Korn Ferry Announces Second Quarter Fiscal 2024 Results of Operations

Rhea-AI Summary

Korn Ferry (NYSE: KFY) reported Q2 FY'24 fee revenue of $704.0 million, a decrease of 3% (5% at constant currency) from Q2 FY'23. The net loss was $1.7 million, including a $52.8 million charge. The company increased its regular quarterly cash dividend by 83% to $0.33 per share. The operating margin was 3.2% in Q2 FY'24.

Positive

• Continued fee revenue resilience in both Consulting and Digital, with each business reporting year-over-year growth of almost 3% in Q2 FY'24.
• Strong new business wins in RPO totaling $141 million with $88 million in renewals and $53 million in new logos.
• Digital achieved all-time record revenue at constant currency during the quarter.

Negative

• Fee revenue decreased due to decreases in permanent placement talent acquisition offerings driven by global economic factors.
• Operating margin was 3.2% in Q2 FY'24, compared to 16.4% in the year-ago quarter.

Highlights

• Korn Ferry reports Q2 FY'24 fee revenue of $704.0 million, a decrease of 3% (5% at constant currency) from Q2 FY'23.
• Net loss attributable to Korn Ferry was $1.7 million in Q2FY'24, which includes a $52.8 million charge, net of tax, primarily relating to restructuring actions taken to realign our workforce due to the current challenging macroeconomic business environment, while diluted loss per share and adjusted diluted earnings per share were $0.04 and $0.97 in Q2 FY'24, respectively.
• Operating income was $22.8 million (operating margin of 3.2%) and Adjusted EBITDA was $98.5 million (Adjusted EBITDA margin of 14.0%), in Q2 FY'24.
• Continued fee revenue resilience in both Consulting and Digital, with each business reporting year-over-year growth of almost 3% in Q2 FY'24.
• Strong new business wins in RPO totaling $141 million with $88 million in renewals and $53 million in new logos.
• On December 5, 2023, the Company increased its regular quarterly cash dividend by 83% to $0.33 per share, which is payable on January 12, 2024 to stockholders of record on December 21, 2023.

LOS ANGELES--(BUSINESS WIRE)-- Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced second quarter fee revenue of $704.0 million. In addition, second quarter diluted loss per share was $0.04 and adjusted diluted earnings per share was $0.97. Diluted earnings per share includes a $52.8 million, or $1.01 per share, net of tax charge, primarily relating to restructuring actions taken to realign our workforce due to the current challenging macroeconomic business environment that is excluded from adjusted earnings per share.

“During the fiscal second quarter we generated $704 million in fee revenue, down 3% year-over-year. Despite a persistent, uneven economic environment, earnings and profitability held steady sequentially as we delivered $99 million of Adjusted EBITDA, at a 14% margin,” said Gary D. Burnison, CEO, Korn Ferry.

“I’m very proud of our organization and how we continue to develop increasingly relevant solutions in a rapidly changing world. In particular, our Consulting and Digital businesses now generate almost 40% of our top line, with Digital achieving all-time record revenue at constant currency during the quarter. Throughout history, change is a catalyst for opportunity. It’s times like these when great companies make their best moves – and Korn Ferry is a great company.”

Selected Financial Results (dollars in millions, except per share amounts) (a)
	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Fee revenue	$	704.0			$	727.8			$	1,403.2			$	1,423.8
Total revenue	$	712.4			$	735.7			$	1,418.7			$	1,438.9
Operating income	$	22.8			$	119.6			$	79.6			$	231.2
Operating margin		3.2	%			16.4	%			5.7	%			16.2	%
Net (loss) income attributable to Korn Ferry	$	(1.7	)		$	73.5			$	44.9			$	150.8
Basic (loss) earnings per share	$	(0.04	)		$	1.39			$	0.86			$	2.85
Diluted (loss) earnings per share	$	(0.04	)		$	1.38			$	0.86			$	2.83

Adjusted Results (b):	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Adjusted EBITDA	$	98.5			$	131.1			$	194.2			$	263.3
Adjusted EBITDA margin		14.0	%			18.0	%			13.8	%			18.5	%
Adjusted net income attributable to Korn Ferry	$	51.0			$	76.1			$	102.5			$	156.1
Adjusted basic earnings per share	$	0.98			$	1.44			$	1.97			$	2.95
Adjusted diluted earnings per share	$	0.97			$	1.43			$	1.96			$	2.93

(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 restructuring charges, net 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’24				FY’23				FY’24				FY’23
Integration/acquisition costs	$	5.0			$	3.4			$	9.2			$	7.0
Impairment of fixed assets	$	1.5			$	—			$	1.6			$	—
Impairment of right of use assets	$	—			$	—			$	1.6			$	—
Restructuring charges, net	$	63.5			$	—			$	63.9			$	—

The Company reported fee revenue in Q2 FY'24 of $704.0 million, a year-over-year decrease of 3% (down 5% on a constant currency basis). Fee revenue decreased primarily due to decreases in our permanent placement talent acquisition offerings, which includes Executive Search, Professional Search Permanent Placement and RPO, due to a decline in demand driven by global economic and other factors. This was partially offset by increases in the Interim portion of Professional Search & Interim, resulting from the acquisition of Salo (“the acquisition”) which was effective February 1, 2023, and increases in fee revenue in Consulting and Digital.

Operating margin was 3.2% in Q2 FY'24, compared to 16.4% in the year-ago quarter. Adjusted EBITDA margin was 14.0% in Q2 FY'24, compared to 18.0% in the year-ago quarter. Net loss attributable to Korn Ferry was $1.7 million in Q2 FY'24, compared to net income attributable to Korn Ferry of $73.5 million in Q2 FY'23 and Adjusted EBITDA was $98.5 million in Q2 FY'24 compared to $131.1 million in Q2 FY'23.

Operating income decreased primarily due to 1) restructuring charges, net recorded in Q2 FY'24 in order to align our workforce to eliminate excess capacity resulting from the challenging macroeconomic business environment, 2) the decrease in fee revenue discussed above, and 3) higher cost of services expense associated with the recently acquired Interim businesses, partially offset by a decrease in compensation and benefits expense driven by reduced headcount and other cost control measures. Net income attributable to Korn Ferry decreased due to the same factors discussed above, partially offset by lower income tax provision.

Adjusted EBITDA decreased due to the same factors discussed above, with the exception of restructuring charges.

Results by Line of Business Selected Consulting Data (dollars in millions) (a)
	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Fee revenue	$	177.8			$	173.1			$	345.9			$	339.6
Total revenue	$	181.0			$	175.8			$	351.7			$	344.6
Ending number of consultants and execution staff (b)		1,780				1,899				1,780				1,899
Hours worked in thousands (c)		431				467				858				926
Average bill rate (d)	$	413			$	371			$	403			$	367
Adjusted Results (e):	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Adjusted EBITDA	$	28.9			$	31.1			$	54.1			$	60.6
Adjusted EBITDA margin		16.3	%			18.0	%			15.6	%			17.9	%

(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’24				FY’23				FY’24				FY’23
Impairment of right of use assets	$	—			$	—			$	0.6			$	—
Restructuring charges, net	$	17.6			$	—			$	17.8			$	—

Fee revenue was $177.8 million in Q2 FY'24 compared to $173.1 million in Q2 FY'23, an increase of $4.7 million or 3% (up 1% on a constant currency basis). The increase in Consulting fee revenue was driven by growth in our organizational strategy and assessment & succession solutions.

Adjusted EBITDA was $28.9 million in Q2 FY'24 with an Adjusted EBITDA margin of 16.3% compared to Adjusted EBITDA of $31.1 million with an Adjusted EBITDA margin of 18.0%, in the year-ago quarter. This decrease in Adjusted EBITDA resulted primarily from increases in compensation and benefits expense and cost of services, partially offset by an increase in Consulting fee revenue.

Selected Digital Data (dollars in millions) (a)
	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Fee revenue	$	97.1			$	94.3			$	185.1			$	178.1
Total revenue	$	97.2			$	94.6			$	185.2			$	178.4
Ending number of consultants		284				365				284				365
Subscription & License fee revenue	$	32.4			$	28.9			$	64.9			$	58.5
Adjusted Results (b):	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Adjusted EBITDA	$	29.0			$	27.5			$	53.3			$	51.7
Adjusted EBITDA margin		29.9	%			29.2	%			28.8	%			29.0	%

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

	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Impairment of fixed assets	$	1.5			$	—			$	1.5			$	—
Restructuring charges, net	$	8.9			$	—			$	8.9			$	—

Fee revenue was $97.1 million in Q2 FY'24 compared to $94.3 million in Q2 FY'23, an increase of $2.8 million or 3% (up 1% on a constant currency basis). The increase was driven by increases in total rewards, organizational strategy and sales effectiveness offerings.

Adjusted EBITDA was $29.0 million in Q2 FY'24 with an Adjusted EBITDA margin of 29.9% compared to $27.5 million and 29.2%, respectively, in the year-ago quarter.

Selected Executive Search Data (a) (dollars in millions) (b)
	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Fee revenue	$	203.0			$	218.4			$	408.2			$	451.1
Total revenue	$	204.8			$	220.4			$	412.4			$	454.9
Ending number of consultants		586				621				586				621
Average number of consultants		599				620				594				604
Engagements billed		3,488				4,054				5,555				6,386
New engagements (c)		1,479				1,637				2,982				3,319
Adjusted Results (d):	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Adjusted EBITDA	$	39.7			$	54.5			$	82.2			$	116.7
Adjusted EBITDA margin		19.6	%			25.0	%			20.1	%			25.9	%

(a)		Executive Search is the sum of the individual Executive Search Reporting Segments described in our annual and quarterly reporting on Forms 10-K and 10-Q 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’24				FY’23				FY’24				FY’23
Impairment of fixed assets	$	—			$	—			$	0.1			$	—
Impairment of right of use assets	$	—			$	—			$	0.9			$	—
Restructuring charges, net	$	25.7			$	—			$	25.9			$	—

Fee revenue was $203.0 million and $218.4 million in Q2 FY'24 and Q2 FY'23, respectively, a year-over-year decrease of $15.4 million or 7% (down 9% on a constant currency basis). The decrease in fee revenue was primarily driven by a decline in executive search activity, resulting from the uncertain and challenging economic environment.

Adjusted EBITDA was $39.7 million in Q2 FY'24 with an Adjusted EBITDA margin of 19.6% compared to Adjusted EBITDA of $54.5 million and an Adjusted EBITDA margin of 25.0%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was primarily due to the decrease in fee revenue discussed above.

Selected Professional Search & Interim Data (dollars in millions) (a)
	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Fee revenue	$	138.4			$	134.7			$	280.6			$	233.7
Total revenue	$	139.5			$	135.8			$	282.5			$	235.8
Permanent Placement:
Fee revenue	$	56.5			$	79.5			$	114.8			$	153.6
Engagements billed (b)		2,018				3,006				3,455				4,709
New engagements (c)		1,184				1,816				2,419				3,662
Ending number of consultants (d)		383				527				383				527
Interim:
Fee revenue	$	81.9			$	55.3			$	165.8			$	80.1
Average bill rate (e)	$	126			$	107			$	124			$	111
Average weekly billable consultants (f)		1,336				1,111				1,387				787
Adjusted Results (g):	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Adjusted EBITDA	$	25.6			$	32.5			$	50.0			$	61.6
Adjusted EBITDA margin		18.5	%			24.1	%			17.8	%			26.4	%

(a)		Numbers may not total due to rounding.
(b)		Represents engagements billed for professional search.
(c)		Represents new engagements opened for professional search in the respective period.
(d)		Represents number of employees originating professional search.
(e)		Fee revenue from interim divided by the number of hours worked by consultants.
(f)		The number of billable consultants based on a weekly average in the respective period.
(g)		Adjusted results exclude the following:

	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Integration/acquisition costs	$	4.9			$	2.5			$	8.9			$	5.0
Restructuring charges, net	$	3.8			$	—			$	3.8			$	—

Fee revenue was $138.4 million in Q2 FY'24, an increase of $3.7 million or 3% (up 2% on a constant currency basis) compared to the year-ago quarter. The increase in fee revenue was mainly driven by additional fee revenue from the acquisition, partially offset by a decrease in permanent placement fee revenue.

Adjusted EBITDA was $25.6 million in Q2 FY'24 with an Adjusted EBITDA margin of 18.5% compared to $32.5 million and 24.1%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to a change in the revenue mix, with increases in fee revenue from the acquisition, partially offset by the decreases in permanent placement fee revenue.

Selected Recruitment Process Outsourcing ("RPO") Data (dollars in millions) (a)
	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Fee revenue	$	87.7			$	107.3			$	183.4			$	221.2
Total revenue	$	90.1			$	109.1			$	186.9			$	225.2
Remaining revenue under contract (b)	$	680.5			$	922.8			$	680.5			$	922.8
RPO new business (c)	$	140.9			$	290.3			$	189.1			$	438.7
Adjusted Results (d):	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Adjusted EBITDA	$	8.9			$	16.0			$	19.3			$	33.7
Adjusted EBITDA margin		10.1	%			14.9	%			10.5	%			15.2	%

(a)		Numbers may not total due to rounding.
(b)		Estimated fee revenue associated with signed contracts for which revenue has not yet been recognized.
(c)		Estimated total value of a contract at the point of execution of the contract.
(d)		Adjusted results exclude the following:

	Second Quarter								Year to Date
	FY’24				FY’23				FY’24				FY’23
Impairment of right of use assets	$	—			$	—			$	0.1			$	—
Restructuring charges, net	$	7.2			$	—			$	7.2			$	—

Fee revenue was $87.7 million in Q2 FY'24, a decrease of $19.6 million or 18% (down 20% on a constant currency basis) compared to the year-ago quarter. RPO fee revenue decreased due to reduced demand for the number of placements being requested by existing clients as a result of the challenging economic environment.

Adjusted EBITDA was $8.9 million in Q2 FY'24 with an Adjusted EBITDA margin of 10.1% compared to $16.0 million and 14.9%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was primarily due to the decline in demand and fee revenue driven by global economic factors, partially offset by a decrease in compensation and benefit expenses due in large part to a decrease in the average headcount compared to the year-ago quarter.

Outlook

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:

• Q3 FY’24 fee revenue is expected to be in the range of $645 million and $665 million; and
• Q3 FY’24 diluted earnings per share is expected to range between to $0.87 to $0.95.

On a consolidated adjusted basis:

• Q3 FY’24 adjusted diluted earnings per share is expected to be in the range from $0.96 to $1.02.

					Q3 FY’24 Earnings Per Share Outlook
					Low				High
Consolidated diluted earnings per share					$	0.87			$	0.95
Integration/acquisition and restructuring charges						0.13				0.09
Tax Rate Impact						(0.04	)			(0.02	)
Consolidated adjusted diluted earnings per share (1)					$	0.96			$	1.02

(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, SVP Business Development & Analytics Gregg Kvochak and VP Investor Relations Tiffany Louder. 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, including statements relating to expected demand for and relevance of our products and services, our workforce reduction plan, 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. 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 global and local political and or economic developments in or affecting countries where we have operations, such as inflation, interest rates, 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, our ability to maintain 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 government 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, develop and respond to new technology, including artificial intelligence, 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 Salo, resulting organizational changes, our indebtedness, those relating to the ultimate magnitude and duration of any pandemic or outbreaks. For a detailed description of risks and uncertainties that could cause differences from our expectations, 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, net 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 1) costs we incurred to acquire and integrate a portion of our Professional Search & Interim business, 2) impairment of fixed assets primarily due to software impairment charge in our Digital segment, 3) impairment of right of use assets due to the decision to terminate and sublease some of our offices and 4) Restructuring charges, net to align workforce to the challenging macroeconomic business environment arising from persistent inflationary pressures, rising interest rates and global economic and geopolitical uncertainty. 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 OPERATIONS (in thousands, except per share amounts)
	Three Months Ended October 31,								Six Months Ended October 31,
		2023				2022				2023				2022
	(unaudited)
Fee revenue	$	704,003			$	727,849			$	1,403,192			$	1,423,752
Reimbursed out-of-pocket engagement expenses		8,444				7,870				15,517				15,115
Total revenue		712,447				735,719				1,418,709				1,438,867
Compensation and benefits		453,859				464,766				933,740				930,392
General and administrative expenses		65,737				65,086				131,654				129,543
Reimbursed expenses		8,444				7,870				15,517				15,115
Cost of services		78,512				61,257				155,702				99,249
Depreciation and amortization		19,554				17,093				38,566				33,322
Restructuring charges, net		63,525				—				63,946				—
Total operating expenses		689,631				616,072				1,339,125				1,207,621
Operating income		22,816				119,647				79,584				231,246
Other loss, net		(13,835	)			(9,048	)			(258	)			(8,273	)
Interest expense, net		(6,596	)			(7,098	)			(11,336	)			(14,710	)
Income before provision for income taxes		2,385				103,501				67,990				208,263
Income tax provision		2,341				28,886				20,761				55,112
Net income		44				74,615				47,229				153,151
Net income attributable to noncontrolling interest		(1,755	)			(1,074	)			(2,335	)			(2,363	)
Net (loss) income attributable to Korn Ferry	$	(1,711	)		$	73,541			$	44,894			$	150,788
(Loss) earnings per common share attributable to Korn Ferry:
Basic	$	(0.04	)		$	1.39			$	0.86			$	2.85
Diluted	$	(0.04	)		$	1.38			$	0.86			$	2.83
Weighted-average common shares outstanding:
Basic		51,328				51,868				51,131				51,820
Diluted		51,328				52,005				51,401				52,143
Cash dividends declared per share:	$	0.18			$	0.15			$	0.36			$	0.30

KORN FERRY AND SUBSIDIARIES FINANCIAL SUMMARY BY REPORTING SEGMENT (dollars in thousands) (unaudited)
	Three Months Ended October 31,											Six Months Ended October 31,
		2023				2022			% Change				2023				2022			% Change
Fee revenue:
Consulting	$	177,795			$	173,092			2.7	%		$	345,883			$	339,576			1.9	%
Digital		97,092				94,329			2.9	%			185,078				178,090			3.9	%
Executive Search:
North America		132,512				142,485			(7.0	)%			260,010				294,029			(11.6	%)
EMEA		43,098				44,645			(3.5	)%			89,874				91,701			(2.0	%)
Asia Pacific		19,304				23,408			(17.5	)%			43,843				49,789			(11.9	%)
Latin America		8,079				7,821			3.3	%			14,500				15,629			(7.2	%)
Total Executive Search (a)		202,993				218,359			(7.0	)%			408,227				451,148			(9.5	%)
Professional Search & Interim		138,384				134,743			2.7	%			280,563				233,690			20.1	%
RPO		87,739				107,326			(18.3	)%			183,441				221,248			(17.1	%)
Total fee revenue		704,003				727,849			(3.3	)%			1,403,192				1,423,752			(1.4	%)
Reimbursed out-of-pocket engagement expenses		8,444				7,870			7.3	%			15,517				15,115			2.7	%
Total revenue	$	712,447			$	735,719			(3.2	)%		$	1,418,709			$	1,438,867			(1.4	%)

(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, 2023				April 30, 2023
	(unaudited)
ASSETS
Cash and cash equivalents	$	620,836			$	844,024
Marketable securities		26,149				44,837
Receivables due from clients, net of allowance for doubtful accounts of $47,574 and $44,377 at October 31, 2023 and April 30, 2023, respectively		592,208				569,601
Income taxes and other receivables		66,073				67,512
Unearned compensation		62,533				63,476
Prepaid expenses and other assets		53,741				49,219
Total current assets		1,421,540				1,638,669
Marketable securities, non-current		196,860				179,040
Property and equipment, net		165,815				161,876
Operating lease right-of-use assets, net		122,621				142,690
Cash surrender value of company-owned life insurance policies, net of loans		202,094				197,998
Deferred income taxes		101,099				102,057
Goodwill		907,563				909,491
Intangible assets, net		101,423				114,426
Unearned compensation, non-current		119,357				103,607
Investments and other assets		22,589				24,590
Total assets	$	3,360,961			$	3,574,444
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	46,375			$	53,386
Income taxes payable		19,446				19,969
Compensation and benefits payable		327,129				532,934
Operating lease liability, current		42,774				45,821
Other accrued liabilities		328,395				324,150
Total current liabilities		764,119				976,260
Deferred compensation and other retirement plans		406,220				396,534
Operating lease liability, non-current		100,321				119,220
Long-term debt		396,565				396,194
Deferred tax liabilities		6,629				5,352
Other liabilities		26,607				27,879
Total liabilities		1,700,461				1,921,439
Stockholders' equity
Common stock: $0.01 par value, 150,000 shares authorized, 77,505 and 76,693 shares issued and 52,656 and 52,269 shares outstanding at October 31, 2023 and April 30, 2023, respectively		435,340				429,754
Retained earnings		1,336,686				1,311,081
Accumulated other comprehensive loss, net		(115,873	)			(92,764	)
Total Korn Ferry stockholders' equity		1,656,153				1,648,071
Noncontrolling interest		4,347				4,934
Total stockholders' equity		1,660,500				1,653,005
Total liabilities and stockholders' equity	$	3,360,961			$	3,574,444

KORN FERRY AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (dollars in thousands, except per share amounts) (unaudited)
	Three Months Ended October 31,								Six Months Ended October 31,
		2023				2022				2023				2022
Net (loss) income attributable to Korn Ferry	$	(1,711	)		$	73,541			$	44,894			$	150,788
Net income attributable to non-controlling interest		1,755				1,074				2,335				2,363
Net income		44				74,615				47,229				153,151
Income tax provision		2,341				28,886				20,761				55,112
Income before provision for income taxes		2,385				103,501				67,990				208,263
Other loss, net		13,835				9,048				258				8,273
Interest expense, net		6,596				7,098				11,336				14,710
Operating income		22,816				119,647				79,584				231,246
Depreciation and amortization		19,554				17,093				38,566				33,322
Other loss, net		(13,835	)			(9,048	)			(258	)			(8,273	)
Integration/acquisition costs (1)		5,030				3,411				9,158				7,016
Impairment of fixed assets (2)		1,452				—				1,575				—
Impairment of right of use assets (3)		—				—				1,629				—
Restructuring charges, net (4)		63,525				—				63,946				—
Adjusted EBITDA	$	98,542			$	131,103			$	194,200			$	263,311
Operating margin		3.2	%			16.4	%			5.7	%			16.2	%
Depreciation and amortization		2.8	%			2.3	%			2.7	%			2.4	%
Other loss, net		(1.9	)%			(1.2	)%			0.0	%			(0.6	)%
Integration/acquisition costs (1)		0.7	%			0.5	%			0.7	%			0.5	%
Impairment of fixed assets (2)		0.2	%			—	%			0.1	%			—	%
Impairment of right of use assets (3)		—	%			—	%			0.1	%			—	%
Restructuring charges, net (4)		9.0	%			—	%			4.5	%			—	%
Adjusted EBITDA margin		14.0	%			18.0	%			13.8	%			18.5	%
Net (loss) income attributable to Korn Ferry	$	(1,711	)		$	73,541			$	44,894			$	150,788
Integration/acquisition costs (1)		5,030				3,411				9,158				7,016
Impairment of fixed assets (2)		1,452				—				1,575				—
Impairment of right of use assets (3)		—				—				1,629				—
Restructuring charges, net (4)		63,525				—				63,946				—
Tax effect on the adjusted items (5)		(17,252	)			(812	)			(18,671	)			(1,705	)
Adjusted net income attributable to Korn Ferry	$	51,044			$	76,140			$	102,531			$	156,099
Basic (loss) earnings per common share	$	(0.04	)		$	1.39			$	0.86			$	2.85
Integration/acquisition costs (1)		0.10				0.07				0.18				0.13
Impairment of fixed assets (2)		0.03				—				0.03				—
Impairment of right of use assets (3)		—				—				0.03				—
Restructuring charges, net (4)		1.24				—				1.24				—
Tax effect on the adjusted items (5)		(0.35	)			(0.02	)			(0.37	)			(0.03	)
Adjusted basic earnings per share	$	0.98			$	1.44			$	1.97			$	2.95
Diluted (loss) earnings per common share	$	(0.04	)		$	1.38			$	0.86			$	2.83
Integration/acquisition costs (1)		0.10				0.07				0.18				0.13
Impairment of fixed assets (2)		0.03				—				0.03				—
Impairment of right of use assets (3)		—				—				0.03				—
Restructuring charges, net (4)		1.23				—				1.23				—
Tax effect on the adjusted items (5)		(0.35	)			(0.02	)			(0.37	)			(0.03	)
Adjusted diluted earnings per share	$	0.97			$	1.43			$	1.96			$	2.93

Explanation of Non-GAAP Adjustments
(1)		Costs associated with 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 primarily due to software impairment charge in our Digital segment.
(3)		Costs associated with impairment of right-of-use assets due to terminating and deciding to sublease some of our office leases.
(4)		Restructuring charges incurred to align our workforce to eliminate excess capacity resulting from the challenging macroeconomic business environment.
(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 GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED (unaudited)
	Three Months Ended October 31,
	2023															2022
	Fee revenue				Total revenue				Adjusted EBITDA				Adjusted EBITDA margin			Fee revenue				Total revenue				Adjusted EBITDA				Adjusted EBITDA margin
	(dollars in thousands)
Consulting	$	177,795			$	180,953			$	28,928			16.3	%		$	173,092			$	175,845			$	31,089			18.0	%
Digital		97,092				97,157				28,983			29.9	%			94,329				94,577				27,524			29.2	%
Executive Search:
North America		132,512				133,933				29,436			22.2	%			142,485				144,147				37,969			26.6	%
EMEA		43,098				43,315				5,619			13.0	%			44,645				44,919				8,081			18.1	%
Asia Pacific		19,304				19,460				3,875			20.1	%			23,408				23,523				5,834			24.9	%
Latin America		8,079				8,085				805			10.0	%			7,821				7,822				2,607			33.3	%
Total Executive Search		202,993				204,793				39,735			19.6	%			218,359				220,411				54,491			25.0	%
Professional Search & Interim		138,384				139,455				25,622			18.5	%			134,743				135,762				32,457			24.1	%
RPO		87,739				90,089				8,855			10.1	%			107,326				109,124				16,004			14.9	%
Corporate		—				—				(33,581	)						—				—				(30,462	)
Consolidated	$	704,003			$	712,447			$	98,542			14.0	%		$	727,849			$	735,719			$	131,103			18.0	%

	Six Months Ended October 31,
	2023															2022
	Fee revenue				Total revenue				Adjusted EBITDA				Adjusted EBITDA margin			Fee revenue				Total revenue				Adjusted EBITDA				Adjusted EBITDA margin
	(dollars in thousands)
Consulting	$	345,883			$	351,746			$	54,108			15.6	%		$	339,576			$	344,580			$	60,639			17.9	%
Digital		185,078				185,169				53,308			28.8	%			178,090				178,392				51,702			29.0	%
Executive Search:
North America		260,010				263,346				58,192			22.4	%			294,029				297,031				81,718			27.8	%
EMEA		89,874				90,450				11,257			12.5	%			91,701				92,248				16,596			18.1	%
Asia Pacific		43,843				44,070				10,190			23.2	%			49,789				49,975				13,185			26.5	%
Latin America		14,500				14,507				2,546			17.6	%			15,629				15,631				5,224			33.4	%
Total Executive Search		408,227				412,373				82,185			20.1	%			451,148				454,885				116,723			25.9	%
Professional Search & Interim		280,563				282,524				49,951			17.8	%			233,690				235,814				61,618			26.4	%
RPO		183,441				186,897				19,326			10.5	%			221,248				225,196				33,713			15.2	%
Corporate		—				—				(64,678	)						—				—				(61,084	)
Consolidated	$	1,403,192			$	1,418,709			$	194,200			13.8	%		$	1,423,752			$	1,438,867			$	263,311			18.5	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231129536853/en/

Investor Relations:

Tiffany Louder, (214) 310-8407

Media:

Dan Gugler, (310) 226-2645

Source: Korn Ferry

FAQ

What is Korn Ferry's Q2 FY'24 fee revenue?

Korn Ferry reported Q2 FY'24 fee revenue of $704.0 million, a decrease of 3% (5% at constant currency) from Q2 FY'23.

What was the net loss in Q2 FY'24?

The net loss attributable to Korn Ferry was $1.7 million in Q2 FY'24, which includes a $52.8 million charge, net of tax.

What was the operating margin in Q2 FY'24?

The operating margin was 3.2% in Q2 FY'24.

What was the change in fee revenue for the Consulting and Digital businesses in Q2 FY'24?

Both Consulting and Digital reported year-over-year growth of almost 3% in Q2 FY'24.

What was the change in fee revenue for the RPO business in Q2 FY'24?

RPO reported strong new business wins totaling $141 million with $88 million in renewals and $53 million in new logos.