Korn Ferry(KFY) - 2025 Q4 - Annual Report

Part I Business Korn Ferry is a global consulting firm specializing in talent and organizational performance across five main solution areas Fiscal 2025 Financial Highlights | Metric | Value (USD Million) | | :--- | :--- | | Fee Revenue | $2,730.1 | | Net Income Attributable to Korn Ferry | $246.1 | | Net Income Margin | 9.0% | | Adjusted EBITDA | $463.9 | | Adjusted EBITDA Margin | 17.0% | | Diluted Earnings Per Share | $4.60 | - The Marquee and Diamond Accounts Program, covering 350 key clients, generated approximately 39% of consolidated fee revenue in fiscal 2025[29] - Cross-solution referrals accounted for approximately 25% of consolidated fee revenue in fiscal 2025, demonstrating successful collaboration across its business segments[30] - The company operates through five solution areas: Consulting, Digital, Executive Search, Professional Search & Interim, and RPO, corresponding to eight reportable segments[37] Consulting The Consulting segment offers talent strategies and organizational solutions, serving over 4,300 clients in fiscal 2025 Consulting FY2025 Performance | Metric | Value | | :--- | :--- | | Fee Revenue | $662.7 million | | Adjusted EBITDA | $115.5 million | | Adjusted EBITDA Margin | 17.4% | | Year-End Staff | 1,599 | | Average Bill Rate | $439 per hour | - In fiscal 2025, the Consulting segment supported over 4,300 clients, and 28% of its fee revenue was referred from other Korn Ferry solutions[43] Digital The Digital segment provides data-driven talent management tools via the Korn Ferry Talent Suite®, serving over 7,800 clients Digital FY2025 Performance | Metric | Value | | :--- | :--- | | Fee Revenue | $363.5 million | | Subscription/License Revenue | $137.7 million (+5.1% YoY) | | Adjusted EBITDA | $112.7 million | | Adjusted EBITDA Margin | 31.0% | - The Digital segment engaged with more than 7,800 clients in fiscal 2025, with 33% of its fee revenue referred from other company solutions[45] Executive Search The Executive Search segment recruits board-level and senior executive talent, opening over 6,300 new engagements Executive Search FY2025 Performance | Metric | Value | | :--- | :--- | | Fee Revenue | $846.2 million | | Adjusted EBITDA | $206.2 million | | Adjusted EBITDA Margin | 24.4% | | New Engagements | > 6,300 | - In fiscal 2025, the Executive Search segment partnered with over 3,700 clients, including many of the world's most recognized public and private enterprises[51] Professional Search & Interim This segment provides scalable recruiting and interim talent solutions for professional roles, partnering with over 3,200 clients Professional Search & Interim FY2025 Performance | Metric | Value | | :--- | :--- | | Fee Revenue | $503.5 million | | Adjusted EBITDA | $107.6 million | | Adjusted EBITDA Margin | 21.4% | | Average Bill Rate | $133 per hour | - The segment partnered with over 3,200 clients globally in fiscal 2025, with 23% of its fee revenue referred from other Korn Ferry solutions[53] Recruitment Process Outsourcing (RPO) The RPO segment offers high-volume, outsourced hiring solutions, securing $533.4 million in new business RPO FY2025 Performance | Metric | Value | | :--- | :--- | | Fee Revenue | $354.1 million | | Adjusted EBITDA | $52.6 million | | Adjusted EBITDA Margin | 14.9% | | New Business | $533.4 million | - The RPO segment supported over 240 enterprise clients in fiscal 2025, with 59% of its fee revenue coming from referrals from other Korn Ferry solutions[59] Risk Factors The company faces significant risks from competition, talent retention, indebtedness, cybersecurity, and global economic factors - The company faces significant competition from large consulting firms, specialized boutiques, and technology-based providers, which may lead to pricing pressures and reduced market share[66][67][68] - The loss of key consultants is a major risk, as the top ten consultants combined generated approximately 5% of total fee revenues in fiscal 2025, and client relationships are highly portable[72] - The company's use of AI technology introduces risks related to operational challenges, data privacy, regulatory compliance, and potential IP infringement[108][109] - As of April 30, 2025, the company had approximately $400.0 million in total indebtedness, which could affect its financial condition and ability to operate[96] - Goodwill and purchased intangibles accounted for approximately 27% of total assets as of April 30, 2025, and changes in business conditions could lead to impairment charges[130] - In fiscal 2025, 47% of fee revenue was generated from operations outside of the U.S., exposing the company to risks associated with social, political, and economic instability in international markets[134] Unresolved Staff Comments The company reports that there are no unresolved staff comments - Not applicable[150] Cybersecurity Korn Ferry maintains an ISO 27001-based cybersecurity program, overseen by the Board, with no material incidents to date - The company's cybersecurity program is based on the ISO 27001 framework, which incorporates NIST and Center for Internet Security frameworks[152] - The Board of Directors is responsible for overseeing the cybersecurity risk program and is briefed at least annually by the Chief Information Officer[160] - The company has not experienced a cybersecurity incident that has materially affected its business strategy, results of operations, or financial condition as of the report date[153] Properties The company's corporate office is in Los Angeles, California, leasing 103 offices globally totaling 0.9 million square feet - As of April 30, 2025, the company leased approximately 0.9 million square feet of office space across 103 offices in 51 countries[162][33] Legal Proceedings The company is involved in litigation but expects no material adverse effect on its business or financial condition - The company is not currently engaged in any legal proceedings that are expected to have a material adverse effect on its business[163] Executive Officers The report details background information for five key executive officers, including the President and CEO, and segment CEOs Executive Officers as of April 30, 2025 | Name | Age | Position | | :--- | :--- | :--- | | Gary D. Burnison | 64 | President and Chief Executive Officer | | Robert P. Rozek | 64 | Executive Vice President, Chief Financial Officer and Chief Corporate Officer | | Lesley Uren | 63 | Chief Executive Officer, Consulting | | Michael Distefano | 55 | Chief Executive Officer, Professional Search & Interim | | Jeanne MacDonald | 56 | Chief Executive Officer, RPO | Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Korn Ferry's common stock trades on NYSE (KFY), with a capital allocation strategy including dividends and share repurchases - The Board of Directors increased the quarterly dividend to $0.48 per share on March 10, 2025[181] Share Repurchases | Period | Amount Repurchased (USD Million) | | :--- | :--- | | Fiscal 2025 | $88.9 | | Fiscal 2024 | $52.5 | | Fiscal 2023 | $93.9 | Issuer Purchases of Equity Securities (Q4 FY2025) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | Value of Shares Remaining for Purchase (USD Million) | | :--- | :--- | :--- | :--- | | Feb 2025 | 39,820 | 66.88 | 106.3 | | Mar 2025 | 65,577 | 66.97 | 102.0 | | Apr 2025 | 131,000 | 62.69 | 93.8 | Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2025 fee revenue decreased 1% to $2.73 billion, while net income increased 45% to $246.1 million due to cost management Results of Operations Fiscal 2025 fee revenue decreased 1% to $2.73 billion, while net income increased 45% to $246.1 million with a 17.0% Adjusted EBITDA margin Consolidated Financial Performance (FY2025 vs. FY2024) | Metric | FY2025 (USD Million) | FY2024 (USD Million) | Change (%) | | :--- | :--- | :--- | :--- | | Fee Revenue | $2,730.1 | $2,762.7 | (1%) | | Net Income Attributable to Korn Ferry | $246.1 | $169.2 | 45% | | Adjusted EBITDA | $463.9 | $408.2 | 14% | | Adjusted EBITDA Margin | 17.0% | 14.8% | +220 bps | Fee Revenue by Segment (FY2025 vs. FY2024) | Segment | FY2025 Fee Revenue (USD Million) | FY2024 Fee Revenue (USD Million) | Change (%) | | :--- | :--- | :--- | :--- | | Consulting | $662.7 | $695.0 | (5%) | | Digital | $363.5 | $366.7 | (1%) | | Executive Search | $846.2 | $806.2 | 5% | | Professional Search & Interim | $503.5 | $540.6 | (7%) | | RPO | $354.1 | $354.1 | 0% | - Compensation and benefits expense decreased by $86.2 million (5%) in FY2025, primarily due to a 7% reduction in average headcount and lower commission expense[228] - Restructuring charges were significantly lower in FY2025 at $1.9 million, compared to $68.6 million in FY2024 related to a plan to eliminate excess capacity[249] Liquidity and Capital Resources As of April 30, 2025, the company held $1.28 billion in cash and marketable securities, generating $364.4 million cash from operations Cash and Liquidity Position (as of April 30, 2025) | Item | Value (USD Million) | | :--- | :--- | | Cash, Cash Equivalents & Marketable Securities | $1,277.0 | | Working Capital | $794.5 | | Long-Term Debt (Notes) | $400.0 | | Availability under Revolver | $645.6 | Cash Flow Summary (FY2025) | Cash Flow Activity | Value (USD Million) | | :--- | :--- | | Net Cash from Operating Activities | $364.4 | | Net Cash used in Investing Activities | ($125.5) | | Net Cash used in Financing Activities | ($190.7) | - On November 1, 2024, the company acquired Trilogy for $44.4 million, net of cash acquired[265] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency fluctuations and interest rate changes, with mitigation strategies in place - The company is exposed to foreign currency risk as a material portion of its revenue and expenses are generated internationally. A 10% change in the value of its ten largest currency exposures could result in a gain or loss of $16.0 million[290] - Interest rate risk is primarily related to the variable-rate Amended Credit Agreement, under which there were no amounts outstanding as of April 30, 2025[291] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of April 30, 2025, with no material internal control changes - Management concluded that the company's disclosure controls and procedures were effective as of April 30, 2025[295] Part III Directors, Compensation, Security Ownership, and Accountant Fees Information for Items 10 through 14 is incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's definitive proxy statement for its 2025 Annual Meeting of Stockholders[299][301][302] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section provides an index of all financial statements, schedules, and exhibits filed with the Form 10-K[307] Financial Statements and Supplementary Data Reports on Financial Statements and Internal Controls Management concluded internal control over financial reporting was effective, with Ernst & Young LLP issuing an unqualified opinion and identifying Consulting Revenue Recognition as a Critical Audit Matter - Management concluded that the Company's internal control over financial reporting was effective as of April 30, 2025[323] - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[326][335] - The audit identified 'Consulting Revenue Recognition' as a Critical Audit Matter, highlighting the complexity and judgment required in estimating total hours for project completion[339][341][342] Notes to Consolidated Financial Statements The notes detail accounting policies, segment performance, debt, and acquisitions, including the $44.4 million Trilogy acquisition and restructuring charges Fee Revenue by Industry (FY2025) | Industry | Fee Revenue (USD Million) | Percentage of Total | | :--- | :--- | :--- | | Industrial | $814.6 | 29.9% | | Financial Services | $516.7 | 18.9% | | Life Sciences/Healthcare | $475.8 | 17.4% | | Technology | $396.0 | 14.5% | | Consumer Goods | $349.2 | 12.8% | | Education/Non–Profit/General | $177.7 | 6.5% | - The company has $400 million in 4.625% Senior Unsecured Notes due 2027. As of April 30, 2025, the fair value of these notes was $389.0 million[466][467] - Goodwill as of April 30, 2025 was $948.8 million, with the largest allocations to the Digital ($326.1M), Professional Search & Interim ($293.3M), and Consulting ($173.2M) segments[494] - The company recorded restructuring charges of $1.9 million in FY2025, following charges of $68.6 million in FY2024 and $42.6 million in FY2023 to align its workforce with business needs[490][491]