Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced fourth quarter and annual fee revenue of $730.9 million and $2,835.4 million, respectively. In addition, fourth quarter diluted earnings per share was $0.91 and adjusted diluted earnings per share was $1.01.
“During fiscal year 2023 our fee revenue reached an all-time high of $2.84 billion, up 8% at actual, 12% constant currency. The story of this period though is really about the success of our diversification strategy, set forth over the past few years, which has created new revenue streams and offerings, as clearly evidenced by our clients and in our results,” said Gary D. Burnison, CEO, Korn Ferry.
“In FY’23 we added a completely new capability – an interim and transition management business with more than $400 million of annual revenue on a run rate basis,” added Burnison. “Additionally, the Consulting and Digital businesses have never been more relevant as our clients increasingly seek transformation, growth and profitability.
“With a world immersed in Generative AI, Korn Ferry will continue to invest not only in these technologies, but also in advancing our proprietary data, assessment instruments and knowledge as these will be the ultimate differentiators.”
Selected Financial Results | ||||||||||||||||
(dollars in millions, except per share amounts) (a) | ||||||||||||||||
Fourth Quarter | Year to Date | |||||||||||||||
FY’23 | FY’22 | FY’23 | FY’22 | |||||||||||||
Fee revenue | $ | 730.9 | $ | 721.1 | $ | 2,835.4 | $ | 2,626.7 | ||||||||
Total revenue | $ | 738.1 | $ | 727.0 | $ | 2,863.8 | $ | 2,643.5 | ||||||||
Operating income | $ | 72.6 | $ | 138.8 | $ | 316.3 | $ | 470.1 | ||||||||
Operating margin | 9.9 | % | 19.2 | % | 11.2 | % | 17.9 | % | ||||||||
Net income attributable to Korn Ferry | $ | 47.5 | $ | 91.7 | $ | 209.5 | $ | 326.4 | ||||||||
Basic earnings per share | $ | 0.91 | $ | 1.71 | $ | 3.98 | $ | 6.04 | ||||||||
Diluted earnings per share | $ | 0.91 | $ | 1.70 | $ | 3.95 | $ | 5.98 | ||||||||
Adjusted Results (b): | Fourth Quarter | Year to Date | ||||||||||||||
FY’23 | FY’22 | FY’23 | FY’22 | |||||||||||||
Adjusted EBITDA | $ | 97.9 | $ | 144.4 | $ | 457.3 | $ | 538.9 | ||||||||
Adjusted EBITDA margin | 13.4 | % | 20.0 | % | 16.1 | % | 20.5 | % | ||||||||
Adjusted net income attributable to Korn Ferry | $ | 53.0 | $ | 94.4 | $ | 262.2 | $ | 340.1 | ||||||||
Adjusted basic earnings per share | $ | 1.02 | $ | 1.77 | $ | 4.98 | $ | 6.30 | ||||||||
Adjusted diluted earnings per share | $ | 1.01 | $ | 1.75 | $ | 4.94 | $ | 6.23 | ||||||||
| ______________________ | ||
(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’23 | FY’22 | FY’23 | FY’22 | |||||||||
Integration/acquisition costs | $ | 5.5 | $ | 3.6 | $ | 14.9 | $ | 7.9 | ||||
Impairment of fixed assets | $ | — | $ | — | $ | 4.4 | $ | 1.9 | ||||
Impairment of right of use assets | $ | — | $ | — | $ | 5.5 | $ | 7.4 | ||||
Restructuring charges, net | $ | 1.4 | $ | — | $ | 42.6 | $ | — | ||||
Fiscal 2023 Fourth Quarter Results
The Company reported fee revenue in Q4 FY’23 of $730.9 million, an increase of 1% (up 3% on a constant currency basis) compared to Q4 FY’22. Fee revenue increased primarily due to an increase in the Interim portion of Professional Search & Interim, resulting from the acquisitions of Patina, Infinity Consulting Solutions and Salo (collectively, the “acquisitions”). This was partially offset by decreases in Executive Search, the Permanent Placement portion of Professional Search & Interim and RPO mainly due to a decline in demand driven by global economic factors.
Operating margin was 9.9% in Q4 FY’23, compared to 19.2% in the year-ago quarter. Adjusted EBITDA margin was 13.4% in Q4 FY'23, compared to 20.0% in the year-ago quarter. Net income attributable to Korn Ferry was $47.5 million in Q4 FY'23, compared to $91.7 million in Q4 FY’22 and Adjusted EBITDA was $97.9 million in Q4 FY’23, compared to $144.4 million in Q4 FY’22.
Operating margin and Adjusted EBITDA margin decreased primarily due to a change in fee revenue mix, with fee revenue decreasing in Executive Search and Permanent Placement, which have higher margins, and being replaced with fee revenue in Interim that has lower margins, but is more resilient to economic factors and in line with our strategy.
Fiscal 2023 Full Year Results
The Company reported fee revenue in FY’23 of $2,835.4 million, an increase of 8% (up 12% on a constant currency basis) compared to FY’22. Fee revenue increased in all lines of business except Executive Search which was down about 6% compared to FY22 mainly due to a decline in demand driven by global economic factors. The acquisitions included in Professional Search & Interim segment were a significant factor in the increase in fee revenue compared to FY22.
Operating margin was 11.2% in FY’23, compared to 17.9% in FY’22. Adjusted EBITDA margin was 16.1% in FY'23 compared to 20.5% in FY’22. Net income attributable to Korn Ferry was $209.5 million in FY’23 as compared to $326.4 million in FY’22 and Adjusted EBITDA was $457.3 million in FY’23 as compared to $538.9 million in FY’22.
Operating margin decreased primarily due to a change in fee revenue mix, with a decrease in fee revenue in Executive Search and Permanent Placement, which have higher margins, and being replaced with fee revenue in Interim that has lower margins, but is more resilient to economic factors and in line with our strategy and was also impacted by an increase in restructuring charges, net recorded in FY’23.
The decline in Adjusted EBITDA margin was primarily due to the change in fee revenue mix discussed above.
Results by Line of Business
Selected Consulting Data | ||||||||||||||||
(dollars in millions) (a) | ||||||||||||||||
Fourth Quarter | Year to Date | |||||||||||||||
FY’23 | FY’22 | FY’23 | FY’22 | |||||||||||||
Fee revenue | $ | 175.3 | $ | 173.9 | $ | 677.0 | $ | 650.2 | ||||||||
Total revenue | $ | 178.0 | $ | 175.6 | $ | 687.0 | $ | 654.2 | ||||||||
Ending number of consultants and execution staff (b) | 1,853 | 1,841 | 1,853 | 1,841 | ||||||||||||
Hours worked in thousands (c) | 450 | 471 | 1,790 | 1,766 | ||||||||||||
Average bill rate (d) | $ | 390 | $ | 369 | $ | 378 | $ | 368 | ||||||||
Adjusted Results (e): | Fourth Quarter | Year to Date | ||||||||||||||
FY’23 | FY’22 | FY’23 | FY’22 | |||||||||||||
Adjusted EBITDA | $ | 24.6 | $ | 30.7 | $ | 108.5 | $ | 116.1 | ||||||||
Adjusted EBITDA margin | 14.0 | % | 17.6 | % | 16.0 | % | 17.9 | % | ||||||||
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(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’23 | FY’22 | FY’23 | FY’22 | |||||||||
Impairment of fixed assets | $ | — | $ | — | $ | 2.8 | $ | 0.3 | ||||
Impairment of right of use assets | $ | — | $ | — | $ | 3.1 | $ | 2.5 | ||||
Restructuring charges, net | $ | 0.8 | $ | — | $ | 11.6 | $ | — | ||||
Fee revenue was $175.3 million in Q4 FY’23 compared to $173.9 million in Q4 FY’22, an increase of $1.4 million or 1% (up 3% on a constant currency basis). Consulting saw growth in our core solution Organizational Strategy, partially offset by a decline in fee revenue from Leadership Development.
Adjusted EBITDA was $24.6 million in Q4 FY’23 with an Adjusted EBITDA margin of 14.0% compared to Adjusted EBITDA of $30.7 million with an associated margin of 17.6% in the year-ago quarter. This decrease in Adjusted EBITDA resulted primarily from an increase in compensation and benefits expense due to higher performance-related bonus expense, partially offset by an increase in fee revenue.
Selected Digital Data | ||||||||||||||||
(dollars in millions) (a) | ||||||||||||||||
Fourth Quarter | Year to Date | |||||||||||||||
FY’23 | FY’22 | FY’23 | FY’22 | |||||||||||||
Fee revenue | $ | 91.5 | $ | 89.5 | $ | 354.7 | $ | 349.0 | ||||||||
Total revenue | $ | 91.5 | $ | 89.5 | $ | 355.0 | $ | 349.4 | ||||||||
Ending number of consultants | 347 | 305 | 347 | 305 | ||||||||||||
Subscription & License fee revenue | $ | 31.6 | $ | 29.1 | $ | 119.7 | $ | 108.7 | ||||||||
Adjusted Results (b): | Fourth Quarter | Year to Date | ||||||||||||||
