Korn Ferry(US:KFY)2024-06-28 19:09Executive 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 $2.76 billion, a slight decrease from $2.84 billion in fiscal 2023[72] - Net income attributable to Korn Ferry for fiscal 2024 was $169.2 million, down from $209.5 million in fiscal 2023[72] - Adjusted EBITDA for fiscal 2024 was $408.2 million, with an Adjusted EBITDA margin of 14.8%, excluding $68.6 million in restructuring charges and other costs[72] - Fee revenue decreased by $72.7 million (3%) to $2,762.7 million in fiscal 2024 compared to $2,835.4 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 $366.7 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 $506.9 million in fiscal 2024, with an 11% decrease in engagements billed[74] - Executive Search EMEA fee revenue decreased by $2.5 million (1%) to $184.5 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 $85.9 million in fiscal 2024, with a 15% decrease in engagements billed[74] - Adjusted EBITDA decreased by $49.1 million (11%) to $408.2 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 $5.8 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 $11.2 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 $2,762,671 thousand, a decrease from $2,835,408 thousand in 2023 and an increase from $2,626,718 thousand in 2022[183] - Total revenue for 2024 was $2,795,505 thousand, compared to $2,863,836 thousand in 2023 and $2,643,455 thousand in 2022[183] - Net income attributable to Korn Ferry for 2024 was $169,154 thousand, down from $209,529 thousand in 2023 and $326,360 thousand in 2022[183] - Earnings per common share (diluted) for 2024 was $3.23, compared to $3.95 in 2023 and $5.98 in 2022[183] - Net income for 2024 decreased to $172.56 million from $213.05 million in 2023 and $330.85 million in 2022[185] - Comprehensive income attributable to Korn Ferry for 2024 was $154.25 million, down from $208.95 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 $68.6 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 $57.0 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 $9.5 million (4%) to $259.0 million in fiscal 2024, primarily due to lower impairment and integration costs[76] - Cost of services expense increased by $61.5 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 $30.7 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 $50.1 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 $9.7 million non-recurring tax benefit[81] - Cash used to pay income taxes decreased to $72.12 million in 2024 from $134.74 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 $1,067.9 million in 2023, with $393.8 million held in foreign locations[109] - Marketable securities totaled $254.4 million as of April 30, 2024, including $219.9 million in equity securities, with $202.5 million classified as non-current[109] - Cash provided by operating activities decreased to $284.0 million in fiscal 2024 from $343.9 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 $323.5 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 $283.96 million, down from $343.89 million in 2023 and $501.66 million in 2022[188] - Cash and cash equivalents at the end of 2024 increased to $941.01 million from $844.02 million in 2023[188] Debt and Financing - The company completed a private placement of $400.0 million Notes in December 2019, with a $4.5 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 $1,150.0 million senior secured credit facility, including a $650.0 million revolving credit facility and a $500.0 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 $0.37 per share in June 2024, reflecting a 270% increase over the period[108] - The company repurchased $52.5 million and $93.9 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 $54.39 million from $32.97 million in 2023 and $26.79 million in 2022[187] - Repurchases of common stock decreased to $53.16 million in 2024 from $95.46 million in 2023[188] Foreign Currency and Risk Management - Foreign currency losses recorded in fiscal 2024, 2023, and 2022 were $4.5 million, $2.0 million, and $1.2 million, respectively[116] - A 10% fluctuation in foreign exchange rates could result in a foreign exchange gain or loss of $11.9 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 $1.65 billion in 2023 and $1.55 billion in 2022[187] - Retained earnings as of April 30, 2024, were $1.43 billion, up from $1.31 billion in 2023 and $1.13 billion in 2022[187] - Accumulated other comprehensive loss as of April 30, 2024, was $107.67 million, compared to $92.76 million in 2023 and $92.19 million in 2022[187] - Noncontrolling interest as of April 30, 2024, was $4.27 million, down from $4.93 million in 2023 and $5.24 million in 2022[187] - Total assets grew to $3.68 billion in 2024, up from $3.57 billion in 2023[195] - Total liabilities increased slightly to $1.94 billion in 2024 compared to $1.92 billion in 2023[195] - Stockholders' equity rose to $1.74 billion in 2024 from $1.65 billion in 2023[195] - Retained earnings increased to $1.43 billion in 2024 from $1.31 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 $444.1 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 $198.0 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 $77.1 million as of April 30, 2023[86] - Borrowings against the CSV of COLI contracts were $77.0 million and $77.1 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 $35.43 million in 2023 and $28.36 million in 2022[187] - Purchase of stock in 2024 amounted to $63.22 million, compared to $116.14 million in 2023 and $117.30 million in 2022[187] - Issuance of stock in 2024 was $9.27 million, slightly higher than $8.45 million in 2023 and $7.69 million in 2022[187] Contractual Obligations - The company has contractual obligations totaling $745.7 million, including $400.0 million in long-term debt and $233.5 million in operating lease commitments[111]