Workflow
Korn Ferry(KFY) - 2024 Q4 - Annual Report
KFYKorn Ferry(KFY)2024-06-28 19:09
Transcript

Executive Search and Client Loyalty - Approximately 80% of executive searches in fiscal 2024 were for board level, chief executive, and other senior executive positions, with over 3,700 search engagement clients[66] - More than 85% of assignments in fiscal 2024 were for repeat clients from the previous three fiscal years, indicating strong client loyalty[66] - Over 75% of revenues were generated from clients utilizing multiple lines of the company's business[66] Financial Performance and Revenue - Fee revenue for fiscal 2024 was 2.76billion,aslightdecreasefrom2.76 billion, a slight decrease from 2.84 billion in fiscal 2023[72] - Net income attributable to Korn Ferry for fiscal 2024 was 169.2million,downfrom169.2 million, down from 209.5 million in fiscal 2023[72] - Adjusted EBITDA for fiscal 2024 was 408.2million,withanAdjustedEBITDAmarginof14.8408.2 million, with an Adjusted EBITDA margin of 14.8%, excluding 68.6 million in restructuring charges and other costs[72] - Fee revenue decreased by 72.7million(372.7 million (3%) to 2,762.7 million in fiscal 2024 compared to 2,835.4millioninfiscal2023,primarilyduetodecreaseddemandforpermanentplacementtalentacquisitionofferings[74]−Consultingfeerevenueincreasedby2,835.4 million in fiscal 2023, primarily due to decreased demand for permanent placement talent acquisition offerings[74] - Consulting fee revenue increased by 18.0 million (3%) to 695.0 million in fiscal 2024, driven by higher demand for organizational strategy and assessment & succession solutions[74] - Digital fee revenue increased by 12.0 million (3%) to 366.7millioninfiscal2024,drivenbyhigherdemandfororganizationalstrategy,leadershipdevelopment,andtotalrewardssales[74]−ExecutiveSearchNorthAmericafeerevenuedecreasedby366.7 million in fiscal 2024, driven by higher demand for organizational strategy, leadership development, and total rewards sales[74] - Executive Search North America fee revenue decreased by 55.2 million (10%) to 506.9millioninfiscal2024,withan11506.9 million in fiscal 2024, with an 11% decrease in engagements billed[74] - Executive Search EMEA fee revenue decreased by 2.5 million (1%) to 184.5millioninfiscal2024,witha7184.5 million in fiscal 2024, with a 7% decrease in engagements billed[74] - Executive Search Asia Pacific fee revenue decreased by 9.7 million (10%) to 85.9millioninfiscal2024,witha1585.9 million in fiscal 2024, with a 15% decrease in engagements billed[74] - Adjusted EBITDA decreased by 49.1 million (11%) to 408.2millioninfiscal2024comparedto408.2 million in fiscal 2024 compared to 457.3 million in fiscal 2023, driven by lower fee revenue and higher cost of services, partially offset by reduced compensation and benefits expenses and increased other income from marketable securities[79] - Consulting Adjusted EBITDA increased by 5.8million(55.8 million (5%) to 114.3 million in fiscal 2024, driven by higher fee revenue, partially offset by increased compensation and benefits expenses and cost of services[79] - Digital Adjusted EBITDA increased by 11.2million(1111.2 million (11%) to 108.7 million in fiscal 2024, driven by higher fee revenue and lower compensation and benefits expenses, partially offset by increased cost of services[79] - The company's fee revenue for 2024 was 2,762,671thousand,adecreasefrom2,762,671 thousand, a decrease from 2,835,408 thousand in 2023 and an increase from 2,626,718thousandin2022[183]−Totalrevenuefor2024was2,626,718 thousand in 2022[183] - Total revenue for 2024 was 2,795,505 thousand, compared to 2,863,836thousandin2023and2,863,836 thousand in 2023 and 2,643,455 thousand in 2022[183] - Net income attributable to Korn Ferry for 2024 was 169,154thousand,downfrom169,154 thousand, down from 209,529 thousand in 2023 and 326,360thousandin2022[183]−Earningspercommonshare(diluted)for2024was326,360 thousand in 2022[183] - Earnings per common share (diluted) for 2024 was 3.23, compared to 3.95in2023and3.95 in 2023 and 5.98 in 2022[183] - Net income for 2024 decreased to 172.56millionfrom172.56 million from 213.05 million in 2023 and 330.85millionin2022[185]−ComprehensiveincomeattributabletoKornFerryfor2024was330.85 million in 2022[185] - Comprehensive income attributable to Korn Ferry for 2024 was 154.25 million, down from 208.95millionin2023and208.95 million in 2023 and 285.99 million in 2022[185] Workforce and Restructuring - The company initiated a workforce reduction plan affecting approximately 8% of employees, resulting in 68.6millioninrestructuringchargesforfiscal2024[68]−Thecompanyrecordedrestructuringchargesof68.6 million in restructuring charges for fiscal 2024[68] - The company recorded restructuring charges of 68.6 million in fiscal 2024 to eliminate excess capacity due to macroeconomic challenges[78] Expenses and Cost Management - Compensation and benefits expense decreased by 57.0million(357.0 million (3%) to 1,844.2 million in fiscal 2024, driven by an 8% decrease in average headcount[75] - General and administrative expenses decreased by 9.5million(49.5 million (4%) to 259.0 million in fiscal 2024, primarily due to lower impairment and integration costs[76] - Cost of services expense increased by 61.5million(2661.5 million (26%) to 300.0 million in fiscal 2024, driven by higher interim services from acquired companies[77] Income and Taxes - Other income, net increased to 30.7millioninfiscal2024from30.7 million in fiscal 2024 from 5.3 million in fiscal 2023, primarily due to greater gains from the increase in the fair value of marketable securities[80] - The provision for income tax decreased to 50.1millioninfiscal2024from50.1 million in fiscal 2024 from 82.7 million in fiscal 2023, reflecting a lower effective tax rate of 22.5% compared to 28.0%, partly due to a 9.7millionnon−recurringtaxbenefit[81]−Cashusedtopayincometaxesdecreasedto9.7 million non-recurring tax benefit[81] - Cash used to pay income taxes decreased to 72.12 million in 2024 from 134.74millionin2023[188]CashFlowandLiquidity−Cashandcashequivalentsincreasedto134.74 million in 2023[188] Cash Flow and Liquidity - Cash and cash equivalents increased to 1,195.4 million as of April 30, 2024, compared to 1,067.9millionin2023,with1,067.9 million in 2023, with 393.8 million held in foreign locations[109] - Marketable securities totaled 254.4millionasofApril30,2024,including254.4 million as of April 30, 2024, including 219.9 million in equity securities, with 202.5millionclassifiedasnon−current[109]−Cashprovidedbyoperatingactivitiesdecreasedto202.5 million classified as non-current[109] - Cash provided by operating activities decreased to 284.0 million in fiscal 2024 from 343.9millioninfiscal2023,primarilyduetolowercashinflows[109]−Cashusedininvestingactivitiesdecreasedto343.9 million in fiscal 2023, primarily due to lower cash inflows[109] - Cash used in investing activities decreased to 53.8 million in fiscal 2024 from 323.5millioninfiscal2023,mainlyduetonoacquisitionsin2024comparedto323.5 million in fiscal 2023, mainly due to no acquisitions in 2024 compared to 254.8 million spent in 2023[109] - Net cash provided by operating activities in 2024 was 283.96million,downfrom283.96 million, down from 343.89 million in 2023 and 501.66millionin2022[188]−Cashandcashequivalentsattheendof2024increasedto501.66 million in 2022[188] - Cash and cash equivalents at the end of 2024 increased to 941.01 million from 844.02millionin2023[188]DebtandFinancing−Thecompanycompletedaprivateplacementof844.02 million in 2023[188] Debt and Financing - The company completed a private placement of 400.0 million Notes in December 2019, with a 4.5milliondiscount,maturingDecember15,2027,andused4.5 million discount, maturing December 15, 2027, and used 276.9 million to repay prior revolving credit facility[108] - The company amended its Credit Agreement in June 2022, extending the maturity date to June 24, 2027, and established a 1,150.0millionseniorsecuredcreditfacility,includinga1,150.0 million senior secured credit facility, including a 650.0 million revolving credit facility and a 500.0milliondelayeddrawtermloanfacility[108]−NoamountswereoutstandingundertheCreditFacilitiesasofApril30,2024[117]−InterestratesforloansundertheAmendedCreditAgreementfluctuatebetweenTermSOFRplus1.125500.0 million delayed draw term loan facility[108] - No amounts were outstanding under the Credit Facilities as of April 30, 2024[117] - Interest rates for loans under the Amended Credit Agreement fluctuate between Term SOFR plus 1.125% to 2.00% per annum[117] - Quarterly commitment fees on the unused Revolver range from 0.175% to 0.300% per annum based on the consolidated net leverage ratio[117] Shareholder Returns and Stock Repurchases - The company increased its quarterly dividend from 0.10 per share in 2014 to 0.37pershareinJune2024,reflectinga2700.37 per share in June 2024, reflecting a 270% increase over the period[108] - The company repurchased 52.5 million and 93.9millionofitsstockduringfiscal2024and2023,respectively,with93.9 million of its stock during fiscal 2024 and 2023, respectively, with 182.7 million remaining available for repurchases as of April 30, 2024[108][109] - Dividends paid to shareholders in 2024 increased to 54.39millionfrom54.39 million from 32.97 million in 2023 and 26.79millionin2022[187]−Repurchasesofcommonstockdecreasedto26.79 million in 2022[187] - Repurchases of common stock decreased to 53.16 million in 2024 from 95.46millionin2023[188]ForeignCurrencyandRiskManagement−Foreigncurrencylossesrecordedinfiscal2024,2023,and2022were95.46 million in 2023[188] Foreign Currency and Risk Management - Foreign currency losses recorded in fiscal 2024, 2023, and 2022 were 4.5 million, 2.0million,and2.0 million, and 1.2 million, respectively[116] - A 10% fluctuation in foreign exchange rates could result in a foreign exchange gain or loss of 11.9millionbasedonexposedbalancesasofApril30,2024[116]−Thecompanyutilizesforeigncurrencyforwardcontractstomitigateforeignexchangerisks,notfortradingorhedgingpurposes[116]−Thecompany′sexposuretoforeigncurrencyexchangeratesinvolves13majorcurrencies,includingtheU.S.Dollar,Euro,andJapaneseYen[116]−Thecompany′sforeignsubsidiaries′operationsaremeasuredinlocalcurrencies,withassetsandliabilitiestranslatedintoU.S.dollarsatreportingperiod−endrates[116]−Thecompany′sforeigncurrencyriskmanagementprogramprimarilyfocusesonoffsettingrisksassociatedwithcurrencyexposures[116]−Foreigncurrencyforwardcontractsareusedtooffsetrisksfromforeigncurrencyexposures,withfairvaluechangesrecordedintheconsolidatedstatementsofincome[144]AccountingandFinancialControls−Thecompany′sdisclosurecontrolsandprocedureswereeffectiveasofApril30,2024,withnomaterialchangesininternalcontroloverfinancialreportingduringthefourthfiscalquarter[93]−Thecompany′sinternalcontroloverfinancialreportingwaseffectiveasofApril30,2024,withnomaterialweaknessesidentified[137]−Thecompanyadoptednewaccountingstandardsinfiscal2023and2024,withnomaterialimpactonconsolidatedfinancialstatements[113][114][115]−Thecompany′sexpectedcreditlossallowanceforaccountsreceivableisbasedonhistoricalcollectionexperience,currentandfutureeconomicconditions,andcustomeraccountstatus[163]−Revenuerecognitionforconsultingservicesisbasedontotalhoursincurredasapercentageoftotalestimatedhoursatcompletion[173]−Digitalfeerevenueisrecognizedasservicesaredeliveredandthecompanyhasalegallyenforceablerighttopayment[173]−Executiveandprofessionalsearchfeerevenueisgenerallyone−thirdoftheestimatedfirst−yearcashcompensationoftheplacedcandidate[173]−RPOfeerevenueisrecognizedovertheperiodthattherelatedrecruitingservicesareperformed,withbothfixedandvariablefees[173]BalanceSheetandEquity−Totalstockholders′equityasofApril30,2024,was11.9 million based on exposed balances as of April 30, 2024[116] - The company utilizes foreign currency forward contracts to mitigate foreign exchange risks, not for trading or hedging purposes[116] - The company's exposure to foreign currency exchange rates involves 13 major currencies, including the U.S. Dollar, Euro, and Japanese Yen[116] - The company's foreign subsidiaries' operations are measured in local currencies, with assets and liabilities translated into U.S. dollars at reporting period-end rates[116] - The company's foreign currency risk management program primarily focuses on offsetting risks associated with currency exposures[116] - Foreign currency forward contracts are used to offset risks from foreign currency exposures, with fair value changes recorded in the consolidated statements of income[144] Accounting and Financial Controls - The company's disclosure controls and procedures were effective as of April 30, 2024, with no material changes in internal control over financial reporting during the fourth fiscal quarter[93] - The company's internal control over financial reporting was effective as of April 30, 2024, with no material weaknesses identified[137] - The company adopted new accounting standards in fiscal 2023 and 2024, with no material impact on consolidated financial statements[113][114][115] - The company's expected credit loss allowance for accounts receivable is based on historical collection experience, current and future economic conditions, and customer account status[163] - Revenue recognition for consulting services is based on total hours incurred as a percentage of total estimated hours at completion[173] - Digital fee revenue is recognized as services are delivered and the company has a legally enforceable right to payment[173] - Executive and professional search fee revenue is generally one-third of the estimated first-year cash compensation of the placed candidate[173] - RPO fee revenue is recognized over the period that the related recruiting services are performed, with both fixed and variable fees[173] Balance Sheet and Equity - Total stockholders' equity as of April 30, 2024, was 1.74 billion, compared to 1.65billionin2023and1.65 billion in 2023 and 1.55 billion in 2022[187] - Retained earnings as of April 30, 2024, were 1.43billion,upfrom1.43 billion, up from 1.31 billion in 2023 and 1.13billionin2022[187]−AccumulatedothercomprehensivelossasofApril30,2024,was1.13 billion in 2022[187] - Accumulated other comprehensive loss as of April 30, 2024, was 107.67 million, compared to 92.76millionin2023and92.76 million in 2023 and 92.19 million in 2022[187] - Noncontrolling interest as of April 30, 2024, was 4.27million,downfrom4.27 million, down from 4.93 million in 2023 and 5.24millionin2022[187]−Totalassetsgrewto5.24 million in 2022[187] - Total assets grew to 3.68 billion in 2024, up from 3.57billionin2023[195]−Totalliabilitiesincreasedslightlyto3.57 billion in 2023[195] - Total liabilities increased slightly to 1.94 billion in 2024 compared to 1.92billionin2023[195]−Stockholders′equityroseto1.92 billion in 2023[195] - Stockholders' equity rose to 1.74 billion in 2024 from 1.65billionin2023[195]−Retainedearningsincreasedto1.65 billion in 2023[195] - Retained earnings increased to 1.43 billion in 2024 from 1.31billionin2023[195]MarketableSecuritiesandInvestments−Thecompany′smarketablesecuritiesarerecordedatfairvalueandclassifiedaseitherequitysecuritiesoravailable−for−saledebtsecurities[165]−Nocreditlosswasrecognizedforthecompany′savailable−for−saledebtsecuritiesduringfiscal2024,2023,and2022[165]−Thecompanyheldassetsmeasuredatfairvalue,includingcashequivalents,accountsreceivable,marketablesecurities,andforeigncurrencyforwardcontracts,withfairvaluesbasedonquotedmarketpricesorthird−partyvaluations[143]−CashequivalentsasofApril30,2024,includedmoneymarketfundsandcommercialpaperwithinitialmaturitiesoflessthan90days[164]COLIContractsandDeathBenefits−Totaldeathbenefitspayable,netofloansunderCOLIcontracts,were1.31 billion in 2023[195] Marketable Securities and Investments - The company's marketable securities are recorded at fair value and classified as either equity securities or available-for-sale debt securities[165] - No credit loss was recognized for the company's available-for-sale debt securities during fiscal 2024, 2023, and 2022[165] - The company held assets measured at fair value, including cash equivalents, accounts receivable, marketable securities, and foreign currency forward contracts, with fair values based on quoted market prices or third-party valuations[143] - Cash equivalents as of April 30, 2024, included money market funds and commercial paper with initial maturities of less than 90 days[164] COLI Contracts and Death Benefits - Total death benefits payable, net of loans under COLI contracts, were 447.3 million as of April 30, 2024, compared to 444.1millionasofApril30,2023[86]−ThenetcashvalueofCOLIpolicieswas444.1 million as of April 30, 2023[86] - The net cash value of COLI policies was 219.0 million as of April 30, 2024, compared to 198.0millionasofApril30,2023[86]−TotaloutstandingborrowingsagainsttheCSVofCOLIcontractswere198.0 million as of April 30, 2023[86] - Total outstanding borrowings against the CSV of COLI contracts were 77.0 million as of April 30, 2024, compared to 77.1millionasofApril30,2023[86]−BorrowingsagainsttheCSVofCOLIcontractswere77.1 million as of April 30, 2023[86] - Borrowings against the CSV of COLI contracts were 77.0 million and 77.1millionasofApril30,2024,and2023,respectively[117]Stock−BasedCompensationandEquityTransactions−Stock−basedcompensationfor2024was77.1 million as of April 30, 2024, and 2023, respectively[117] Stock-Based Compensation and Equity Transactions - Stock-based compensation for 2024 was 39.08 million, up from 35.43millionin2023and35.43 million in 2023 and 28.36 million in 2022[187] - Purchase of stock in 2024 amounted to 63.22million,comparedto63.22 million, compared to 116.14 million in 2023 and 117.30millionin2022[187]−Issuanceofstockin2024was117.30 million in 2022[187] - Issuance of stock in 2024 was 9.27 million, slightly higher than 8.45millionin2023and8.45 million in 2023 and 7.69 million in 2022[187] Contractual Obligations - The company has contractual obligations totaling 745.7million,including745.7 million, including 400.0 million in long-term debt and $233.5 million in operating lease commitments[111]