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Korn Ferry Announces Fourth Quarter and Full Year FY’22 Results of Operations

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·13 min read
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Highlights

  • Korn Ferry reports Q4 FY’22 fee revenue of $721.1 million and full year FY’22 fee revenue of $2,626.7 million, both new all-time highs.

  • Net income attributable to Korn Ferry for the fourth quarter and full year of FY’22 was $91.7 million and $326.4 million, respectively, while diluted and adjusted diluted earnings per share were $1.70 and $1.75 in Q4 FY’22, and were $5.98 and $6.23 for the full year, respectively, all reaching new highs.

  • Operating income and Adjusted EBITDA both reached new highs in Q4 FY’22 at $138.8 million (operating margin of 19.2%) and $144.4 million (Adjusted EBITDA margin of 20.0%), while full year amounts were $470.1 million (operating margin of 17.9%) and $538.9 million (Adjusted EBITDA margin of 20.5%), respectively.

  • The Company repurchased 1,035,000 shares of stock during the quarter for $67.2 million, bringing full year share repurchases to 1,471,000 for $98.8 million. Further, the Board authorized an incremental $300 million for future share repurchases.

  • Commencing in Q1 FY’23, the Company has increased its regular quarterly cash dividend by 25% to $0.15 per share. During the fourth quarter, the Company completed the acquisition of the Patina Solutions Group ("Patina"), which is included in the RPO and Professional Search segment.

LOS ANGELES, June 22, 2022--(BUSINESS WIRE)--Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced fourth quarter and annual fee revenue of $721.1 million and $2,626.7 million, respectively. In addition, fourth quarter diluted earnings per share was $1.70 and adjusted diluted earnings per share was $1.75, both are new highs.

"I am extremely pleased with our financial results during the fiscal fourth quarter, as Korn Ferry once again achieved new highs. We generated $721 million in fee revenue, up 30% (33% at constant currency) year over year. Our diluted earnings per share and adjusted diluted earnings per share, at $1.70 and $1.75, respectively, were new highs, and our Adjusted EBITDA margin of 20% represents our sixth consecutive quarter at 20% or greater," said Gary D. Burnison, CEO, Korn Ferry.

"The world and our clients have entered a new reality – a Covid transitory era in which there will be a contest for not only growth, but also relevancy and profitability. Companies will have to reassess all aspects of their strategy including their organizational, leadership and talent imperatives. We are also in a cycle in which, regardless of economic activity, shortages of skilled labor are projected to persist for years to come," Burnison added. "Korn Ferry is the right firm for the right time to help companies solve these market imbalances. We help our clients achieve relevancy and performance by addressing the people and organizational requirements they need in this new world."

Selected Financial Results
(dollars in millions, except per share amounts) (a)

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Fee revenue

$

721.1

$

555.2

$

2,626.7

$

1,810.0

Total revenue

$

727.0

$

557.4

$

2,643.5

$

1,819.9

Operating income

$

138.8

$

86.3

$

470.1

$

155.8

Operating margin

19.2

%

15.5

%

17.9

%

8.6

%

Net income attributable to Korn Ferry

$

91.7

$

66.2

$

326.4

$

114.5

Basic earnings per share

$

1.71

$

1.22

$

6.04

$

2.11

Diluted earnings per share

$

1.70

$

1.21

$

5.98

$

2.09

Adjusted Results (b):

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Adjusted EBITDA

$

144.4

$

112.8

$

538.9

$

286.3

Adjusted EBITDA margin

20.0

%

20.3

%

20.5

%

15.8

%

Adjusted net income attributable to Korn Ferry

$

94.4

$

66.2

$

340.1

$

137.3

Adjusted basic earnings per share

$

1.77

$

1.22

$

6.30

$

2.53

Adjusted diluted earnings per share

$

1.75

$

1.21

$

6.23

$

2.51

___________

(a)

Numbers may not total due to rounding.

(b)

Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and net restructuring charges when applicable. Adjusted results on a consolidated basis are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations):

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Integration/acquisition costs

$

3.6

$

$

7.9

$

0.7

Impairment of fixed assets

$

$

$

1.9

$

Impairment of right of use assets

$

$

$

7.4

$

Restructuring charges, net

$

$

$

$

30.7

Fiscal 2022 Fourth Quarter Results

The Company reported fee revenue in Q4 FY’22 of $721.1 million, an increase of 30% (up 33% on a constant currency basis) compared to Q4 FY’21. Fee revenue increased in all lines of business. The increase in fee revenue when compared to Q4 FY’21 was primarily due to an increase in demand for the Company’s increasingly relevant core and integrated service offerings and the acquisitions of Lucas Group and Patina (the "acquisitions") in the RPO and Professional Search segment.

Operating margin was 19.2% in Q4 FY’22 compared to 15.5% in the year-ago quarter. The Adjusted EBITDA margin was 20.0% in Q4 FY’22 compared to 20.3%, in the year-ago quarter. Net income attributable to Korn Ferry was $91.7 million in Q4 FY’22 compared to $66.2 million in Q4 FY’21 and Adjusted EBITDA reached $144.4 million in Q4 FY’22 compared to $112.8 in Q4 FY’21.

The year-over-year improvement in operating margin was due to the increase in fee revenue discussed above, improved productivity resulting from work being conducted virtually, and cost savings from the structural changes made to the Company’s business during the pandemic. Partially offsetting this were increases in 1) compensation and benefits expense primarily due to increased headcount and performance-based incentives, 2) general and administrative expenses primarily due to increased marketing, premise and office expense, and integration and acquisition costs and 3) cost of services expense associated with newly acquired entities.

Fiscal 2022 Full Year Results

The Company reported fee revenue in FY’22 of $2,626.7 million, an increase of $816.7 million or 45% (up 45% on a constant currency basis) compared to FY’21. The increase in fee revenue when compared to FY’21 was primarily due to an increase in demand for the Company’s increasingly relevant core and integrated service offerings and the acquisitions in the RPO and Professional Search segment. Further COVID-19 adversely impacted the Company’s fee revenue on a worldwide basis in FY’21.

Operating margin was 17.9% in FY’22 compared to 8.6% in FY’21. Adjusted EBITDA margin was 20.5% in FY’22 compared to 15.8% in FY21. Net income attributable to Korn Ferry was $326.4 million in FY’22 as compared to $114.5 million in FY’21 and Adjusted EBITDA reached $538.9 million in FY’22 as compared to $286.3 million in FY’21.

The improvement in operating margin was due to the increase in fee revenue discussed above, no restructuring charges as compared to the prior year, improved productivity resulting from work being conducted virtually, and cost savings from the structural changes made to the Company’s business during the pandemic. Improvement in Adjusted EBITDA margin is due to these same factors with the exception of the restructuring charges.

Results by Line of Business

Selected Consulting Data
(dollars in millions) (a)

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Fee revenue

$

173.9

$

153.6

$

650.2

$

515.8

Total revenue

$

175.6

$

153.8

$

654.2

$

517.0

Ending number of consultants and execution staff (b)

1,841

1,565

1,841

1,565

Hours worked in thousands (c)

471

428

1,766

1,565

Average bill rate (d)

$

369

$

359

$

368

$

330

Adjusted Results (e):

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Adjusted EBITDA

$

30.7

$

27.2

$

116.1

$

81.5

Adjusted EBITDA margin

17.6

%

17.7

%

17.9

%

15.8

%

___________

(a)

Numbers may not total due to rounding.

(b)

Represents number of employees originating, delivering and executing consulting services.

(c)

The number of hours worked by consultant and execution staff during the period.

(d)

The amount of fee revenue divided by the number of hours worked by consultants and execution staff.

(e)

Adjusted results exclude the following:

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Impairment of fixed assets

$

$

$

0.3

$

Impairment of right of use assets

$

$

$

2.5

$

Restructuring charges, net

$

$

$

$

14.2

Fee revenue was $173.9 million in Q4 FY’22 compared to $153.6 million in Q4 FY’21, an increase of $20.3 million or 13% (up 16% on a constant currency basis). Growth in Consulting fee revenue continues to be driven by significant client workforce transformation initiatives including diversity, equity and inclusion ("DE&I") and environmental and social governance ("ESG"), delivered through our Organization Strategy, Assessment and Succession, and Leadership Development solutions. In addition, our Total Rewards offering has increased as clients address compensation and retention issues associated with labor market dislocation and pay governance issues.

Adjusted EBITDA was $30.7 million in Q4 FY’22 with an Adjusted EBITDA margin of 17.6% compared to Adjusted EBITDA of $27.2 million with an associated margin of 17.7%, respectively, in the year-ago quarter. This increase in Adjusted EBITDA resulted from the increase in fee revenue outlined above, partially offset by an increase in compensation and benefits expense. The increase in compensation and benefits expense was driven by higher salaries and related payroll taxes and performance-related bonus expense due to an increase in fee revenue and headcount.

Selected Digital Data
(dollars in millions) (a)

Digital leverages an artificial intelligence powered, machine-learning platform to help identify the best structures, roles, capabilities, and behaviors needed to drive business forward. This end-to-end platform combines Korn Ferry proprietary data, client data, and external market data to help make better, faster decisions about organizations, leadership, and people.

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Fee revenue

$

89.5

$

80.5

$

349.0

$

287.3

Total revenue

$

89.5

$

80.8

$

349.4

$

287.8

Ending number of consultants

305

295

305

295

Subscription & License fee revenue

$

29.1

$

23.6

$

108.7

$

89.9

Adjusted Results (b):

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Adjusted EBITDA

$

27.7

$

27.9

$

110.1

$

86.1

Adjusted EBITDA margin

31.0

%

34.7

%

31.5

%

30.0

%

___________

(a)

Numbers may not total due to rounding.

(b)

Adjusted results exclude the following:

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Impairment of fixed assets

$

$

$

0.2

$

Impairment of right of use assets

$

$

$

1.3

$

Integration/acquisition costs

$

$

$

$

0.6

Restructuring charges, net

$

$

$

$

2.9

Fee revenue was $89.5 million in Q4 FY’22 compared to $80.5 million in Q4 FY’21, an increase of $9.0 million or 11% (up 15% on a constant currency basis). The increase in fee revenue was primarily due to growth in Total Rewards and Leadership Development offerings as companies contend with elevated levels of attrition due to dislocation in the labor markets and professional development around sales effectiveness as companies reassess their commercial models in a post-COVID world.

Adjusted EBITDA was $27.7 million in Q4 FY’22 with an Adjusted EBITDA margin of 31.0% compared to $27.9 million and 34.7%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was due to an increase in compensation and benefits expense, driven by higher salaries and related payroll taxes, commission expense and performance-related bonus expense, partially offset by higher fee revenue.

Selected Executive Search Data(a)
(dollars in millions) (b)

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Fee revenue

$

244.2

$

200.7

$

935.6

$

637.0

Total revenue

$

245.7

$

201.3

$

939.9

$

639.3

Ending number of consultants

587

524

587

524

Average number of consultants

584

523

555

540

Engagements billed

4,417

3,794

11,085

8,672

New engagements (c)

1,851

1,712

7,213

5,459

Adjusted Results (d):

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Adjusted EBITDA

$

64.2

$

49.8

$

257.6

$

127.8

Adjusted EBITDA margin

26.3

%

24.8

%

27.5

%

20.1

%

________

(a)

Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.

(b)

Numbers may not total due to rounding.

(c)

Represents new engagements opened in the respective period.

(d)

Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that adjust for the following:

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Impairment of fixed assets

$

$

$

0.1

$

Impairment of right of use assets

$

$

$

0.9

$

Restructuring charges, net

$

$

$

$

10.4

Fee revenue was $244.2 million and $200.7 million in Q4 FY’22 and Q4 FY’21, respectively, a year-over-year increase of $43.5 million or 22% (up 23% on a constant currency basis). The increase in fee revenue was driven by an increase in the number of new search engagements as well as an increase in the average fee revenue per search. These increases were across all regions with the largest increase in North America.

Adjusted EBITDA was $64.2 million in Q4 FY’22 with an Adjusted EBITDA margin of 26.3% compared to Adjusted EBITDA of $49.8 million and Adjusted EBITDA margin of 24.8%, respectively, in the year-ago quarter. This improvement resulted from the increase in fee revenue discussed above, as well as productivity realized from work being conducted virtually and cost savings from the structural changes made during the pandemic. These changes were partially offset by increases in compensation and benefits expense due to an increase in performance-related bonus expense and salaries and related payroll taxes due to an increase in fee revenue and headcount.

Selected RPO and Professional Search Data
(dollars in millions) (a)

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Fee revenue

$

213.5

$

120.4

$

691.9

$

369.9

Total revenue

$

216.1

$

121.5

$

699.9

$

375.8

Engagements billed (b)

2,892

1,626

6,633

3,558

New engagements (c)

1,904

883

5,633

2,971

Adjusted Results (d):

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Adjusted EBITDA

$

50.8

$

30.0

$

165.1

$

69.4

Adjusted EBITDA margin

23.8

%

24.9

%

23.9

%

18.8

%

___________

(a)

Numbers may not total due to rounding.

(b)

Represents professional search engagements billed.

(c)

Represents new professional search engagements opened in the respective period.

(d)

Adjusted results exclude the following:

Fourth Quarter

Year to Date

FY’22

FY’21

FY’22

FY’21

Impairment of fixed assets

$

$

$

1.3

$

Impairment of right of use assets

$

$

$

2.6

$

Integration/acquisition costs

$

2.3

$

$

3.7

$