared to 30% in fiscal 2021.
Executive Search North America Adjusted EBITDA increased by $83.5 million, or 85%, to $181.6 million in fiscal 2022
compared to $98.1 million in fiscal 2021. The increase was driven by higher fee revenue in the segment, partially offset by
an increase in compensation and benefits expense and general and administrative expenses. Executive Search North
America Adjusted EBITDA, as a percentage of fee revenue, was 30% in fiscal 2022 compared to 25% in fiscal 2021.
Executive Search EMEA Adjusted EBITDA increased by $20.1 million, or 172%, to $31.8 million in fiscal 2022 compared to
$11.7 million in fiscal 2021. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment, partially
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offset by increases in compensation and benefits expense and general and administrative expenses (excluding impairment
charges). Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 17% in fiscal 2022 compared to
8% in fiscal 2021.
Executive Search Asia Pacific Adjusted EBITDA increased by $18.4 million, or 110%, to $35.1 million in fiscal 2022
compared to $16.7 million in fiscal 2021. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment,
partially offset by increases in the compensation and benefits expense and general and administrative expenses. Executive
Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, was 30% in fiscal 2022 compared to 20% in fiscal
2021.
Executive Search Latin America Adjusted EBITDA increased by $7.8 million to $9.1 million in fiscal 2022 compared to $1.3
million in fiscal 2021. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment, partially offset by
an increase in compensation and benefits expense. Executive Search Latin America Adjusted EBITDA, as a percentage of
fee revenue, was 31% in fiscal 2022 compared to 7% in fiscal 2021.
Professional Search & Interim Adjusted EBITDA was $106.0 million in fiscal 2022, an increase of $69.1 million, or 187%,
compared to $36.9 million in fiscal 2021. The increase in Adjusted EBITDA was mainly driven by higher fee revenue,
partially offset by increases in compensation and benefits expense (excluding integration/acquisition costs), cost of services
expense and general and administrative expenses (excluding impairment charges and integration and acquisition costs).
Professional Search & Interim Adjusted EBITDA, as a percentage of fee revenue, was 36% in fiscal 2022 compared to 28%
in fiscal 2021.
RPO Adjusted EBITDA was $59.1 million in fiscal 2022, an increase of $26.6 million, or 82%, compared to $32.5 million in
fiscal 2021. The increase in Adjusted EBITDA was mainly driven by higher fee revenue in the segment, partially offset by
increases in compensation and benefits expense, cost of services expense and general and administrative expenses
(excluding impairment charges). RPO Adjusted EBITDA, as a percentage of fee revenue, was 15% in fiscal 2022 compared
to 14% in fiscal 2021.
Other (Loss) Income, Net
Other loss, net was $11.9 million in fiscal 2022 compared to other income, net of $37.2 million in fiscal 2021. The difference
was primarily due to losses from the fair value of our marketable securities in fiscal 2022 compared to gains in fiscal 2021.
Interest Expense, Net
Interest expense, net primarily relates to our Notes issued in December 2019 and borrowings under our COLI policies, which
are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $25.3 million in fiscal
2022 compared to $29.3 million in fiscal 2021. Interest expense, net decreased due to interest income earned on the death
benefits received from our COLI policies in fiscal 2022 and lower interest expense on borrowings under our COLI policies in
fiscal 2022 compared to fiscal 2021 due to the lower amount of borrowings outstanding.
Income Tax Provision
The provision for income tax was $102.1 million in fiscal 2022 compared to $48.1 million in fiscal 2021. This reflects a 24%
effective tax rate for fiscal 2022 compared to a 29% effective tax rate for fiscal 2021. In addition to the impact of U.S. state
income taxes and jurisdictional mix of earnings, which generally create variability in our effective tax rate over time, the lower
effective tax rate in fiscal 2022 was partially attributable to a tax benefit recorded in connection with tax credits claimed in the
current year for eligible research and development expenditures. The fiscal 2021 effective tax rate was higher due to a tax
expense recorded for withholding taxes on intercompany dividends that are not eligible for credit and a shortfall recorded in
connection with stock-based awards that vested in fiscal 2021. The shortfall is the amount by which the Company’s tax
deduction for these awards, based on the fair market value of the awards on the date of vesting, is less than the expense
recorded in the Company’s financial statements over the awards’ vesting period. Conversely, the Company recorded a tax
benefit for a windfall in connection with stock-based awards that vested in fiscal 2022.
Net Income Attributable to Noncontrolling Interest
Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to
shares of such subsidiary not held by Korn Ferry that are included in the consolidated results of income. Net income
attributable to noncontrolling interest was $4.5 million and $1.1 million in fiscal 2022 and fiscal 2021, respectively.
Liquidity and Capital Resources
The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s long-term
priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and derivative
products and services and the investment in synergistic, accretive merger and acquisition transactions that are expected to
earn a return that is superior to the Company's cost of capital. Next, the Company’s capital allocation approach
contemplates the return of a portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to
the factors discussed below and in the “Risk Factors” section of this Annual Report on Form 10-K. Additionally, the Company
considers share repurchases on an opportunistic basis and subject to the terms of our Amended Credit Agreement (defined
below) and Notes, as well as using excess cash to repay the Notes.
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On February 1, 2023, we completed the acquisition of Salo for $155.4 million, net of cash acquired. Salo is a leading
provider of finance, accounting and HR interim talent, with a strong focus on serving organizations in healthcare, among
other industries.
On August 1, 2022, we completed the acquisition of ICS for $99.3 million, net of cash acquired. ICS contributes interim
professional placement offerings and expertise that are highly relevant for the new world of work where more workplaces are
hybrid or virtual. ICS is a highly regarded provider of senior-level IT interim professional solutions with additional expertise in
the areas of compliance and legal, accounting and finance, and HR.
We believe the above acquisitions echo the commitment to scale our solutions and further increase our focus at the
intersection of talent and strategy-wherever and however the needs of organizations-evolve and present real, tangible
opportunity for us and our clients looking for the right talent, who are highly agile, with specialized skills and expertise, to
help them drive superior performance, including on an interim basis. The addition of these acquisitions to our broader talent
acquisition portfolio–spanning Executive Search, RPO, Professional Search and Interim services–has accelerated our ability
to capture additional shares of this significant market. Both acquisitions are included in the Professional Search & Interim
segment.
On December 16, 2019, we completed a private placement of the Notes with a $400 million principal amount pursuant to
Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes were issued with a $4.5 million
discount and will mature December 15, 2027, with interest payable semi-annually in arrears on June 15 and December 15 of
each year, that commenced on June 15, 2020. The Notes represent senior unsecured obligations that rank equally in right of
payment to all existing and future senior unsecured indebtedness. We may redeem the Notes prior to maturity, subject to
certain limitations and premiums defined in the indenture governing the Notes. The Notes are guaranteed by each of our
existing and future wholly owned domestic subsidiaries to the extent such subsidiaries guarantee our obligations under the
Credit Agreement (defined below). The indenture governing the Notes requires that, upon the occurrence of both a Change
of Control and a Rating Decline (each as defined in the indenture), we shall make an offer to purchase all of the Notes at
101% of their principal amount, and accrued and unpaid interest. We used the proceeds from the offering of the Notes to
repay $276.9 million outstanding under our prior revolving credit facility and to pay expenses and fees in connection
therewith. As of April 30, 2023, the fair value of the Notes was $381.5 million, which is based on borrowing rates currently
required of notes with similar terms, maturity and credit risk.
On June 24, 2022, we entered into an amendment (the "Amendment") to our December 16, 2019 Credit Agreement (the
"Credit Agreement"; as amended by the Amendment, the “Amended Credit Agreement”) with the lenders party thereto and
Bank of America, National Association as administrative agent, to, among other things (i) extend the existing maturity date of
the revolving facility to June 24, 2027, (ii) provide for a new delayed draw term loan facility as described below, (iii) replace
the London interbank offered rate with Term SOFR, and (iv) replace the existing financial covenants with financial covenants
described below. The Amended Credit Agreement provides for five-year senior secured credit facilities in an aggregate
amount of $1,150 million comprised of a $650.0 million revolving credit facility (the "Revolver") and a $500 million delayed
draw term loan facility with the delayed draw having an expiration date of June 23, 2023 (the "Delayed Draw Facility", and
together with the Revolver, the "Credit Facilities"). The Amended Credit Agreement also provides that, under certain
circumstances, the Company may incur term loans or increase the aggregate principal amount of revolving commitments by
an aggregate amount of up to $250 million plus an unlimited amount subject to a consolidated secured net leverage ratio of
3.25 to 1.00. See Note 11 —Long-Term Debt for a further description of the Amended Credit Agreement. The Company has
a total of $1,145.4 million available under the Credit Facilities and had a total of $645.3 million available under the previous
credit facilities after $4.6 million and $4.7 million of standby letters of credit have been issued as of April 30, 2023 and 2022,
respectively. Of the amount available under the Credit Facilities, the $500.0 million Delayed Draw Facility expired on June
24, 2023 and is no longer available as a source of liquidity. The Company had a total of $11.5 million and $10.0 million of
standby letters with other financial institutions as of April 30, 2023 and 2022, respectively. The standby letters of credits were
generally issued as a result of entering into office premise leases.
On December 8, 2014, the Board of Directors adopted a dividend policy to distribute to our stockholders a regular quarterly
cash dividend of $0.10 per share. Every quarter since the adoption of the dividend policy, the Company has declared a
quarterly dividend. On June 21, 2021 and 2022, the Board of Directors increased the quarterly dividend to $0.12 per share
and $0.15 per share, respectively. On June 26, 2023, the Board of Directors approved an increase of 20% in the quarterly
dividend, which increased the quarterly dividend to $0.18 per share. The Amended Credit Agreement permits us to pay
dividends to our stockholders and make share repurchases so long as there is no default under the Amended Credit
Agreement, our total funded debt to adjusted EBITDA ratio (as set forth in the Amended Credit Agreement, the “consolidated
net leverage ratio”) is no greater than 5.00 to 1.00, and we are in pro forma compliance with our financial covenant.
Furthermore, our Notes allow us to pay $25 million of dividends per fiscal year with no restrictions plus an unlimited amount
of dividends so long as our consolidated total leverage ratio is not greater than 3.50 to 1.00, and there is no default under
the indenture governing the Notes. The declaration and payment of future dividends under the quarterly dividend program
will be at the discretion of the Board of Directors and will depend upon many factors, including our earnings, capital
requirements, financial conditions, the terms of our indebtedness and other factors our Board of Directors may deem to be
relevant. Our Board of Directors may, however, amend, revoke or suspend our dividend policy at any time and for any
reason.
46
On June 21, 2022, our Board of Directors approved an increase to the share repurchase program of approximately $300
million, which at the time brought our available capacity to repurchase shares in the open market or privately negotiated
transactions to $318 million. The Company repurchased approximately $93.9 million and $98.8 million of the Company’s
stock during fiscal 2023 and fiscal 2022, respectively. As of April 30, 2023, $235.2 million remained available for common
stock repurchases under our share repurchase program. Any decision to continue to execute our currently outstanding share
repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered
relevant by our Board of Directors.
Our primarily source of liquidity is the fee revenue generated from our operations, supplemented by our borrowing capacity
under our Amended Credit Agreement. Our performance is subject to the general level of economic activity in the
geographic regions and the industries we service. We believe, based on current economic conditions, that our cash on hand
and funds from operations and the Amended Credit Agreement will be sufficient to meet anticipated working capital, capital
expenditures, general corporate requirements, debt repayments, share repurchases and dividend payments under our
dividend policy during the next 12 months. However, if the national or global economy, credit market conditions and/or labor
markets were to deteriorate in the future, including as a result of ongoing macroeconomic uncertainty due to inflation and a
potential recession, such changes have and could put further negative pressure on demand for our services and affect our
operating cash flows. If these conditions were to persist over an extended period of time, we may incur negative cash flows
and it might require us to access additional borrowings under the Amended Credit Agreement to meet our capital needs and/
or discontinue our share repurchases and dividend policy.
Cash and cash equivalents and marketable securities were $1,067.9 million and $1,211.1 million as of April 30, 2023 and
2022, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and cash
equivalents and marketable securities were $488.2 million and $605.4 million at April 30, 2023 and 2022, respectively. As of
April 30, 2023 and 2022, we held $395.2 million and $416.7 million, respectively of cash and cash equivalents in foreign
locations, net of amounts held in trust for deferred compensation plans and to pay accrued bonuses. Cash and cash
equivalents consist of cash and highly liquid investments purchased with original maturities of three months or less.
Marketable securities consist of mutual funds and investments in commercial paper, corporate notes/bonds and U.S.
Treasury and Agency securities. The primary objectives of our investment in mutual funds are to meet the obligations under
certain of our deferred compensation plans, while the commercial paper, corporate notes/bonds and U.S. Treasury and
Agency securities are available for general corporate purposes.
As of April 30, 2023 and 2022, marketable securities of $223.9 million and $233.0 million, respectively, included equity
securities of $187.8 million (net of gross unrealized gains of $9.5 million and gross unrealized losses of $8.7 million) and
$168.7 million (net of gross unrealized gains of $10.7 million and gross unrealized losses of $6.1 million), respectively, and
were held in trust for settlement of our obligations under certain deferred compensation plans, of which $176.1 million and
$158.7 million, respectively, are classified as non-current. These marketable securities were held to satisfy vested
obligations totaling $172.2 million and $160.8 million as of April 30, 2023 and 2022, respectively. Unvested obligations under
the deferred compensation plans totaled $21.9 million and $24.0 million as of April 30, 2023 and 2022, respectively.
The net decrease in our working capital of $113.3 million as of April 30, 2023 compared to April 30, 2022 is primarily
attributable to decreases in cash and cash equivalents. Cash and cash equivalents decreased primarily due to the
acquisitions of ICS and Salo, purchases of property and equipment, repurchases of common stock and dividends paid to
shareholders during fiscal 2023. Cash provided by operating activities was $343.9 million in fiscal 2023, a decrease of
$157.8 million, compared to $501.7 million in fiscal 2022.
Cash used in investing activities was $323.5 million in fiscal 2023 compared to $184.3 million in fiscal 2022. The increase in
cash used in investing activities was primarily due to higher cash paid for acquisitions of $254.8 million in fiscal 2023
compared to $133.8 million in fiscal 2022, an increase in purchases of property and equipment of $21.0 million coupled with
a decrease in proceeds received from sales of marketable securities of $26.6 million, partially offset by a decrease in
purchases of marketable securities of $28.5 million in fiscal 2023 compared to fiscal 2022.
Cash used in financing activities was $152.2 million in fiscal 2023 compared to $137.4 million in fiscal 2022. The increase in
cash used in financing activities was primarily due to increases in dividends paid to our shareholders of $6.2 million,
dividends paid to non controlling interest of $3.3 million, payments made on life insurance policies of $2.6 million, as well as
higher cash used to repurchase shares of common stock to satisfy tax withholding requirements upon the vesting of
restricted stock of $22.2 million in fiscal 2023 compared to $18.5 million in fiscal 2022.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated, special
purpose entities.
47
Contractual Obligations
Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude
contingent liabilities for which we cannot reasonably predict future payment. The following table represents our contractual
obligations as of April 30, 2023:
Operating lease commitments
Finance lease commitments
Accrued restructuring charges
Interest payments on COLI loans (2)
Long-term debt
Estimated interest on long-term debt (3)
Total
Note (1)
Total
Less Than
1 Year
1-3 Years
3-5 Years
More Than
5 Years
Payments Due in:
(in thousands)
15
15
13
11
11
11
$ 182,666 $
51,760 $
83,598 $
31,013 $
16,295
4,828
8,004
31,698
400,000
1,545
8,004
4,507
—
2,248
—
9,011
1,035
—
8,440
—
400,000
92,500
18,500
37,000
37,000
—
—
9,740
—
—
$ 719,696 $
84,316 $ 131,857 $ 477,488 $
26,035
_______________________________
(1)
(2)
(3)
See the corresponding Note in the accompanying consolidated financial statements in Item 15.
Assumes COLI loans remain outstanding until receipt of death benefits on COLI policies and applies current interest rates on COLI
loans ranging from 4.76% to 8.00% with total death benefits payable, net of loans under COLI contracts of $444.1 million at April 30,
2023.
Interest on the Notes payable semi-annually in arrears on June 15 and December 15 of each year, commenced on June 15, 2020.
In addition to the contractual obligations above, we have liabilities related to certain employee benefit plans. These liabilities
are recorded in our consolidated balance sheets. The obligations related to these employee benefit plans are described in
Note 6—Deferred Compensation and Retirement Plans, in the Notes to our Consolidated Financial Statements in this
Annual Report on Form 10-K.
Lastly, we have contingent commitments under certain employment agreements that are payable upon involuntary
termination without cause, as described in Note 17—Commitments and Contingencies, in the Notes to our Consolidated
Financial Statements in this Annual Report on Form 10-K.
Cash Surrender Value of Company Owned Life Insurance Policies, Net of Loans
We purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in the deferred
compensation and pension plans as a means of funding benefits under such plans. As of April 30, 2023 and 2022, we held
contracts with gross cash surrender value (“CSV”) of $275.1 million and $263.2 million, respectively. Total outstanding
borrowings against the CSV of COLI contracts were $77.1 million and $79.8 million as of April 30, 2023 and 2022,
respectively. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and are
secured by the CSV of COLI contracts. At April 30, 2023 and 2022, the net cash value of these policies was $198.0 million
and $183.3 million, respectively. Total death benefits payable, net of loans under COLI contracts, were $444.1 million and
$449.3 million at April 30, 2023 and 2022, respectively.
Other than the factors discussed in this section, we are not aware of any other trends, demands or commitments that would
materially affect liquidity or those that relate to our resources as of April 30, 2023.
Accounting Developments
Recently Proposed Accounting Standards - Not Yet Adopted
In October 2021, the FASB issued an amendment in accounting for contract assets and contract liabilities from contracts
with customers, which clarifies that an acquirer of a business should recognize and measure contract assets and contract
liabilities in a business combination in accordance with Accounting Standards Codification ("ASC 606"), Revenue from
Contracts with Customers. The amendment of this standard becomes effective in fiscal years beginning after December 15,
2022. The amendment should be applied prospectively to business combinations that occur after the effective date. We will
adopt this guidance in our fiscal year beginning May 1, 2023. We do not anticipate that this accounting guidance will have a
material impact on the consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a result of our global operating activities, we are exposed to certain market risks, including foreign currency exchange
fluctuations and fluctuations in interest rates. We manage our exposure to these risks in the normal course of our business
as described below.
48
Foreign Currency Risk
Substantially all our foreign subsidiaries’ operations are measured in their local currencies. Assets and liabilities are
translated into U.S. dollars at the rates of exchange in effect at the end of each reporting period and revenue and expenses
are translated at daily rates of exchange during the reporting period. Resulting translation adjustments are reported as a
component of accumulated other comprehensive loss, net on our consolidated balance sheets.
Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to foreign
currency gains or losses that impact our results of operations. Historically, we have not realized significant foreign currency
gains or losses on such transactions. During fiscal 2023, 2022 and 2021, we recorded foreign currency losses of $2.0
million, $1.2 million and $2.7 million, respectively, in general and administrative expenses in the consolidated statements of
income.
Our exposure to foreign currency exchange rates is primarily driven by fluctuations involving the following currencies — U.S.
Dollar, Canadian Dollar, Pound Sterling, Euro, Swiss Franc, Danish Krone, Polish Zloty, Singapore Dollar, and Mexican
Peso. Based on balances exposed to fluctuation in exchange rates between these currencies as of April 30, 2023, a 10%
increase or decrease in the value of these currencies could result in a foreign exchange gain or loss of $10.2 million. We
have a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of
certain foreign currency exposures. These foreign currency forward contracts are neither used for trading purposes nor are
they designated as hedging instruments pursuant to ASC 815, Derivatives and Hedging.
Interest Rate Risk
Our exposure to interest rate risk is limited to our Credit Facilities, borrowings against the CSV of COLI contracts and to a
lesser extent, our fixed income debt securities. As of April 30, 2023, there were no amounts outstanding under the Credit
Facilities. At our option, loans issued under the Amended Credit Agreement bear interest at either Term Secured Overnight
Financing Rate ("SOFR") or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate
applicable to loans outstanding under the Amended Credit Agreement may fluctuate between Term SOFR plus a SOFR
adjustment of 0.10%, plus 1.125% per annum to 2.00% per annum, in the case of Term SOFR borrowings (or between the
alternate base rate plus 0.125% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based
upon our total funded debt to adjusted EBITDA ratio (as set forth in the Amended Credit Agreement, the “consolidated net
leverage ratio”) at such time. In addition, we are required to pay the lenders a quarterly commitment fee ranging from
0.175% to 0.300% per annum on the average daily unused amount of the Revolver, based upon our consolidated net
leverage ratio at such time, a ticking fee of 0.20% per annum on the actual daily unused portion of the Delayed Draw Facility
during the availability period of the Delayed Draw Facility, and fees relating to the issuance of letters of credit.
We had $77.1 million and $79.8 million of borrowings against the CSV of COLI contracts as of April 30, 2023 and 2022,
respectively, bearing interest primarily at variable rates. We have sought to minimize the risk of fluctuations in these variable
rates by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate, which has the effect of
increasing the CSV on our COLI contracts.
Item 8. Financial Statements and Supplementary Data
See Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
a)
Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this Annual Report on Form 10-K, management, our Chief Executive Officer
and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and
procedures and internal controls over financial reporting. Based on their evaluation of our disclosure controls and
procedures conducted as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (the “Exchange Act”)) were effective as of April 30, 2023.
b)
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting during the fourth fiscal quarter that have
materially affected or are reasonably likely to materially affect our internal control over financial reporting. See
Management’s Report on Internal Control Over Financial Reporting and Report of Independent Registered Public
Accounting Firm on Internal Control Over Financial Reporting on pages F-2 and F-3, respectively.
Item 9B. Other Information
None.
49
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
50
Item 10. Directors, Executive Officers and Corporate Governance
PART III.
The information required by this Item will be included under the captions “The Board of Directors,” "Culture of Integrity and
Code of Business Conduct and Ethics," "Board Committees," and, when applicable, “Delinquent Section 16(a) Reports” in
our 2023 Proxy Statement and is incorporated herein by reference. The information under the heading “Information about
our Executive Officers” in Part I of this Annual Report on Form 10-K is also incorporated by reference in this section.
We have adopted a “Code of Business Conduct and Ethics” that applies to all of our directors, officers and employees,
including our principal executive officer (who is our Chief Executive Officer), principal financial officer, and principal
accounting officer (who is our Chief Financial Officer) and senior financial officers, or persons performing similar functions.
The Code of Business Conduct and Ethics is available on the Investor Relations portion of our website at http://
ir.kornferry.com. If, or when, applicable we will disclose amendments to certain provisions of the Code of Business Conduct
and Ethics and waivers of the Code of Business Conduct and Ethics granted to executive officers and directors on our
website within four business days following the date of the amendment or waiver.
Item 11. Executive Compensation
The information required by this Item will be included under the captions “Compensation Discussion and Analysis,”
“Compensation of Executive Officers and Directors,” "Assessment of Risk Related to Compensation Programs," and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be included under the captions “Security Ownership of Certain Beneficial Owners
and Management” and "Equity Compensation Plan Information" and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be included under the captions “Certain Relationships and Related Transactions,"
"Related Person Transaction Approval Policy," "Director Independence," and "Board Committees," and is incorporated
herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be included under the captions “Fees Paid to Ernst & Young” and “Audit Committee
Pre-Approval Policies and Procedures” and is incorporated herein by reference.
51
PART IV.
Item 15. Exhibits and Financial Statement Schedules
Financial Statements.
a)
The following documents are filed as part of this report:
1.
2.
Index to Financial Statements:
See Consolidated Financial Statements included as part of this Annual Report on Form 10-K.
Index to Financial Statement Schedules:
All schedules have been omitted because the required information is included in the financial statements or notes
thereto, or because it is not required.
3.
Index to Exhibits:
See exhibits listed under Part (b) below.
Page
F-1
_
52
b)
Exhibits:
Exhibit
Number
2.1+
2.2+
2.3+
3.1+
3.2+
4.1+
4.2+
4.3+
10.1*+
10.2*+
10.3*+
10.4*+
10.5*+
10.6*+
10.7*+
10.8*+
10.9*+
Description
Stock Purchase Agreement by and between HG (Bermuda) Limited and Korn/Ferry International, dated
as of September 23, 2015, filed as Exhibit 2.1 to the Company’s Form 8-K, filed September 24, 2015.
Letter Agreement dated November 30, 2015, by and between Korn/Ferry International and HG
(Bermuda) Limited, filed as Exhibit 2.1 to the Company’s Form 8-K, filed December 2, 2015.
Letter Agreement dated April 19, 2018, by and between Korn/Ferry International and HG (Bermuda)
Limited.
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.
Eighth Amended and Restated Bylaws, effective May 26, 2023, filed as Exhibit 3.1 to the Company’s
Report on Form 8-K, filed May 30, 2023.
Form of Common Stock Certificate of the Company, filed as Exhibit 4.1 to the Company's Annual Report
on Form 10-K, filed June 28, 2019.
Description of Securities, filed as Exhibit 4.2 to the Company's Annual Report on Form 10-K, filed June
28, 2019.
Indenture, dated as of December 16, 2019, by and among Korn Ferry, an issuer, certain subsidiaries of
Korn Ferry, as guarantors thereto, and Wells Fargo Bank, National Association, as trustee, filed as
Exhibit 4.1 to the Company’s Form 8-K, filed December 16, 2019.
Form of Indemnification Agreement between the Company and some of its executive officers and
directors, filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1/A (No. 333-61697),
filed December 24, 1998.
Form of U.S. and International Worldwide Executive Benefit Retirement Plan, filed as Exhibit 10.3 to the
Company’s Registration Statement on Form S-1/A (No. 333-61697), filed September 4, 1998.
Form of U.S. and International Worldwide Executive Benefit Life Insurance Plan, filed as Exhibit 10.4 to
the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
Worldwide Executive Benefit Disability Plan (in the form of Long-Term Disability Insurance Policy), filed
as Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September
4, 1998.
Form of U.S. and International Enhanced Executive Benefit and Wealth Accumulation Plan, filed as
Exhibit 10.6 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4,
1998.
Form of U.S. and International Senior Executive Incentive Plan, filed as Exhibit 10.7 to the Company’s
Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
Executive Salary Continuation Plan, filed as Exhibit 10.8 to the Company’s Registration Statement on
Form S-1 (No. 333-61697), filed September 4, 1998.
Form of Amended and Restated Stock Repurchase Agreement, filed as Exhibit 10.10 to the Company’s
Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
Form of Standard Employment Agreement, filed as Exhibit 10.11 to the Company’s Registration
Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
52
10.10*+
10.11*+
10.12*+
10.13*+
10.14*+
10.15*+
10.16*+
10.17*+
10.18*+
10.19*+
10.20*+
10.21*+
10.22*+
10.23*+
10.24*+
10.25*+
10.26*+
10.27*+
10.28*+
10.29*+
10.30*+
10.31*+
10.32*+
10.33+
10.34*+
10.35*+
Form of U.S. and Foreign Executive Participation Program, filed as Exhibit 10.27 to the Company’s
Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
Korn/Ferry International Second Amended and Restated Performance Award Plan, filed as Appendix A to
the Company’s Definitive Proxy Statement, filed August 12, 2004.
Form of Indemnification Agreement between the Company and some of its executive officers and
directors, filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed March 12, 2004.
Form of Restricted Stock Unit Award Agreement to Directors Under the Performance Award Plan, filed
as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed December 10, 2007.
Form of Stock Option Agreement to Employees and Non-Employee Directors Under the Korn/Ferry
International 2008 Stock Incentive Plan, filed as Exhibit 10.3 to the Company’s Form 8-K, filed June 12,
2009.
Korn/Ferry International Executive Capital Accumulation Plan, filed as Exhibit 4.1 to the Company’s
Registration Statement on Form S-8 (No. 333-111038), filed December 10, 2003.
Korn Ferry Amended and Restated Employee Stock Purchase Plan, filed as Exhibit 10.17 to the
Company’s Annual Report on Form 10-K, filed June 28, 2019.
Second Amended and Restated Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.1
to the Company’s Form 8-K, filed October 2, 2012.
Form of Restricted Stock Unit Award Agreement to Non-Employee Directors Under the 2008 Stock
Incentive Plan, filed as Exhibit 10.38 to the Company’s Annual Report on Form 10-K, filed June 25,
2013.
Form of Restricted Stock Unit Award Agreement to Employees Under the 2008 Stock Incentive Plan,
filed as Exhibit 10.39 to the Company’s Annual Report on Form 10-K, filed June 25, 2013.
Amended and Restated Korn Ferry Executive Capital Accumulation Plan, as of January 1, 2019, filed as
Exhibit 10.23 to the Company’s Annual Report on Form 10-K, filed June 28, 2019.
Amended and Restated Korn Ferry Executive Capital Accumulation Plan, as of December 4, 2019, filed
as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed March 11, 2020.
Form of Indemnification Agreement between the Company and some of its directors and executive
officers, filed as Exhibit 10.1 to the Company’s Form 8-K, filed June 15, 2015.
Korn Ferry Long Term Performance Unit Plan, filed as Exhibit 10.26 to the Company's Annual Report on
Form 10-K, filed June 28, 2019.
Korn Ferry Long Term Performance Unit Plan Form of Unit Award Agreement, filed as Exhibit 10.27 to
the Company's Annual Report on Form 10-K, filed June 28,2019.
Amended and Restated Korn Ferry Long Term Performance Unit Plan, as of December 4, 2019, filed as
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed March 11, 2020.
Third Amendment and Restated Korn Ferry 2008 Stock Incentive Plan, filed as Exhibit 10.28 to the
Company’s Annual Report on Form 10-K, filed June 28, 2019.
Fourth Amended and Restated Korn Ferry 2008 Stock Incentive Plan, filed as Exhibit 10.1 to the
Company's Form 8-K, filed October 7, 2019.
Summary of Non-Employee Director Compensation Program Effective December 7, 2016, filed as
Exhibit 10.1 to the Company’s 10-Q, filed March 10, 2017.
Form of Restricted Stock Unit Award Agreement to Non-Employee Directors under the 2008 Stock
Incentive Plan, filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K, filed June 28,
2019.
Form of Performance Restricted Stock Unit Award Agreement Under the 2008 Stock Incentive Plan, filed
as Exhibit 10.32 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
Form of Restricted Stock Unit Award Agreement to Employees Under the 2008 Stock Incentive Plan,
filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
Form of Restricted Stock Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as
Exhibit 10.34 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
Credit Agreement, dated December 16, 2019, by and among Korn Ferry, Bank of America, N.A., as
administrative agent, and other lender parties thereto, filed as Exhibit 10.1 to the Company’s Form 8-K,
filed December 16, 2019.
Amended and Restated Korn Ferry Long Term Performance Unit Plan, effective June 1, 2020, filed as
Exhibit 10.44 to the Company’s Annual Report on Form 10-K, filed July 15, 2020.
Korn Ferry Amended and Restated Employee Stock Purchase Plan, effective July 1, 2020, filed as
Exhibit 10.45 to the Company’s Annual Report on Form 10-K, filed July 15, 2020.
53
10.36*+
10.37*+
10.38*+
10.39*+
10.40*+
10.41*+
10.42*+
10.43+
10.44*+
10.45*+
10.46*+
10.47*+
10.48*+
10.49*+
10.50*+
Amended and Restated Korn Ferry Executive Capital Accumulation Plan, effective July 1, 2021, filed as
Exhibit 10.50 to the Company’s Annual Report on Form 10-K, filed June 28, 2021.
Amended and Restated Korn Ferry Long Term Performance Unit Plan, effective July 1, 2021, filed as
Exhibit 10.51 to the Company’s Annual Report on Form 10-K, filed June 28, 2021.
Form of Unit Award Agreement under Amended and Restated Korn Ferry Long Term Performance Unit
Plan, filed as Exhibit 10.52 to the Company’s Annual Report on Form 10-K, filed June 28, 2021.
Amended and Restated Employment Agreement dated June 28, 2021 between the Company and Gary
Burnison, filed as Exhibit 10.53 to the Company’s Annual Report on Form 10-K, filed June 28, 2021.
Amended and Restated Employment Agreement dated June 28, 2021 between the Company and
Robert Rozek, filed as Exhibit 10.54 to the Company’s Annual Report on Form 10-K, filed June 28, 2021.
Employment Agreement dated June 28, 2021 between the Company and Byrne Mulrooney, filed as
Exhibit 10.55 to the Company’s Annual Report on Form 10-K, filed June 28, 2021.
Employment Agreement dated June 28, 2021 between the Company and Mark Arian, filed as Exhibit
10.56 to the Company’s Annual Report on Form 10-K, filed June 28, 2021.
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, filed June 28, 2022.
Korn Ferry 2022 Stock Incentive Plan, effective September 22, 2022, filed as Exhibit 10.1 to the
Company's Report on Form 8-K, filed September 26, 2022.
Korn Ferry Amended and Restated Employees Stock Purchase Plan, effective September 22, 2022, filed
as Exhibit 10.2 to the Company's Report on Form 8-K, filed September 26, 2022.
Korn Ferry 2022 Stock Incentive Plan US RSA Notice and Restricted Stock Award Agreement, filed as
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed December 9, 2022.
Korn Ferry 2022 Stock Incentive Plan US and Foreign RSU Performance Award Notice TSR and
Restricted Stock Unit Performance Award Agreement, filed as Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-Q, filed December 9, 2022.
Korn Ferry 2022 Stock Incentive Plan Foreign RSU Notice and Restricted Stock Unit Award Agreement,
filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed December 9, 2022.
Korn Ferry 2022 Stock Incentive Plan BOD RSU Notice and Nonemployee Director Restricted Stock
Unit Award Agreement, filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed
December 9, 2022.
Summary of Non-Employee Director Compensation Program as effective December 15, 2022, filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed March 10, 2023.
10.51*
Employment Agreement dated July 1, 2022 between the Company and Michael Distefano.
21.1
23.1
24.1
31.1
31.2
32.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Subsidiaries of Korn Ferry.
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
Power of Attorney (contained on signature page).
Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File
because XBRL tags are embedded within the Inline XBRL document.
Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Definition Linkbase Document.
Inline XBRL Taxonomy Extension Label Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
This cover page from the Company’s Annual Report on Form 10-K for the year ended April 30, 2023,
had been formatted in Inline XBRL and included as Exhibit 101.
_______________________________
*
Management contract, compensatory plan or arrangement.
+
Incorporated herein by reference.
Item 16. Form 10-K Summary
None
54
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Korn Ferry
By:
/s/ Robert P. Rozek
Robert P. Rozek
Executive Vice President, Chief Financial Officer and Chief Corporate Officer
Date: June 28, 2023
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of the registrant hereby
constitutes and appoints Jonathan M. Kuai and Gary D. Burnison, and each of them, as lawful attorney-in-fact and agent for
each of the undersigned (with full power of substitution and resubstitution, for and in the name, place and stead of each of
the undersigned officers and directors), to sign and file with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, any and all amendments, supplements and exhibits to this report and any and all other
documents in connection therewith, hereby granting unto said attorneys-in-fact, and each of them, full power and authority to
do and perform each and every act and thing necessary or desirable to be done in order to effectuate the same as fully and
to all intents and purposes as each of the undersigned might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or any of their substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ JERRY P. LEAMON
Jerry P. Leamon
/s/ GARY D. BURNISON
Gary D. Burnison
/s/ ROBERT P. ROZEK
Robert P. Rozek
/s/ DOYLE N. BENEBY
Doyle N. Beneby
/s/ LAURA M. BISHOP
Laura M. Bishop
/s/ CHARLES L. HARRINGTON
Charles L. Harrington
/s/ ANGEL R. MARTINEZ
Angel R. Martinez
/s/ DEBRA J. PERRY
Debra J. Perry
/s/ LORI J. ROBINSON
Lori J. Robinson
Chairman of the Board and Director
June 28, 2023
June 28, 2023
June 28, 2023
June 28, 2023
June 28, 2023
June 28, 2023
June 28, 2023
June 28, 2023
June 28, 2023
President & Chief Executive Officer
(Principal Executive Officer) and Director
Executive Vice President, Chief Financial Officer and
Chief Corporate Officer
(Principal Financial Officer and Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
55
KORN FERRY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2023
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets as of April 30, 2023 and 2022
Consolidated Statements of Income for the years ended April 30, 2023, 2022, and 2021
Consolidated Statements of Comprehensive Income for the years ended April 30, 2023, 2022, and 2021
Consolidated Statements of Stockholders’ Equity for the years ended April 30, 2023, 2022, and 2021
Consolidated Statements of Cash Flows for the years ended April 30, 2023, 2022, and 2021
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-6
F-7
F-8
F-9
F-10
F-11
F-1
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Korn Ferry (the “Company”) is responsible for establishing and maintaining adequate internal control over
financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the
Securities and Exchange Commission, internal control over financial reporting is a process designed by, or supervised by,
the issuer’s principal executive and principal financial officers, and effected by the issuer’s board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting is supported by written policies and procedures, that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of the Company’s management and directors; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of the Company’s annual financial statements, management of the Company has
undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2023
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of the
Company’s internal control over financial reporting and testing of the operational effectiveness of the Company’s internal
control over financial reporting.
Based on this assessment, management did not identify any material weakness in the Company’s internal control over
financial reporting, and management has concluded that the Company’s internal control over financial reporting was
effective as of April 30, 2023.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial statements for
the year ended April 30, 2023 included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness
of the Company’s internal control over financial reporting as of April 30, 2023, a copy of which is included in this Annual
Report on Form 10-K.
June 28, 2023
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Korn Ferry
Opinion on Internal Control over Financial Reporting
We have audited Korn Ferry and subsidiaries’ internal control over financial reporting as of April 30, 2023, based on criteria
established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Korn Ferry and subsidiaries (the Company)
maintained, in all material respects, effective internal control over financial reporting as of April 30, 2023, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of April 30, 2023 and 2022, the related consolidated
statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period
ended April 30, 2023, and the related notes and our report dated June 28, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Los Angeles, California
June 28, 2023
F-3
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Korn Ferry
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Korn Ferry and subsidiaries (the Company) as of April
30, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders' equity and cash
flows for each of the three years in the period ended April 30, 2023, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at April 30, 2023 and 2022, and the results of its operations and its cash
flows for each of the three years in the period ended April 30, 2023, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of April 30, 2023, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated June 28, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the accounts or disclosures to which it relates.
Description of the Matter
Revenue recognition
As described in Note 1 to the consolidated financial statements, the Company recognizes
revenue when control of the goods and services are transferred to the customer. Revenue
recognition includes management estimates of uptick fee variable consideration for Search
engagements and estimates of the total hours at completion used to recognize revenue as
services are rendered under Consulting contracts.
Auditing revenue recognition was complex due to the volume of transactions within the
various revenue streams with each revenue stream representing a different pattern of
revenue recognition. Auditing revenue recognition also incorporates testing the underlying
data supporting management estimates mentioned above that are used in recognizing
revenues under Search and Consulting contracts.
F-4
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of the Company’s processes and controls related to the recognition of each revenue stream,
including, among others, controls over management review of contractual terms,
management’s determination of when control of goods and services are transferred to
customers as well as management’s review of the accuracy and completeness of underlying
data used in the estimates mentioned above.
Our audit procedures included, among others, testing a sample of contracts to determine
whether terms that may affect revenue recognition were identified and properly considered,
performance obligations were appropriately identified in the Company’s evaluation of the
accounting for the contracts and revenue was recognized when control of the goods or
services is transferred to the customer. In addition, we tested management estimates
mentioned above. For Search contracts, we compared the estimates of uptick fee revenues
to historical actual data for a portfolio of similar contracts. For Consulting contracts, we
compared the data used in the estimate of the total hours at completion to time reports for
work completed to date, recalculated the percentage of completion and assessed the
reasonableness of management’s estimates to complete based on an understanding of the
current status of the contracts. We also performed analysis over contracts completed during
the year to determine whether there are significant changes in the estimate from initiation to
completion of contracts.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Los Angeles, California
June 28, 2023
F-5
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents
Marketable securities
ASSETS
Receivables due from clients, net of allowance for doubtful accounts of $44,377
and $36,384 at April 30, 2023 and 2022, respectively
Income taxes and other receivables
Unearned compensation
Prepaid expenses and other assets
Total current assets
Marketable securities, non-current
Property and equipment, net
Operating lease right-of-use assets, net
Cash surrender value of company-owned life insurance policies, net of loans
Deferred income taxes
Goodwill
Intangible assets, net
Unearned compensation, non-current
Investments and other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable
Income taxes payable
Compensation and benefits payable
Operating lease liability, current
Other accrued liabilities
Total current liabilities
Deferred compensation and other retirement plans
Operating lease liability, non-current
Long-term debt
Deferred tax liabilities
Other liabilities
Total liabilities
Commitments and contingencies
Stockholders' equity
April 30,
2023
2022
(in thousands, except per share data)
$
844,024 $
44,837
569,601
67,512
63,476
49,219
1,638,669
179,040
161,876
142,690
197,998
102,057
909,491
114,426
103,607
24,590
978,070
57,244
590,260
31,884
60,749
41,763
1,759,970
175,783
138,172
167,734
183,308
84,712
725,592
89,770
118,238
21,267
$
$
3,574,444 $
3,464,546
53,386 $
19,969
532,934
45,821
324,150
976,260
396,534
119,220
396,194
5,352
27,879
50,932
34,450
547,826
48,609
302,408
984,225
357,175
151,212
395,477
2,715
24,153
1,921,439
1,914,957
Common stock: $0.01 par value, 150,000 shares authorized, 76,693 and 75,409
shares issued and 52,269 and 53,190 shares outstanding at April 30, 2023 and
2022, respectively
Retained earnings
Accumulated other comprehensive loss, net
Total Korn Ferry stockholders' equity
Noncontrolling interest
Total stockholders' equity
429,754
1,311,081
(92,764)
1,648,071
4,934
1,653,005
Total liabilities and stockholders' equity
$
3,574,444 $
The accompanying notes are an integral part of these consolidated financial statements.
502,008
1,134,523
(92,185)
1,544,346
5,243
1,549,589
3,464,546
F-6
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Fee revenue
Reimbursed out-of-pocket engagement expenses
Total revenue
Compensation and benefits
General and administrative expenses
Reimbursed expenses
Cost of services
Depreciation and amortization
Restructuring charges, net
Total operating expenses
Operating income
Other income (loss), net
Interest expense, net
Income before provision for income taxes
Income tax provision
Net income
Net income attributable to noncontrolling interest
Net income attributable to Korn Ferry
Earnings per common share attributable to Korn Ferry:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Year Ended April 30,
2023
2022
2021
(in thousands, except per share data)
$
2,835,408 $
2,626,718 $
1,810,047
28,428
16,737
9,899
2,863,836
2,643,455
1,819,946
1,901,203
1,741,452
1,297,880
268,458
28,428
238,499
68,335
42,573
237,272
16,737
114,399
63,521
—
191,776
9,899
72,030
61,845
30,732
2,547,496
2,173,381
1,664,162
316,340
5,261
470,074
(11,880)
155,784
37,194
(25,864)
(25,293)
(29,278)
295,737
82,683
213,054
432,901
102,056
330,845
163,700
48,138
115,562
(3,525)
(4,485)
(1,108)
$
209,529 $
326,360 $
114,454
$
$
3.98 $
3.95 $
6.04 $
5.98 $
51,482
51,883
52,807
53,401
2.11
2.09
52,928
53,405
Cash dividends declared per share:
$
0.60 $
0.48 $
0.40
The accompanying notes are an integral part of these consolidated financial statements.
F-7
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive (loss) income:
Foreign currency translation adjustments
Deferred compensation and pension plan adjustments, net of tax
Net unrealized gain (loss) on marketable securities, net of tax
Comprehensive income
Less: comprehensive income attributable to noncontrolling interest
Year Ended April 30,
2023
2022
2021
(in thousands)
$
213,054 $
330,845 $
115,562
(3,256)
(59,227)
3,420
144
19,096
(410)
50,069
5,419
(53)
213,362
290,304
170,997
(4,412)
(4,309)
(1,191)
Comprehensive income attributable to Korn Ferry
$
208,950 $
285,995 $
169,806
The accompanying notes are an integral part of these consolidated financial statements.
F-8
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common Stock
Shares
Amount
Retained
Earnings
Accumulated
Other
Comprehensive
Loss, Net
Total
Korn Ferry
Stockholders'
Equity
Noncontrolling
Interest
Total
Stockholders'
Equity
(in thousands)
Balance at May 1, 2020
54,450
$
585,560 $
742,993 $
(107,172) $
1,221,381 $
2,310 $
1,223,691
Net income
Other comprehensive income
Dividends paid to shareholders
Dividends paid to noncontrolling
interest
Purchase of stock
Issuance of stock
Stock-based compensation
—
—
—
—
—
—
—
—
(1,146)
(35,376)
704
6,560
—
26,516
Balance at April 30, 2021
54,008
583,260
Net income
Other comprehensive loss
Dividends paid to shareholders
Dividends paid to noncontrolling
interest
Purchase of stock
Issuance of stock
Stock-based compensation
—
—
—
—
—
—
—
—
(1,743)
(117,301)
925
7,688
—
28,361
114,454
—
(22,498)
—
—
—
—
834,949
326,360
—
55,352
—
—
—
—
—
114,454
55,352
(22,498)
—
(35,376)
6,560
26,516
(51,820)
1,366,389
—
—
(40,365)
(26,786)
—
—
—
—
—
—
—
—
—
326,360
(40,365)
(26,786)
—
(117,301)
7,688
28,361
Balance at April 30, 2022
53,190
502,008
1,134,523
(92,185)
1,544,346
Net income
Other comprehensive (loss)
income
Dividends paid to shareholders
Dividends paid to noncontrolling
interest
Purchase of stock
Issuance of stock
Stock-based compensation
—
—
—
—
—
—
—
—
(2,082)
(116,139)
1,161
8,452
—
35,433
209,529
—
(32,971)
—
—
—
—
—
(579)
—
—
—
—
—
209,529
(579)
(32,971)
—
(116,139)
8,452
35,433
1,108
83
—
(1,115)
—
—
—
2,386
4,485
(176)
—
(1,452)
—
—
—
5,243
3,525
887
—
(4,721)
—
—
—
115,562
55,435
(22,498)
(1,115)
(35,376)
6,560
26,516
1,368,775
330,845
(40,541)
(26,786)
(1,452)
(117,301)
7,688
28,361
1,549,589
213,054
308
(32,971)
(4,721)
(116,139)
8,452
35,433
Balance at April 30, 2023
52,269
$
429,754 $ 1,311,081 $
(92,764) $
1,648,071 $
4,934 $
1,653,005
The accompanying notes are an integral part of these consolidated financial statements.
F-9
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Net cash provided by operating activities
343,894
501,658
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Stock-based compensation expense
Impairment of right-of-use assets
Impairment of fixed assets
Provision for doubtful accounts
Gain on cash surrender value of life insurance policies
(Gain) loss on marketable securities
Deferred income taxes
Change in other assets and liabilities:
Deferred compensation
Receivables due from clients
Income taxes and other receivables
Prepaid expenses and other assets
Unearned compensation
Income taxes payable
Accounts payable and accrued liabilities
Other
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired
Purchase of property and equipment
Purchase of marketable securities
Proceeds from sales/maturities of marketable securities
Premium on company-owned life insurance policies
Proceeds from life insurance policies
Dividends received from unconsolidated subsidiaries
Net cash used in investing activities
Cash flows from financing activities:
Repurchases of common stock
Payments of tax withholdings on restricted stock
Proceeds from issuance of common stock upon exercise of employee stock
options and in connection with an employee stock purchase plan
Payments on life insurance policy loans
Principal payments on finance leases
Dividends paid to shareholders
Dividends paid to noncontrolling interest
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year
Supplemental cash flow information:
Cash used to pay interest
Cash used to pay income taxes, net of refunds
$
$
$
Year Ended April 30,
2023
2022
2021
(in thousands)
$
213,054 $
330,845 $
115,562
68,335
36,285
5,471
4,375
22,493
(10,576)
(2,874)
(14,403)
52,291
33,483
(25,615)
(5,884)
11,904
(15,304)
(27,821)
(1,320)
63,521
29,210
7,392
1,915
21,552
(5,819)
11,978
(16,963)
27,197
(138,627)
3,969
(9,534)
(23,425)
12,751
191,447
(5,751)
(254,750)
(70,382)
(53,530)
65,878
(15,219)
4,376
150
(323,477)
(133,802)
(49,406)
(82,015)
92,472
(15,218)
3,382
255
(184,332)
(95,463)
(22,232)
(96,258)
(18,532)
7,606
(2,760)
(1,639)
(32,971)
(4,721)
(152,180)
(2,283)
(134,046)
978,070
844,024 $
6,919
(178)
(1,157)
(26,786)
(1,452)
(137,444)
(52,590)
127,292
850,778
978,070 $
61,845
27,157
—
—
15,763
(13,017)
(38,529)
(14,140)
64,005
(67,331)
5,798
(3,902)
(32,935)
(1,824)
122,687
10,294
251,433
—
(31,122)
(103,499)
69,683
(15,353)
18,707
205
(61,379)
(30,387)
(4,989)
5,706
(12,279)
(1,324)
(22,498)
(1,115)
(66,886)
38,366
161,534
689,244
850,778
25,409 $
134,741 $
24,607 $
107,602 $
25,207
55,317
The accompanying notes are an integral part of these consolidated financial statements.
F-10
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023
1. Organization and Summary of Significant Accounting Policies
Nature of Business
Korn Ferry, a Delaware corporation, and its subsidiaries (the “Company”) is a global organizational consulting firm. The
Company helps clients synchronize strategy and talent to drive superior performance. The Company works with
organizations to design their structures, roles, and responsibilities. The Company helps organizations hire the right people to
bring their strategy to life and advise them on how to reward, develop, and motivate their people.
The Company is pursuing a strategy designed to help Korn Ferry focus on clients and collaborate intensively across the
organization. This approach is intended to build on the best of the Company’s past and give the Company a clear path to the
future with focused initiatives to increase its client and commercial impact. Korn Ferry is transforming how clients address
their talent management needs. The Company has evolved from a mono-line to a diversified business, giving its consultants
more frequent and expanded opportunities to engage with clients. In fiscal year 2023 and 2022, the Company acquired
companies that have added critical mass to our existing professional search and interim operations, as described in Note 12.
This provided the Company with the opportunity to reassess how it manages the Recruitment Process Outsourcing ("RPO")
& Professional Search segment. Therefore, beginning in fiscal 2023, the Company separated RPO & Professional Search
into two segments to align with the Company's strategy and the decisions of the Company's chief operating decision maker
("CODM"), who began to regularly make separate resource allocation decisions and assess performance separately
between Professional Search & Interim and RPO.
The Company now has eight reportable segments that operate through the following five lines of business:
1.
2.
3.
4.
5.
Consulting aligns organizational 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 enabled by a comprehensive set of Digital Performance
Management Tools, based on some of the world’s leading intellectual property (“lP”) and data. The Consulting teams
employ an integrated approach across core capabilities and integrated solutions, each one intended to strengthen the
work and thinking in the next, to help clients execute their strategy in a digitally enabled world.
Digital develops technology-enabled Performance Management Tools that empower our clients. The digital products
give clients direct access to Korn Ferry proprietary data, client data and analytics to deliver clear insights with the
training and tools needed to align organizational structure with business strategy.
Executive Search helps organizations recruit board level, chief executive and other senior executive and general
management talent to deliver lasting impact. The Company’s approach to placing talent is bringing together research-
based IP, proprietary assessments and behavioral interviewing with practical experience to determine ideal
organizational fit. Salary benchmarking then helps the Company build appropriate frameworks for compensation and
retention. This business is managed and reported on a geographic basis and represents four of the Company’s
reportable segments (Executive Search North America, Executive Search Europe, the Middle East and Africa
("EMEA"), Executive Search Asia Pacific and Executive Search Latin America).
Professional Search & Interim delivers enterprise talent acquisition solutions for professional level middle and
upper management. The Company helps clients source high-quality candidates at speed and scale globally, covering
single-hire to multi-hire permanent placements and interim contractors.
RPO offers scalable recruitment outsourcing solutions leveraging customized technology and talent insights. The
Company's scalable solutions, built on science and powered by best-in-class technology and consulting expertise,
enable the Company to act as a strategic partner in clients’ quest for superior recruitment outcomes and better
candidate fit.
Basis of Consolidation and Presentation
The consolidated financial statements include the accounts of the Company and its wholly and majority owned/controlled
domestic and international subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The preparation of the consolidated financial statements conform with United States (“U.S.”) generally accepted accounting
principles (“GAAP”) and prevailing practice within our different industries. The consolidated financial statements include all
adjustments, consisting of normal recurring accruals and any other adjustments that management considers necessary for a
fair presentation of the results for these periods.
The Company has control of a Mexican subsidiary and consolidates the operations of this subsidiary. Noncontrolling interest,
which represents the Mexican partners’ 51% interest in the Mexican subsidiary, is reflected on the Company’s consolidated
financial statements.
F-11
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The Company considers events or transactions that occur after the balance sheet date but before the consolidated financial
statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional
disclosures.
Use of Estimates and Uncertainties
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates, and changes in estimates are reported in current operations as new
information is learned or upon the amounts becoming fixed or determinable. The most significant areas that require
management’s judgment are revenue recognition, deferred compensation, annual performance-related bonuses, evaluation
of the carrying value of receivables, goodwill and other intangible assets, share-based payments, leases and the
recoverability of deferred income taxes.
Revenue Recognition
Substantially all fee revenue is derived from talent and organizational consulting services and digital sales, stand-alone or as
part of a solution, fees for professional services related to executive and professional recruitment performed on a retained
basis, interim services and RPO, either stand-alone or as part of a solution.
Revenue is recognized when control of the goods and services are transferred to the customer in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those goods and services. Revenue contracts with
customers are evaluated based on the five-step model outlined in Accounting Standards Codification (“ASC”) 606 (“ASC
606”), Revenue from Contracts with Customers: 1) identify the contract with a customer; 2) identify the performance
obligation(s) in the contract; 3) determine the transaction price; 4) allocate the transaction price to the separate performance
obligation(s); and 5) recognize revenue when (or as) each performance obligation is satisfied.
Consulting fee revenue is primarily recognized as services are rendered, measured by total hours incurred as a percentage
of the total estimated hours at completion. It is possible that updated estimates for consulting engagements may vary from
initial estimates with such updates being recognized in the period of determination. Depending on the timing of billings and
services rendered, the Company accrues or defers revenue as appropriate.
Digital fee revenue is generated from IP platforms enabling large-scale, technology-based talent programs for pay, talent
development, engagement, and assessment and is consumed directly by an end user or indirectly through a consulting
engagement. Revenue is recognized as services are delivered and the Company has a legally enforceable right to payment.
Revenue also comes from the sale of the Company’s proprietary IP subscriptions, which are considered symbolic IP due to
the dynamic nature of the content. As a result, revenue is recognized over the term of the contract. Functional IP licenses
grant customers the right to use IP content via the delivery of a flat file. Because the IP content license has significant stand-
alone functionality, revenue is recognized upon delivery and when an enforceable right to payment exists. Revenue for
tangible and digital products sold by the Company, such as books and digital files, is recognized when these products are
shipped.
Fee revenue from executive and professional search activities is generally one-third of the estimated first-year cash
compensation of the placed candidate, plus a percentage of the fee to cover indirect engagement-related expenses. In
addition to the search retainer, an uptick fee is billed when the actual compensation awarded by the client for a placement is
higher than the estimated compensation. In the aggregate, upticks have been a relatively consistent percentage of the
original estimated fee; therefore, the Company estimates upticks using the expected value method based on historical data
on a portfolio basis. In a standard search engagement, there is one performance obligation, which is the promise to
undertake a search. The Company generally recognizes such revenue over the course of a search and when it is legally
entitled to payment as outlined in the billing terms of the contract. Any revenues associated with services that are provided
on a contingent basis are recognized once the contingency is resolved, as this is when control is transferred to the customer.
These assumptions determine the timing of revenue recognition for the reported period. In addition to talent acquisition for
permanent placement roles, the Professional Search & Interim segment also offers recruitment services for interim roles.
Interim roles are short term in duration, generally less than 12 months. Generally, each interim role is a separate
performance obligation. The Company recognizes fee revenue over the duration that the interim resources' services are
provided which also aligns to the contracted invoicing plan and enforceable right to payment.
RPO fee revenue is generated through two distinct phases: 1) the implementation phase and 2) the post-implementation
recruitment phase. The fees associated with the implementation phase are recognized over the period that the related
implementation services are provided. The post-implementation recruitment phase represents end-to-end recruiting services
to clients for which there are both fixed and variable fees, which are recognized over the period that the related recruiting
services are performed.
F-12
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Reimbursements
The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue
in the consolidated statements of income.
Allowance for Doubtful Accounts
An allowance is established for doubtful accounts by taking a charge to general and administrative expenses. The
Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection
experience, current and future economic and market conditions and a review of the current status of customers’ trade
accounts receivable. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable
that may not be collected is primarily based on historical loss-rate experience. When required, the Company adjusts the
loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic
and market conditions. The Company generally assesses future economic condition for a period of sixty to ninety days,
which corresponds with the contractual life of its accounts receivables. After the Company exhausts all collection efforts, the
amount of the allowance is reduced for balances written off as uncollectible.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less from the date of
purchase to be cash equivalents. As of April 30, 2023 and 2022, the Company’s investments in cash equivalents consisted
of money market funds, and as of April 30, 2022 also consisted of commercial paper with initial maturity of less than 90 days
for which market prices are readily available.
Marketable Securities
The Company currently has investments in marketable securities and mutual funds that are classified as either equity
securities or available-for-sale debt securities. The classification of the investments in these marketable securities and
mutual funds is assessed upon purchase and reassessed at each reporting period. These investments are recorded at fair
value and are classified as marketable securities in the accompanying consolidated balance sheets. The investments that
the Company may sell within the next 12 months are carried as current assets.
The Company invests in mutual funds (for which market prices are readily available) that are held in trust to satisfy
obligations under the Company’s deferred compensation plans. Such investments are classified as equity securities and
mirror the employees’ investment elections in their deemed accounts in the Executive Capital Accumulation Plan and similar
plans in Asia Pacific and Canada (“ECAP”) from a pre-determined set of securities. Realized gains (losses) on marketable
securities are determined by specific identification. Interest is recognized on an accrual basis; dividends are recorded as
earned on the ex-dividend date. Interest, dividend income and the changes in fair value in marketable securities are
recorded in the accompanying consolidated statements of income in other income (loss), net.
The Company also invests cash in excess of its daily operating requirements and capital needs primarily in marketable fixed
income (debt) securities in accordance with the Company’s investment policy, which restricts the type of investments that
can be made. The Company’s investment portfolio includes commercial paper and corporate notes/bonds as of April 30,
2023 and 2022 and also included US Treasury and Agency securities as of April 30, 2022. These marketable fixed income
(debt) securities are classified as available-for-sale securities based on management’s decision, at the date such securities
are acquired, not to hold these securities to maturity or actively trade them. The Company carries these marketable debt
securities at fair value based on the market prices for these marketable debt securities or similar debt securities whose
prices are readily available. The changes in fair values, net of applicable taxes, are recorded as unrealized gains or losses
as a component of comprehensive income unless the change is due to credit loss. A credit loss is recorded in the statements
of income in other income (loss), net; any amount in excess of the credit loss is recorded as unrealized losses as a
component of comprehensive income. Generally, the amount of the loss is the difference between the cost or amortized cost
and its then current fair value; a credit loss is the difference between the discounted expected future cash flows to be
collected from the debt security and the cost or amortized cost of the debt security. During fiscal 2023, 2022 and 2021, no
amount was recognized as a credit loss for the Company’s available for sales debt securities.
Fair Value of Financial Instruments
Fair value is the price the Company would receive to sell an asset or transfer a liability (exit price) in an orderly transaction
between market participants. For those assets and liabilities recorded or disclosed at fair value, the Company determines
the fair value based upon the quoted market price, if available. If a quoted market price is not available for identical assets,
the fair value is based upon the quoted market price of similar assets. The fair values are assigned a level within the fair
value hierarchy as defined below:
▪
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
F-13
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
▪
▪
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or
similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
As of April 30, 2023 and 2022, the Company held certain assets that are required to be measured at fair value on a recurring
basis. These included cash, cash equivalents, accounts receivable, marketable securities and foreign currency forward
contracts. The carrying amount of cash, cash equivalents and accounts receivable approximates fair value due to the short-
term maturity of these instruments. The fair values of marketable securities classified as equity securities are obtained from
quoted market prices, and the fair values of marketable securities classified as available-for-sale and foreign currency
forward contracts are obtained from a third party, which are based on quoted prices or market prices for similar assets and
financial instruments.
Foreign Currency Forward Contracts Not Designated as Hedges
The Company has established a program that primarily utilizes foreign currency forward contracts to offset the risks
associated with the effects of certain foreign currency exposures primarily originating from intercompany balances due to
cross border work performed in the ordinary course of business. These foreign currency forward contracts are neither used
for trading purposes nor are they designated as hedging instruments pursuant to ASC 815, Derivatives and Hedging.
Accordingly, the fair value of these contracts is recorded as of the end of the reporting period in the accompanying
consolidated balance sheets, while the change in fair value is recorded to the accompanying consolidated statements of
income.
Business Acquisitions
Business acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity
to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities
assumed and any noncontrolling interest in the acquired entity, and recognize and measure goodwill or a gain from the
purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of
acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price
over the amounts assigned is recorded as goodwill, or if the fair value of the assets acquired exceeds the purchase price
consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to
goodwill over the measurement period (not longer than 12 months). The acquisition method also requires that acquisition-
related transaction and post-acquisition restructuring costs be charged to expense as committed and requires the Company
to recognize and measure certain assets and liabilities including those arising from contingencies and contingent
consideration in a business combination.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-
of-use (“ROU”) assets and current and non-current operating lease liability, in the consolidated balance sheets. Finance
leases are included in property and equipment, net, other accrued liabilities and other liabilities in the consolidated balance
sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term, and the lease liabilities represent
the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease
liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the
commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated
incremental borrowing rate based on the information available at commencement date in determining the present value of
future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives
and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably
certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-
line basis over the lease term, with variable lease payments recognized in the periods in which they are incurred.
The Company has lease agreements with lease and non-lease components. For all leases with non-lease components the
Company accounts for the lease and non-lease components as a single lease component.
Property and Equipment, Net
Property and equipment is carried at cost less accumulated depreciation. Leasehold improvements are amortized on a
straight-line basis over the estimated useful life of the asset, or the lease term, whichever is shorter. Software development
costs incurred for internal use projects are capitalized and once placed in service, amortized using the straight-line method
over the estimated useful life, generally three to ten years. All other property and equipment is depreciated or amortized on a
straight-line basis over the estimated useful lives of three to ten years.
F-14
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Impairment of Long-Lived Assets
Long-lived assets include property, equipment, ROU assets and software developed or obtained for internal use. In
accordance with ASC 360, Property, Plant and Equipment, management reviews the Company’s recorded long-lived assets
for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be fully recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions,
recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company
determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability, as well
as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If
the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized
for the difference between fair value and the carrying value of the asset. During fiscal 2023, the Company reduced its real
estate footprint and as a result, the Company took an impairment charge of ROU assets of $5.5 million and an impairment of
leasehold improvements and furniture and fixtures of $4.4 million, both recorded in the consolidated statements of income in
general and administrative expenses. During fiscal 2022, the Company reduced its real estate footprint and as a result, the
Company took an impairment charge of ROU assets of $7.4 million and an impairment of leasehold improvements and
furniture and fixtures of $1.9 million, both recorded in the consolidated statements of income in general and administrative
expenses. During fiscal 2021, there were no impairment charges recorded.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of assets acquired. Goodwill is tested for
impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that
the asset is impaired. Results of the annual qualitative impairment test performed as of January 31, 2023, indicated that the
fair value of each of the reporting units exceeded its carrying amount and no reporting units were at risk of failing the
impairment test. As a result, no impairment charge was recognized. There was also no indication of potential impairment
during the fourth quarter of fiscal 2023 that would require further testing.
Intangible assets primarily consist of customer lists, non-compete agreements, proprietary databases and IP. Intangible
assets are recorded at their estimated fair value at the date of acquisition and are amortized in a pattern in which the asset
is consumed if that pattern can be reliably determined, or using the straight-line method over their estimated useful lives,
which range from one to 24 years. For intangible assets subject to amortization, an impairment loss is recognized if the
carrying amount of the intangible assets is not recoverable and exceeds fair value. The carrying amount of the intangible
assets is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from use of the
asset. The Company reviewed its intangible assets and noted no impairment as of April 30, 2023, 2022 and 2021.
Compensation and Benefits Expense
Compensation and benefits expense in the accompanying consolidated statements of income consist of compensation and
benefits paid to consultants (employees who originate business), executive officers and administrative and support
personnel. The most significant portions of this expense are salaries and the amounts paid under the annual performance-
related bonus plan to employees. The portion of the expense applicable to salaries is comprised of amounts earned by
employees during a reporting period. The portion of the expenses applicable to annual performance-related bonuses refers
to the Company’s annual employee performance-related bonus with respect to a fiscal year, the amount of which is
communicated and paid to each eligible employee following the completion of the fiscal year.
Each quarter, management makes its best estimate of its annual performance-related bonuses, which requires management
to, among other things, project annual consultant productivity (as measured by engagement fees billed and collected by
Executive Search and Professional Search consultants and revenue and other performance/profitability metrics for
Consulting, Digital, Interim and RPO consultants), the level of engagements referred by a consultant in one line of business
to a different line of business, and Company performance, including profitability, competitive forces and future economic
conditions and their impact on the Company’s results. At the end of each fiscal year, annual performance-related bonuses
take into account final individual consultant productivity (including referred work), Company/line of business results,
including profitability, the achievement of strategic objectives, the results of individual performance appraisals and the
current economic landscape. Accordingly, each quarter the Company reevaluates the assumptions used to estimate annual
performance-related bonus liability and adjusts the carrying amount of the liability recorded on the consolidated balance
sheet and reports any changes in the estimate in current operations.
Because annual performance-based bonuses are communicated and paid only after the Company reports its full fiscal year
results, actual performance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus
estimate historically have been immaterial and are recorded in current operations in the period in which they are determined.
The performance-related bonus expense was $409.4 million, $447.6 million and $287.3 million for the years ended April 30,
2023, 2022 and 2021, respectively, included in compensation and benefits expense in the consolidated statements of
income.
F-15
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Other expenses included in compensation and benefits expense are due to changes in deferred compensation and pension
plan liabilities, changes in cash surrender value (“CSV”) of company-owned life insurance (“COLI”) contracts, amortization of
stock-based compensation awards, commissions, payroll taxes and employee insurance benefits. Unearned compensation
on the consolidated balance sheets includes long-term retention awards that are generally amortized over four-to-five years.
Deferred Compensation and Pension Plans
For financial accounting purposes, the Company estimates the present value of the future benefits payable under the
deferred compensation and pension plans as of the estimated payment commencement date. The Company also estimates
the remaining number of years a participant will be employed by the Company. Then, each year during the period of
estimated employment, the Company accrues a liability and recognizes expense for a portion of the future benefit using the
unit credit cost method for the Senior Executive Incentive Plan (“SEIP”), Wealth Accumulation Plan (“WAP”), Enhanced
Wealth Accumulation Plan (“EWAP”) and Worldwide Executive Benefit Plan (“WEB”) and the pension plan acquired under
Hay Group, while the medical and life insurance plan and Long Term Performance Unit Plan (“LTPU Plan”) uses the
projected unit credit cost method. The amounts charged to operations are made up of service and interest costs and the
expected return on plan assets. Actuarial gains and losses are initially recorded in accumulated other comprehensive loss.
The actuarial gains/losses included in accumulated other comprehensive loss are amortized to the consolidated statements
of income, if at the beginning of the year, the amount exceeds 10% of the greater of the projected benefit obligation and
market-related plan assets. The amortization included in periodic benefit cost is divided by the average remaining service of
inactive plan participants, or the period for which benefits will be paid, if shorter. The expected return on plan assets takes
into account the current fair value of plan assets and reflects the Company’s estimate for trust asset returns given the
current asset allocation and any expected changes to the asset allocation and current and future market conditions.
In calculating the accrual for future benefit payments, management has made assumptions regarding employee turnover,
participant vesting, violation of non-competition provisions and the discount rate. Management periodically reevaluates all
assumptions. If assumptions change in future reporting periods, the changes may impact the measurement and recognition
of benefit liabilities and related compensation expense.
Executive Capital Accumulation Plan
The Company, under the ECAP, makes discretionary contributions and such contributions may be granted to key employees
annually based on the employee’s performance. Certain key management may also receive Company contributions upon
commencement of employment. The Company amortizes these contributions on a straight-line basis as they vest, generally
over a five-year period. The amounts that are expected to be paid to employees over the next 12 months are classified as a
current liability included in compensation and benefits payable in the accompanying consolidated balance sheets.
The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are
adjusted with a corresponding charge (or credit) to compensation and benefits costs.
Cash Surrender Value of Life Insurance
The Company purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in certain of
the deferred compensation and pension plans as a means of funding benefits under such plans. The Company purchased
both fixed and variable life insurance contracts and does not purchase “split-dollar” life insurance policy contracts. The
Company only holds contracts or policies that provide for a fixed or guaranteed rate of return. The CSV of these COLI
contracts are carried at the amounts that would be realized if the contract were surrendered at the balance sheet date, net of
the outstanding loans from the insurer. The Company has the intention and ability to continue to hold these COLI policies
and contracts. Additionally, the loans secured by the policies do not have any scheduled payment terms and the Company
also does not intend to repay the loans outstanding on these policies until death benefits under the policy have been
realized. Accordingly, the investment in COLI is classified as long-term in the accompanying consolidated balance sheets.
The change in the CSV of COLI contracts, net of insurance premiums paid and gains realized, is reported net in
compensation and benefits expense. As of April 30, 2023 and 2022, the Company held contracts with net CSV of $198.0
million and $183.3 million, respectively. If the issuing insurance companies were to become insolvent, the Company would
be considered a general creditor; therefore, these assets are subject to credit risk. Management, together with its outside
advisors, routinely monitors the claims paying abilities of these insurance companies.
Restructuring Charges, Net
The Company accounts for its restructuring charges as a liability when the obligations are incurred and records such
charges at fair value. Changes in the estimates of the restructuring charges are recorded in the period the change is
determined.
F-16
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Stock-Based Compensation
The Company has employee compensation plans under which various types of stock-based instruments are granted. These
instruments principally include restricted stock units, restricted stock and an Employee Stock Purchase Plan (“ESPP”). The
Company recognizes compensation expense related to restricted stock units, restricted stock and the estimated fair value of
stock purchases under the ESPP on a straight-line basis over the service period for the entire award.
Reclassification
Certain reclassifications have been made to the amounts in the prior periods in order to conform to the current period's
presentation.
Translation of Foreign Currencies
Generally, financial results of the Company’s foreign subsidiaries are measured in their local currencies. Assets and liabilities
are translated into U.S. dollars at exchange rates in effect at the balance sheet date, while revenue and expenses are
translated using the daily exchange rates during the fiscal year. Resulting translation adjustments are recorded as a
component of accumulated comprehensive loss. Gains and losses from foreign currency transactions of the Company’s
foreign subsidiaries and the translation of the financial results of subsidiaries operating in highly inflationary economies are
included in general and administrative expense in the period incurred. During fiscal 2023, 2022 and 2021, the Company
recorded foreign currency losses of $2.0 million, $1.2 million and $2.7 million respectively, in general and administrative
expenses in the consolidated statements of income.
Income Taxes
There are two components of income tax expense: current and deferred. Current income tax expense (benefit)
approximates taxes to be paid or refunded for the current period. Deferred income tax expense (benefit) results from
changes in deferred tax assets and liabilities between periods. These gross deferred tax assets and liabilities represent
decreases or increases in taxes expected to be paid in the future because of future reversals of temporary differences in the
basis of assets and liabilities as measured by tax laws and their basis as reported in the consolidated financial statements.
Deferred tax assets are also recognized for tax attributes such as net operating loss carryforwards and tax credit
carryforwards. Deferred tax assets and deferred tax liabilities are presented net on the consolidated balance sheets by tax
jurisdiction. Valuation allowances are then recorded to reduce deferred tax assets to the amounts management concludes
are more likely than not to be realized.
Income tax benefits are recognized and measured based upon a two-step model: (1) a tax position must be more-likely-
than-not to be sustained based solely on its technical merits in order to be recognized and (2) the benefit is measured as the
largest dollar amount of that position that is more-likely-than-not to be sustained upon settlement. The difference between
the benefit recognized for a position and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit.
The Company records income tax-related interest and penalties within income tax expense.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash
equivalents, investments, foreign currency forward contracts, receivables due from clients and net CSV due from insurance
companies, which are discussed above. Cash equivalents include investments in money market securities and may include
commercial papers while investments include mutual funds, commercial papers, corporate notes/bonds and may include US
Treasury and Agency securities. Investments are diversified throughout many industries and geographic regions. The
Company maintains its cash and cash equivalents in bank accounts that exceed federally insured FDIC limits. The Company
has not experiences any losses in such accounts. The Company conducts periodic reviews of its customers’ financial
condition and customer payment practices to minimize collection risk on accounts receivable. As of April 30, 2023 and 2022,
the Company had no other significant credit concentrations.
Recently Proposed Accounting Standards - Not Yet Adopted
In October 2021, the FASB issued an amendment in accounting for contract assets and contract liabilities from contracts
with customers, which clarifies that an acquirer of a business should recognize and measure contract assets and contract
liabilities in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. The amendment
of this standard becomes effective in fiscal years beginning after December 15, 2022. The amendment should be applied
prospectively to business combinations that occur after the effective date. The Company will adopt this guidance in its fiscal
year beginning May 1, 2023. The Company does not anticipate this accounting guidance will have a material impact on the
consolidated financial statements.
F-17
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
2. Basic and Diluted Earnings Per Share
ASC 260, Earnings Per Share, requires companies to treat unvested share-based payment awards that have non-forfeitable
rights to dividends prior to vesting as a separate class of securities in calculating earnings per share. The Company has
granted and expects to continue to grant to certain employees under its restricted stock agreements, grants that contain
non-forfeitable rights to dividends. Such grants are considered participating securities. Therefore, the Company is required
to apply the two-class method in calculating earnings per share. The two-class method of computing earnings per share is
an earnings allocation formula that determines earnings per share for each class of common stock and participating security
according to dividends declared (or accumulated) and participation rights in undistributed earnings. The dilutive effect of
participating securities is calculated using the more dilutive of the treasury method or the two-class method.
Basic earnings per common share was computed using the two-class method by dividing basic net earnings attributable to
common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share
was computed using the two-class method by dividing diluted net earnings attributable to common stockholders by the
weighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common
equivalent shares include all in-the-money outstanding options or other contracts to issue common stock as if they were
exercised or converted. Financial instruments that are not in the form of common stock, but when converted into common
stock increase earnings per share, are anti-dilutive and are not included in the computation of diluted earnings per share.
During fiscal 2023, 2022 and 2021, restricted stock awards of 1.2 million shares, 1.2 million shares and 1.3 million shares,
respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-
dilutive.
The following table summarizes basic and diluted earnings per common share attributable to common stockholders:
Year Ended April 30,
2023
2022
2021
(in thousands, except per share data)
Net income attributable to Korn Ferry
$
209,529 $
326,360 $
114,454
Less: distributed and undistributed earnings to nonvested restricted
stockholders
Basic net earnings attributable to common stockholders
Add: undistributed earnings to nonvested restricted stockholders
Less: reallocation of undistributed earnings to nonvested restricted
stockholders
4,618
204,911
3,912
7,343
319,017
6,750
2,763
111,691
2,185
3,882
6,676
2,165
Diluted net earnings attributable to common stockholders
$
204,941 $
319,091 $
111,711
Weighted-average common shares outstanding:
Basic weighted-average number of common shares outstanding
51,482
52,807
52,928
Effect of dilutive securities:
Restricted stock
ESPP
Diluted weighted-average number of common shares outstanding
384
17
580
14
476
1
51,883
53,401
53,405
Net earnings per common share:
Basic earnings per share
Diluted earnings per share
$
$
3.98 $
3.95 $
6.04 $
5.98 $
2.11
2.09
F-18
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
3. Comprehensive Income
Comprehensive income is comprised of net income and all changes to stockholders’ equity, except those changes resulting
from investments by stockholders (changes in paid-in capital) and distributions to stockholders (dividends) and is reported in
the accompanying consolidated statements of comprehensive income. Accumulated other comprehensive loss, net of taxes,
is recorded as a component of stockholders’ equity.
The components of accumulated other comprehensive loss, net were as follows:
Foreign currency translation adjustments
Deferred compensation and pension plan adjustments, net of taxes
Marketable securities unrealized loss, net of tax
Accumulated other comprehensive loss, net
April 30,
2023
2022
(in thousands)
$
(96,860) $
(92,717)
4,381
(285)
961
(429)
$
(92,764) $
(92,185)
The following table summarizes the changes in each component of accumulated other comprehensive loss, net:
Foreign
Currency
Translation
Deferred
Compensation
and Pension
Plan (1)
Unrealized Gains
(Losses) on
Marketable
Securities (2)
Accumulated
Other
Comprehensive
Loss
(in thousands)
Balance as of May 1, 2020
$
(83,652) $
(23,554) $
34 $
(107,172)
Unrealized gains (losses) arising during the period
Reclassification of realized net losses to net income
Balance as of April 30, 2021
Unrealized (losses) gains arising during the period
Reclassification of realized net losses to net income
Balance as of April 30, 2022
Unrealized (losses) gains arising during the period
Reclassification of realized net losses to net income
49,986
—
(33,666)
(59,051)
—
(92,717)
(4,143)
—
2,660
2,759
(18,135)
17,747
1,349
961
3,211
209
(53)
—
(19)
(411)
1
(429)
144
—
52,593
2,759
(51,820)
(41,715)
1,350
(92,185)
(788)
209
Balance as of April 30, 2023
$
(96,860) $
4,381 $
(285) $
(92,764)
_______________________________
(1) The tax effects on unrealized gains were $1.1 million, $6.0 million and $1.1 million as of April 30, 2023, 2022 and 2021, respectively.
The tax effects on reclassifications of realized net losses were $0.1 million, $0.5 million and $1.0 million as of April 30, 2023, 2022 and
2021, respectively.
(2) The tax effects on unrealized gain (losses) were $0.1 million and $(0.1) million as of April 30, 2023 and 2022, respectively.
F-19
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
4. Employee Stock Plans
Stock-Based Compensation
The following table summarizes the components of stock-based compensation expense recognized in the Company’s
consolidated statements of income for the periods indicated:
Restricted stock
ESPP
Total stock-based compensation expense
Stock Incentive Plan
Year Ended April 30,
2023
2022
2021
(in thousands)
$
$
35,433 $
28,361 $
26,516
852
849
641
36,285 $
29,210 $
27,157
At the Company’s 2022 Annual Meeting of Stockholders, held on September 22, 2022, the Company’s stockholders
approved the Korn Ferry 2022 Stock Incentive Plan (the "2022 Plan"), which, among other things, increased the total
number of shares of the Company’s common stock available for stock-based awards by 1,700,000 shares, leaving
2,248,284 shares available for issuance, subject to certain changes in the Company’s capital structure and other
extraordinary events. The 2022 Plan requires a minimum one-year vesting for all future awards, and provides for the grant of
awards to eligible participants, designated as either nonqualified or incentive stock options, restricted stock and restricted
stock units, any of which are market-based, and incentive bonuses, which may be paid in cash or stock or a combination
thereof.
Restricted Stock
The Company grants time-based restricted stock awards to executive officers and other senior employees that generally
vest over a four-year period. In addition, certain key management members typically receive time-based restricted stock
awards upon commencement of employment and may receive them annually in conjunction with the Company’s
performance review. Time-based restricted stock awards are granted at a price equal to fair value, which is determined
based on the closing price of the Company’s common stock on the grant date. The Company recognizes compensation
expense for time-based restricted stock awards on a straight-line basis over the vesting period.
The Company also grants market-based restricted stock units to executive officers and other senior employees. The market-
based units vest after three years depending upon the Company’s total stockholder return over the three-year performance
period relative to other companies in its selected peer group. The fair value of these market-based restricted stock units are
determined by using extensive market data that is based on historical Company and peer group information. The Company
recognizes compensation expense for market-based restricted stock units on a straight-line basis over the vesting period.
Restricted stock activity is summarized below:
2023
Weighted-
Average
Grant Date
Fair Value
Shares
April 30,
2022
Weighted-
Average
Grant Date
Fair Value
Shares
Shares
2021
Weighted-
Average
Grant Date
Fair Value
(in thousands, except per share data)
1,980 $
1,143 $
(1,006) $
(54) $
2,063 $
40.32
49.12
37.72
52.58
50.12
2,370 $
483 $
(821) $
(52) $
1,980 $
34.34
65.05
43.76
34.30
40.32
1,365 $
1,606 $
(516) $
(85) $
2,370 $
44.59
27.63
39.78
22.35
34.34
Non-vested, beginning of year
Granted
Vested
Forfeited
Non-vested, end of year
As of April 30, 2023, there were 0.4 million shares outstanding relating to market-based restricted stock units with total
unrecognized compensation totaling $17.7 million.
F-20
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
As of April 30, 2023, there was $69.8 million of total unrecognized compensation cost related to all non-vested awards of
restricted stock, which is expected to be recognized over a weighted-average period of 2.4 years. During fiscal 2023 and
2022, 372,556 shares and 271,794 shares of restricted stock totalling $22.2 million and $18.5 million, respectively, were
repurchased by the Company, at the option of the employee, to pay for taxes related to the vesting of restricted stock.
Employee Stock Purchase Plan
The Company has an ESPP that, in accordance with Section 423 of the Internal Revenue Code, allows eligible employees
to authorize payroll deductions of up to 15% of their salary to purchase shares of the Company’s common stock. On June 3,
2020, the Company amended the plan so that the purchase price of the shares purchased could not be less than 85% or
more than 100% of the fair market price of the common stock on the last day of the enrollment period. This amendment
became effective July 1, 2020. At the Company's 2022 Annual Meeting of Stockholders, held on September 22, 2022, the
Company's stockholders approved the Korn Ferry Amended and Restated Employee Stock Purchase Plan, which, among
other things, increased the total number of shares of the Company's common stock that may be purchased thereunder by
1,500,000 shares. Employees may not purchase more than $25,000 in stock during any calendar year. The maximum
number of shares that may be issued under the ESPP is 4.5 million shares. During fiscal 2023, 2022, and 2021, employees
purchased 154,720 shares at an average price of $49.16 per share, 103,826 shares at an average price of $66.64 per share
and 188,608 shares at an average price of $30.25 per share, respectively. As of April 30, 2023, the ESPP had approximately
1.8 million shares remaining available for future issuance.
Common Stock
During fiscal 2023, 2022 and 2021, the Company repurchased (on the open market or privately negotiated transactions)
1,709,867 shares of the Company’s common stock for $93.9 million, 1,470,983 shares for $98.8 million and 973,451 shares
for $30.4 million, respectively.
5. Financial Instruments
The following tables show the Company’s financial instruments and balance sheet classification as of April 30, 2023 and
2022:
Fair Value Measurement
Balance Sheet Classification
April 30, 2023
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
$
11,751 $
— $
(30) $
11,721 $
— $
11,721 $
— $
Corporate notes/bonds
24,754
—
(355)
24,399
—
21,492
2,907
Total debt investments
$
36,505 $
— $
(385) $
36,120 $
— $
33,213 $
2,907 $
—
—
—
—
—
—
—
2,133
$
$
$
187,757 $
— $
11,624 $
176,133 $
187,757 $
— $
11,624 $
176,133 $
696,180 $
696,180 $
— $
— $
147,844
147,844
2,133
—
—
—
—
—
$ 1,070,034 $
844,024 $
44,837 $
179,040 $
2,133
F-21
Changes in Fair Value
Recorded in
Net Income
Level 1:
Mutual funds (1)
Total equity investments
Cash
Money market funds
Level 2:
Foreign currency forward
contracts
Total
—
—
—
—
—
—
—
—
(204)
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
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
U.S. Treasury and Agency
Securities
37,736
995
—
—
(450)
(8)
37,286
987
—
—
20,242
987
17,044
—
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)
Total equity investments
Cash
Money market funds
Level 2:
Foreign currency forward
contracts
Total
$
$
$
168,742 $
— $
10,003 $
158,739 $
168,742 $
— $
10,003 $
158,739 $
874,490 $
874,490 $
— $
— $
88,091
88,091
(204)
—
—
—
—
—
$ 1,210,893 $
978,070 $
57,244 $
175,783 $
(204)
_______________________________
(1)
These investments are held in trust for settlement of the Company’s vested obligations of $172.2 million and $160.8 million as of
April 30, 2023 and 2022, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans). Unvested
obligations under the deferred compensation plans totaled $21.9 million and $24.0 million as of April 30, 2023 and 2022, respectively.
During fiscal 2023 and 2021, the fair value of the investments increased; therefore, the Company recognized income of $2.9 million
and $38.5 million, respectively, which was recorded in other income (loss), net. During fiscal 2022, the fair value of the investments
decreased; therefore, the Company recognized a loss of $12.0 million which was recorded in other income (loss), net.
Investments in marketable securities classified as available-for-sale securities are made based on the Company’s
investment policy, which restricts the types of investments that can be made. As of April 30, 2023 and 2022 marketable
securities classified as available-for-sale consisted of commercial paper and corporate notes/bonds, and also included US
Treasury and Agency securities as of April 30, 2022, for which market prices for similar assets are readily available.
Investments that have an original maturity of 90 days or less and are considered highly liquid investments are classified as
cash equivalents. As of April 30, 2023, available-for-sale marketable securities had remaining maturities ranging from 1
month to 13 months. During fiscal 2023, 2022 and 2021, there were $58.6 million, $79.3 million and $60.6 million in sales/
maturities of available-for-sale marketable securities, respectively. Investments in marketable securities that are held in trust
for settlement of the Company’s vested obligations under the ECAP are equity securities and are based upon the investment
selections the employee elects from a pre-determined set of securities in the ECAP and the Company invests in equity
securities to mirror these elections. As of April 30, 2023 and 2022, the Company’s investments in equity securities consisted
of mutual funds for which market prices are readily available. Unrealized losses that relate to equity securities still held as of
April 30, 2023 and 2022, was $3.8 million and $27.3 million, respectively, while unrealized gains that relate to equity
securities held as of April 30, 2021, was $32.7 million.
F-22
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Foreign Currency Forward Contracts Not Designated as Hedges
The fair value of derivatives not designated as hedge instruments are as follows:
Derivative assets:
Foreign currency forward contracts
Derivative liabilities:
Foreign currency forward contracts
April 30,
2023
2022
(in thousands)
$
$
2,813 $
1,639
680 $
1,843
As of April 30, 2023, the total notional amounts of the forward contracts purchased and sold were $112.7 million and $41.1
million, respectively. As of April 30, 2022, the total notional amounts of the forward contracts purchased and sold were $89.7
million and $35.8 million, respectively. The Company recognizes forward contracts as a net asset or net liability on the
consolidated balance sheets as such contracts are covered by master netting agreements. During fiscal 2023 and 2021, the
Company incurred gains of $2.1 million and $2.7 million, respectively, related to forward contracts which is recorded in
general and administrative expenses in the accompanying consolidated statements of income. During fiscal 2022, the
Company incurred losses of $0.2 million, related to forward contracts which is recorded in general and administrative
expenses in the accompanying consolidated statements of income. These foreign currency gains/losses offset foreign
currency losses/gains that result from transactions denominated in a currency other than the Company’s functional currency.
The cash flows related to foreign currency forward contracts are included in cash flows from operating activities.
6. Deferred Compensation and Retirement Plans
The Company has several deferred compensation and retirement plans for eligible consultants and vice presidents that
provide defined benefits to participants based on the deferral of current compensation or contributions made by the
Company subject to vesting and retirement or termination provisions.
The total benefit obligations for these plans were as follows:
Deferred compensation and pension plans
Medical and Life Insurance plan
International retirement plans
Executive Capital Accumulation Plan
Total benefit obligation
Less: current portion of benefit obligation (1)
Non-current benefit obligation
Year Ended April 30,
2023
2022
(in thousands)
$
227,255 $
4,838
13,617
178,043
423,753
(27,219)
396,534 $
$
189,608
5,365
14,395
166,723
376,091
(18,916)
357,175
_______________________________
(1)
Current portion of benefit obligation is included in Compensation and benefits payable in the consolidated balance sheet.
Deferred Compensation and Pension Plans
The EWAP was established in fiscal 1994, which replaced the WAP. Certain vice presidents elected to participate in a
“deferral unit” that required the participant to contribute a portion of their compensation for an eight year period, or in some
cases, make an after-tax contribution, in return for defined benefit payments from the Company over a fifteen year period at
retirement age of 65 or later. Participants were able to acquire additional “deferral units” every five years. Vice presidents
who did not choose to roll over their WAP units into the EWAP continue to be covered under the earlier version in which
participants generally vest and commence receipt of benefit payments at retirement age of 65. In June 2003, the Company
amended the EWAP and WAP, so as not to allow new participants or the purchase of additional deferral units by existing
participants.
F-23
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
In conjunction with the acquisition of Hay Group, the Company acquired multiple pension and savings plans covering certain
of its employees worldwide. Among these plans is a defined benefit pension plan for certain employees in the U.S. The
assets of this plan are held separately from the assets of the sponsors in self-administered funds.
On July 8, 2016, the Company established the LTPU Plan in order to promote the success of the Company by providing a
select group of management and highly compensated employees with nonqualified supplemental retirement benefits as an
additional means to attract, motivate and retain such employees. A unit award has a base value of either $25,000 or $50,000
for the purpose of determining the payment that would be made upon early termination for a partially vested unit award. The
units vest 25% on each anniversary date with the unit becoming fully vested on the fourth anniversary of the grant date,
subject to the participant’s continued service as of each anniversary date. Each vested unit award will pay out an annual
benefit of either $12,500 or $25,000 for each of five years commencing on the seventh anniversary of the grant date.
Deferred Compensation and Pension Plans
The following tables reconcile the benefit obligation for the deferred compensation and pension plans:
Change in benefit obligation:
Benefit obligation, beginning of year
Service cost
Interest cost
Actuarial gain
Administrative expenses paid
Benefits paid from plan assets
Benefits paid from cash
Benefit obligation, end of year
Change in fair value of plan assets:
Fair value of plan assets, beginning of year
Actual return on plan assets
Benefits paid from plan assets
Administrative expenses paid
Employer contributions
Fair value of plan assets, end of year
Funded status and balance, end of year (1)
Current liability
Non-current liability
Total liability
Plan Assets - weighted-average asset allocation:
Debt securities
Equity securities
Other
Total
Year Ended April 30,
2023
2022
(in thousands)
$
211,598
$
205,740
40,843
9,511
(6,083)
(168)
(1,901)
(7,460)
37,952
4,028
(25,757)
(196)
(2,543)
(7,626)
246,340
211,598
21,990
(836)
(1,901)
(168)
—
26,746
(2,113)
(2,543)
(196)
96
19,085
21,990
(227,255)
$
(189,608)
15,447
$
8,833
211,808
180,775
$
$
$
227,255
$
189,608
44 %
52 %
4 %
100 %
42 %
55 %
3 %
100 %
_______________________________
(1)
The Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the deferred compensation
and pension plans as a means of funding benefits under such plans. As the COLI contracts are held in trust and are not separated from
F-24
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
our general corporate assets, they are not included in the funded status. As of April 30, 2023 and 2022, the Company held contracts
with gross CSV of $275.1 million and $263.2 million, offset by outstanding policy loans of $77.1 million and $79.8 million, respectively.
The pension obligation in fiscal 2023 increased compared to fiscal 2022 due to the ongoing accruals for the LTPU Plan for
additional awards issued in fiscal 2023. Additionally, the actual return on plan assets was lower than the expected return and
this caused our funded position to decrease. The increase in pension benefit obligations was partially offset by the actuarial
gain which was primarily due to an increase in discount rates. The fair value measurements of the defined benefit plan
assets fall within the following levels of the fair value hierarchy as of April 30, 2023 and 2022:
April 30, 2023:
Mutual funds
Money market funds
Total
April 30, 2022:
Mutual funds
Money market funds
Total
Level 1
Level 2
Level 3
Total
(in thousands)
$
$
$
$
— $
18,350 $
— $
18,350
735
—
—
735
735 $
18,350 $
— $
19,085
— $
21,353 $
— $
21,353
637
—
—
637
637 $
21,353 $
— $
21,990
Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and
investment return over the long term. The investment goal is a return on assets that is at least equal to the assumed
actuarial rate of return over the long term within reasonable and prudent levels of risk. Investment policies reflect the unique
circumstances of the respective plans and include requirements designed to mitigate risk including quality and diversification
standards. Asset allocation targets are reviewed periodically with investment advisors to determine the appropriate
investment strategies for acceptable risk levels. Our target allocation ranges are as follows: equity securities 40% to 60%
and debt securities 40% to 60%. We establish our estimated long-term return on plan assets considering various factors,
including the targeted asset allocation percentages, historic returns and expected future returns.
The components of net periodic benefits costs are as follows:
Service cost
Interest cost
Amortization of actuarial loss
Net prior service credit amortization
Expected return on plan assets
Net periodic benefit cost (1)
Year Ended April 30,
2023
2022
2021
(in thousands)
$
40,843 $
37,952 $
31,947
9,511
945
4,028
2,170
(97)
(97)
(1,156)
(1,554)
$
50,046 $
42,499 $
4,035
4,117
(97)
(1,404)
38,598
_______________________________
(1)
The service cost, interest cost and 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.
F-25
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The weighted-average assumptions used in calculating the benefit obligations were as follows:
Discount rate, beginning of year
Discount rate, end of year
Rate of compensation increase
Expected long-term rates of return on plan assets
Year Ended April 30,
2023
2022
2021
4.08 %
4.77 %
0.00 %
6.00 %
2.17 %
4.08 %
0.00 %
5.50 %
2.29 %
2.17 %
0.00 %
6.00 %
Benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as
follows:
Year Ending April 30,
2024
2025
2026
2027
2028
2029-2033
Deferred
Retirement
Plans
(in thousands)
$
17,219
26,151
34,713
43,306
52,563
237,542
Medical and Life Insurance Plan
In conjunction with the acquisition of Hay Group, the Company inherited a benefit plan which offers medical and life
insurance coverage to 107 participants. The medical and life insurance benefit plan is closed to new entrants and is
unfunded.
The following table reconciles the benefit obligation for the medical and life insurance plan:
Year End April 30,
2023
2022
(in thousands)
$
5,365 $
6,584
195
(93)
(629)
110
(857)
(472)
4,838 $
5,365
563 $
4,275
4,838 $
585
4,780
5,365
$
$
$
Change in benefit obligation:
Benefit obligation, beginning of year
Interest cost
Actuarial gain
Benefits paid
Benefit obligation, end of year
Current liability
Non-current liability
Total liability
F-26
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The components of net periodic benefits costs are as follows:
Service cost
Interest cost
Net periodic service credit amortization
Amortization of actuarial gain
Net periodic benefit cost (1)
Year Ended April 30,
2023
2022
2021
(in thousands)
$
— $
— $
195
(308)
(74)
110
(308)
—
$
(187) $
(198) $
—
140
(308)
—
(168)
_______________________________
(1)
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.
The weighted-average assumptions used in calculating the medical and life insurance plan were as follows:
Discount rate, beginning of year
Discount rate, end of year
Healthcare care cost trend rate
Year Ended April 30,
2023
2022
2021
4.25 %
4.85 %
6.50 %
2.54 %
4.25 %
6.00 %
2.45 %
2.54 %
6.25 %
Benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as
follows:
Year Ending April 30,
2024
2025
2026
2027
2028
2029-2033
International Retirement Plans
Medical and
Life Insurance
(in thousands)
$
577
551
525
486
450
1,869
The Company also maintains various retirement plans and other miscellaneous deferred compensation arrangements in 25
foreign jurisdictions. The aggregate of the long-term benefit obligation accrued at April 30, 2023 and 2022 is $13.6 million for
4,058 participants and $14.4 million for 3,568 participants, respectively. The Company’s contribution to these plans was
$16.4 million and $14.8 million in fiscal 2023 and 2022, respectively.
Executive Capital Accumulation Plan
The Company’s ECAP is intended to provide certain employees an opportunity to defer their salary and/or bonus on a pre-
tax basis. In addition, the Company, as part of its compensation philosophy, makes discretionary contributions into the ECAP
and such contributions may be granted to key employees annually based on the employee’s performance. Certain key
management may also receive Company ECAP contributions upon commencement of employment. The Company
amortizes these contributions on a straight-line basis over the service period, generally a five year period. Participants have
the ability to allocate their deferrals among a number of investment options and may receive their benefits at termination,
retirement or ‘in service’ either in a lump sum or in quarterly installments over one-to-15 years. The ECAP amounts that are
expected to be paid to employees over the next 12 months are classified as a current liability included in compensation and
benefits payable on the accompanying consolidated balance sheets.
F-27
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The Company issued ECAP awards during fiscal 2023, 2022 and 2021 of $6.5 million, $7.5 million and $8.2 million,
respectively.
The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are
adjusted with a corresponding charge (or credit) to compensation and benefits costs. During both fiscal 2023 and 2021, the
deferred compensation liability increased; therefore, the Company recognized a compensation expense of $3.5 million and
$37.3 million, respectively. Offsetting the increase in compensation and benefits expense in fiscal 2023 and 2021 was an
increase in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) of $2.9 million
and $38.5 million in fiscal 2023 and 2021, respectively, recorded in other income (loss), net on the consolidated statements
of income. During fiscal 2022, deferred compensation liability decreased; therefore, the Company recognized a reduction in
compensation expense of $10.6 million. Offsetting the decrease in compensation and benefits expense in fiscal 2022 was a
decrease in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) of $12.0 million
in fiscal 2022, recorded in other income (loss), net on the consolidated statement of income.
Changes in ECAP liability were as follows:
Balance, beginning of year
Employee contributions
Amortization of employer contributions
Gain (loss) on investment
Employee distributions
Acquisition of Lucas Group
Exchange rate fluctuations
Balance, end of year
Less: current portion
Non-current portion
Year Ended April 30,
2023
2022
(in thousands)
$
166,723 $
163,582
17,046
5,886
3,464
(14,306)
—
(770)
8,541
7,060
(10,602)
(10,880)
9,620
(598)
178,043
166,723
(11,209)
(9,498)
$
166,834 $
157,225
As of April 30, 2023 and 2022, the unamortized portion of the Company contributions to the ECAP was $16.1 million and
$18.2 million, respectively.
Defined Contribution Plan
The Company has a defined contribution plan (“401(k) plan”) for eligible employees. Participants may contribute up to 50%
of their base compensation as defined in the plan agreement. In addition, the Company has the option to make matching
contributions. Beginning in fiscal 2022, the Company began to match 10% of the employee contributions each pay period
up to the IRS limit (excluding catch-up contributions) and then making an additional discretionary match after the fiscal year.
The Company made $3.5 million in matching contributions during fiscal 2023. In addition, the Company intends to make an
additional matching contribution relating to fiscal 2023 of $3.1 million in fiscal 2024, which are accrued in compensation and
benefits payable on the consolidated balance sheet. The Company made $2.1 million matching contributions during fiscal
2022 and an additional $2.7 million matching contribution in fiscal 2023 related to contributions made by employees in fiscal
2022. The Company made a $3.0 million matching contribution in fiscal 2022 related to contributions made by employees in
fiscal 2021.
Company Owned Life Insurance
The Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the deferred
compensation and pension plans as a means of funding benefits under such plans. The gross CSV of these contracts of
$275.1 million and $263.2 million as of April 30, 2023 and 2022, respectively, is offset by outstanding policy loans of $77.1
million and $79.8 million in the accompanying consolidated balance sheets as of April 30, 2023 and 2022, respectively. Total
death benefits payable, net of loans under COLI contracts, were $444.1 million and $449.3 million at April 30, 2023 and
2022, respectively. Management intends to use the future death benefits from these insurance contracts to fund the deferred
compensation and pension arrangements; however, there may not be a direct correlation between the timing of the future
cash receipts and disbursements under these arrangements. The CSV of the underlying COLI investments increased by
$10.6 million, $5.8 million and $13.0 million during fiscal 2023, 2022 and 2021, respectively, recorded as a decrease in
F-28
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
compensation and benefits expense. Certain of the policies are held in trusts to provide additional benefit security for the
deferred compensation and pension plans. As of April 30, 2023, COLI contracts with a net CSV of $173.9 million and death
benefits, net of loans, of $393.3 million were held in trust for these purposes.
7. Fee Revenue
Contract Balances
A contract asset (unbilled receivables) is recorded when the Company transfers control of products or services before there
is an unconditional right to payment. A contract liability (deferred revenue) is recorded when cash is received in advance of
performance of the obligation. Deferred revenue represents the future performance obligations to transfer control of products
or services for which we have already received consideration. Deferred revenue is presented in other accrued liabilities on
the consolidated balance sheets.
The following table outlines the Company’s contract asset and liability balances as of April 30, 2023 and 2022:
Contract assets-unbilled receivables
Contract liabilities-deferred revenue
April 30,
2023
2022
(in thousands)
$
$
99,442 $
257,067 $
100,652
244,149
During fiscal 2023, 2022, and 2021 we recognized revenue of $181.7 million, $131.3 million and $92.4 million, respectively,
that were included in the contract liabilities balance at the beginning of the period.
Performance Obligations
The Company has elected to apply the practical expedient to exclude the value of unsatisfied performance obligations for
contracts with a duration of one year or less, which applies to all executive search, professional search and to most of the
fee revenue from the interim business. As of April 30, 2023, the aggregate transaction price allocated to the performance
obligations that are unsatisfied for contracts with an expected duration of greater than one year at inception was $1,118.0
million. Of the $1,118.0 million of remaining performance obligations, the Company expects to recognize approximately
$600.7 million in fiscal 2024, $325.4 million in fiscal 2025, $138.5 million in fiscal 2026 and the remaining $53.4 million in
fiscal 2027 and thereafter. However, this amount should not be considered an indication of the Company’s future revenue as
contracts with an initial term of one year or less are not included. Further, our contract terms and conditions allow for clients
to increase or decrease the scope of services and such changes do not increase or decrease a performance obligation until
the Company has an enforceable right to payment.
Disaggregation of Revenue
The Company disaggregates its revenue by line of business and further by region for Executive Search. This information is
presented in Note 12—Segments.
The following table provides further disaggregation of fee revenue by industry:
2023
2022
2021
Dollars
%
Dollars
%
Dollars
%
Year Ended April 30,
(dollars in thousands)
Industrial
$
805,241
28.4 % $
688,902
26.2 % $
490,863
27.1 %
Life Sciences/Healthcare
Financial Services
Technology
Consumer Goods
Education/Non–Profit/General
522,372
494,299
483,787
386,409
143,300
18.4
17.4
17.1
13.6
5.1
501,463
475,326
456,498
372,720
131,809
19.1
18.1
17.4
14.2
5.0
355,668
331,976
275,510
239,457
116,573
19.7
18.3
15.2
13.2
6.5
Fee Revenue
$
2,835,408
100.0 % $
2,626,718
100.0 % $
1,810,047
100.0 %
F-29
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
8. Credit Losses
The Company is exposed to credit losses primarily through the services it provides. The Company’s expected credit loss
allowance methodology for accounts receivable is developed using historical collection experience, current and future
economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the
short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is
primarily based on historical loss-rate experience. When required, the Company adjusts the loss-rate methodology to
account for current conditions and reasonable and supportable expectations of future economic and market conditions. The
Company generally assesses future economic conditions for a period of sixty to ninety days, which corresponds with the
contractual life of its accounts receivables. Additionally, specific allowance amounts are established to record the appropriate
provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account
reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic
conditions. Balances are written off when determined to be uncollectible.
The activity in the allowance for credit losses on the Company's trade receivables is as follows:
Balance at May 1, 2020
Provision for credit losses
Write-offs
Recoveries of amounts previously written off
Foreign currency translation
Balance at April 30, 2021
Provision for credit losses
Write-offs
Recoveries of amounts previously written off
Foreign currency translation
Balance at April 30, 2022
Provision for credit losses
Write-offs
Recoveries of amounts previously written off
Foreign currency translation
Balance at April 30, 2023
(in thousands)
$
23,795
15,763
(12,073)
311
1,528
29,324
21,552
(14,052)
702
(1,142)
36,384
22,493
(15,806)
585
721
$
44,377
F-30
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The fair value and unrealized losses on available for sale debt securities, aggregated by investment category and the length
of time the security has been in an unrealized loss position as of April 30, 2023 and 2022, are as follows:
Less Than 12 Months
12 Months or longer
Balance Sheet Classification
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
(in thousands)
Cash and
Cash
Equivalents
Marketable
Securities,
Current
Marketable
Securities,
Non-
Current
Balance at April 30, 2022
Commercial paper
Corporate notes/bonds
U.S. Treasury and Agency
Securities
Balance at April 30, 2023
Commercial paper
Corporate notes/bonds
$
$
$
$
$
37,002 $
125 $
4,499 $
1 $
15,489 $
26,012 $
—
32,186 $
446 $
3,800 $
4 $
— $
18,942 $
17,044
987 $
8 $
— $
— $
— $
987 $
8,229 $
26 $
3,492 $
4 $
— $
11,721 $
—
—
9,581 $
123 $
13,815 $
232 $
— $
20,489 $
2,907
The unrealized losses on 7 and 27 investments in commercial paper securities, 16 and 23 investments in corporate notes/
bonds, and no investment and 1 investment in U.S treasury and agency securities on April 30, 2023 and 2022, respectively,
were caused by fluctuations in market interest rates. The Company only purchases high grade bonds that have a maturity
from the date of purchase of no more than two years. The Company monitors the credit worthiness of its investments on a
quarterly basis. The Company does not intend to sell the investments and does not believe it will be required to sell the
investments before the investments mature and therefore recover the amortized cost basis.
9. Income Taxes
Income from continuing operations before provision for income taxes was as follows:
Domestic
Foreign
Income before provision for income taxes
Year Ended April 30,
2023
2022
2021
(in thousands)
$
$
136,269 $
184,877 $
34,661
159,468
248,024
129,039
295,737 $
432,901 $
163,700
F-31
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The provision for domestic and foreign income taxes was as follows:
Current income taxes:
Federal
State
Foreign
Current provision for income taxes
Deferred income taxes:
Federal
State
Foreign
Year Ended April 30,
2023
2022
2021
(in thousands)
$
39,188 $
43,993 $
15,879
42,019
97,086
15,962
59,064
119,019
(13,228)
(13,858)
(5,723)
(3,936)
4,548
831
16,913
4,719
40,646
62,278
(5,809)
(5,025)
(3,306)
Deferred benefit for income taxes
Total provision for income taxes
(14,403)
(16,963)
(14,140)
$
82,683 $
102,056 $
48,138
The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:
U.S. federal statutory income tax rate
State tax, net of federal effect
Foreign tax rates differential
Non-deductible officer's compensation
Excess tax (benefit) expense on stock-based compensation
Change in valuation allowance
COLI increase, net
Change in uncertain tax positions
R&D tax credit
Other
Effective income tax rate
Year Ended April 30,
2023
2022
2021
21.0 %
21.0 %
21.0 %
2.8
4.0
1.0
(0.9)
0.3
(0.8)
0.1
(0.6)
1.1
2.5
2.5
0.7
(0.6)
(0.7)
(0.3)
0.3
(1.3)
(0.5)
1.0
4.5
2.3
0.8
0.3
(1.7)
1.1
(0.9)
1.0
28.0 %
23.6 %
29.4 %
F-32
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Components of deferred tax assets and liabilities were as follows:
Deferred tax assets:
Deferred compensation
Operating lease liability
Loss carryforwards
Reserves and accruals
Allowance for doubtful accounts
Deferred revenue
Gross deferred tax assets
Deferred tax liabilities:
Operating lease, right-of-use, assets
Intangibles and goodwill
Property and equipment
Prepaid expenses
Other
Gross deferred tax liabilities
Valuation allowances
Net deferred tax asset
April 30,
2023
2022
(in thousands)
$
120,361 $
111,133
26,952
28,707
21,140
7,272
6,436
35,158
33,360
20,887
5,645
6,207
210,868
212,390
(22,056)
(26,310)
(15,953)
(20,037)
(4,581)
(27,513)
(28,388)
(24,063)
(24,453)
(1,951)
(88,937)
(106,368)
(25,226)
(24,025)
$
96,705 $
81,997
Deferred tax assets are reduced by a valuation allowance if it is more-likely-than-not that some portion or all of the deferred
tax assets will not be realized. Management believes uncertainty exists regarding the realizability of certain deferred tax
assets and has, therefore, established a valuation allowance offsetting deferred tax assets that are not more-likely-than-not
to be realized. Realization of the deferred tax asset is dependent on the Company generating enough taxable income of the
appropriate nature in future years. Although realization is not assured, management believes that it is more-likely-than-not
that the net deferred tax assets will be realized. In fiscal 2023, the Company’s valuation allowance increased by $1.2 million
primarily due to increases in deferred tax asset balances, including net operating loss carryforwards, in certain foreign
jurisdictions that were not more-likely-than-not to be realized. In fiscal 2022 and 2021, the Company’s valuation allowance
decreased by $1.1 million and increased by $7.3 million, respectively, primarily due to changes in deferred tax asset
balances, including net operating loss carryforwards in certain foreign jurisdictions that were not more-likely-than-not to be
realized. Deferred tax assets and deferred tax liabilities are presented net on the consolidated balance sheets by tax
jurisdiction.
As of April 30, 2023, the Company had U.S. federal net operating loss carryforwards of $8.2 million, which if unutilized, will
begin to expire in fiscal 2036. The Company has state net operating loss carryforwards of $32.1 million, which, if unutilized,
will begin to expire in fiscal 2024. The Company also has foreign net operating loss carryforwards of $103.7 million, which, if
unutilized, will begin to expire in fiscal 2024.
We continue to consider approximately $730.9 million of undistributed earnings of our foreign subsidiaries to be indefinitely
reinvested, and, accordingly, have provided no state, local or foreign withholding income taxes on such earnings. While we
do not anticipate a need to repatriate funds to the U.S. to satisfy domestic liquidity needs, we review our cash positions
regularly and, to the extent we determine that all or a portion of our foreign earnings are not indefinitely reinvested, we
provide additional state, local and foreign withholding income taxes. Under current U.S. federal tax law, we do not expect to
incur a U.S. federal income tax liability on the undistributed earnings in the event they are repatriated to the United States.
The Company elected to treat taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed
Income as an expense when incurred (the “period cost method”) as opposed to factoring such amounts in the Company’s
measurement of its deferred taxes (the “deferred method”).
The Company and its subsidiaries file federal and state income tax returns in the U.S. as well as in foreign jurisdictions.
These income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax
F-33
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
authorities. Currently, income tax returns of the Company’s subsidiaries are under audit in Brazil, Germany, Switzerland,
Japan, and India. The Company’s income tax returns are not otherwise under examination in any material jurisdictions. The
statute of limitations varies by jurisdiction in which the Company operates. With few exceptions, however, the Company’s tax
returns for years prior to fiscal 2017 are no longer open to examination by tax authorities (including U.S. federal, state and
foreign).
Unrecognized tax benefits are the differences between the amount of benefits of tax positions taken, or expected to be
taken, on a tax return and the amount of benefits recognized for financial reporting purposes. As of April 30, 2023, the
Company had a liability of $10.6 million for unrecognized tax benefits. A reconciliation of the beginning and ending balances
of the unrecognized tax benefits is as follows:
Unrecognized tax benefits, beginning of year
Additions based on tax positions related to the current year
Additions based on tax positions related to prior years
Settlement with tax authority
Lapse of applicable statute of limitations
Unrecognized tax benefits, end of year
Year Ended April 30,
2023
2022
2021
(in thousands)
$
10,682 $
9,954 $
1,257
28
(545)
(856)
456
272
—
—
6,037
1,716
2,201
—
—
$
10,566 $
10,682 $
9,954
The full amount of unrecognized tax benefits would impact the effective tax rate if recognized. In the next 12 months, it is
reasonably possible that the Company’s unrecognized tax benefits could change due to the resolution of certain tax matters
either because the tax positions are sustained on audit or the Company agrees to their disallowance. These resolutions
could reduce the Company’s liability for unrecognized tax benefits by approximately $1.4 million.
The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for
income taxes. The Company had accruals of $1.8 million, $1.4 million, and $0.9 million for interest related to unrecognized
tax benefits as of April 30, 2023, 2022, and 2021 respectively. The Company had an accrual of $0.5 million and $0.5 million
as of April 30, 2023 and 2022, respectively, for penalties related to unrecognized tax benefits. The Company recognized tax
expense of $0.4 million, $0.4 million, and $0.8 million for interest and penalties related to unrecognized tax benefits during
fiscal 2023, 2022, and 2021, respectively.
10. Property and Equipment, Net
Property and equipment include the following:
Computer equipment and software (1)
Leasehold improvements
Furniture and fixtures
Automobiles
Less: accumulated depreciation and amortization
Property and equipment, net
April 30,
2023
2022
(in thousands)
$
383,701 $
331,371
73,980
37,844
3,346
81,743
41,999
3,460
498,871
458,573
(336,995)
(320,401)
$
161,876 $
138,172
_______________________________
(1)
Depreciation expense for capitalized software was $29.3 million, $28.0 million and $25.4 million during fiscal 2023, 2022 and 2021,
respectively. The net book value of the Company’s computer software costs included in property and equipment, net was $121.9
million and $94.7 million as of April 30, 2023 and 2022, respectively.
Depreciation expense for property and equipment was $44.6 million, $43.2 million and $42.6 million during fiscal 2023, 2022
and 2021, respectively.
F-34
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
11. Long-Term Debt
4.625% Senior Unsecured Notes due 2027
On December 16, 2019, the Company completed a private placement of 4.625% Senior Unsecured Notes due 2027 (the
“Notes”) with a $400 million principal amount pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as
amended. The Notes were issued with a $4.5 million discount and will mature December 15, 2027, with interest payable
semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. The Notes represent
senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness.
The Company may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture
governing the Notes. Prior to December 15, 2022, the Company was permitted to redeem the Notes at a redemption price
equal to 100% of the principal plus the Applicable Premium (as defined in the indenture governing the Notes), and accrued
and unpaid interest. Also, prior to December 15, 2022, the Company was permitted to use the proceeds of certain equity
offerings to redeem up to 35% of the aggregate principal amount of the Notes, including any permitted additional notes, at a
redemption price equal to 104.625% of the principal amount and accrued and unpaid interest. Since December 15, 2022,
the Company may redeem the Notes at the applicable redemption prices set forth in the table below, plus accrued and
unpaid interest, if redeemed during the 12-month period beginning on December 15 of each of the years indicated:
Year
2022
2023
2024 and thereafter
Percentage
102.313%
101.156%
100.000%
The Notes allow the Company to pay $25 million of dividends per fiscal year with no restrictions, plus an unlimited amount of
dividends so long as the Company’s consolidated total leverage ratio is not greater than 3.50 to 1.00, and the Company is
not in default under the indenture governing the Notes. The Notes are guaranteed by each of the Company's existing and
future wholly owned domestic subsidiaries to the extent such subsidiaries guarantee the Company's credit facilities. The
indenture governing the Notes requires that, upon the occurrence of both a Change of Control and a Rating Decline (each
as defined in the indenture), the Company shall make an offer to purchase all of the Notes at 101% of their principal amount,
and accrued and unpaid interest. The Company used the proceeds from the offering of the Notes to repay $276.9 million
outstanding under the Company’s prior revolving credit facility and to pay expenses and fees in connection therewith. The
remainder of the proceeds were used for general corporate requirements. The effective interest rate on the Notes was
4.86% as of April 30, 2023. As of April 30, 2023 and 2022, the fair value of the Notes was $381.5 million and $379.5 million,
respectively, based on borrowing rates then required of notes with similar terms, maturity and credit risk. The fair value of the
Notes was classified as a Level 2 measurement in the fair value hierarchy.
Long-term debt, at amortized cost, consisted of the following:
In thousands
Senior Unsecured Notes
Less: Unamortized discount and issuance costs
Long-term borrowings, net of unamortized discount and debt issuance costs
Credit Facilities
April 30, 2023
April 30, 2022
$
$
400,000 $
400,000
(3,806)
(4,523)
396,194 $
395,477
On June 24, 2022, the Company entered into an amendment (the “Amendment”) to its December 16, 2019 Credit
Agreement (the “Credit Agreement”; as amended by the Amendment, the “Amended Credit Agreement”) with a syndicate of
banks and Bank of America, National Association as administrative agent, to, among other things, (i) extend the existing
maturity date of the revolving facility to June 24, 2027, (ii) provide for a new delayed draw term loan facility as described
below, (iii) replace the London interbank offered rate with forward-looking SOFR term rate (“Term SOFR”) as described
below, and (iv) replace the existing financial covenants with the financial covenant described below. The Amended Credit
Agreement provides for five-year senior secured credit facilities in an aggregate amount of $1,150.0 million comprised of a
$650.0 million revolving credit facility (the “Revolver”) and a $500.0 million delayed draw term loan facility (the “Delayed
Draw Facility”, and together with the Revolver, the “Credit Facilities”). The Amended Credit Agreement also provides that,
under certain circumstances, the Company may incur term loans or increase the aggregate principal amount of revolving
commitments by an aggregate amount up to $250.0 million plus an unlimited amount subject to a consolidated secured net
leverage ratio of 3.25 to 1.00.
F-35
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Extensions of credit under the Delayed Draw Facility were available to the Company in up to two advances through June 24,
2023. Any amounts undrawn under the Delayed Draw Facility as of June 24, 2023 are no longer available to the Company.
The Amended Credit Agreement contains certain customary affirmative and negative covenants that, among other things,
restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset
dispositions and restricted payments. In addition, the Amended Credit Agreement contains a covenant that requires the
Company to maintain a maximum consolidated secured leverage ratio of 3.50 to 1.00 (which may be temporarily increased
to 4.00 following certain material acquisitions under certain circumstances) (the “Financial Covenant”).
The principal balance of the Delayed Draw Facility, if any, is subject to annual term loan amortization of 2.5% for the fiscal
quarters ending September 30, 2022 through June 30, 2024, and 5.0% for the fiscal quarter ending September 30, 2024
through June 30, 2027, with the remaining principal due at maturity. The principal balance of the Revolver, if any, is due at
maturity. The Credit Facilities mature on June 24, 2027 and any unpaid principal balance is payable on this date. The Credit
Facilities may also be prepaid and terminated early by the Company at any time without premium or penalty (subject to
customary breakage fees).
Amounts outstanding under the Amended Credit Agreement will bear interest at a rate equal to, at the Company’s election,
either Term SOFR plus a SOFR adjustment of 0.10%, plus an interest rate margin between 1.125% per annum and 2.00%
per annum, depending on the Company’s consolidated net leverage ratio, or base rate plus an interest rate margin between
0.125% per annum and 1.00% per annum depending on the Company’s consolidated net leverage ratio. In addition, the
Company will be required to pay to the lenders a ticking fee of 0.20% per annum on the actual daily unused portion of the
Delayed Draw Facility, and a quarterly commitment fee ranging from 0.175% to 0.300% per annum on the actual daily
unused amount of the Revolver, based upon the Company’s consolidated net leverage ratio at such time, and fees relating
to the issuance of letters of credit.
As of April 30, 2023 and 2022, there was no outstanding liability under the Credit Facilities and the credit facilities under the
Credit Agreement prior to the Amendment (the “Prior Credit Facility”), respectively. The unamortized debt issuance costs
associated with the Amended Credit Agreement was $4.2 million as of April 30, 2023 and $2.4 million under the Credit
Agreement as of April 30, 2022. The debt issuance costs were included in other current assets and other non-current assets
on the consolidated balance sheets. As of April 30, 2023, the Company was in compliance with its debt covenants.
The Company has a total of $1,145.4 million available under the Credit Facilities and had a total $645.3 million available
under the Prior Credit Facility after $4.6 million and $4.7 million of standby letters of credit were issued as of April 30, 2023
and 2022, respectively. Of the amount available under the Credit Facilities, $500.0 million is under the Delayed Draw Facility
that expired on June 24, 2023. The Company had a total of $11.5 million and $10.0 million of standby letters with other
financial institutions as of April 30, 2023 and 2022, respectively. The standby letters of credit were generally issued as a
result of entering into office premise leases.
The Company has outstanding borrowings against the CSV of COLI contracts of $77.1 million and $79.8 million at April 30,
2023 and 2022, respectively. CSV reflected in the accompanying consolidated balance sheets is net of the outstanding
borrowings, which are secured by the CSV of the life insurance policies. Principal payments are not scheduled and interest
is payable at least annually at various fixed and variable rates ranging from 4.76% to 8.00%.
12. Segments
In the past two years, the Company has allocated capital to build out its Professional Search and Interim operations through
the acquisition of Lucas Group, Patina Solutions Group ("Patina"), Infinity Consulting Solutions ("ICS") and Salo LLC
("Salo"). These acquisitions provided the Company with the opportunity to reassess how it manages its RPO & Professional
Search segment. Given the Company’s strategy and development of separate financial and operational metrics for the
Professional Search & Interim and RPO operations, the Company’s chief operating decision maker began to regularly make
separate resource allocation decisions between Professional Search & Interim and RPO. Therefore, on May 1, 2022, the
Company changed the composition of its global segments and under the new reporting format, the RPO & Professional
Search segment has been separated into two segments: Professional Search & Interim and RPO. Revenues are directly
attributed to a segment and expenses not directly associated with a specific segment are allocated based on the most
relevant measures applicable, including revenues, headcount and other factors. Due to this change, the Company
completed a quantitative assessment for potential goodwill impairment both prior and subsequent to the aforementioned
change and determined there was no goodwill impairment. The presentation of operating results prior to May 1, 2022 has
been revised to conform to the new segment reporting.
The Company now has eight reportable segments: Consulting, Digital, Executive Search North America, Executive Search
EMEA, Executive Search Asia Pacific, Executive Search Latin America, Professional Search & Interim and RPO.
F-36
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The Company’s eight reportable segments operate through the following five lines of business:
1.
2.
3.
4.
5.
Consulting aligns organizational 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 enabled by a set of Digital Performance
Management Tools, based on some of the world’s leading lP and data. The Consulting teams employ an
integrated approach across our core capabilities and integrated solutions, each one intended to strengthen the
work and thinking in the next, to help clients execute their strategy in a digitally enabled world.
Digital develops technology-enabled Performance Management Tools that empower our clients. The digital
products give clients direct access to Korn Ferry proprietary data, client data and analytics to deliver clear
insights with the training and tools needed to align organizational structure with business strategy.
Executive Search helps organizations recruit board level, chief executive and other senior executive and
general management talent to deliver lasting impact. The Company’s approach to placing talent is bringing
together research-based IP, proprietary assessments and behavioral interviewing with practical experience to
determine the ideal organizational fit. Salary benchmarking then helps the Company build appropriate
frameworks for compensation and retention. This business is managed and reported on a geographic basis
and represents four of the Company’s reportable segments (Executive Search North America, Executive
Search EMEA, Executive Search Asia Pacific, and Executive Search Latin America).
Professional Search & Interim delivers enterprise talent acquisition solutions for professional level middle
and upper management. The Company helps clients source high-quality candidates at speed and scale
globally, covering single-hire to multi-hire permanent placements and interim contractors.
RPO offers scalable recruitment outsourcing solutions leveraging customized technology and talent insights.
The Company's scalable solutions, built on science and powered by best-in-class technology and consulting
expertise, enables the Company to act as a strategic partner in clients’ quest for superior recruitment outcomes
and better candidate fit.
Executive Search is managed by geographic regional leaders. Worldwide operations for Consulting, Digital, Professional
Search & Interim and RPO are managed by their Chief Executive Officers. The Executive Search geographic regional
leaders and the Chief Executive Officers of Consulting, Digital, Professional Search & Interim and RPO report directly to the
Chief Executive Officer of the Company. The Company also operates Corporate to record global expenses.
The Company evaluates performance and allocates resources based on the Company’s CODM review of (1) fee revenue
and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such
costs or charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation
costs and certain non-cash charges (goodwill, intangible asset and other impairment charges). The CODM is not provided
asset information by reportable segment.
F-37
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Financial highlights are as follow:
Fee revenue
Total revenue
Net income attributable to Korn Ferry
Net income attributable to noncontrolling interest
Other (income) loss, net
Interest expense, net
Income tax provision
Operating income
Depreciation and amortization
Other income (loss), net
Integration/acquisition costs
Impairment of fixed assets
Impairment of right of use assets
Restructuring charges, net
Adjusted EBITDA(1)
Year Ended April 30,
2023
2022
2021
Consolidated
(in thousands)
2,835,408 $
2,626,718 $
1,810,047
2,863,836 $
2,643,455 $
1,819,946
209,529 $
326,360 $
114,454
$
$
$
3,525
(5,261)
25,864
82,683
316,340
68,335
5,261
14,922
4,375
5,471
42,573
4,485
11,880
25,293
102,056
470,074
63,521
(11,880)
7,906
1,915
7,392
—
1,108
(37,194)
29,278
48,138
155,784
61,845
37,194
737
—
—
30,732
$
457,277 $
538,928 $
286,292
_______________________________
(1)
Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes integration/acquisition
costs, impairment of fixed assets, impairment of right-of-use assets, and restructuring charges, net.
Financial highlights by reportable segments are as follows:
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Professional Search & Interim
RPO
Corporate
Consolidated
Year Ended April 30, 2023
Fee revenue
Total revenue
Adjusted
EBITDA(1)
(in thousands)
$
677,001 $
686,979 $
108,502
354,651
354,967
97,458
562,139
187,014
95,598
31,047
503,395
424,563
—
568,212
188,114
95,956
31,054
507,058
431,496
140,850
31,380
24,222
9,370
110,879
52,588
—
(117,972)
$
2,835,408 $
2,863,836 $
457,277
_______________________________
(1)
Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes integration/acquisition
costs, impairment of fixed assets, impairment of right-of-use assets, and restructuring charges, net.
F-38
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Professional Search & Interim
RPO
Corporate
Consolidated
Year Ended April 30, 2022
Fee revenue
Total revenue
Adjusted
EBITDA(1)
(in thousands)
$
650,204 $
654,199 $
116,108
349,025
349,437
110,050
605,704
182,192
118,596
29,069
297,096
394,832
—
609,258
182,866
118,705
29,079
297,974
401,937
181,615
31,804
35,105
9,089
106,015
59,126
—
(109,984)
$
2,626,718 $
2,643,455 $
538,928
______________________________
(1)
Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes integration/acquisition
costs, impairment of fixed assets and impairment of right-of-use assets.
Year Ended April 30, 2021
Fee revenue
Total revenue
Adjusted
EBITDA(1)
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Professional Search & Interim
RPO
Corporate
Consolidated
_______________________________
(in thousands)
$
515,844 $
517,046 $
287,306
287,780
397,275
138,954
83,306
17,500
130,831
239,031
—
399,104
139,213
83,463
17,500
131,080
244,760
81,522
86,095
98,099
11,742
16,676
1,289
36,934
32,477
$
1,810,047 $
1,819,946 $
286,292
—
(78,542)
(1)
Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes, integration/acquisition
costs and restructuring charges, net.
F-39
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Fee revenue attributed to an individual customer or country, other than the U.S. in fiscal year 2023 and 2022, and the U.S
and United Kingdom in fiscal year 2021, did not account for more than 10% of the total fee revenue in those fiscal years.
Fee revenue classified by country in which the Company derives revenues are as follows:
U.S.
United Kingdom
Other countries
Year Ended April 30,
2023
2022
2021
(in thousands)
$
1,568,119 $
1,348,377 $
837,682
255,797
247,617
1,011,492
1,030,724
189,893
782,472
Total fee revenue
$
2,835,408 $
2,626,718 $
1,810,047
Other than the U.S. in fiscal 2023 and 2022, and the U.S. and United Kingdom in fiscal 2021, no single country had over
10% of the total long-lived assets, excluding financial instruments and tax assets. Long-lived assets, excluding financial
instruments and tax assets, classified by location of the controlling statutory country are as follows:
U.S.(1)
United Kingdom
Other countries
Year Ended April 30,
2023
2022
2021
(in thousands)
$
186,220 $
185,228 $
182,218
22,893
95,453
26,711
93,967
34,081
89,600
Total long-lived assets
$
304,566 $
305,906 $
305,899
_______________________________
(1)
Includes Corporate long-lived assets
13. Restructuring Charges, Net
In light of the Company’s evolution to an organization that is selling larger integrated solutions in a world where there are
shifts in global trade lanes and persistent inflationary pressures, on January 11, 2023, the Company initiated a plan (the
“Plan”) intended to realign its workforce with its business needs and objectives, namely, to invest in areas of potential growth
and implement reductions where there is excess capacity. Due to the implementation of the Plan, the Company recorded
restructuring charges of $42.6 million during fiscal 2023 across all lines of business related to severance for positions that
were eliminated. There were no restructuring charges in fiscal 2022.
In the fourth quarter of fiscal 2020, in light of the uncertainty in worldwide economic conditions caused by the coronavirus
pandemic and, as part of a broader program aimed at further enhancing Korn Ferry’s strong balance sheet and liquidity
position, the Company adopted a restructuring plan intended to adjust its cost base to the then-current economic
environment and to position the Company to invest in its recovery. The Company continued the implementation of this
restructuring plan in the first quarter of fiscal 2021 and this resulted in restructuring charges, net of $30.7 million during fiscal
2021 across all lines of business relating to severance for positions that were eliminated.
F-40
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Changes in the restructuring liability were as follows:
As of May 1, 2020
Restructuring charges, net
Reductions for cash payments
Non-cash payments
Exchange rate fluctuations
As of April 30, 2021
Reductions for cash payments
Exchange rate fluctuations
As of April 30, 2022
Restructuring charges, net
Reductions for cash payments
Non-cash payments
Exchange rate fluctuations
As of April 30, 2023
Restructuring Liability
(in thousands)
$
$
34,153
30,732
(56,387)
(3,968)
2,455
6,985
(4,829)
(654)
1,502
42,573
(24,485)
(10,827)
(759)
8,004
As of April 30, 2023 and 2022, the restructuring liability is included in the current portion of other accrued liabilities on the
consolidated balance sheets, except for $0.5 million as of April 30, 2022, which was included in other long-term liabilities.
Restructuring charges incurred by segment were as follows:
Consulting
Digital
Executive Search:
North America
EMEA
Asia Pacific
Latin America
Professional Search & Interim
RPO
Corporate
Consolidated
Year Ended April 30
2023
2022
2021
(in thousands)
$
11,613 $
— $
2,856
4,515
12,732
2,129
697
4,835
3,097
99
—
—
—
—
—
—
—
—
14,223
2,947
958
8,868
181
405
1,543
1,607
—
$
42,573 $
— $
30,732
F-41
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
14. Goodwill and Intangible Assets
Changes in the carrying value of goodwill by reportable segment were as follows:
Consulting
Digital
North
America
EMEA
Asia
Pacific
Executive Search
Professional
Search &
Interim (1)
RPO (1)
Consolidated
(in thousands)
Balance as of May 1, 2021
$
173,410 $
326,628 $
48,498 $
47,449 $
972 $
15,705 $
14,007 $
626,669
Additions (2)
—
—
Exchange rate fluctuations
(440)
(1,274)
—
(934)
—
(877)
Balance as of April 30, 2022
172,970
325,354
47,564
46,572
Additions (3)
Exchange rate fluctuations
—
123
—
204
—
(1,327)
—
(171)
—
—
972
—
—
55,480
49,482
104,962
(1,329)
69,856
184,519
291
(1,185)
62,304
—
260
(6,039)
725,592
184,519
(620)
Balance as of April 30, 2023
$
173,093 $
325,558 $
46,237 $
46,401 $
972 $
254,666 $
62,564 $
909,491
_______________________________
(1)
Segment data for FY'22 has been recast to reflect the division of the RPO & Professional Search segment into the RPO segment
and Professional Search & Interim segment.
(2)
(3)
Additions to goodwill in fiscal 2022 were due to $76.8 million and $28.2 million from the acquisition of the Lucas Group and Patina,
respectively.
Additions to goodwill in fiscal 2023 were due to $68.3 million and $116.2 million from the acquisition of the ICS and Salo,
respectively.
Tax deductible goodwill from the acquisitions of Salo and ICS were $114.3 million and $64.9 million, respectively, as of
April 30, 2023. Tax deductible goodwill from the Miller Heiman acquisition was $16.3 million and $22.7 million as of April 30,
2023 and 2022, respectively. Tax deductible goodwill from the PIVOT Leadership acquisition was $5.2 million and $5.9
million as of April 30, 2023 and 2022, respectively.
Intangible assets include the following:
Amortized intangible assets:
Gross
April 30, 2023
Accumulated
Amortization
April 30, 2022
(in thousands)
Net
Gross
Accumulated
Amortization
Net
Customer lists
$
192,099 $
(104,429) $
87,670 $
146,799 $
(89,024) $
Intellectual property
Proprietary databases
Non-compete agreements
Trademarks
Total (1)
Exchange rate fluctuations
Total Intangible assets
69,100
4,256
910
12,086
(47,187)
(4,256)
(910)
(7,123)
21,913
—
—
4,963
69,100
4,256
910
8,986
(40,720)
(4,256)
(910)
(5,261)
$
278,451 $
(163,905)
114,546 $
230,051 $
(140,171)
(120)
$
114,426
57,775
28,380
—
—
3,725
89,880
(110)
$
89,770
_______________________________
(1)
In fiscal 2023 there were intangible assets additions of $16.4 million and $32.0 million from the acquisition of the ICS and Salo,
respectively. In fiscal 2022 there were intangible assets additions of $11.6 million and $5.7 million from the acquisition of the Lucas
Group and Patina, respectively.
Acquisition-related intangible assets acquired in fiscal 2023 consists of customer relationships and tradenames of $45.3
million and $3.1 million, respectively, with weighted-average useful lives from the date of purchase of seven years and two
years, respectively. Acquisition-related intangible assets acquired in fiscal 2022 consists of customer relationships and
tradenames of $15.5 million and $1.8 million, respectively, with weighted-average useful lives from the date of purchase of
seven years and two years, respectively.
F-42
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Amortization expense for amortized intangible assets was $23.7 million, $20.3 million and $19.2 million during fiscal 2023,
2022 and 2021, respectively. Estimated annual amortization expense related to amortizing intangible assets is as follows:
Year Ending April 30,
2024
2025
2026
2027
2028
Thereafter
Estimated
Annual
Amortization
Expense
(in thousands)
$
25,604
24,256
22,859
17,106
10,080
14,521
$
114,426
All amortizable intangible assets will be fully amortized by the end of fiscal 2032.
15. Leases
The Company’s lease portfolio is comprised of operating leases for office space and equipment and finance leases for
equipment. Equipment leases are comprised of vehicles and office equipment. The majority of the Company’s leases include
both lease and non-lease components. Non-lease components primarily include maintenance, insurance, taxes and other
utilities. The Company combines fixed payments for non-lease components with its lease payments and accounts for them
as a single lease component, which increases its ROU assets and lease liabilities. Some of the leases include one or more
options to renew or terminate the lease at the Company’s discretion. Generally, the renewal and termination options are not
included in the ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company has elected
not to recognize a ROU asset or lease liability for leases with an initial term of 12 months or less.
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on
the information available at commencement date in determining the present value of the future minimum lease payments.
The Company applies the portfolio approach when determining the incremental borrowing rate since it has a centrally
managed treasury function. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a
collateralized basis with similar terms and payments in a similar economic environment.
Operating leases contain both office and equipment leases and have remaining terms that range from less than one year to
nine years, some of which also include options to extend or terminate the lease. Finance leases are comprised of equipment
leases and have remaining terms that range from less than one year to six years. Finance lease assets are included in
property and equipment, net while finance lease liabilities are included in other accrued liabilities and other liabilities.
During fiscal 2023 and 2022, the Company reduced its real estate footprint and as a result recorded an impairment charge
of the ROU assets of $5.5 million and $7.4 million, respectively, in the consolidated statements of income.
In fiscal 2023, the Company acquired ICS and Salo and as a result recognized ROU assets of $0.8 million and $2.1 million,
respectively, with corresponding liabilities of $1.0 million and $2.9 million, respectively. In fiscal 2022, the Company acquired
Lucas Group and Patina and as a result recognized ROU assets of $3.8 million and $0.2 million, respectively, with
corresponding liabilities of $9.4 million and $0.7 million, respectively. In these acquisitions, the ROU assets were adjusted to
reflect unfavorable lease terms when compared with current market rates.
F-43
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
The components of lease expense were as follows:
Finance lease cost
Amortization of ROU assets
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Lease impairment cost
Sublease income
Total lease cost
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Financing cash flows from finance leases
ROU assets obtained in exchange for lease obligations:
Operating leases
Finance leases
Year Ended April 30,
2023
2022
2021
(in thousands)
$
1,479 $
1,065 $
190
1,669
48,901
833
11,157
5,471
84
1,149
53,092
966
10,986
7,392
(3,420)
(1,119)
1,221
114
1,335
56,166
474
11,592
—
(657)
$
64,611 $
72,466 $
68,910
Year Ended April 30,
2023
2022
2021
(in thousands)
63,496 $
62,996 $
1,639 $
1,157 $
66,991
1,324
19,015 $
49,235 $
13,638
3,123 $
1,586 $
516
$
$
$
$
F-44
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
Supplemental balance sheet information related to leases was as follows:
Finance Leases:
Property and equipment, at cost
Accumulated depreciation
Property and equipment, net
Other accrued liabilities
Other liabilities
Total finance lease liabilities
Weighted average remaining lease terms:
Operating leases
Finance leases
Weighted average discount rate:
Operating leases
Finance leases
Maturities of lease liabilities are as follows:
Year Ended April 30,
2023
2022
(in thousands)
$
$
$
$
7,103
$
5,770
(2,741)
(3,085)
4,362
$
2,685
1,372
$
3,053
4,425
$
1,049
1,657
2,706
4.5 years
3.8 years
5.1 years
3.3 years
4.5 %
4.7 %
4.3 %
3.2 %
Year Ending April 30,
Operating
Financing
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total
(in thousands)
$
51,760 $
44,050
39,548
20,888
10,125
16,295
182,666
17,625
$
165,041 $
1,545
1,313
935
597
438
—
4,828
403
4,425
F-45
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
16. Acquisition
The following table provides a summary of the net assets acquired in the periods indicated (no acquisitions were completed
in fiscal 2021).
Current assets (1)
Long-term assets
Intangible assets
Current liabilities
Long-term liabilities
Net assets acquired
Purchase price
Goodwill
Year Ended April 30
2023 (2)
2022 (3)
(in thousands)
$
37,586 $
5,736
48,400
18,327
3,164
70,231
36,071
9,351
17,300
17,672
16,210
28,840
254,750
133,802
$
184,519 $
104,962
_______________________________
(1)
(2)
(3)
Included in current assets is acquired receivables in the amount of $35.3 million and $24.5 million for acquisitions completed in fiscal
2023 and 2022, respectively.
On February 1, 2023, the Company completed its acquisition of Salo for $155.4 million, net of cash acquired. Salo is a leading
provider of finance, accounting and HR interim talent, with a strong focus on serving organizations in healthcare, among other
industries. Actual results of operations of Salo are included in the Company's consolidated financial statements from February 1,
2023, the effective date of the acquisition.
On August 1, 2022, the Company completed its acquisition of ICS for $99.3 million, net of cash acquired. ICS contributes interim
professional placement offerings and expertise that are highly relevant for the new world of work where more workplaces are hybrid
or virtual. ICS is a highly regarded provider of senior-level IT interim professional solutions with additional expertise in the areas of
compliance and legal, accounting and finance, and human resources. Actual results of operations of ICS are included in the
Company's consolidated financial statements from August 1, 2022, the effective date of the acquisition.
On April 1, 2022, the Company completed its acquisition of Patina for $42.9 million, net of cash acquired. Patina brought the
Company interim executive solutions expertise across multiple industry verticals as well as offers ideal solutions for today’s nomadic
labor market. Patina’s vast network of C-suite, top-tier, and professional interim talent spanned functional areas of expertise such as
finance, operations, legal, human resources, IT and more. Actual results of operation of Patina are included in the Company’s
consolidated financial statement from April 1, 2022, the effective date of the acquisition.
On November 1, 2021, the Company completed its acquisition of Lucas Group for $90.9 million, net of cash acquired. Lucas Group
contributed a substantial professional search and interim expertise that has enhanced the Company’s search portfolio. Actual results
of operations of Lucas Group are included in the Company’s consolidated financial statements from November 1, 2021, the effective
date of the acquisition.
We believe the above acquisitions echo the commitment to scale the Company's solutions and further increase the
Company's focus at the intersection of talent and strategy-wherever and however the needs of organizations evolve-and
present real, tangible opportunities for Korn Ferry and our clients, looking for the right talent, that is highly agile, with
specialized skills and expertise, to drive superior performance, including on an interim basis. The addition of these
acquisitions to Korn Ferry’s broader talent acquisition portfolio–spanning Executive Search, RPO, Professional Search and
Interim services–has accelerated Korn Ferry’s ability to capture additional shares of this significant market. All of the
acquisitions in fiscal 2023 and 2022 are included in the Professional Search & Interim segment.
For each acquisition, the aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities
assumed on their estimated fair values at the date of acquisition. As of April 30, 2023, the aggregate purchase price
allocations for Salo and ICS remain preliminary with regard to income taxes. The measurement period for purchase price
allocation ends as soon as information on the facts and circumstances become available, not to exceed 12 months.
17. Commitments and Contingencies
Employment Agreements
The Company has a policy of entering into offer letters of employment or letters of promotion with vice presidents, which
provide for an annual base salary and discretionary and incentive bonus payments. Certain key vice presidents who typically
F-46
KORN FERRY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2023 (continued)
have been employed by the Company for several years may also have a standard form employment agreement. Upon
termination without cause, the Company is required to pay the amount of severance due under the employment agreement,
if any. The Company also requires its vice presidents to agree in their employment letters and their employment agreement,
if applicable, not to compete with the Company during the term of their employment and for a certain period after their
employment ends.
Litigation
From time to time, the Company has been and is involved in litigation incidental to its business. The Company is currently
not a party to any litigation which, if resolved adversely against the Company, would, in the opinion of management, after
consultation with legal counsel, have a material adverse effect on the Company’s business, financial position or results of
operations.
18. Subsequent Event
Quarterly Dividend Declaration
On June 26, 2023, the Board of Directors of the Company approved an increase of 20% in the Company's quarterly dividend
policy to $0.18 per share and declared an $0.18 per share dividend with a payment date of July 31, 2023 to holders of the
Company’s common stock of record at the close of business on July 7, 2023. The declaration and payment of future
dividends under the quarterly dividend policy will be at the discretion of the Board of Directors and will depend upon many
factors, including the Company’s earnings, capital requirements, financial condition, the terms of the Company’s
indebtedness and other factors that the Board of Directors may deem to be relevant. The Board of Directors may amend,
revoke or suspend the dividend policy at any time and for any reason.
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ANNUAL MEETING
Date: September 21, 2023
Time: 8.00 a.m. Pacific Time
Virtual Meeting Site:
www.virtualshareholdermeeting.com/KFY2023
REGISTRAR &
TRANSFER AGENT
For address changes, account
consolidation, registration changes,
stock holdings, and lost stock
certificates, please contact:
Computershare
150 Royall Street
Canton, Massachusetts 02021
USA
+1 877 889 7584
www.computershare.com/investor
CONTACTS
For investors
Tiffany Louder
+1 214 310 8407
For media
Dan Gugler
+1 310 226 2645
BOARD OF
DIRECTORS
Gary Burnison
Chief Executive Officer
Doyle Beneby
Former President and Chief Executive
Officer, Midland Cogeneration Venture
Laura Bishop
Former Executive Vice President
and Chief Financial Officer at USAA
Charles Harrington
Former Chairman, CEO and
President of Parsons Corporation
Jerry Leamon
Former Global Managing Director,
Deloitte
Angel Martinez
Former Chairman and Chief Executive
Officer, Deckers Brands
Debra Perry
Former Senior Managing Director,
Moody’s Investors Service, Inc.
Lori Robinson
Retired General for the US Air Force
STOCK LISTING
Common stock is traded on
the New York Stock Exchange
under the symbol KFY.
Korn Ferry is a global organizational
consulting firm. We work with our
clients to design optimal organization
structures, roles, and responsibilities.
We help them hire the right people
and advise them on how to reward
and motivate their workforce while
developing professionals as they
navigate and advance their careers.
Business advisors.
Career makers.