Korn Ferry(US:KFY)2023-06-27 16:00Financial Performance - Korn Ferry generated $2,835.4 million in fee revenue for fiscal 2023, an increase of 8.0% compared to fiscal 2022[22]. - Net Income attributable to Korn Ferry was $209.5 million, with an operating income of $316.3 million and an Adjusted EBITDA of $457.3 million, representing margins of 11.2% and 16.1% respectively[22]. - Fiscal 2023 fee revenue for the Professional Search & Interim segment was $875.8 million, a decrease of 6% compared to fiscal 2022, representing 31% of total fee revenue[36]. - Adjusted EBITDA for the Professional Search & Interim segment was $205.8 million with an Adjusted EBITDA margin of 23.5%[36]. - The Executive Search segment generated fee revenue of $503.4 million, an increase of 69% compared to fiscal 2022, representing 18% of total fee revenue[37]. - Fee revenue for fiscal 2023 was $2,835.4 million, an increase of $208.7 million, or 8%, compared to $2,626.7 million in fiscal 2022, with all lines of business except Executive Search showing growth[193]. - Net income attributable to Korn Ferry decreased by $116.9 million to $209.5 million in fiscal 2023 from $326.4 million in fiscal 2022[193]. - Adjusted EBITDA was $457.3 million, a decrease of $81.6 million from $538.9 million in fiscal 2022[193]. - Total revenue for 2023 was $2,863,836, up from $2,643,455 in 2022[212]. Client Engagement and Loyalty - Korn Ferry worked with nearly 15,000 organizations in fiscal 2023, achieving a client loyalty rate of nearly 80% for repeat engagements[16]. - The company generated over 25% of total fee revenues through referrals between different lines of business, highlighting the effectiveness of its integrated solutions[18]. - Korn Ferry's go-to-market strategy resulted in approximately 80% of revenue coming from clients using multiple lines of business in fiscal 2023[49]. - Nearly 80% of assignments in fiscal 2023 were for clients who had previously engaged the Company, demonstrating strong client loyalty[188]. Investments and Acquisitions - The company invested $254.8 million in acquisitions and $61.0 million in capital expenditures during fiscal 2023, while returning $93.9 million in share repurchases and $33.0 million in dividends to shareholders[22]. - Korn Ferry's acquisition strategy included the purchase of three Interim hiring firms in the last 18 months, enhancing its capabilities in the Professional Search and Interim sectors[16]. - The company completed several strategic acquisitions, including The Lucas Group and Patina Solutions Group, Inc. in fiscal 2022, and Infinity Consulting Solutions and Salo LLC in fiscal 2023, as part of its growth strategy[129]. - The company acknowledges risks associated with acquisitions, including potential liabilities and operational issues that may not be discovered during due diligence[151]. Operational Metrics - Korn Ferry opened more than 6,300 new engagements in fiscal 2023, averaging 594 consultants per engagement[36]. - The company operates in 108 offices across 53 countries, with a workforce of 10,697 full-time employees, 62% of whom are female in the U.S.[41]. - The company has approximately 1.1 million square feet of leased office space across 107 locations in North America, EMEA, Asia Pacific, and Latin America as of April 30, 2023[156]. - The company promoted over 1,200 employees across its five lines of business and Corporate in fiscal 2023[58]. Financial Risks and Liabilities - The company faces significant competition from larger consulting firms, which may lead to pricing pressures and reduced market share[71]. - The company is highly dependent on a small executive team, and the loss of any key executive could adversely affect operations[80]. - The company is exposed to inflationary pressures that may increase operating costs, including labor and borrowing costs[99]. - The company may incur significant expenses to comply with evolving government regulations, which could adversely impact its business[89]. - The company is subject to interest rate risk due to its variable rate indebtedness, which could significantly increase debt service obligations if interest rates rise[106]. - A decline in operating results or available cash could lead to difficulties in complying with financial covenants, potentially resulting in bankruptcy or liquidation[114]. Employee Well-being and Diversity - Korn Ferry's employee well-being initiatives include mental health awareness campaigns and flexible work schedules[62]. - The company is implementing diversity, equity, and inclusion initiatives to enhance talent recruitment and retention[79]. - The company has been recognized as the best company for Parents 2022 and one of the Human Rights Campaign's Best Places to Work for LGBTQ Equality 2022[59]. Market and Economic Conditions - The company is exposed to economic conditions that can impact demand for its services, including recessions and inflation, which could negatively affect its financial results[134]. - The company faces potential operational challenges and client-related risks due to pandemics, including heightened attention to employee health and safety and disruptions in service delivery[154]. - The company faces risks related to compliance with various international laws and regulations, which could impact its operations and financial condition[136]. Financial Management and Capital Allocation - The company’s capital allocation strategy prioritizes investments in growth initiatives, including hiring consultants and developing intellectual property, while also considering share repurchases and dividends[173]. - The company approved an increase in its stock repurchase program by approximately $300 million, bringing the total capacity to $318 million[177]. - In fiscal 2023, the Company repurchased approximately $93.9 million of its common stock, compared to $98.8 million in fiscal 2022 and $30.4 million in fiscal 2021[177]. - The company has $645.4 million of availability under its $650.0 million five-year senior secured revolving credit facility[102]. Compliance and Regulatory Risks - Compliance with data protection laws such as GDPR has resulted in additional costs and may require changes to business practices, with potential penalties for non-compliance reaching up to 4% of annual worldwide revenue[123]. - The evolving regulatory landscape, including new cybersecurity laws in various U.S. states, may impose additional obligations and increase compliance costs[124]. - The company relies on third-party vendors for critical functions, and any failure on their part could lead to operational disruptions and increased costs[119]. - Cybersecurity incidents pose a risk of unauthorized disclosure of sensitive information, which could adversely impact the company's reputation and financial results[120].