Korn Ferry(US:KFY)2022-09-07 16:00Part I. Financial Information Consolidated Financial Statements The unaudited consolidated financial statements for Q1 FY2023 report fee revenue of $695.9 million and net income of $77.2 million, with a new segment reporting structure Consolidated Statements of Income (Unaudited) | | Three Months Ended July 31, | | | :--- | :--- | :--- | | | 2022 | 2021 | | | (in thousands, except per share data) | | | Fee revenue | $695,903 | $585,395 | | Total revenue | $703,148 | $588,098 | | Operating income | $111,599 | $101,255 | | Net income attributable to Korn Ferry | $77,247 | $74,823 | | Diluted earnings per share | $1.45 | $1.37 | | Cash dividends declared per share | $0.15 | $0.12 | Consolidated Balance Sheets (Unaudited) | | July 31, 2022 | April 30, 2022 | | :--- | :--- | :--- | | | (in thousands) | | | Total current assets | $1,497,292 | $1,759,970 | | Total assets | $3,204,079 | $3,464,546 | | Total current liabilities | $686,054 | $984,225 | | Total liabilities | $1,632,845 | $1,914,957 | | Total stockholders' equity | $1,571,234 | $1,549,589 | - Beginning in fiscal 2023, the company separated its former RPO & Professional Search segment into two new reportable segments: Professional Search & Interim and RPO, aligning with strategic assessment and resource allocation2095 Notes to Consolidated Unaudited Financial Statements Detailed notes explain accounting policies, segment reporting, revenue recognition, and financial instruments, with a 25.0% effective tax rate for the quarter Fee Revenue by Industry (Three Months Ended July 31, 2022) | Industry | Dollars (in thousands) | % of Total | | :--- | :--- | :--- | | Industrial | $195,909 | 28.2% | | Life Sciences/Healthcare | $133,204 | 19.1% | | Technology | $122,652 | 17.6% | | Financial Services | $118,799 | 17.1% | | Consumer Goods | $95,948 | 13.8% | | Education/Non–Profit/General | $29,391 | 4.2% | | Total Fee Revenue | $695,903 | 100.0% | Segment Financial Highlights (Three Months Ended July 31, 2022) | Segment | Fee Revenue (in thousands) | Adjusted EBITDA (in thousands) | | :--- | :--- | :--- | | Consulting | $166,484 | $29,550 | | Digital | $83,761 | $24,178 | | Executive Search | $232,789 | $62,232 | | Professional Search & Interim | $98,947 | $29,161 | | RPO | $113,922 | $17,709 | | Consolidated | $695,903 | $132,208 | - On June 24, 2022, the company amended its credit agreement, extending maturity to 2027 and increasing the total facility to $1.15 billion, comprising a $650 million revolver and a $500 million delayed draw term loan facility103 - On September 6, 2022, the Board of Directors declared a quarterly cash dividend of $0.15 per share116 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2023 financial results, highlighting a 19% fee revenue increase to $695.9 million and 9% Adjusted EBITDA growth to $132.2 million, alongside capital allocation Q1 FY2023 vs Q1 FY2022 Performance | Metric | Q1 FY2023 (in millions) | Q1 FY2022 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Fee Revenue | $695.9 | $585.4 | +$110.5 | +19% | | Net Income (attributable to KF) | $77.2 | $74.8 | +$2.4 | +3% | | Adjusted EBITDA | $132.2 | $121.3 | +$10.9 | +9% | | Adjusted EBITDA Margin | 19.0% | 20.7% | -1.7 p.p. | N/A | - The Professional Search & Interim segment's fee revenue grew 91% YoY to $98.9 million, primarily due to the acquisitions of Lucas Group and Patina Solutions Group144 - Capital allocation actions during the quarter included increasing the quarterly dividend by 25% to $0.15 per share and repurchasing $22.4 million of common stock191192 - Subsequent to the quarter's end, on August 1, 2022, the company acquired Infinity Consulting Solutions (ICS) for approximately $100 million to be integrated into the Professional Search & Interim segment187 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange rate fluctuations and interest rate changes, with foreign currency risk managed via forward contracts - The company is exposed to foreign currency risk, primarily from the Pound Sterling, Canadian Dollar, Euro, and other currencies, where a hypothetical 10% change could result in a foreign exchange gain or loss of $13.8 million208 - Interest rate risk is mainly associated with the variable-rate Credit Facilities, with no amounts outstanding as of July 31, 2022209 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of July 31, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of July 31, 2022212 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting212 Part II. Other Information Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - As of the report date, the company is not engaged in any legal proceedings expected to have a material adverse effect on its business215 Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have occurred to the risk factors described in the company's Form 10-K216 Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company repurchased 369,867 shares for $22.4 million, and the Board approved a $300 million increase to the share repurchase program Issuer Purchases of Equity Securities (Quarter Ended July 31, 2022) | Period | Total Shares Purchased (in shares) | Average Price Paid Per Share (in USD) | Shares Purchased (Public Program) (in shares) | | :--- | :--- | :--- | :--- | | May 2022 | 174,120 | $61.61 | 174,120 | | June 2022 | 41,227 | $57.52 | 40,000 | | July 2022 | 519,984 | $59.96 | 155,747 | | Total | 735,331 | $60.21 | 369,867 | - On June 21, 2022, the Board of Directors authorized a $300 million increase to the share repurchase program, with $306.7 million available for future repurchases as of July 31, 2022217218 Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and Inline XBRL data files