Korn Ferry Announces Record Second Quarter Fiscal 2022 Results of Operations

Rhea-AI Summary

Korn Ferry reports record Q2 FY’22 fee revenue of $639.4 million, marking a 47% increase from Q2 FY’21 and a 9% rise from Q1 FY’22. The company achieved record net income of $75.8 million with diluted EPS of $1.38 and adjusted diluted EPS of $1.53. Operating income reached $103.8 million (16.2% margin) while adjusted EBITDA was $134.9 million (21.1% margin). A quarterly dividend of $0.12 per share was declared. Korn Ferry’s growth is attributed to strong new business in consulting and digital services against a backdrop of workforce transformation.

Positive

• Record Q2 FY'22 fee revenue of $639.4 million, up 47% YoY.
• Net income of $75.8 million, compared to $27.8 million in Q2 FY'21.
• Diluted EPS reached $1.38, with adjusted EPS at $1.53, both all-time highs.
• Operating income of $103.8 million, 16.2% operating margin, up from 11.1% YoY.
• Adjusted EBITDA of $134.9 million, yielding a 21.1% margin, improvement from 15.2%.

Negative

• Increased compensation and benefits expenses due to higher salaries and performance-related bonuses.
• Higher general and administrative expenses primarily from acquisition costs and marketing.
• Legal expenses rose, affecting overall profitability despite revenue gains.

Highlights

• Korn Ferry reports record quarterly fee revenue of $639.4 million in Q2 FY’22, an increase of 47% from Q2 FY’21 and a sequential increase of 9% from Q1 FY’22.
• Record net income attributable to Korn Ferry of $75.8 million and record diluted and adjusted diluted earnings per share of $1.38 and $1.53 in Q2 FY’22, respectively.
• Operating income and Adjusted EBITDA were both all-time highs in Q2 FY’22 at $103.8 million (operating margin of 16.2%) and $134.9 million (Adjusted EBITDA margin of 21.1%), respectively.
• Declared a quarterly dividend of $0.12 per share on December 7, 2021, which is payable on January 14, 2022, to stockholders of record on December 21, 2021.

LOS ANGELES--(BUSINESS WIRE)-- Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced record second quarter fee revenue of $639.4 million. In addition, second quarter diluted earnings per share was $1.38 and adjusted diluted earnings per share was $1.53, both an all-time high.

“I am extremely pleased with our results during the fiscal second quarter, as Korn Ferry once again achieved all-time financial performance highs. We generated a record $639 million in fee revenue, up 47% year over year. Our diluted and adjusted diluted earnings per share, at $1.38 and $1.53, respectively and Adjusted EBITDA margin of 21.1% were also record highs,” said Gary D. Burnison, CEO, Korn Ferry.

“Our solid performance over recent quarters speaks to our agility, execution and operational excellence amid a time of great change. The new world of work is all about career nomads, aging demographics, a real war for talent, work from anywhere, anytime and the digitization of everything. Companies are re-imagining their businesses, from strategy to people to culture. This constant state of flux represents opportunity for Korn Ferry and we look forward to continuing to drive performance for clients in the New Year ahead.”

Selected Financial Results
(dollars in millions, except per share amounts) ^(a)

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Fee revenue		$	639.4			$	435.4			$	1,224.8			$	779.5
Total revenue		$	643.4			$	437.8			$	1,231.5			$	784.7
Operating income		$	103.8			$	48.2			$	205.0			$	4.4
Operating margin			16.2	%			11.1	%			16.7	%			0.6	%
Net income (loss) attributable to Korn Ferry		$	75.8			$	27.8			$	150.6			$	(3.1	)
Basic earnings (loss) per share		$	1.40			$	0.51			$	2.78			$	(0.06	)
Diluted earnings (loss) per share		$	1.38			$	0.51			$	2.75			$	(0.06	)

Adjusted Results (b):		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Adjusted EBITDA		$	134.9			$	66.2			$	256.2			$	76.8
Adjusted EBITDA margin			21.1	%			15.2	%			20.9	%			9.8	%
Adjusted net income attributable to Korn Ferry		$	83.9			$	29.5			$	158.8			$	19.3
Adjusted basic earnings per share		$	1.55			$	0.54			$	2.93			$	0.35
Adjusted diluted earnings per share		$	1.53			$	0.54			$	2.90			$	0.35

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

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Integration/acquisition costs		$	1.1			$	—			$	1.1			$	0.7
Impairment of fixed assets		$	1.9			$	—			$	1.9			$	—
Impairment of right of use assets		$	7.4			$	—			$	7.4			$	—
Restructuring charges, net		$	—			$	2.4			$	—			$	29.9

The Company reported record fee revenue in Q2 FY’22 of $639.4 million, an increase of 47% (up 46% on a constant currency basis) compared to Q2 FY’21. Fee revenue increased in all lines of business. The increase in fee revenue when compared to Q2 FY’21 was primarily due to the record levels of new business in the quarter driven by the relevance of the Company’s solutions in helping businesses solve their organizational and human capital issues driven by secular changes (i.e., workforce transformation, Diversity, Equity & Inclusion (“DE&I”) and Environmental, Social and Governance (“ESG”)) in today’s business environment. Further, the coronavirus pandemic (“COVID-19”) adversely impacted the Company on a worldwide basis in Q2 FY’21.

Operating margin was 16.2% in Q2 FY’22 compared to 11.1% in the year-ago quarter. Adjusted EBITDA margin was 21.1%, compared to Adjusted EBITDA margin of 15.2% in the year-ago quarter. Net income attributable to Korn Ferry was $75.8 million in Q2 FY’22 compared to net income attributable to Korn Ferry of $27.8 million in Q2 FY’21.

The year-over-year improvement in operating margin was due to the increase in fee revenue discussed above, as well as cost savings realized from work being conducted virtually. Partially offsetting this were increases in compensation and benefits expense, general and administrative expenses and cost of services expense. The increase in compensation and benefits expense was driven by higher salaries and related payroll taxes and performance-related bonus expense due to the increase in fee revenue combined with increases in overall profitability and headcount. The change in general and administrative expenses was primarily due to integration and acquisition costs incurred in connection with the Lucas Group acquisition and the impairment charges associated with the execution of the Company’s real estate footprint reduction strategy. In addition, the Company incurred higher marketing and business development expenses which contributed to record fee revenue and new business in the quarter, as well as increased legal professional fees.

The year-over-year improvement in Adjusted EBITDA was the result of all of the factors above with the exception of integration and acquisition costs and impairment charges which are adjusted out when calculating the metric.

Results by Line of Business

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

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Fee revenue		$	164.9			$	126.7			$	313.4			$	226.0
Total revenue		$	165.7			$	127.1			$	314.7			$	226.6
Ending number of consultants and execution staff (b)			1,739				1,491				1,739				1,491
Hours worked in thousands (c)			445				399				871				766
Average bill rate (d)		$	371			$	318			$	360			$	295

Adjusted Results (e):		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Adjusted EBITDA		$	30.1			$	20.2			$	56.9			$	26.8
Adjusted EBITDA margin			18.2	%			15.9	%			18.2	%			11.8	%

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

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Impairment of fixed assets		$	0.3			$	—			$	0.3			$	—
Impairment of right of use assets		$	2.5			$	—			$	2.5			$	—
Restructuring charges, net		$	—			$	1.1			$	—			$	13.9

Fee revenue was $164.9 million in Q2 FY’22 compared to $126.7 million in Q2 FY’21, an increase of $38.2 million or 30% (up 29% on a constant currency basis). Growth in Consulting fee revenue continues to be driven by significant client workforce transformation initiatives including DE&I and ESG, delivered through our Organization Strategy, Assessment, and Leadership Development solutions. In addition, Total Rewards offering has increased as clients address compensation and retention issues associated with labor market dislocation and pay governance issues. Further, COVID-19 negatively impacted the Company on a worldwide basis in Q2 FY’21.

Adjusted EBITDA was $30.1 million in Q2 FY’22 with an Adjusted EBITDA margin of 18.2% compared to Adjusted EBITDA of $20.2 million with an associated margin of 15.9%, respectively, in the year-ago quarter. This improvement resulted from the increase in fee revenue outlined above, as well as cost savings realized from work being conducted virtually. These changes were partially offset by increases in both compensation and benefits expense and cost of services expense. The increase in compensation and benefits expense was driven by higher salaries and related payroll taxes and performance-related bonus expense due to an increase in fee revenue combined with increases in overall profitability 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.

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Fee revenue		$	88.6			$	75.0			$	169.3			$	131.0
Total revenue		$	88.7			$	75.0			$	169.4			$	131.1
Ending number of consultants			282				299				282				299
Subscription & License fee revenue		$	26.3			$	22.7			$	50.7			$	43.8

Adjusted Results (b):		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Adjusted EBITDA		$	28.6			$	23.1			$	54.2			$	31.0
Adjusted EBITDA margin			32.2	%			30.8	%			32.0	%			23.7	%

___________________
(a)	Numbers may not total due to rounding.
(b)	Adjusted results exclude the following:

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Impairment of fixed assets		$	0.2			$	—			$	0.2			$	—
Impairment of right of use assets		$	1.3			$	—			$	1.3			$	—
Integration/acquisition costs		$	—			$	—			$	—			$	0.6
Restructuring charges, net		$	—			$	0.1			$	—			$	2.9

Fee revenue was $88.6 million in Q2 FY’22 compared to $75.0 million in Q2 FY’21, an increase of $13.6 million or 18% (up 17% on a constant currency basis). The increase in fee revenue was primarily due to growth in total rewards offering as companies deal with elevated levels of attrition due to dislocation in the labor markets and professional development around sales effectiveness as companies reassess their commercial models in a post-COVID world.

Adjusted EBITDA was $28.6 million in Q2 FY’22 with an Adjusted EBITDA margin of 32.2% compared to $23.1 million and 30.8%, respectively, in the year-ago quarter. Contributing to the increase were higher fee revenues as well as cost savings realized from work being conducted virtually. Partially offsetting this were increases in compensation and benefits expense and cost of services expense. The increase in compensation and benefits expense was driven by higher performance-related bonus expense, salaries and related payroll taxes and commission expense as a result of increased fee revenue.

Selected Executive Search Data^(a)
(dollars in millions) ^(b)

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Fee revenue		$	235.5			$	148.1			$	452.4			$	268.2
Total revenue		$	236.5			$	148.6			$	454.1			$	269.5
Ending number of consultants			570				512				570				512
Average number of consultants			568				511				547				534
Engagements billed			4,365				3,082				6,631				4,618
New engagements (c)			1,830				1,331				3,575				2,446

Adjusted Results (d):		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Adjusted EBITDA		$	66.1			$	28.2			$	127.7			$	36.3
Adjusted EBITDA margin			28.1	%			19.1	%			28.2	%			13.5	%

___________________
(a)	Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.
(b)	Numbers may not total due to rounding.
(c)	Represents new engagements opened in the respective period.
(d)	Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that adjust for the following:

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Impairment of fixed assets		$	0.1			$	—			$	0.1			$	—
Impairment of right of use assets		$	0.9			$	—			$	0.9			$	—
Restructuring charges, net		$	—			$	0.9			$	—			$	10.0

Fee revenue was $235.5 million and $148.1 million in Q2 FY’22 and Q2 FY’21, respectively, a year-over-year increase of $87.4 million or 59% (up 58% on a constant currency basis). Fee revenue increases were driven by an increase in the number of new search engagements as well as an increase in the average fee revenue per search. These increases were across all regions with the largest increase in North America.

Adjusted EBITDA was $66.1 million in Q2 FY’22 with an Adjusted EBITDA margin of 28.1% compared to Adjusted EBITDA of $28.2 million and Adjusted EBITDA margin of 19.1%, respectively, in the year-ago quarter. This improvement resulted from the increase in fee revenue discussed above, as well as cost savings realized from work being conducted virtually. These changes were partially offset by increases in compensation and benefits expense due to an increase in performance-related bonus expense and salaries and related payroll taxes as a result of increased fee revenue combined with increases in overall profitability and headcount. Also partially offsetting the increase in Adjusted EBITDA was an increase in general and administrative expenses due to higher business development and bad debt expense.

Selected RPO and Professional Search Data
(dollars in millions) ^(a)

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Fee revenue		$	150.5			$	85.7			$	289.8			$	154.3
Total revenue		$	152.5			$	87.1			$	293.2			$	157.5
Engagements billed (b)			1,824				1,173				2,925				1,778
New engagements (c)			1,048				657				2,036				1,221

Adjusted Results (d):		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Adjusted EBITDA		$	36.3			$	13.8			$	70.2			$	19.8
Adjusted EBITDA margin			24.1	%			16.1	%			24.2	%			12.8	%

___________________
(a)	Numbers may not total due to rounding.
(b)	Represents professional search engagements billed.
(c)	Represents new professional search engagements opened in the respective period.
(d)	Adjusted results exclude the following:

		Second Quarter								Year to Date
		FY’22				FY’21				FY’22				FY’21
Impairment of fixed assets		$	1.3			$	—			$	1.3			$	—
Impairment of right of use assets		$	2.6			$	—			$	2.6			$	—
Restructuring charges, net		$	—			$	0.3			$	—			$	3.1

Fee revenue was $150.5 million in Q2 FY’22, an increase of $64.8 million or 76% (up 74% on a constant currency basis), compared to the year-ago quarter. The higher fee revenue was driven by an increase in recruitment process outsourcing (“RPO”) fee revenue of $39.3 million or 69% (67% at constant currency) and an increase in Professional Search fee revenue of $25.5 million or 88% (86% at constant currency). The increase in RPO fee revenue is due to the wider adoption of RPO services in the market in combination with our differentiate solution, while Professional Search fee revenue increased due to an increase in both the number of engagements billed and the weighted-average fee billed per engagement.

Adjusted EBITDA was $36.3 million in Q2 FY’22 with an Adjusted EBITDA margin of 24.1% in Q2 FY’22 compared to $13.8 million and 16.1%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the higher fee revenue discussed above, as well as cost savings realized from work being conducted virtually. Partially offsetting this were increases in compensation and benefits expense and cost of services expense. The increase in compensation and benefits was driven by higher salaries and related payroll taxes, the use of outside contractors and performance-related bonus expense as a result of increased fee revenue combined with increases in overall profitability and headcount.

Outlook

Assuming no new major pandemic lockdowns (including emerging variants), and worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis:

• Q3 FY’22 fee revenue is expected to be in the range of $640 million and $660 million; and
• Q3 FY’22 diluted earnings per share is expected to range between $1.38 to $1.56.

On a consolidated adjusted basis:

• Q3 FY’22 adjusted diluted earnings per share is expected to be in the range from $1.42 to $1.58.

		Q3 FY’22 Earnings Per Share Outlook (1)
		Low				High
Consolidated diluted earnings per share		$	1.38			$	1.56
Integration/acquisition costs			0.05				0.04
Tax rate impact			(0.01	)			(0.02	)
Consolidated adjusted diluted earnings per share		$	1.42			$	1.58

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

Earnings Conference Call Webcast

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

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, the magnitude and duration of the impact of the COVID-19 outbreak on our business, employees, customers and our ability to provide services in affected regions, and the potential opportunities for our business as a result of worldwide changes in how companies conduct business as a result of COVID-19. Readers are cautioned not to place undue reliance on such statements. Such statements are based on current expectations; actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn Ferry. The potential risks and uncertainties include those relating to the ultimate magnitude and duration of COVID-19 and any future pandemic or similar outbreaks, and related restrictions and operational requirements that apply to our business and the businesses of our clients, and any related negative impacts on our business, employees, customers and our ability to provide services in affected regions, global and local political or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, the dependence on and costs of attracting and retaining qualified and experienced consultants, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, the portability of client relationships, consolidation of the industries we serve, changes and developments in government laws and regulations, evolving investor and customer expectations with regard to environmental matters, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, dependence on third parties for the execution of critical functions, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, technical guidance relating to the Tax Act, treaties, or regulations on our business and our company, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our indebtedness, the phase-out of the London Interbank Offered Rate, the withdrawal of the United Kingdom from the European Union, expansion of social media platforms, seasonality, ability to effect acquisition and integrate acquired businesses and employment liability risk. For a detailed description of risks and uncertainties that could cause differences, please refer to Korn Ferry’s periodic filings with the Securities and Exchange Commission. Korn Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

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

• Adjusted net income attributable to Korn Ferry, adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and restructuring charges net of income tax effect;
• Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and restructuring charges net of income tax effect;
• Constant currency (calculated using a quarterly average) percentages that represent the percentage change that would have resulted had exchange rates in the prior period been the same as those in effect in the current period;
• Consolidated and Executive Search Adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and restructuring charges, and Consolidated and Executive 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 1) costs we incurred to acquire and integrate a portion of our Digital business as well as cost incurred to acquire an RPO & Professional Search business, 2) impairment of fixed assets associated with the decision to terminate and sublease some of our offices, 3) impairment of right of use assets due to the decision to terminate and sublease some of our offices and 4) charges we incurred to restructure the Company as a result of COVID-19. The use of non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance. Korn Ferry includes non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Consolidated and Executive Search Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company’s operating results. Management further believes that Consolidated and Executive Search Adjusted EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company. In the case of constant currency percentages, management believes the presentation of such information provides useful supplemental information regarding Korn Ferry's performance as excluding the impact of exchange rate changes on Korn Ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the Company’s operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry's ongoing operations and financial and operational decision-making.

[Tables attached]

KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
		Three Months Ended								Six Months Ended
		October 31,								October 31,
		2021				2020				2021				2020
		(unaudited)
Fee revenue		$	639,443			$	435,439			$	1,224,838			$	779,536
Reimbursed out-of-pocket engagement expenses			3,955				2,350				6,658				5,136
Total revenue			643,398				437,789				1,231,496				784,672
Compensation and benefits			431,640				307,185				827,876				591,197
General and administrative expenses			64,065				46,476				114,332				93,565
Reimbursed expenses			3,955				2,350				6,658				5,136
Cost of services			24,329				15,901				46,322				30,170
Depreciation and amortization			15,633				15,298				31,277				30,333
Restructuring charges, net			-				2,407				-				29,894
Total operating expenses			539,622				389,617				1,026,465				780,295
Operating income			103,776				48,172				205,031				4,377
Other income, net			5,066				277				9,513				11,439
Interest expense, net			(6,365	)			(7,494	)			(11,791	)			(14,388	)
Income before provision for income taxes			102,477				40,955				202,753				1,428
Income tax provision			26,145				12,877				50,024				4,205
Net income (loss)			76,332				28,078				152,729				(2,777	)
Net income attributable to noncontrolling interest			(560	)			(300	)			(2,134	)			(278	)
Net income (loss) attributable to Korn Ferry		$	75,772			$	27,778			$	150,595			$	(3,055	)
Earnings (loss) per common share attributable to Korn Ferry:
Basic		$	1.40			$	0.51			$	2.78			$	(0.06	)
Diluted		$	1.38			$	0.51			$	2.75			$	(0.06	)
Weighted-average common shares outstanding:
Basic			53,114				53,229				52,937				53,246
Diluted			53,568				53,390				53,494				53,246
Cash dividends declared per share:		$	0.12			$	0.10			$	0.24			$	0.20

KORN FERRY AND SUBSIDIARIES
FINANCIAL SUMMARY BY REPORTING SEGMENT
(dollars in thousands)
(unaudited)
			Three Months Ended October 31,														Six Months Ended October 31,
			2021						2020				% Change				2021						2020				% Change
Fee revenue:
Consulting			$	164,893					$	126,685				30.2	%		$	313,371					$	226,003				38.7	%
Digital				88,639						75,043				18.1	%			169,310						131,016				29.2	%
Executive Search:
	North America			158,197						91,168				73.5	%			296,875						160,483				85.0	%
	EMEA			42,434						31,629				34.2	%			85,181						61,710				38.0	%
	Asia Pacific			28,257						20,807				35.8	%			56,960						38,059				49.7	%
	Latin America			6,571						4,456				47.5	%			13,347						7,951				67.9	%
Total Executive Search (a)				235,459						148,060				59.0	%			452,363						268,203				68.7	%
RPO and Professional Search				150,452						85,651				75.7	%			289,794						154,314				87.8	%
	Total fee revenue			639,443						435,439				46.9	%			1,224,838						779,536				57.1	%
Reimbursed out-of-pocket engagement expenses				3,955						2,350				68.3	%			6,658						5,136				29.6	%
	Total revenue		$	643,398					$	437,789				47.0	%		$	1,231,496					$	784,672				56.9	%

(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)
		October 31,				April 30,
		2021				2021
		(unaudited)
ASSETS
Cash and cash equivalents		$	725,391			$	850,778
Marketable securities			77,496				63,667
Receivables due from clients, net of allowance for doubtful accounts of $33,488 and $29,324 at October 31, 2021 and April 30, 2021, respectively			608,141				448,733
Income taxes and other receivables			37,515				40,024
Unearned compensation			63,639				53,206
Prepaid expenses and other assets			37,054				30,724
Total current assets			1,549,236				1,487,132
Marketable securities, non-current			194,047				182,692
Property and equipment, net			126,500				131,778
Operating lease right-of-use assets, net			149,180				174,121
Cash surrender value of company-owned life insurance policies, net of loans			164,772				161,295
Deferred income taxes			68,041				73,106
Goodwill			624,899				626,669
Intangible assets, net			83,326				92,949
Unearned compensation, non-current			136,878				102,356
Investments and other assets			20,609				24,428
Total assets		$	3,117,488			$	3,056,526
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	41,800			$	44,993
Income taxes payable			21,209				23,041
Compensation and benefits payable			315,095				394,606
Operating lease liability, current			49,836				47,986
Other accrued liabilities			269,129				239,444
Total current liabilities			697,069				750,070
Deferred compensation and other retirement plans			376,199				346,455
Operating lease liability, non-current			132,645				155,998
Long-term debt			395,132				394,794
Deferred tax liabilities			1,996				3,832
Other liabilities			30,558				36,602
Total liabilities			1,633,599				1,687,751
Stockholders' equity
Common stock: $0.01 par value, 150,000 shares authorized, 75,408 and 74,915 shares issued and 54,466 and 54,008 shares outstanding at October 31, 2021 and April 30, 2021, respectively			574,058				583,260
Retained earnings			971,995				834,949
Accumulated other comprehensive loss, net			(66,530	)			(51,820	)
Total Korn Ferry stockholders' equity			1,479,523				1,366,389
Noncontrolling interest			4,366				2,386
Total stockholders' equity			1,483,889				1,368,775
Total liabilities and stockholders' equity		$	3,117,488			$	3,056,526

KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(dollars in thousands, except per share amounts)
(unaudited)
	Three Months Ended								Six Months Ended
	October 31,								October 31,
	2021				2020				2021				2020
Net income (loss) attributable to Korn Ferry	$	75,772			$	27,778			$	150,595			$	(3,055	)
Net income attributable to non-controlling interest		560				300				2,134				278
Net income (loss)		76,332				28,078				152,729				(2,777	)
Income tax provision		26,145				12,877				50,024				4,205
Income before provision for income taxes		102,477				40,955				202,753				1,428
Other income, net		(5,066	)			(277	)			(9,513	)			(11,439	)
Interest expense, net		6,365				7,494				11,791				14,388
Operating income		103,776				48,172				205,031				4,377
Depreciation and amortization		15,633				15,298				31,277				30,333
Other income, net		5,066				277				9,513				11,439
Integration/acquisition costs (1)		1,084				-				1,084				737
Impairment of fixed assets (2)		1,915				-				1,915				-
Impairment of right of use assets (3)		7,392				-				7,392				-
Restructuring charges, net (4)		-				2,407				-				29,894
Adjusted EBITDA	$	134,866			$	66,154			$	256,212			$	76,780
Operating margin		16.2	%			11.1	%			16.7	%			0.6	%
Depreciation and amortization		2.4	%			3.4	%			2.6	%			3.9	%
Other income, net		0.8	%			0.1	%			0.8	%			1.4	%
Integration/acquisition costs (1)		0.2	%			-				0.1	%			0.1	%
Impairment of fixed assets (2)		0.3	%			-				0.1	%			-
Impairment of right of use assets (3)		1.2	%			-				0.6	%			-
Restructuring charges, net (4)		-				0.6	%			-				3.8	%
Adjusted EBITDA margin		21.1	%			15.2	%			20.9	%			9.8	%
Net income (loss) attributable to Korn Ferry	$	75,772			$	27,778			$	150,595			$	(3,055	)
Integration/acquisition costs (1)		1,084				-				1,084				737
Impairment of fixed assets (2)		1,915				-				1,915				-
Impairment of right of use assets (3)		7,392				-				7,392				-
Restructuring charges, net (4)		-				2,407				-				29,894
Tax effect on the adjusted items (5)		(2,228	)			(717	)			(2,228	)			(8,321	)
Adjusted net income attributable to Korn Ferry	$	83,935			$	29,468			$	158,758			$	19,255
Basic earnings (loss) per common share	$	1.40			$	0.51			$	2.78			$	(0.06	)
Integration/acquisition costs (1)		0.02				-				0.02				0.01
Impairment of fixed assets (2)		0.04				-				0.04				-
Impairment of right of use assets (3)		0.14				-				0.14				-
Restructuring charges, net (4)		-				0.04				-				0.56
Tax effect on the adjusted items (5)		(0.05	)			(0.01	)			(0.05	)			(0.16	)
Adjusted basic earnings per share	$	1.55			$	0.54			$	2.93			$	0.35
Diluted earnings (loss) per common share	$	1.38			$	0.51			$	2.75			$	(0.06	)
Integration/acquisition costs (1)		0.02				-				0.02				0.01
Impairment of fixed assets (2)		0.04				-				0.04				-
Impairment of right of use assets (3)		0.14				-				0.14				-
Restructuring charges, net (4)		-				0.04				-				0.56
Tax effect on the adjusted items (5)		(0.05	)			(0.01	)			(0.05	)			(0.16	)
Adjusted diluted earnings per share	$	1.53			$	0.54			$	2.90			$	0.35

Explanation of Non-GAAP Adjustments
(1)	Costs associated with current and previous acquisitions, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.
(2)	Costs associated with impairment of fixed assets (i.e., leasehold improvements) due to terminating and subleasing some of our office leases.
(3)	Costs associated with impairment of right-of-use assets due to terminating and subleasing some of our office leases.
(4)	Restructuring charges we incurred to rationalize our cost structure by eliminating redundant positions because of COVID-19.
(5)	Tax effect on integration/acquisition costs, impairment of fixed assets and right of use assets, and restructuring charges, net.

KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF CONSOLIDATED NET INCOME AND
OPERATING INCOME (GAAP) TO ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
		Three Months Ended October 31, 2021
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO and Professional Search				Corporate				Consolidated
Fee revenue		$	164,893			$	88,639			$	158,197			$	42,434			$	28,257			$	6,571			$	235,459			$	150,452			$	-			$	639,443
Total revenue		$	165,732			$	88,712			$	159,082			$	42,571			$	28,267			$	6,572			$	236,492			$	152,462			$	-			$	643,398
Net income attributable to Korn Ferry																																						$	75,772
Net income attributable to noncontrolling interest																																							560
Other income, net																																							(5,066	)
Interest expense, net																																							6,365
Income tax provision																																							26,145
Operating income																																							103,776
Depreciation and amortization																																							15,633
Other income, net																																							5,066
Integration/acquisition costs																																							1,084
Impairment of fixed assets																																							1,915
Impairment of right of use assets																																							7,392
Adjusted EBITDA		$	30,061			$	28,556			$	48,907			$	7,663			$	8,201			$	1,366			$	66,137			$	36,258			$	(26,146	)		$	134,866
Adjusted EBITDA margin			18.2	%			32.2	%			30.9	%			18.1	%			29.0	%			20.8	%			28.1	%			24.1	%							21.1	%
		Three Months Ended October 31, 2020
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO and Professional Search				Corporate				Consolidated
Fee revenue		$	126,685			$	75,043			$	91,168			$	31,629			$	20,807			$	4,456			$	148,060			$	85,651			$	-			$	435,439
Total revenue		$	127,051			$	75,038			$	91,609			$	31,714			$	20,820			$	4,456			$	148,599			$	87,101			$	-			$	437,789
Net income attributable to Korn Ferry																																						$	27,778
Net income attributable to noncontrolling interest																																							300
Other income, net																																							(277	)
Interest expense, net																																							7,494
Income tax provision																																							12,877
Operating income																																							48,172
Depreciation and amortization																																							15,298
Other income, net																																							277
Restructuring charges, net																																							2,407
Adjusted EBITDA		$	20,163			$	23,084			$	21,186			$	2,817			$	3,641			$	584			$	28,228			$	13,799			$	(19,120	)		$	66,154
Adjusted EBITDA margin			15.9	%			30.8	%			23.2	%			8.9	%			17.5	%			13.1	%			19.1	%			16.1	%							15.2	%

KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) AND
OPERATING INCOME (GAAP) TO ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
		Six Months Ended October 31, 2021
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO and Professional Search				Corporate				Consolidated
Fee revenue		$	313,371			$	169,310			$	296,875			$	85,181			$	56,960			$	13,347			$	452,363			$	289,794			$	-			$	1,224,838
Total revenue		$	314,739			$	169,393			$	298,382			$	85,414			$	56,999			$	13,351			$	454,146			$	293,218			$	-			$	1,231,496
Net income attributable to Korn Ferry																																						$	150,595
Net income attributable to noncontrolling interest																																							2,134
Other income, net																																							(9,513	)
Interest expense, net																																							11,791
Income tax provision																																							50,024
Operating income																																							205,031
Depreciation and amortization																																							31,277
Other income, net																																							9,513
Integration/acquisition costs																																							1,084
Impairment of fixed assets																																							1,915
Impairment of right of use assets																																							7,392
Adjusted EBITDA		$	56,902			$	54,188			$	92,237			$	15,248			$	16,521			$	3,720			$	127,726			$	70,225			$	(52,829	)		$	256,212
Adjusted EBITDA margin			18.2	%			32.0	%			31.1	%			17.9	%			29.0	%			27.9	%			28.2	%			24.2	%							20.9	%
		Six Months Ended October 31, 2020
										Executive Search
		Consulting				Digital				North America				EMEA				Asia Pacific				Latin America				Subtotal				RPO and Professional Search				Corporate				Consolidated
Fee revenue		$	226,003			$	131,016			$	160,483			$	61,710			$	38,059			$	7,951			$	268,203			$	154,314			$	-			$	779,536
Total revenue		$	226,641			$	131,060			$	161,465			$	61,909			$	38,160			$	7,951			$	269,485			$	157,486			$	-			$	784,672
Net loss attributable to Korn Ferry																																						$	(3,055	)
Net income attributable to noncontrolling interest																																							278
Other income, net																																							(11,439	)
Interest expense, net																																							14,388
Income tax provision																																							4,205
Operating income																																							4,377
Depreciation and amortization																																							30,333
Other income, net																																							11,439
Integration/acquisition costs																																							737
Restructuring charges, net																																							29,894
Adjusted EBITDA		$	26,767			$	31,027			$	26,498			$	4,527			$	5,235			$	22			$	36,282			$	19,823			$	(37,119	)		$	76,780
Adjusted EBITDA margin			11.8	%			23.7	%			16.5	%			7.3	%			13.8	%			0.3	%			13.5	%			12.8	%							9.8	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211208005265/en/

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

Media: Dan Gugler, (310) 226-2645

Source: Korn Ferry

FAQ

What are Korn Ferry's Q2 FY'22 financial results?

Korn Ferry reported record fee revenue of $639.4 million, a net income of $75.8 million, and diluted EPS of $1.38 for Q2 FY'22.

How much did Korn Ferry earn per share in Q2 FY'22?

In Q2 FY'22, Korn Ferry achieved an adjusted diluted EPS of $1.53.

What was the operating margin for Korn Ferry in Q2 FY'22?

The operating margin for Korn Ferry in Q2 FY'22 was 16.2%.

What does Korn Ferry expect for Q3 FY'22?

Korn Ferry anticipates Q3 FY'22 fee revenue between $640 million and $660 million, with diluted EPS forecasted between $1.38 and $1.56.