Korn Ferry Announces First Quarter Fiscal 2023 Results of Operations

Rhea-AI Summary

Korn Ferry reported Q1 FY'23 fee revenue of $695.9 million, a 19% increase year-over-year (24% at constant currency). Net income was $77.2 million, with diluted and adjusted diluted EPS at $1.45 and $1.50, respectively. Operating income rose to $111.6 million (16.0% margin), and Adjusted EBITDA reached $132.2 million (19.0% margin). The company repurchased 370,000 shares for $22.4 million. Despite strong revenue growth, the operating margin declined from 17.3% to 16.0%, raising concerns about cost management amidst increases in compensation and administrative expenses.

Positive

• Q1 FY'23 fee revenue increased by 19% year-over-year.
• Net income of $77.2 million, up from $74.8 million in Q1 FY'22.
• Diluted EPS rose to $1.45, and adjusted diluted EPS increased to $1.50.
• Repurchased 370,000 shares for $22.4 million.
• Strong fee revenue growth across all lines of business.

Negative

• Operating margin decreased from 17.3% to 16.0%.
• Adjusted EBITDA margin declined from 20.7% to 19.0%.
• Increased compensation and benefits expense due to higher headcount and performance bonuses.

Highlights

• Korn Ferry reports fee revenue of $695.9 million in Q1 FY’23, an increase of 19% (24% on a constant currency) from Q1 FY’22.
• Net income attributable to Korn Ferry was $77.2 million in Q1 FY’23, while diluted and adjusted diluted earnings per share were $1.45 and $1.50 in Q1 FY’23, respectively.
• Operating income and Adjusted EBITDA were $111.6 million (operating margin of 16.0%) and $132.2 million (Adjusted EBITDA margin of 19.0%), respectively, in Q1 FY’23.
• The Company repurchased 370,000 shares of stock during the quarter for $22.4 million.
• On August 1^st, 2022, Korn Ferry completed the acquisition of Infinity Consulting Solutions, which will be included in the Professional Search & Interim segment in Q2 FY’23.
• Declared a quarterly dividend of $0.15 per share on September 6, 2022, which is payable on October 14, 2022 to stockholders of record on September 23, 2022.
• On May 1, 2022, Korn Ferry separated the RPO & Professional Search segment into two segments, Professional Search & Interim segment and the RPO segment.

LOS ANGELES--(BUSINESS WIRE)-- Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced first quarter fee revenue of $695.9 million. In addition, first quarter diluted earnings per share was $1.45 and adjusted diluted earnings per share was $1.50.

“I am pleased with our financial results during the fiscal first quarter. We generated $696 million in fee revenue, up 19% (24% at constant currency) year over year. Our diluted earnings per share and adjusted diluted earnings per share were $1.45 and $1.50, respectively, and our Adjusted EBITDA was $132 million, representing a 19% margin,” said Gary D. Burnison, CEO, Korn Ferry.

“We are in a new paradigm as global organizations fight for growth and relevancy while facing economic ambiguity. Today’s workscape has never been more complex – an imbalanced labor market, skills shortage and a major shift in how and where people work. While cycles will continually change, the long-term premium on people endures. Strategy without talent is helpless and talent without strategy is hopeless. Korn Ferry is the firm that helps clients drive performance through synchronizing their organization, their strategy and their people.”

Selected Financial Results (dollars in millions, except per share amounts) (a)
		First Quarter
		FY’23				FY’22
Fee revenue		$	695.9			$	585.4
Total revenue		$	703.1			$	588.1
Operating income		$	111.6			$	101.3
Operating margin			16.0	%			17.3	%
Net income attributable to Korn Ferry		$	77.2			$	74.8
Basic earnings per share		$	1.46			$	1.38
Diluted earnings per share		$	1.45			$	1.37

Adjusted Results (b):		First Quarter
		FY’23				FY’22
Adjusted EBITDA		$	132.2			$	121.3
Adjusted EBITDA margin			19.0	%			20.7	%
Adjusted net income attributable to Korn Ferry		$	80.0			$	74.8
Adjusted basic earnings per share		$	1.51			$	1.38
Adjusted diluted earnings per share		$	1.50			$	1.37

___________

(a)		Numbers may not total due to rounding.
(b)		Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs when applicable. Adjusted results on a consolidated basis are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations):

		First Quarter
		FY’23				FY’22
Integration/acquisition costs		$	3.6			$	—

The Company reported fee revenue in Q1 FY’23 of $695.9 million, an increase of 19% (up 24% on a constant currency basis) compared to Q1 FY’22. Fee revenue increased in all lines of business. The increase in fee revenue when compared to Q1 FY’22 was primarily due to the continuing demand for the Company’s integrated service offerings and the acquisitions of Lucas Group and Patina (the “acquisitions”) in Q3 FY’22 and Q4 FY’22, respectively, which are included in the new Professional Search & Interim segment.

Operating margin was 16.0% in Q1 FY’23 compared to 17.3% in the year-ago quarter. Adjusted EBITDA margin was 19.0% in Q1 FY’23 compared to 20.7%, in the year-ago quarter. Net income attributable to Korn Ferry was $77.2 million in Q1 FY’23 compared to $74.8 million in Q1 FY’22 and Adjusted EBITDA reached $132.2 million in Q1 FY’23 compared to $121.3 million in Q1 FY’22.

Operating income increased due to an increase in fee revenue as discussed above. Partially offsetting this increase were increases in 1) compensation and benefits expense primarily due to increased headcount and performance-based incentives, 2) general and administrative expenses and 3) cost of services expense associated with the recently acquired interim business.

Adjusted EBITDA increased due to the same factors discussed above with the exception of integration and acquisition costs primarily included in general and administrative expenses.

Results by Line of Business Selected Consulting Data (dollars in millions) (a)
		First Quarter
		FY’23				FY’22
Fee revenue		$	166.5			$	148.5
Total revenue		$	168.7			$	149.0
Ending number of consultants and execution staff (b)			1,879				1,651
Hours worked in thousands (c)			459				426
Average bill rate (d)		$	363			$	349

Adjusted Results:		First Quarter
		FY’23				FY’22
Adjusted EBITDA		$	29.6			$	26.8
Adjusted EBITDA margin			17.7	%			18.1	%

___________

(a)		Numbers may not total due to rounding.
(b)		Represents number of employees originating, delivering and executing consulting services.
(c)		The number of hours worked by consultant and execution staff during the period.
(d)		The amount of fee revenue divided by the number of hours worked by consultants and execution staff.

Fee revenue was $166.5 million in Q1 FY’23 compared to $148.5 million in Q1 FY’22, an increase of $18.0 million or 12% (up 18% on a constant currency basis). Growth in Consulting fee revenue continues to be driven by large workforce transformation initiatives delivered through our Organization Strategy, Assessment and Succession, and Leadership Development solutions. We also saw significant growth in Organization Design, Change Management, and Workforce Sales Compensation as clients aligned their structures to new market opportunities and addressed compensation and retention issues associated with labor market dislocation.

Adjusted EBITDA was $29.6 million in Q1 FY’23 with an Adjusted EBITDA margin of 17.7% compared to Adjusted EBITDA of $26.8 million with an associated margin of 18.1%, respectively, in the year-ago quarter. This increase in Adjusted EBITDA resulted from the increase in fee revenue outlined above, partially offset by an increase in compensation and benefits expense and cost of services expense, driven by higher salaries and related payroll taxes and performance-related bonus expense due to an increase in fee revenue and headcount.

Selected Digital Data
(dollars in millions) ^(a)

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

		First Quarter
		FY’23				FY’22
Fee revenue		$	83.8			$	80.7
Total revenue		$	83.8			$	80.7
Ending number of consultants			331				297
Subscription & License fee revenue		$	29.6			$	24.4

Adjusted Results:		First Quarter
		FY’23				FY’22
Adjusted EBITDA		$	24.2			$	25.6
Adjusted EBITDA margin			28.9	%			31.8	%

___________

(a)

Numbers may not total due to rounding.

Fee revenue was $83.8 million in Q1 FY’23 compared to $80.7 million in Q1 FY’22, an increase of $3.1 million or 4% (up 10% on a constant currency basis). The increase in fee revenue was primarily due to growth in Total Rewards and Leadership Development offerings as companies try to reward and retain employees in a changing labor market and invest in sales effectiveness tools to enable their commercial teams to maximize revenue growth.

Adjusted EBITDA was $24.2 million in Q1 FY’23 with an Adjusted EBITDA margin of 28.9% compared to $25.6 million and 31.8%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was due to 1) an increase in compensation and benefits expense, driven by higher salaries and related payroll taxes associated with the increased investment made on product development initiatives and an increase in the commercial salesforce and 2) general and administrative expenses. This was partially offset by higher fee revenue.

Selected Executive Search Data(a) (dollars in millions) (b)
		First Quarter
		FY’23				FY’22
Fee revenue		$	232.8			$	216.9
Total revenue		$	234.5			$	217.7
Ending number of consultants			619				565
Average number of consultants			603				544
Engagements billed			4,133				4,175
New engagements (c)			1,682				1,745

Adjusted Results:		First Quarter
		FY’23				FY’22
Adjusted EBITDA		$	62.2			$	61.6
Adjusted EBITDA margin			26.7	%			28.4	%

___________

(a)		Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.
(b)		Numbers may not total due to rounding.
(c)		Represents new engagements opened in the respective period.

Fee revenue was $232.8 million and $216.9 million in Q1 FY’23 and Q1 FY’22, respectively, a year-over-year increase of $15.9 million or 7% (up 11% on a constant currency basis). The increase in fee revenue was driven by an increase in the weighted-average fees billed per engagement. Fee revenue increased in North America, EMEA and Latin America with the largest increase in North America.

Adjusted EBITDA was $62.2 million in Q1 FY’23 with an Adjusted EBITDA margin of 26.7% compared to Adjusted EBITDA of $61.6 million and Adjusted EBITDA margin of 28.4%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the increase in fee revenue discussed above, partially offset by increases in compensation and benefits expense due to an increase in performance-related bonus expense and salaries and related payroll taxes due to an increase in fee revenue and headcount. General and administrative expense also increased in Q1 FY’23 compared to the year-ago quarter.

Selected Professional Search & Interim Data(a) (dollars in millions) (b)
		First Quarter
		FY’23				FY’22
Fee revenue		$	98.9			$	51.8
Total revenue		$	100.1			$	51.9
Permanent Placement:
Fee revenue		$	74.1			$	51.8
Engagements billed (c)			2,739				1,824
New engagements (d)			1,846				988
Ending number of consultants (e)			497				190
Interim (started in Q3 FY'22):
Fee revenue		$	24.8			$	-
Average bill rate (f)		$	122			$	-
Average weekly billable consultants (g)			463				-

Adjusted Results (h):		First Quarter
		FY’23				FY’22
Adjusted EBITDA		$	29.2			$	19.4
Adjusted EBITDA margin			29.5	%			37.5	%

___________

(a)		In the first quarter of fiscal 2023, the Company changed the composition of its global segments. Professional Search & Interim segment represents the single hire to multi hire permanent placement and interim business that was previously included in the RPO & Professional Search segment. Segment data for Q1 FY’22 has been recast to reflect the division of the RPO & Professional Search segment into the RPO segment and Professional Search & Interim segment.
(b)		Numbers may not total due to rounding.
(c)		Represents engagements billed for professional search.
(d)		Represents new engagements opened for professional search in the respective period.
(e)		Represents number of employees originating professional search.
(f)		Fee revenue from interim divided by the number of hours worked by consultants.
(g)		The number of billable consultants based on a weekly average in the respective period.
(h)		Adjusted results exclude the following:

		First Quarter
		FY’23				FY’22
Integration/acquisition costs		$	2.5			$	—

Fee revenue was $98.9 million in Q1 FY’23, an increase of $47.1 million or 91% (up 98% on a constant currency basis), compared to the year-ago quarter. Interim fee revenue and permanent placement fee revenue increased by $24.8 million and $22.3 million, respectively, due to the acquisitions.

Adjusted EBITDA was $29.2 million in Q1 FY’23 with an Adjusted EBITDA margin of 29.5% compared to $19.4 million and 37.5%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the higher fee revenue discussed above. Partially offsetting this increase were increases in compensation and benefits expense driven by higher salaries and related payroll taxes and commission expense driven by increases in fee revenue and headcount associated with the acquisitions. Also partially offsetting the increase in Adjusted EBITDA was an increase in cost of services expense due to the recently acquired interim businesses.

Selected RPO Data(a) (dollars in millions) (b)
		First Quarter
		FY’23				FY’22
Fee revenue		$	113.9			$	87.5
Total revenue		$	116.1			$	88.8
Remaining revenue under contract(c)		$	821.3			$	576.1
RPO new business(d)		$	148.4			$	113.0

Adjusted Results:		First Quarter
		FY’23				FY’22
Adjusted EBITDA		$	17.7			$	14.5
Adjusted EBITDA margin			15.5	%			16.6	%

___________

(a)		In the first quarter of fiscal 2023, the Company changed the composition of its global segments. RPO segment represents the recruitment outsourcing business that was previously included in the RPO & Professional Search segment. Segment data for Q1 FY’22 has been recast to reflect the division of the RPO & Professional Search segment into a RPO segment and Professional Search & Interim segment.
(b)		Numbers may not total due to rounding.
(c)		Estimated fee revenue associated with signed contracts for which revenue has not yet been recognized.
(d)		Estimated total value of a contract at the point of execution of the contract.

Fee revenue was $113.9 million in Q1 FY’23, an increase of $26.4 million or 30% (up 37% on a constant currency basis), compared to the year-ago quarter. RPO fee revenue increased due to the wider adoption of RPO services in the market in combination with our differentiated solutions.

Adjusted EBITDA was $17.7 million in Q1 FY’23 with an Adjusted EBITDA margin of 15.5% compared to $14.5 million and 16.6%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the higher fee revenue discussed above. Partially offsetting this were increases in compensation and benefits expense driven by higher salaries and related payroll taxes driven by increases in headcount associated with increased levels of fee revenue.

Outlook

Despite the continuing strength in new business trends coming out of Q1 FY’23, economic factors like global inflation, rising interest rates, and escalating geo-political tensions present a level of risk and uncertainty that is difficult to quantify. With this in mind and assuming no new major pandemic related lockdowns or further changes in worldwide geopolitical conditions, economic conditions, financial markets or foreign exchange rates, on a consolidated basis:

• Q2 FY’23 fee revenue is expected to be in the range of $678 million and $708 million; and
• Q2 FY’23 diluted earnings per share is expected to range between $1.28 to $1.45.

On a consolidated adjusted basis:

• Q2 FY’23 adjusted diluted earnings per share is expected to be in the range from $1.34 to $1.50.

		Q2 FY’23 Earnings Per Share Outlook
		Low			High
Consolidated diluted earnings per share		$	1.28		$	1.45
Integration/acquisition costs			0.06			0.05
Consolidated adjusted diluted earnings per share(1)		$	1.34		$	1.50

________

(1)

Consolidated adjusted diluted earnings per share is a non-GAAP financial measure that excludes the items listed in the table.

Earnings Conference Call Webcast

The earnings conference call will be held today at 12:00 PM (EDT) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak. The conference call will be webcast and available online at ir.kornferry.com. We will also post to this section of our website earnings slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.

About Korn Ferry

Korn Ferry is a global organizational consulting firm. We help clients synchronize strategy and talent to drive superior performance. We work with organizations to design their structures, roles, and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop, and motivate their people. Visit kornferry.com for more information.

Forward-Looking Statements

Statements in this press release and our conference call that relate to our outlook, projections, goals, strategies, future plans and expectations, and other statements of future events or conditions are forward-looking statements that involve a number of risks and uncertainties. Words such as “believes,” “expects,” “anticipates,” “goals,” “estimates,” “guidance,” “may,” “should,” “could,” “will” or “likely,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to expected demand for our products and services. Readers are cautioned not to place undue reliance on such statements. Such statements are based on current expectations; actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn Ferry. The potential risks and uncertainties include those relating to the ultimate magnitude and duration of any pandemic or outbreaks, and related restrictions and operational requirements that apply to our business and the businesses of our clients, and any related negative impacts on our business, employees, customers and our ability to provide services in affected regions, global and local political or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, the dependence on and costs of attracting and retaining qualified and experienced consultants, dislocation in the labor markets and increasing competition for highly skilled workers, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, impact of inflationary pressures on our profitability, potential legal liability and regulatory developments, the portability of client relationships, consolidation of the industries we serve, changes and developments in government laws and regulations, evolving investor and customer expectations with regard to environmental, social and governmental matters, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, dependence on third parties for the execution of critical functions, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, treaties, or regulations on our business and our company, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our indebtedness, expansion of social media platforms, seasonality, ability to effect acquisition and integrate acquired businesses and employment liability risk. For a detailed description of risks and uncertainties that could cause differences, please refer to Korn Ferry’s periodic filings with the Securities and Exchange Commission. Korn Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). In particular, it includes:

• Adjusted net income attributable to Korn Ferry, adjusted to exclude integration/acquisition costs, net of income tax effect;
• Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, net of income tax effect;
• Constant currency (calculated using a quarterly average) percentages that represent the percentage change that would have resulted had exchange rates in the prior period been the same as those in effect in the current period;
• Consolidated and Executive Search Adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs, when applicable, and Consolidated and Executive Search Adjusted EBITDA margin.

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges that may not be indicative of Korn Ferry’s ongoing operating results. These non-GAAP financial measures are performance measures and are not indicative of the liquidity of Korn Ferry. These charges, which are described in the footnotes in the attached reconciliations, represent costs we incurred to acquire and integrate a portion of our Professional Search & Interim business. The use of non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance. Korn Ferry includes non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Consolidated and Executive Search Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company’s operating results. Management further believes that Consolidated and Executive Search Adjusted EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company. In the case of constant currency percentages, management believes the presentation of such information provides useful supplemental information regarding Korn Ferry's performance as excluding the impact of exchange rate changes on Korn Ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the Company’s operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry's ongoing operations and financial and operational decision-making.

KORN FERRY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
		Three Months Ended
		July 31,
		2022				2021
		(unaudited)
Fee revenue		$	695,903			$	585,395
Reimbursed out-of-pocket engagement expenses			7,245				2,703
Total revenue			703,148				588,098
Compensation and benefits			465,626				396,236
General and administrative expenses			64,457				50,267
Reimbursed expenses			7,245				2,703
Cost of services			37,992				21,993
Depreciation and amortization			16,229				15,644
Total operating expenses			591,549				486,843
Operating income			111,599				101,255
Other income, net			775				4,447
Interest expense, net			(7,612	)			(5,426	)
Income before provision for income taxes			104,762				100,276
Income tax provision			26,226				23,879
Net income			78,536				76,397
Net income attributable to noncontrolling interest			(1,289	)			(1,574	)
Net income attributable to Korn Ferry		$	77,247			$	74,823
Earnings per common share attributable to Korn Ferry:
Basic		$	1.46			$	1.38
Diluted		$	1.45			$	1.37
Weighted-average common shares outstanding:
Basic			51,771				52,760
Diluted			52,106				53,320
Cash dividends declared per share:		$	0.15			$	0.12

KORN FERRY AND SUBSIDIARIES FINANCIAL SUMMARY BY REPORTING SEGMENT (dollars in thousands) (unaudited)
		Three Months Ended July 31,
		2022			2021			% Change
Fee revenue:
Consulting		$	166,484		$	148,478		12.1	%
Digital			83,761			80,671		3.8	%
Executive Search:
North America			151,544			138,678		9.3	%
EMEA			47,056			42,747		10.1	%
Asia Pacific			26,381			28,703		(8.1	%)
Latin America			7,808			6,776		15.2	%
Total Executive Search (a)			232,789			216,904		7.3	%
Professional Search & Interim			98,947			51,837		90.9	%
RPO			113,922			87,505		30.2	%
Total fee revenue			695,903			585,395		18.9	%
Reimbursed out-of-pocket engagement expenses			7,245			2,703		168.0	%
Total revenue		$	703,148		$	588,098		19.6	%

(a)

Total Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.

KORN FERRY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)
		July 31,				April 30,
		2022				2022
		(unaudited)
ASSETS
Cash and cash equivalents		$	639,784			$	978,070
Marketable securities			71,172				57,244
Receivables due from clients, net of allowance for doubtful accounts of $39,432 and $36,384 at July 31, 2022 and April 30, 2022, respectively			637,061				590,260
Income taxes and other receivables			35,186				31,884
Unearned compensation			60,726				60,749
Prepaid expenses and other assets			53,363				41,763
Total current assets			1,497,292				1,759,970
Marketable securities, non-current			185,492				175,783
Property and equipment, net			147,117				138,172
Operating lease right-of-use assets, net			158,918				167,734
Cash surrender value of company-owned life insurance policies, net of loans			184,742				183,308
Deferred income taxes			81,422				84,712
Goodwill			724,426				725,592
Intangible assets, net			84,167				89,770
Unearned compensation, non-current			117,346				118,238
Investments and other assets			23,157				21,267
Total assets		$	3,204,079			$	3,464,546
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	55,003			$	50,932
Income taxes payable			37,552				34,450
Compensation and benefits payable			250,818				547,826
Operating lease liability, current			46,700				48,609
Other accrued liabilities			295,981				302,408
Total current liabilities			686,054				984,225
Deferred compensation and other retirement plans			380,137				357,175
Operating lease liability, non-current			140,611				151,212
Long-term debt			395,653				395,477
Deferred tax liabilities			4,052				2,715
Other liabilities			26,338				24,153
Total liabilities			1,632,845				1,914,957
Stockholders' equity
Common stock: $0.01 par value, 150,000 shares authorized, 76,568 and 75,409 shares issued and 53,502 and 53,190 shares outstanding at July 31, 2022 and April 30, 2022, respectively			470,127				502,008
Retained earnings			1,203,067				1,134,523
Accumulated other comprehensive loss, net			(108,444	)			(92,185	)
Total Korn Ferry stockholders' equity			1,564,750				1,544,346
Noncontrolling interest			6,484				5,243
Total stockholders' equity			1,571,234				1,549,589
Total liabilities and stockholders' equity		$	3,204,079			$	3,464,546

KORN FERRY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (dollars in thousands, except per share amounts) (unaudited)
	Three Months Ended
	July 31,
	2022				2021
Net income attributable to Korn Ferry	$	77,247			$	74,823
Net income attributable to non-controlling interest		1,289				1,574
Net income		78,536				76,397
Income tax provision		26,226				23,879
Income before provision for income taxes		104,762				100,276
Other income, net		(775	)			(4,447	)
Interest expense, net		7,612				5,426
Operating income		111,599				101,255
Depreciation and amortization		16,229				15,644
Other income, net		775				4,447
Integration/acquisition costs (1)		3,605				-
Adjusted EBITDA	$	132,208			$	121,346
Operating margin		16.0	%			17.3	%
Depreciation and amortization		2.3	%			2.7	%
Other income, net		0.1	%			0.7	%
Integration/acquisition costs (1)		0.6	%			-
Adjusted EBITDA margin		19.0	%			20.7	%
Net income attributable to Korn Ferry	$	77,247			$	74,823
Integration/acquisition costs (1)		3,605				-
Tax effect on the adjusted items (2)		(893	)			-
Adjusted net income attributable to Korn Ferry	$	79,959			$	74,823
Basic earnings per common share	$	1.46			$	1.38
Integration/acquisition costs (1)		0.07				-
Tax effect on the adjusted items (2)		(0.02	)			-
Adjusted basic earnings per share	$	1.51			$	1.38
Diluted earnings per common share	$	1.45			$	1.37
Integration/acquisition costs (1)		0.07				-
Tax effect on the adjusted items (2)		(0.02	)			-
Adjusted diluted earnings per share	$	1.50			$	1.37

Explanation of Non-GAAP Adjustments
(1)	Costs associated with current and previous acquisitions, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.
(2)	Tax effect on integration/acquisition costs.

KORN FERRY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED (unaudited)
	Three Months Ended July 31,
	2022													2021
	Fee revenue			Total revenue			Adjusted EBITDA				Adjusted EBITDA margin			Fee revenue			Total revenue			Adjusted EBITDA				Adjusted EBITDA margin
	(dollars in thousands)
Consulting	$	166,484		$	168,735		$	29,550			17.7	%		$	148,478		$	149,007		$	26,841			18.1	%
Digital		83,761			83,815			24,178			28.9	%			80,671			80,681			25,632			31.8	%
Executive Search:
North America		151,544			152,884			43,749			28.9	%			138,678			139,300			43,330			31.2	%
EMEA		47,056			47,329			8,515			18.1	%			42,747			42,843			7,585			17.7	%
Asia Pacific		26,381			26,452			7,351			27.9	%			28,703			28,732			8,320			29.0	%
Latin America		7,808			7,809			2,617			33.5	%			6,776			6,779			2,354			34.7	%
Total Executive Search		232,789			234,474			62,232			26.7	%			216,904			217,654			61,589			28.4	%
Professional Search & Interim		98,947			100,052			29,161			29.5	%			51,837			51,932			19,439			37.5	%
RPO		113,922			116,072			17,709			15.5	%			87,505			88,824			14,528			16.6	%
Corporate		-			-			(30,622	)						-			-			(26,683	)
Consolidated	$	695,903		$	703,148		$	132,208			19.0	%		$	585,395		$	588,098		$	121,346			20.7	%

 

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Investor Relations: Gregg Kvochak, (310) 556-8550

Media: Dan Gugler, (310) 226-2645

Source: Korn Ferry

FAQ

What were Korn Ferry's Q1 FY'23 earnings results?

Korn Ferry reported Q1 FY'23 fee revenue of $695.9 million, net income of $77.2 million, diluted EPS of $1.45, and adjusted diluted EPS of $1.50.

What is the outlook for Korn Ferry's Q2 FY'23?

For Q2 FY'23, Korn Ferry expects fee revenue between $678 million and $708 million and diluted EPS ranging from $1.28 to $1.45.

How did Korn Ferry perform compared to Q1 FY'22?

Korn Ferry's Q1 FY'23 fee revenue increased by 19% compared to Q1 FY'22, with net income rising from $74.8 million to $77.2 million.

Did Korn Ferry repurchase any shares in Q1 FY'23?

Yes, Korn Ferry repurchased 370,000 shares for a total of $22.4 million during Q1 FY'23.