EDGAR 10-K Filing

Company CIK: 56679
Filing Year: 2021
Filename: 56679_10-K_2021_0001564590-21-034775.json

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ITEM 1. BUSINESS
Item 1. Business
ABOUT KORN FERRY
Korn Ferry (referred to herein as the “Company” or in the first-person notations “we,” “our,” and “us”) is a global organizational consulting firm, synchronizing our clients’ strategy, operations and talent to drive superior business performance.
During fiscal 2021, we partnered with 13,038 organizations. Our clients include many of the world’s largest and most prestigious public and private companies, middle-market and emerging growth companies, as well as government and nonprofit organizations. We serve approximately 94% of the Fortune 100 and 86% of the Financial Times Stock Exchange 100. We have built strong client loyalty, with 90% of our engagements in fiscal 2021 being completed on behalf of clients for whom we had conducted engagements in the previous three fiscal years.
The Company has seven reportable segments that operate through the following four lines of business:
1.
Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs: Organization Strategy, Assessment and Succession, Leadership and Professional Development and Total Rewards. This work is supported by a comprehensive range of some of the world’s leading intellectual property (“lP”) and data.
2.
Digital leverages an artificial intelligence (“AI”) powered, machine-learning platform to identify the best structures, roles, capabilities and behaviors needed to drive business forward. The end-to-end system combines Korn Ferry proprietary data, client data, and external market data to generate insight and recommend action.
3.
Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent. Behavioral interviewing and proprietary assessments are used to determine ideal organization fit, and salary benchmarking builds appropriate frameworks for compensation and retention. This business is managed and reported on a geographic basis and represents four of the Company’s reportable segments (Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific and Executive Search Latin America).
4.
RPO and Professional Search combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to clients. Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions.
In March 2020, COVID-19 was reported to have spread to over 100 countries, territories or areas worldwide, and in the fourth quarter of our fiscal 2020, the World Health Organization declared it a pandemic. The negative business impact of the coronavirus outbreak was initially most pronounced in the Asia Pacific region. During fiscal 2021, the impact was felt throughout all the geographical areas in which we do business. Governments and companies implemented social distancing - limiting either travel or in person individual or group face-to-face interaction as well as working from home to adhere to stay at home orders from national, state and city governments. Such restrictions initially impacted our ability to provide our products and services to our clients with such impact lessening in the second, third and fourth quarters of fiscal 2021 as the world learned to operate in different ways. Further, the outbreak has restricted the level of economic activity in the areas in which we operate and had an adverse impact on demand for and sales of our products and services throughout the pandemic. All of our reportable segments across all of our geographies have been impacted as fee revenue decreased significantly in the fourth quarter of fiscal 2020 and further decreased in the first quarter of fiscal 2021 due to a decrease in demand as clients responded to the pandemic. As a result of this and, as part of a broader program aimed at taking advantage of our strong balance sheet and liquidity position, on April 20, 2020, we initiated a plan that was intended to adjust our cost base to the current economic environment and to position us to invest in the recovery. This plan included (i) a reduction in workforce, which was completed by the end of the first quarter of fiscal 2021 and resulted in restructuring charges of $40.5 million and $30.7 million associated with severance during fiscal 2020 and 2021, respectively, (ii) the temporary furlough of certain employees, (iii) subject to certain exceptions and legal requirements, salary reductions across the organization through December 31, 2020, and (iv) other cost saving measures relating to general and administrative expenses.
In the third and fourth quarter of fiscal 2021, the Company saw business conditions improve substantially from where they were in the first and second quarters with fee revenues increasing 27% in the second quarter of fiscal 2021
compared to the first quarter, 9% in the third quarter from the second quarter of fiscal 2021, and 17% in the fourth quarter from the third quarter of fiscal 2021 to $555.2 million, and all lines of business contributing to the improvement of fee revenue. As such, no further restructuring actions were taken. With the sequential improvement in fee revenue and leveraging of the restructured cost base, the Company experienced better profitability each quarter sequentially during fiscal 2021. In the first quarter of fiscal 2021, the Company’s results were better than anticipated, and the Company decided to pay all colleagues and Directors approximately 50% of the amount they gave up. In the second and third quarter of the Company’s 2021 fiscal year, the Company made a decision to pay all colleagues their full salary and non-executive directors their full retainers. In the fourth quarter of fiscal 2021, the Company made a decision to repay all colleagues the remaining 50% of the first quarter salary reductions, with the exception of the Senior Leadership team and the Directors. Beginning on January 1, 2021 salaries of our employees were fully reinstated.
Throughout this fiscal year, we continued to innovate to support our clients’ business needs to adapt and reconfigure strategy and talent to accelerate growth during a post-COVID-19. And, we have continued to make significant investments in our business that have strengthened our IP, enhanced our geographical presence, added complementary offerings to deepen client relationships, and broadened our capabilities. Our service delivery organizes around the Korn Ferry Potential Gap™, a model for helping clients understand how to identify and close gaps in workforce shaping, talent practices, organization design and culture to allow organizations to reach their full potential.
We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”), pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our reports, proxy statements and other documents filed electronically with the SEC are available at the website maintained by the SEC at www.sec.gov.
We also make available, free of charge on the Investor Relations portion of our website at http://ir.kornferry.com, our annual, quarterly, and current reports, and, if applicable, amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC at www.sec.gov.
In addition, we make available on the Investor Relations portion of our website at http://ir.kornferry.com press releases and related earnings presentations and other important information, which we encourage you to review.
Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters of the Audit Committee, Compensation and Personnel Committee, and Nominating and Corporate Governance Committee of our Board of Directors are also posted on the Investor Relations portion of our website at http://ir.kornferry.com. Stockholders may request copies of these documents by writing to our Corporate Secretary at 1900 Avenue of the Stars, Suite 2600, Los Angeles, California 90067.
THE KORN FERRY OPPORTUNITY
With long overdue calls for social change, the pandemic, and a workforce that has been upended, it is clear that we will continue to experience more change over the next couple of years than we’ve seen in the past decade. Different work will need to get done-and work will need to get done differently. In this kind of environment in which ambiguity abounds, leaders will need to adjust, and companies will need to be agile, decisive, act and scale fast.
Aligned around our vision to be the preeminent organizational consulting firm, Korn Ferry has continued to innovate to support our clients’ business needs to adapt to this new and evolving environment. We are pursuing an ambitious strategy that will help us focus relentlessly on clients and collaborate intensively across our organization. This approach builds on the best of our past and gives us a clear path to the future with focused initiatives to increase our client and commercial impact.
Korn Ferry is transforming how clients address their talent management needs. We have evolved from a mono-line business to a multi-faceted consultancy, giving our consultants more frequent and expanded opportunities to engage with clients. The expansion of our business into larger addressable markets offers higher growth potential and more durable and visible revenue streams.
While most organizations can develop a sound strategy, they often struggle with how to make it stick. We help companies design their organization-the structure, roles and responsibilities-to seize these opportunities. In addition, we help organizations select and hire the talent they need to execute their strategy-and show them the best way to compensate, develop and motivate their people.
We do this through our five core capabilities:
Core Capabilities
Organization Strategy
We map talent strategy to business strategy, designing operating models and organization structures that help companies put their plans into action.
Assessment and Succession
We identify the talent you need, compare that to the talent you have, and then help close those gaps.
Talent Acquisition
From executive search to recruitment process outsourcing (“RPO”), we help organizations attract and retain the right people across all functions, at every level.
Leadership and Professional Development
We develop leaders along every stage of their career journey with a spectrum of intensive high-touch and scalable high-tech development experiences.
Total Rewards
We help organizations pay their people fairly for doing the right things-with rewards they value-at a cost the organization can afford.
Integrated Market Offerings
Additionally, we deliver differentiated approaches for our clients through our integrated market offerings, which bring together our best thinking from across our core capabilities. These offerings, guided by an ever-changing business environment, target specific client needs and demonstrate Korn Ferry’s competitive advantage and durability.
•
Workforce Transformation - Post COVID-19, we anticipate that organizations will operate more virtually, communicate with workforces differently, consider deploying less contingent labor and will retrain and reskill workers to meet changing needs. Korn Ferry delivers successful workforce transformation by assessing the current organization - structure, culture, leadership, people performance - and benchmarking against the organization needed to meet the changes to drive real workforce transformation.
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Diversity, Equity & Inclusion - We help organizations build diverse and inclusive organizations, unlocking the power and potential of all their people, through a systematic approach to building inclusive organizations to deliver superior organization performance.
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Accelerating Revenue Growth - Today’s selling environment is more complex with sales teams being challenged to deliver value. In order to do this, sellers need the right tools, training and approach to deliver success. Korn Ferry combines our technology and methodology to help organizations accelerate their revenue growth.
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People Cost Optimization - In this disruptive world, there can be increased pressure to cut costs and drive efficiency. We work with leaders to manage the key drivers of cost - organization, people, and rewards. We put in place strategies to help cost reductions stick, performance is maintained, and growth is achieved - making client organizations fit for the future.
From core through integrated, across our solution portfolio, we have the advantage of best-in-class solutions, products and talent, coupled with deep market expertise, to deliver a seamless approach to organization, talent and reward strategies. Our change management capabilities further support our clients, through the successful execution of their transformational strategies and the effective implementation of their people and culture programs.
OUR INTELLECTUAL PROPERTY AND TECHNOLOGY
We work across five capabilities all of which are fueled by robust IP, data and our digital suite of platforms and technology. Our capabilities are intended to cover the whole talent journey, each one thereby strengthening our work and thinking in the next. By bringing together our industry knowledge, methodology, measurements, and data insights, we can not only benchmark clients against the best but also help them make the changes necessary to achieve their optimal performance. We seek to offer a complete view of the talent they need and the talent they have. We endeavor to know if their rewards are fair and effective and we strive to align their structures, role profiles, and
people to support the strategy so that clients know where to focus their efforts to create lasting change in the organization.
The Korn Ferry Intelligence Cloud
At the core of our approach is deep IP, rich data, and research that informs smarter, more data-driven outcomes for our clients.
The Korn Ferry Intelligence Cloud uses descriptive and predicative analytics to provide insights and recommend actions, helping organizations enable business strategies through their talent.
With more than five billion total data points, including approximately 87 million assessment results, seven million employee engagement survey responses, and reward data for 25 million employees across over 26,000 organizations and more than 150 countries, our Intelligence Cloud fuels our services, solutions and products, bringing clients a research-based foundation to support their decision-making process.
The result is data-driven decisions to help clients speed up their business transformation - whether that is assessing and optimizing the talent they have, identifying the talent they want, or hiring the talent they need.
The Korn Ferry Institute
The Korn Ferry Institute, our research and analytics arm, develops robust research, innovative IP, and advanced analytics that enable Korn Ferry colleagues to engage clients and partner with people and organizations to activate their potential and be successful.
At the highest level, the Korn Ferry Institute is built on three core pillars:
1.
Robust Research and Thought Leadership to anticipate and innovate: We explore trends and define leadership, human and organizational performance for a fast-changing economy. For example, our researchers recently identified the underlying drivers for organizational transformation highlighted in our high-impact Radically Human Transformation solution.
2.
Science-Based IP to enable growth: We develop and measure what is required for success at work in the new economy. During the pandemic, we identified eight distinctive Personas to link assessment insights to scalable development journeys and optimize learning and resiliency.
3.
Client Advanced Analytics and Data Management to generate insights: We integrate and build upon our datasets and external data using advanced modeling and artificial intelligence to produce predictive insights and deliver demonstrable client impact. Recent client projects include identifying levers for behavioral and structural inclusion (DE&I), predicting performance using KF assessment, engagement and pay data, and identifying capabilities that correlate most highly with organizational effectiveness and performance.
In the fiscal year ahead, we will continue to innovate, with the goal of driving even greater business and societal impact as we focus on leveraging neuroscience, bolstering climate change resiliency, leading in a network economy, building a diverse pipeline of inclusive, equitable organizations, and defining the future of leadership.
INDUSTRY TRENDS
The emergence of COVID-19 is an event of historic magnitude, with repercussions that will undoubtedly be felt for years. There is virtually no company or industry that has not been impacted by the crisis, forcing them to evolve their talent processes and find new ways to deliver customer value as they lead employees through this uncertainty and change. And, while the world battles this pandemic and the resulting adverse economic and humanitarian consequences, we are seeing an equally charged uprising in the United States over racial injustice driving an agenda for social equality. It’s a challenging business environment, and organizations are increasingly turning to partners like Korn Ferry to synchronize their strategy with their talent as an answer to these pressing business challenges, specifically:
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Creating cultures of inclusion where diversity is intrinsically valued; where every individual can contribute fully.
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Pivoting from in-person/classroom delivery and training to a model where services and solutions are consumed virtually.
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Developing employee experience (EX) and communications programs to improve declining morale, leading employees through change to maintain employee engagement and purpose in post COVID-19 working environments.
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Managing the increased demand for career transition, outplacement and leadership coaching services as part of talent strategy and organizational change.
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Managing potential market volatility by optimizing cost in reward structures and workforce mix to sustain productivity.
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Achieving growth and cost synergies from M&A transactions without destroying employee engagement.
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Having the right people, mindsets and structures to achieve successful digital transformations.
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Accelerating revenue in the post COVID-19 economy through sales team transformation, sales force effectiveness training and an enhanced customer experience.
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Transitioning to the workforce of the future to address changes in work such as the need for greater agility and new roles being created by technology, plus changes to worker preferences such as remote working.
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Changing ingrained ways of thinking and building strategies that energize employees and drive performance in the face of disruptive change. Developing leaders, with unique needs, at all levels and delivering superior results, at scale.
In addition, we believe the following factors will have a long-term positive impact on our industry:
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Companies are actively in search of trusted advisors that can offer a full suite of organizational consulting products and solutions, to manage the multiple needs of their business on a global scale using a common language and technology platform.
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Over the next decade, demand for skilled workers will outstrip supply, resulting in a global talent shortage. Organizations must make talent strategy a key priority and take steps now to educate, train and upskill their existing workforces to attract and develop next generation talent, including adopting Gen Z into the workforce, embracing AI to increase hiring efficiencies and focusing on the need to recruit hard-to-find skill sets.
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Companies are increasingly leveraging big data and predictive analytics to measure the influence of activities across all aspects of their business, including their people. They expect their partners to deliver superior metrics and better ways of driving results.
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There is an increasing demand for professionals with not just the right experience, but also the right leadership competencies, traits and drivers to meet the requirements of the position and organizational culture today and prepare it for tomorrow.
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Executive management tenure continues to hover at historically low levels.
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The balance of power is shifting from the employer to the employee, as more people take charge of their own careers and the gig economy continues to grow in popularity.
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Companies are increasingly operating in an environment in which they are answerable not just to investors but also to the perceptions and expectations of employees and society and the subsequent need to align company culture around societal and purpose driven goals - Environmental, Social and Governance (ESG).
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Talent mobility is being recognized as a critical driver in the recruitment, development and retention of an organization’s people, particularly their early career professionals.
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Succession planning remains under heightened scrutiny amidst pressure to generate growth, shorter C suites tenures and the emphasis being placed on making succession planning a systemic governance process within global organizations.
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Executive pay is under a perpetual spotlight, making it imperative that organizations get this right to ensure the public trust and establish a functional compensation strategy that starts right at the top and helps to drive retention and close the diversity pay gap.
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More companies are maintaining strategic focus by choosing to outsource non-core functions like talent acquisition to RPO providers who can offer efficient, high-quality services.
GROWTH STRATEGY
Our objective is to expand our position as the preeminent organizational consulting firm. In order to meet this objective, we will continue to pursue our multi-pronged strategy:
Drive a One Korn Ferry Go-to-Market Strategy
Our synergistic go-to-market strategy, bringing together our core solutions, is driving more integrated, scalable client relationships. This is evidenced by the fact that approximately 70% of our revenue comes from clients that have utilized multiple lines of our business. To better compete in the market, we will continue to evolve from our traditional line of business segmentation to integrated solutions along industry lines.
A pillar of our growth strategy is our Marquee and Regional Accounts program. This program drives significant global and regional strategic account development and provides a framework for all our client development activities as we successfully deepen client relationships. Our Marquee and Regional Accounts program now comprises approximately one-third of our global fee revenue. In the year ahead, we will continue to expand our account management activities. This includes driving consistent account selection, assignment, planning and execution; implementing account-based marketing; optimizing the pipeline and opportunity process; integrating our best thinking across solutions; and hiring additional dedicated account leaders. The success of this approach has now been extended to include a broader set of Regional Accounts to be serviced with this same attention and care.
Deliver Client Excellence and Innovation
Technology is positioned to reshape the future of work and with it, the workforce as we know it today. Market innovations contribute to more accurate, faster, cost-effective, and impactful business and human decisions. Our firm is uniquely positioned here. We have a set of assets that are critical to such decisions: deep science on organization and human motivation, data on talent, work and rewards, and proven products and solutions.
The scientists in our Korn Ferry Institute in partnership with the technologists in our Digital business are focusing on this future, developing new software-as-a-service (“SaaS”) -based HR tech solutions. At the heart of this, is the new Korn Ferry Intelligence Cloud™, an integrated digital platform that brings together proprietary internal and external market data. This platform, powered by artificial intelligence, is trained by our more than 50 years of empirical data and feeds a suite of applications for recruiting, assessing, and advancing talent. These applications allow us to create meaningful impact across our clients’ business, from organizational development and job profiling to selection, training, individual and team development, succession planning, M&A, DE&I, digital transformation and more. This SaaS model creates revenue durability and helps us generate wider and more long-term relationships with our clients through large scale and technology-based solutions. Digital, with its discrete capabilities, also enables us to engage businesses we might not have previously worked with when a comprehensive consulting solution was not required or cost was a barrier. We continue to seek ways to further scale these profitable products to our global clients.
Beyond our core business-to-business (“B2B”) business, we continue our expansion into the consumer market. More than 120,000 consumers have registered and are using Korn Ferry Advance, our business-to-consumer offering, since it launched in the United States (the “U.S.”) in July 2017. Korn Ferry Advance will continue to leverage cutting-edge technology as well as the greatest asset we have-our consultants. Korn Ferry Advance is also being used to deliver our Consulting business, primarily in leadership and professional development.
Create the Top-of-Mind Brand in Organizational Consulting
Along with our people and IP, the Korn Ferry brand is the strongest asset of the Company. Positioning Korn Ferry as the preeminent global organizational consultancy and demonstrating our ability to drive business performance through people remains the goal of our global marketing program.
We evolved our brand and value proposition post-COVID-19 to focus messaging on enabling people and organizations to exceed their potential by solving their biggest people challenges around performance, leadership, recruitment, culture, team, and development. The Korn Ferry Potential Gap is our One Korn Ferry story to help clients close the gap between where they are now and where they need to be - having the right talent, in the right roles, with the proper structure, to achieve sustainable growth.
The Korn Ferry brand is brought to market via two distinct channels: primarily through B2B and in the early stage of business-to-consumer (“B2C”). In both instances, we communicate key core values about what we do, expressing that we are ‘more than’ as well as inspiring action in the way our customers run their businesses and in the way that individuals approach their careers. We are executing against our strategy with these priorities in mind:
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One Korn Ferry-We will partner with internal and external stakeholders to advance a differentiated one Korn Ferry story and brand that minimizes operational risks, engages our employees, resonates in the broader market, and becomes a platform for differentiation and sustainable growth.
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Generate Demand-We will assess market trends, liaise with clients, and partner with internal stakeholders to develop a steady cadence of thought leadership-based campaigns, public relations and demand generation activities that engage clients and prospects in meaningful conversations.
Pursue Transformational Opportunities at the Intersection of Talent and Strategy
We have developed a core competency in identifying, acquiring and integrating M&A targets that have the potential to further our strategic objectives and enhance shareholder value. Our disciplined approach to M&A considers strategic alignment and cultural fit along with economics that deliver a return in excess of our cost of capital. M&A will continue to play a critical role in the ongoing evolution of Korn Ferry into an industry specialized, business outcomes-oriented solution provider at the intersection of talent and strategy. While we will continue to execute on our targeted organic growth pathways, M&A will be a vital component of our future growth and capital deployment strategies.
OUR ORGANIZATION
The Company’s seven reportable segments operate through four lines of business: Consulting, Digital, Executive Search, and RPO & Professional Search. Consulting, Digital, and RPO & Professional Search are managed on a global basis with operations in North America, Europe, the Middle East and Africa (“EMEA”), Asia Pacific and Latin America. Our Executive Search business is managed and reported on a geographic basis across four regions and represents four of the Company’s reportable segments: Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific and Executive Search Latin America.
While our segments stand as separate operating units, they are united as we work in the service of our clients. Notably, the close alignment of our Consulting and Digital practices has enabled us to create integrated solutions that continue to drive larger projects with greater sustainability and more durable revenues.
Consulting
Overview-Korn Ferry helps clients design their organization-the structure, roles and responsibilities-and shows them the best way to develop, motivate and compensate their people. Our focus is on making change happen and helping people and organizations exceed their potential. Through our talented colleagues, robust solutions and IP, our consultants can help solve the most disruptive and challenging organizational and talent problems facing clients.
Our Consulting team is comprised of top leadership and organizational consultants and thought leaders, working in 82 cities in 49 countries. Our consultants are predominately recruited from local markets, so they are sensitive to local issues, but work together in global teams, resulting in larger opportunities with greater client and commercial impact. Within Consulting, we offer the following core capabilities:
Organizational Strategy: We map talent strategy to business strategy, designing operating models and organization structures that help companies put their plans into action.
Assessment and Succession: We identify the talent clients need, compare that to the talent they have, and then help close those gaps.
Leadership and Professional Development: We develop leaders along every stage of their career journey with a spectrum of intensive high-touch and scalable high-tech development experiences.
Total Rewards: We help organizations pay their people fairly for doing the right things-with rewards they value-at a cost the organization can afford.
These solutions are bundled into integrated market offerings (Workforce Transformation, DE&I, Accelerating Revenue Growth, People Cost Optimization) that include our IP and data and reflect our best thinking across our solutions, enabling us to develop innovative and differentiated approaches to our clients’ most pressing business challenges.
We partner with some of the world’s most admired organizations in the creation and execution of talent strategy. We accomplish this through consulting solutions that address how people work and show how to nurture them so that their strategies succeed. We capitalize on the breadth of our IP, service offerings and expertise to do what is right for the client-transforming ideas into actionable insights. Clients can depend on our solutions to be data backed, market tested and agile.
Client Base-During fiscal 2021, the Consulting segment partnered with approximately 4,500 clients across the globe and 27% of Consulting’s fiscal 2021 fee revenue was referred from Korn Ferry’s other lines of business. Our clients
come from the private, public, and not-for-profit sectors, across every major industry and represent diverse business challenges.
Competition-The people and organizational consulting market is fragmented with different competitor sets for each of our core solutions. It is also extremely competitive, as companies are increasingly seeking ways to synchronize their strategy and talent to drive superior business performance. Our competitors include consulting organizations affiliated with accounting, insurance, information systems and strategy consulting firms. Although such firms are our largest competitors, we also compete with smaller boutique firms that specialize in specific regional, industry or functional aspects of leadership and HR consulting.
Digital
Overview-As the world changes, organizations need to be agile, decisive, and to act and scale fast. Korn Ferry Digital empowers leaders to reach their goals by optimizing the potential of their people.
The subscription-based platform that powers our Digital business combines our bank of employee data and Korn Ferry methodology to benchmark where individuals and teams are now, and then identifies the best structure, roles, capabilities and behaviors and rewards needed to drive organizational effectiveness. Digital delivers clear insight with the training and tools needed to align organizational structure with business strategy.
Our Digital solutions cover the talent journey:
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Korn Ferry Assess: our assessment solution helps clients understand, develop and leverage talent
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Korn Ferry Listen: customized employee engagement programs
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Korn Ferry Pay: market-leading compensation data and tools for employee rewards programs
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Korn Ferry Recruit: AI-enabled talent acquisition tools that streamline hiring
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Korn Ferry Select: our pre-hire assessment to help clients find and hire the best talent
Our Digital team is comprised of top leadership, organizational consultants and thought leaders, located in 67 cities in 47 countries. Our experts are predominately recruited from local markets, so they are sensitive to local issues, but work together in global teams, resulting in larger opportunities with greater client and commercial impact.
Client Base-During fiscal 2021, the Digital segment partnered with approximately 7,900 clients across the globe and 35% of Digital’s fiscal 2021 fee revenue was referred from Korn Ferry’s other lines of business. Our clients come from the private, public and not-for-profit sectors, across every major industry and represent diverse business challenges.
Competition-The competitor landscape is fragmented. We compete with specialist suppliers, boutique and large consulting companies in each solution area. One of our advantages is the way we have linked our data, IP, and our technology platform. This allows us to provide an end-to-end view of talent. We are able to show what success looks like across more than 4,000 roles, and our Success Profile model provides a holistic way to look at a job from multiple angles, providing connectivity from people to strategy.
Executive Search
Overview-Korn Ferry helps clients attract and hire leaders who fit with their organization and make it stand out. Our services are typically used to fill executive-level positions, such as board directors, chief executive officers, chief financial officers, chief operating officers, chief information officers, chief human resource officers and other senior executive officers.
All our reportable segments within the Executive Search business line provide services that concentrate on searches for positions with average annual cash compensation of $360,000 or more, or comparable compensation in foreign locations. The industry is comprised of retained and contingency recruitment firms. Retained firms, such as Korn Ferry, typically charge a fee for their services equal to approximately one-third of the first-year annual cash compensation for the position being filled regardless of whether the position is filled. Contingency firms generally work on a non-exclusive basis and are compensated only upon successfully placing a recommended candidate.
As part of this retainment, we assemble a team of consultants with appropriate geographic, industry and functional expertise. We utilize a standardized and differentiated approach to placing talent that integrates our research-based IP with our practical experience. Our search consultants serve as management advisors who work closely with the client in identifying, assessing and placing qualified candidates. In fiscal 2021, we executed more than 5,400 new executive search assignments.
Industry Specialization-Consultants organized in six broad industry groups bring an in-depth understanding of the market conditions and strategic management issues faced by clients within their specific industries and geographies.
We are continually looking to expand our specialized expertise through internal development and strategic hiring in targeted growth areas.
Percentage of Fiscal 2021 Assignments Opened by Industry Specialization
Global Industries:
Industrial
%
Financial Services
%
Life Sciences/Healthcare Provider
%
Consumer
%
Technology
%
Regional Specialties (U.S.):
Education/Not-for-Profit
%
Functional Expertise-We also have organized executive search centers of functional expertise, composed of consultants who have extensive backgrounds in placing executives in certain functions, such as board directors, CEOs and other senior executive officers. Our Board & CEO Services group, for example, focuses exclusively on placing CEOs and board directors in organizations around the world. This is a dedicated team from the most senior ranks of the firm. Their work is with CEOs and in the boardroom, and their expertise is in organizational leadership and governance. They conduct hundreds of engagements every year, tapping talent from every corner of the globe. This work spans all ranges of organizational scale and purpose. Members of functional groups are located throughout our regions and across our industry groups.
Percentage of Fiscal 2021 Assignments Opened by Functional Expertise
Board Level/CEO/CFO/Senior Executive and General Management
%
Finance and Control
%
Marketing and Sales
%
Information Systems
%
Manufacturing/Engineering/Research and Development/Technology
%
Human Resources and Administration
%
Regions
North America-In fiscal 2021, the region opened more than 2,500 new engagements with an average of almost 250 consultants.
EMEA-In fiscal 2021, the region opened more than 1,500 new engagements with an average of nearly 170 consultants.
Asia Pacific-In fiscal 2021, the region opened almost 1,000 new engagements with an average of almost 90 consultants.
Latin America-In fiscal 2021, the region opened more than 400 new engagements with an average of more than 35 consultants.
Client Base-Our more than 3,600 Search engagement clients in fiscal 2021 include many of the world’s largest and most prestigious public and private companies.
Competition-In Executive Search, we compete with other global executive search firms (i.e. Egon Zehnder, Heidrick & Struggles International, Inc., Russell Reynolds Associates and Spencer Stuart). Although these firms are our largest competitors, we also compete with smaller boutique firms that specialize in specific regional, industry or functional searches. We believe our brand name, differentiated business model, systematic approach to client service, cutting-edge technology, unique IP, global network, prestigious clientele, strong specialty practices and high-caliber colleagues are recognized worldwide. We also believe our long-term incentive compensation arrangements, as well as other executive benefits, distinguish us from most of our competitors and are important in attracting and retaining our key consultants.
RPO & Professional Search
Overview-Korn Ferry combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to our clients. Our recruiting solutions have breadth, including all functional talent segments-IT, Marketing, R&D, Commercial Sales, HR, Healthcare, Supply Chain, Finance and Legal. We also have depth, with the ability to deliver transaction sizes ranging from single professional searches to team, department and line of business projects, and enterprise global professional recruiting solutions. Our global capabilities deliver 1-10,000 or more new hires to address our clients’ employment needs.
RPO: In fiscal 2021, Korn Ferry was recognized as one of the top RPO providers in the Baker’s Dozen list, marking our 14th consecutive year on the list. We were also named a leader on the Everest PEAK Matrix for four years running and achieved star performer status in 2021, with an improved leader position from 2020. Through decades of experience, we have enhanced our RPO solution to deliver quality candidates that drive our clients’ business strategies. We leverage proprietary IP and data sets to guide clients on the critical skills and competencies to look for, compensation information to align with market demand, and assessment tools to ensure candidate fit. In fiscal 2021 we introduced Nimble, a new, fully integrated recruitment technology solution incorporating Candidate Relationship Management, AI Assistance & Screening and Korn Ferry Assessments.
We combine traditional recruitment expertise with a multi-tiered portfolio of talent acquisition solutions. Consultants, based in 33 countries, have access to our databases of pre-screened, mid-level professionals. Our global candidate pool complements our international presence and multi-channel sourcing strategy to provide speed, efficiency and quality service for clients worldwide.
Project Recruitment: We can deliver the same talent acquisition services as we would in an end-to-end RPO solution, but within a defined project start and end date. Our Project Recruitment solution is seamless and aligned with the client’s broader talent acquisition strategy. Clients enjoy the same benefits around reduced time to hire, reduced cost per hire and improved candidate quality that they would with a full RPO solution, but via an on-demand model to manage short-term or specialized needs.
Professional Search: We are positioned to help organizations identify and attract professionals at the middle to upper levels of management in single-search engagements. We focus on:
INDUSTRIES:
▪ Consumer
FUNCTIONAL EXPERTISE:
▪ Finance & Accounting
▪ Financial Services
▪ Human Resources
▪ Industrial
▪ Information Technology
▪ Life Sciences/Healthcare
▪ Sales, Marketing & Digital
▪ Technology
▪ Supply Chain Management
▪ Education/Not-for-Profit/Government
Our innovative search process mirrors our Executive Search solution, offering access to active and passive candidate pools, the industry’s richest data on salaries and employee engagement, and proprietary tools in Korn Ferry Digital. A wealth of assessment data defines the traits needed for success in each role we recruit and matches candidates against best-in-class profiles while also gauging cultural fit. Our newest offering, Korn Ferry Recruit, a nimble solution, provides a fully integrated end-to-end technology solution for high-volume hiring of repeatable roles.
Client Base-During fiscal 2021, the RPO & Professional Search segment partnered with more than 2,000 clients across the globe and 50% of RPO & Professional Search’s fiscal 2021 fee revenue was referred from Korn Ferry’s Consulting and Digital and all four reportable segments in the Executive Search line of business.
Competition-We primarily compete for RPO business with other global RPO providers and compete for search assignments with regional contingency recruitment firms and large national retained recruitment firms. We believe our competitive advantage is distinct. We are strategic, working with clients to hire best-fit candidates using our assessment IP, proprietary technology and professional recruiters. Our Talent Delivery Centers provide our teams with increased scalability, multilingual capabilities, global reach and functional specialization. We also work under the One Korn Ferry umbrella to help clients plan for their broader talent acquisition needs as part of their business strategy planning.
HUMAN CAPITAL
At Korn Ferry, talent truly matters. We believe it is how organizations succeed, opportunities arise and greatness happens. When people are in the right roles and engaged, ideas come to life, businesses grow and the leaders who will shape tomorrow emerge. We aim to continue making Korn Ferry a place that energizes, develops, rewards, and empowers people to pursue their passions and help our business succeed.
We operate in 101 offices in 53 countries, enabling us to deliver our solutions on a global basis, wherever our clients do business. As of April 30, 2021, we had 7,889 full-time employees, including 2,669 consultants and execution staff who are primarily responsible for originating client services. Of this, 1,527 were Executive Search employees consisting of 524 consultants and 1,003 associates, researchers, administrative and support staff. Our Consulting segment had 1,923 employees as of April 30, 2021, consisting of 1,565 consultants and execution staff and 358 associates, researchers, administrative and support staff. Our Digital segment had 1,200 employees as of April 30, 2021, consisting of 295 consultants and 905 associates, researchers, administrative and support staff. Our RPO & Professional Search segment had 3,071 employees as of April 30, 2021, consisting of 285 consultants and 2,786 administrative and support staff. Corporate had 168 professionals as of April 30, 2021. We are not party to a
collective bargaining agreement and consider our relations with our employees to be good. Korn Ferry is an equal opportunity employer.
We have assembled a wealth of talent that is rewarded based on performance. Our Company brings together a wide range of disciplines and professions-everything from academic research and technology development to executive recruiting, consulting, and business leadership. We are also a culturally diverse organization. Our people come from all over the world and speak a multitude of languages. For us, this diversity is a key source of strength. It means we have people who are able to challenge convention, offer unique perspectives, and generate innovative ideas. We are recognized by our clients and within the industry for our company culture and excellent work. Some highlights from fiscal 2021 include:
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Leader, Sales Training Service Providers (Gartner Magic Quadrant)
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Leader and Star Performer on the 2021 PEAK matrix (Everest)
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Pacesetter, Workforce Management Services (ALM Intelligence)
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Leader, Recruitment Process Outsourcing (RPO) (NelsonHall’s Vendor Evaluation and Assessment (NEAT))
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America’s Best Executive Recruiting Firm (Forbes Magazine)
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2021 Perfect score 100 on Human Rights Campaign Foundation’s Corporate Equality Index which measures equality for LGBTQ colleagues
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2020 100 Best Companies for Moms (Working Mother)
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2020 Best Companies for Dads (Working Mother)
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2020+ Top Companies for Executive Women (Working Mother)
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Best Companies for Women (Women’s Choice Award)
Our People
We continue to invest in building a world-class organization that is aligned to our strategy and is staffed by a skilled, motivated and agile workforce. We know our people are key to our business success. Key initiatives in this area include:
Safety and Well-Being
In response to the pandemic, we developed and implemented new practices designed to prioritize the health and safety of our employees and clients. In March of 2020, we halted travel, closed all offices and shifted to a work-from-home approach, reopening offices only when local governments deemed it safe and even then, required adherence to social distancing protocols, offered access to personal protective equipment, established occupancy limits, enhanced cleaning procedures and increased visibility and access to mental health and other wellness offerings.
Workplace and Culture
We work to foster a supportive, respectful culture where everyone feels valued for their contribution. It starts with our values of Inclusion, Honesty, Knowledge and Performance. Under these values, we seek to embrace people with different points of view. We say what we mean and do what we say. We hold ourselves to the highest standards and make it safe for people to speak out when they see something wrong. We actively help our colleagues grow, develop with mentoring and support and we never settle for the status quo. We always strive to be better today than we were yesterday and do our best for our clients, colleagues, and shareholders.
Diversity, Equity and Inclusion
Inclusion is intentionally the first of our four core values and a pillar of our firm. Our people come from all over the world and speak a multitude of languages. For us, this diversity is a key source of strength. It means we have people who are able to challenge convention, offer unique perspectives and generate innovative ideas. Equally important, it means we can think and act globally-just like our clients. In fiscal 2021, hundreds of our leaders worldwide participated in our Conscious Inclusion training program. This training is a part of a series of other firm-wide inclusion culture efforts to increase individual and team engagement and contribution.
Mentorship, Training and Career Development
We are focused on teaching and mentoring to support the career growth and success of our colleagues and believe these efforts have fostered stability and expertise in our workforce. Development happens broadly throughout the organization from formal mentoring using KF Advance, and direct training on our learning management platform, iAcademy, to a range of career and leadership programs such as our Mosaic program for diverse high-potentials, Leadership U PLUS for all Korn Ferry colleagues, a leadership development program for all interested colleagues, and Leadership U for Korn Ferry Plus, which supplements our core learning program with individual and group coaching. In fiscal 2021, we promoted more than 1,000 colleagues across our four lines of business and Corporate.
Benefits
We offer competitive benefits across the globe that are customized within each country we operate in based on market prevalence and cultural relevance. The Korn Ferry Cares benefits strategy focuses on keeping our colleagues and their families healthy - physically, emotionally, financially and socially. Our progressive benefit offerings in the U.S. helped us earn top recognitions as a best employer by Working Mother Magazine and the Human Rights Campaign.
Our Community
Its not just about our people, its about all people. Korn Ferry supports philanthropic organizations and is actively engaged and dedicated to have a positive impact in the communities where we work and live. Our offices and colleges worldwide take part in community services through a variety of organizations and programs. Not only do we proudly contribute financially to many organizations but we provide a work environment that is supportive of employees opportunities to volunteer in their local communities.
In addition in 2020, we created the Korn Ferry Charitable Foundation, a 501(c)(3) non-profit organization. The Foundation’s mission is have real impact by helping people exceed their potential; whether that is in the boardroom, the classroom or their living room. The first major initiative of the Foundation is Leadership U for Humanity. This initiative seeks to help underrepresented populations strength their leadership skills and enhance their careers through personalized one-on-one coaching, leadership development training and leveraging other Korn Ferry intellectual property
Volunteering in our Communities
We are committed to making a difference in our communities and the world. We proudly contribute financially to organizations and causes that we believe will significantly impact the greater good. We believe that donating our time, talent and resources is equally as important. So, we provide a work environment that gives our employees opportunities to volunteer in local communities. Our offices and colleagues worldwide take part in community service through a variety of organizations and programs.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
The discussion below describes the material factors, events, and uncertainties that make an investment in our securities risky, and these risk factors should be considered carefully together with all other information in this Annual Report, including the financial statements and notes thereto. It does not address all of the risks that we face, and additional risks not presently known to us or that we currently deem immaterial may also arise and impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by the occurrence of any of these risks.
Risks Related to Our Business
We face various risks related to health epidemics, pandemics, and similar outbreaks, such as COVID-19. COVID-19 has been negatively impacting the operations and financial performance of many of the clients we serve. The ultimate magnitude of COVID-19 and of any future pandemics or similar outbreaks, will depend on a variety of factors, including its duration, related restrictions and operational requirements that apply to our business and the businesses of our clients, and the state of the global economy, the full extent of which cannot be predicted at this time.
Our business and financial results have been, and could be in the future, adversely affected by health epidemics, pandemics, and similar outbreaks. The COVID-19 pandemic has caused, and is expected to continue to cause, a global slowdown in economic activity, a decrease in demand for a broad variety of goods and services, disruptions in global supply chains, and significant volatility and disruption of financial markets. Because the severity, magnitude and duration of the pandemic and its economic consequences are uncertain, vary by region, are rapidly changing and difficult to predict, its full impact on our operations and financial performance, as well as its impact on our near-term ability to successfully execute our strategic objectives, remains similarly uncertain and difficult to predict. Further, the pandemic’s ultimate impact depends in part on many factors not within our control and which may vary by region
(heightening the uncertainty as to the ultimate impact COVID-19 may have on our operations and financial performance), including (1) restrictive governmental and business actions (including travel restrictions, work from home requirements, and other workforce limitations), (2) economic stimulus, funding and relief programs and other governmental economic responses, (3) the effectiveness of governmental actions, (4) economic uncertainty in key global markets and financial market volatility, (5) levels of economic contraction or growth, (6) the impact of the pandemic on health and safety, (7) the pace of recovery if and when the pandemic subsides, including the rollout of vaccines, and (8) how significantly the number of cases increases as economies begin to open up and the restrictive governmental and business actions referred to above are relaxed.
Further, the COVID-19 pandemic has subjected our operations and financial performance to a number of risks, including those discussed below, which may also re-occur in any future pandemic:
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Operations-related risks: Across all of our businesses, we are facing increased operational challenges including a heightened need to protect employee health and safety, office shutdowns, workplace disruptions, cybersecurity risks, and restrictions on the movement of people, both at our own offices and at those of our clients and our suppliers. In addition, as we start to re-open offices in certain jurisdictions, we face additional employee health and safety concerns.
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Client-related risks: Our clients have been and will be disrupted by quarantines, fluctuations in their financial condition, and restrictions on employees’ ability to work and office closures. Such disruptions have and may continue to restrict our ability to provide products and services to our clients (or for clients to pay for such products and services) and have also and may continue to reduce demand for our products and services.
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Employee-related risks: We have experienced and will experience disruptions to our operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to deliver our products and services in a timely manner or meet milestones or customer commitments.
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Liquidity- and funding-related risks: A prolonged period of generating lower revenue could adversely affect our cash flow and liquidity. Conditions in the financial and credit markets may also limit our ability to draw on our revolving credit line, as well as the availability of additional funding or increase the cost of funding, if it were to become necessary.
Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
Should we experience a disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack, security breach, power loss, telecommunications failure or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel, our office facilities, and the proper functioning of our computer, telecommunication and other related systems and operations. In such an event, we could experience near-term operational challenges with regard to particular areas of our operations. In particular, our ability to recover from any disaster or other business continuity problem will depend on our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. For example, much of our corporate staff are based in California, which has a high level of risk from wildfires and earthquakes. The impacts of climate change may heighten or exacerbate the occurrence of such events. We could potentially lose client data or experience material adverse interruptions to our operations or delivery of services to our clients in a disaster. A disaster on a significant scale or affecting certain of our key operating areas within or across regions, or our inability to successfully recover should we experience a disaster, pandemic or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client relationships or legal liability.
We are limited in our ability to recruit candidates from certain of our clients due to off-limit agreements with those clients and for client relation and marketing purposes; such limitations could harm our business.
Either by agreement with clients, or for client relations or marketing purposes, we are required to or elect to refrain from, for a specified period of time, recruiting candidates from a client when conducting searches on behalf of other clients. These off-limit agreements can cause us to lose search opportunities to our competition. The duration and scope of the off-limit agreement, including whether it covers all operations of the client and its affiliates or only certain divisions of a client, generally are subject to negotiation or internal policies and may depend on factors such as the scope, size and complexity of the client’s business, the length of the client relationship and the frequency with which we have been engaged to perform executive and professional searches for the client. We cannot ensure that off-limit agreements will not impede our growth or our ability to attract and serve new clients, or otherwise harm our business.
We face significant competition: competition in our industries could result in lost market share, reduced demand for our services, and/or require us to charge lower prices for our services, which could adversely affect our operating results and future growth.
We continue to face significant competition to each of our services and product offerings. The human resource consulting market has been traditionally fragmented and a number of large consulting firms, such as McKinsey, Willis Towers Watson and Deloitte are building businesses in human resource consulting to serve these needs. Our consulting business line has and continues to face competition from human resource consulting businesses. Many of these competitors are significantly larger than Korn Ferry and have considerable resources at their disposal, allowing for potentially significant investment to grow their human resource consulting business. Digital Products in the human resource market has been traditionally fragmented and a number of firms such as AON, Mercer, Willis Towers Watson, SHL, Fuel 50, SkillSoft, Criteria, Predictive Index, Prevue Hire and Textio offer competitive products. Competitors in the digital marketplace are a combination of large, well-capitalized firms and niche players who have received multiple rounds of private financing. Increased competition, whether as a result of professional and social networking website providers, traditional executive search firms, sole proprietors and in-house human resource professionals (as noted above) or larger consulting firms building human resources consulting businesses, may lead to pricing pressures that could negatively impact our business. For example, increased competition could require us to charge lower prices, and/or cause us to lose market share, each of which could reduce our fee revenue.
Our executive search services face competition from both traditional and non-traditional competitors that provide job placement services, including other large global executive search firms, smaller specialty firms and web-based firms. In recent years, we have also begun facing increased competition from sole proprietors and in-house human resource professionals whose ability to provide job placement services has been enhanced by professional profiles made available on the internet and enhanced social media-based search tools. The continued growth of the shared economy and related freelancing platform sites may also negatively impact demand for our services by allowing employers seeking services to connect with employees in real time and without any significant cost. Traditional executive search competitors include Egon Zehnder, Heidrick & Struggles International, Inc., Russell Reynolds Associates and Spencer Stuart. In each of our markets, one or more of our competitors may possess greater resources, greater name recognition, lower overhead or other costs and longer operating histories than we do, which may give them an advantage in obtaining future clients, capitalizing on new technology and attracting qualified professionals in these markets. Additionally, specialty firms can focus on regional or functional markets or on particular industries and executive search firms that have a smaller client base are subject to fewer off-limits arrangements. There are no extensive barriers to entry into the executive search industry and new recruiting firms continue to enter the market.
We believe the continuing development and increased availability of information technology will continue to attract new competitors, especially web-enabled professional and social networking website providers, and these providers may be facilitating a company’s ability to insource their recruiting capabilities. Competitors in these fields include SmashFly, iCIMS, Yello, Indeed, Google for Jobs and Jobvite. As these providers continue to evolve, they may develop offerings similar to or more expansive than ours, thereby increasing competition for our services or more broadly causing disruption in the executive search industry. Further, as technology continues to develop and the shared economy continues to grow, we expect that the use of freelancing platform sites will become more prevalent. As a result, companies may turn to such sites for their talent needs, which could negatively impact demand for the services we offer.
Our RPO & Professional Search services primarily compete for business with other RPO providers such as Cielo, Alexander Mann Solutions, IBM, Allegis and Kelly Services, and compete for mid-level professional search assignments with regional contingency recruitment firms and large national retained recruitment firms such as Robert Half, Michael Page, Harvey Nash and the Lucas Group. In addition, some organizations have developed or may develop internal solutions to address talent acquisition that may be competitive with our solutions. This is a highly competitive and developing industry with numerous specialists. To compete successfully and achieve our growth targets for our talent acquisition business, we must continue to support and develop assessment and analytics solutions, maintain and grow our proprietary database, deliver demonstrable return on investment to clients, support our products and services globally, and continue to provide consulting and training to support our assessment products. Our failure to compete effectively could adversely affect our operating results and future growth.
Failure to attract and retain qualified and experienced consultants, could result in a loss of clients which in turn could cause a decline in our revenue and harm to our business.
We compete with other executive and professional search and consulting firms for qualified and experienced consultants. These other firms may be able to offer greater compensation and benefits or more attractive lifestyle choices, career paths or geographic locations than we do. Attracting and retaining consultants in our industry is particularly important because, generally, a small number of consultants have primary responsibility for a client relationship. Because client responsibility is so concentrated, the loss of key consultants may lead to the loss of client
relationships. In fiscal 2021, our top three consultants in Executive Search (including all four reportable regional segments) and in our Consulting segment had generated business equal to approximately 1% and 2% of our total fee revenues, respectively. Furthermore, our top ten consultants in Executive Search (including all four reportable regional segments) and in our Consulting segment had generated business equal to approximately 3% and 4% of our total fee revenues, respectively. This risk is heightened due to the general portability of a consultant’s business: consultants have in the past, and will in the future, terminate their employment with our Company. Any decrease in the quality of our reputation, reduction in our compensation levels relative to our peers or restructuring of our compensation program, whether as a result of insufficient revenue, a decline in the market price of our common stock or for any other reason, could impair our ability to retain existing consultants or attract additional qualified consultants with the requisite experience, skills and established client relationships. Our failure to retain our most productive consultants, whether in Executive Search, Consulting, Digital or RPO & Professional Search, or maintain the quality of service to which our clients are accustomed, as well as the ability of a departing consultant to move business to his or her new employer, could result in a loss of clients, which could in turn cause our fee revenue to decline and our business to be harmed. We may also lose clients if the departing Executive Search, Consulting, Digital or RPO & Professional Search consultant has widespread name recognition or a reputation as a specialist in his or her line of business in a specific industry or management function. We could also lose additional consultants if they choose to join the departing Executive Search, Consulting, Digital or RPO & Professional Search consultant at another executive search or consulting firm. Failing to limit departing consultants from moving business or recruiting our consultants to a competitor could adversely affect our business, financial condition and results of operations.
Failing to maintain our professional reputation and the goodwill associated with our brand name could seriously harm our business.
We depend on our overall reputation and brand name recognition to secure new engagements and to hire qualified professionals. Our success also depends on the individual reputations of our professionals. We obtain a majority of our new engagements from existing clients or from referrals by those clients. Any client who is dissatisfied with our services can adversely affect our ability to secure new engagements. If any factor, including poor performance or negative publicity, whether or not true, hurts our reputation, we may experience difficulties in competing successfully for both new engagements and qualified consultants, which could seriously harm our business.
As we develop new services, clients and practices, enter new lines of business, and focus more of our business on providing a full range of client solutions, the demands on our business and our operating and legal risks may increase.
As part of our corporate strategy, we are attempting to leverage our research and consulting services to sell a full range of services across the life cycle of a policy, program, project or initiative, and we are regularly searching for ways to provide new services to clients. This strategy, even if effectively executed, may prove insufficient in light of changes in market conditions, technology, competitive pressures or other external factors. In addition, we plan to extend our services to new clients and into new lines of business and geographic locations. As we focus on developing new services, clients, practice areas and lines of business; open new offices; and engage in business in new geographic locations, our operations are exposed to additional as well as enhanced risks.
In particular, our growth efforts place substantial additional demands on our management and staff, as well as on our information, financial, administrative and operational systems. We may not be able to manage these demands successfully. Growth may require increased recruiting efforts, opening new offices, increased business development, selling, marketing and other actions that are expensive and entail increased risk. We may need to invest more in our people and systems, controls, compliance efforts, policies and procedures than we anticipate. Therefore, even if we do grow, the demands on our people and systems, controls, compliance efforts, policies and procedures may exceed the benefits of such growth, and our operating results may suffer, at least in the short-term, and perhaps in the long-term.
Efforts involving a different focus and/or new services, clients, practice areas, lines of business, offices and geographic locations entail inherent risks associated with our inexperience and competition from mature participants in those areas. Our inexperience may result in costly decisions that could harm our profit and operating results. In particular, new or improved services often relate to the development, implementation and improvement of critical infrastructure or operating systems that our clients may view as “mission critical,” and if we fail to satisfy the needs of our clients in providing these services, our clients could incur significant costs and losses for which they could seek compensation from us. As our business continues to evolve and we provide a wider range of services, we will become increasingly dependent upon our employees, particularly those operating in business environments less familiar to us. Failure to identify, hire, train and retain talented employees who share our values could have a negative effect on our reputation and our business.
We are subject to potential legal liability from clients, employees, candidates for employment, stockholders and others. Insurance coverage may not be available to cover all of our potential liability and available coverage may not be sufficient to cover all claims that we may incur.
We are exposed to potential claims with respect to the executive search process and our consulting services, among numerous other matters. For example, a client could assert a claim for matters such as breach of an off-limit agreement or recommending a candidate who subsequently proves to be unsuitable for the position filled. Further, the current employer of a candidate whom we placed could file a claim against us alleging interference with an employment contract; a candidate could assert an action against us for failure to maintain the confidentiality of the candidate’s employment search; and a candidate or employee could assert an action against us for alleged discrimination, violations of labor and employment law or other matters. Also, in various countries, we are subject to data protection, employment and other laws impacting the processing of candidate information and other regulatory requirements that could give rise to liabilities/claims. Client dissatisfaction with the consulting services provided by our consultants may also lead to claims against us.
Additionally, as part of our consulting services, we often send a team of leadership consultants to our clients’ workplaces. Such consultants generally have access to client information systems and confidential information. An inherent risk of such activity includes possible claims of misuse or misappropriation of client IP, confidential information, funds or other property, as well as harassment, criminal activity, torts, or other claims. Such claims may result in negative publicity, injunctive relief, criminal investigations and/or charges, payment by us of monetary damages or fines, or other material adverse effects on our business.
From time to time, we may also be subject to legal actions or claims brought by our stockholders, including securities, derivative and class actions, for a variety of matters related to our operations, such as significant business transactions, cybersecurity incidents, volatility in our stock, and our responses to stockholder activism, among others. Such actions or claims and their resolution may result in defense costs, as well as settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance. The payment of any such costs, settlements, fines or judgments that are not insured could have a material adverse effect on our business. In addition, such matters may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and expose us to increased risks that would be uninsured.
We cannot ensure that our insurance will cover all claims or that insurance coverage will be available at economically acceptable rates. Our ability to obtain insurance, its coverage levels, deductibles and premiums, are all dependent on market factors, our loss history and insurers’ perception of our overall risk profile. Our insurance may also require us to meet a deductible. Significant uninsured liabilities could have a material adverse effect on our business, financial condition and results of operations.
We are subject to numerous and varied government regulations across the jurisdictions in which we operate.
Our business is subject to various federal, state, local, and foreign laws and regulations that are complex, change frequently and may become more stringent over time. Future legislation, regulatory changes or policy shifts under the new U.S. administration or other governments, could impact our business. Our failure to comply with applicable laws and regulations could restrict our ability to provide certain services or result in the imposition of fines and penalties, substantial regulatory and compliance costs, litigation expense, adverse publicity, and loss of revenue. We incur, and expect to continue to incur, significant expenses in our attempt to comply with these laws, and our businesses are also subject to an increasing degree of compliance oversight by regulators and by our clients. In addition, our Digital services and increasing use of technology in our business expose us to data privacy and cybersecurity laws and regulations that vary and are evolving across jurisdictions. These and other laws and regulations, as well as laws and regulations in the various states or in other countries, could limit our ability to pursue business opportunities we might otherwise consider engaging in, impose additional costs or restrictions on us, result in significant loss of revenue, impact the value of assets we hold, or otherwise significantly adversely affect our business. Any failure by us to comply with applicable laws or regulations could also result in significant liability to us from private legal actions, or may result in the cessation of our operations or portions of our operations or impositions of fines and restrictions on our ability to carry on or expand our operations. Our operations could also be negatively affected by changes to laws and regulations and enhanced regulatory oversight of our clients and us. These changes may compel us to change our prices, may restrict our ability to implement price increases, and may limit the manner in which we conduct our business or otherwise may have a negative impact on our ability to generate revenues, earnings, and cash flows. If we are unable to adapt our products and services to conform to the new laws and regulations, or if these laws and regulations have a negative impact on our clients, we may experience client losses or increased operating costs, and our business and results of operations could be negatively affected.
Our business and operations are impacted by developing laws and regulations, as well as evolving investor and customer expectations with regard to environmental matters, including the impacts and actions needed to address climate change.
We are subject to evolving local, state, federal and/or international laws, regulations, and expectations regarding the environment and climate change. These requirements and expectations may increase the time and cost of our efforts to monitor and comply with those obligations; limit the extent, frequency, and modality with which our consultants travel; and expose us to liability. Within our own operations, we face additional costs from rising energy costs which make it more expensive to power our corporate offices.
The impacts of climate change present notable risks, including damage to assets and technology caused by extreme weather events linked to climate change.
Risks Related To Our Profitability
We may not be able to align our cost structure with our revenue level, which in turn may require additional financing in the future that may not be available at all or may be available only on unfavorable terms.
Our efforts to align our cost structure with the current realities of our markets may not be successful. When actual or projected fee revenues are negatively impacted by weakening customer demand, we have and may again find it necessary to take cost cutting measures so that we can minimize the impact on our profitability. In fiscal 2020, due to the decrease in fee revenue as a result of COVID-19 and, as part of a broader program aimed at further enhancing our strong balance sheet and liquidity position, the Company developed and implemented a plan that was intended to adjust our cost base to the then-current economic environment and to position us to invest in the recovery. This plan included (i) a reduction in workforce, which was completed by the end of the first quarter of fiscal 2021 and resulted in in restructuring charges of $40.5 million and $30.7 million associated with severance during fiscal 2020 and 2021, respectively, (ii) the temporary furlough of certain employees, (iii) subject to certain exceptions and legal requirements, salary reductions across the organization through December 31, 2020, and (iv) other cost saving measures relating to general and administrative expenses. Failing to maintain a balance between our cost structure and our revenue could adversely affect our business, financial condition, and results of operations and lead to negative cash flows, which in turn might require us to obtain additional financing to meet our capital needs. If we are unable to secure such additional financing on favorable terms, or at all, our ability to fund our operations could be impaired, which could have a material adverse effect on our results of operations.
Our financial results could suffer if we are unable to achieve or maintain adequate utilization and suitable billing rates for our consultants.
Our profitability depends, to a large extent, on the utilization and billing rates of our professionals. Utilization of our professionals is affected by a number of factors, including: the number and size of client engagements; the timing of the commencement, completion and termination of engagements (for example, the commencement or termination of multiple RPO engagements could have a significant impact on our business, including significant fluctuations in our fee revenue, since these types of engagements are generally larger, in terms of both staffing and fee revenue generated, than our other engagements); our ability to transition our consultants efficiently from completed engagements to new engagements; the hiring of additional consultants because there is generally a transition period for new consultants that results in a temporary drop in our utilization rate; unanticipated changes in the scope of client engagements; our ability to forecast demand for our services and thereby maintain an appropriate level of consultants; and conditions affecting the industries in which we practice, as well as general economic conditions.
The billing rates of our consultants that we are able to charge are also affected by a number of factors, including: our clients’ perception of our ability to add value through our services; the market demand for the services we provide, which may vary globally or within particular industries that we serve; an increase in the number of clients in the government sector in the industries we serve; the introduction of new services by us or our competitors; our competition and the pricing policies of our competitors; and current economic conditions.
If we are unable to achieve and maintain adequate overall utilization, as well as maintain or increase the billing rates for our consultants, our financial results could materially suffer. In addition, our consultants oftentimes perform services at the physical locations of our clients. Natural disasters, pandemics, disruptions to travel and transportation or problems with communications systems negatively impact our ability to perform services for, and interact with, our clients at their physical locations, which could have an adverse effect on our business and results of operations.
The profitability of our fixed-fee engagements with clients may not meet our expectations if we underestimate the cost of these engagements when pricing them.
When making proposals for fixed-fee engagements, we estimate the costs and timing for completing the engagements and these estimates may not be accurate. Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-fee engagements, including delays caused by factors outside our control, could make these contracts less profitable or unprofitable, which would have an adverse effect on our profit margin. For the years ended April 30, 2021, 2020, and 2019, fixed-fee engagements represented 26%, 25%, and 27% of our revenues, respectively.
Risks Related To Accounting and Taxation
Foreign currency exchange rate risks affect our results of operations.
A material portion of our revenue and expenses are generated by our operations in foreign countries, and we expect that our foreign operations will account for a material portion of our revenue and expenses in the future. Most of our international expenses and revenue are denominated in foreign currencies. As a result, our financial results are affected by changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we have operations, among other factors. Fluctuations in the value of those currencies in relation to the U.S. dollar have caused and will continue to cause dollar-translated amounts to vary from one period to another. Such variations expose us to both adverse as well as beneficial movements in currency exchange rates. Given the volatility of exchange rates, we are not always able to manage effectively our currency translation or transaction risks, which has and may continue to adversely affect our financial condition and results of operations.
We have deferred tax assets that we may not be able to use under certain circumstances.
If we are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant change in the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowances against our deferred tax assets. This would result in an increase in our effective tax rate, and an adverse effect on our future operating results. In addition, changes in statutory tax rates may also change our deferred tax assets or liability balances, with either a favorable or unfavorable impact on our effective tax rate. Our deferred tax assets may also be impacted by new legislation or regulation.
Risks Related to Our Financing/Indebtedness
Our indebtedness could adversely affect our financial condition, our ability to operate our business, react to changes in the economy or our industry, prevent us from fulfilling our obligations under our indebtedness and could divert our cash flow from operations for debt payments.
As of April 30, 2021, we had approximately $400.0 million in total indebtedness outstanding, and $646.0 million of availability under our $650.0 million five-year senior secured revolving credit facility (the “Revolver”) provided for under our Credit Agreement (the “Credit Agreement”) that we entered into on December 16, 2019, with a syndicate of banks and Bank of America, National Association as administrative agent. Subject to the limits contained in the Credit Agreement that govern our Revolver and the indenture governing our $400.0 million principal amount of the 4.625% Senior Unsecured Notes due 2027 (the “Notes”), we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisition, or for other purposes. If we do so, the risks related to our debt could increase.
Specifically, our level of debt could have important consequences to us, including the following: it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt; our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate purposes may be impaired; requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, including the Notes, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities and other purposes; we are more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry is more limited; our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our high level of debt and the restrictive covenants in the Credit Agreement and the indenture governing our Notes; our ability to borrow additional funds or to refinance debt may be limited; COVID-19 could impact our ability to draw on the revolver or result in a credit downgrade; and it may cause potential or existing customers to not contract with us due to concerns over our ability to meet our financial obligations, such as insuring against our professional liability risks, under such contracts.
Furthermore, our debt under our Revolver bears interest at variable rates.
Despite our indebtedness levels, we and our subsidiaries may still incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.
We and our subsidiaries may incur substantial additional indebtedness in the future. The Credit Agreement and the indenture governing our Notes contain restrictions on the incurrence of additional indebtedness, but these restrictions are subject to several qualifications and exceptions, and the indebtedness that may be incurred in compliance with these restrictions could be substantial. If we incur additional debt, the risks associated with our leverage, including those described above, would increase. Further, the restrictions in the indenture governing the Notes and the Credit Agreement will not prevent us from incurring obligations, such as trade payables, that do not constitute indebtedness as defined in such debt instruments. As of April 30, 2021, we had $646.0 million of availability to incur additional secured indebtedness under our Revolver.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.
Interest rates fluctuate. As a result, interest rates on the Revolver or other variable rate debt offerings could be higher or lower than current levels. If interest rates increase, our debt service obligations on our variable rate indebtedness, if any, would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. In addition, a transition away from the London Interbank Offered Rate (“LIBOR”) as a benchmark for establishing the applicable interest rate may affect the cost of servicing our debt under the Revolver. In July 2017, the Financial Conduct Authority of the U.K. announced that it plans to phase out LIBOR by the end of calendar year 2021. On March 5, 2021, however, the ICE Benchmark Administration (the “IBA”), the administrator of LIBOR, announced its intention to cease the publication of all settings of non-U.S. dollar LIBOR and only the one-week and two-month U.S. dollar LIBOR settings on December 31, 2021, with the publication of the remaining U.S. dollar LIBOR settings being discontinued after June 30, 2023. It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established. Our borrowing arrangements provide for alternative base rates, but such alternative base rates may or may not be related to LIBOR, and the consequences of the phase out of LIBOR cannot be entirely predicted at this time. For example, if any alternative base rate or means of calculating interest with respect to our outstanding variable rate indebtedness leads to an increase in the interest rates charged, it could result in an increase in the cost of such indebtedness, impact our ability to refinance some or all of our existing indebtedness or otherwise have a material adverse impact on our business, financial condition and results of operations.
We may be unable to service our indebtedness.
Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors, all of which are beyond our control, including the availability of financing in the international banking and capital markets. Lower total revenue generally will reduce our cash flow. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs.
If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt, which could cause us to default on our debt obligations and impair our liquidity. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.
Moreover, in the event of a default, the holders of our indebtedness, including the Notes, could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest, if any. The lenders under the Revolver could also elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against their collateral, and we could be forced into bankruptcy or liquidation. If we breach our covenants under the Revolver, we would be in default thereunder. The lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.
The agreements governing our debt impose significant operating and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities.
The Credit Agreement and the indenture governing the Notes impose significant operating and financial restrictions on us. These restrictions limit our ability and the ability of our subsidiaries to, among other things: incur or guarantee additional debt or issue capital stock; pay dividends and make other distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; merge or consolidate; enter into agreements that restrict the ability of subsidiaries to make dividends, distributions or other payments to us or the guarantors; in the case of the indenture governing our Notes, designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell assets.
We and our subsidiaries are subject to covenants, representations and warranties in respect of the Revolver, including financial covenants as defined in the Credit Agreement. See “Note 11 - Long-Term Debt” of our notes to our consolidated financial statements included in this Annual Report on Form 10-K.
As a result of these restrictions, we are limited as to how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
Our failure to comply with the restrictive covenants described above and/or the terms of any future indebtedness from
time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected.
A decline in our operating results or available cash could cause us to experience difficulties in complying with covenants contained in more than one agreement, which could result in our bankruptcy or liquidation.
If we sustain a decline in our operating results or available cash, we could experience difficulties in complying with the financial covenants contained in the Credit Agreement. The failure to comply with such covenants could result in an event of default under the Revolver and by reason of cross-acceleration or cross-default provisions, other indebtedness may then become immediately due and payable. In addition, should an event of default occur, the lenders under our Revolver could elect to terminate their commitments thereunder, cease making loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the lenders under our Revolver to avoid being in default. If we breach our covenants under our Revolver and seek a waiver, we may not be able to obtain a waiver from the lenders thereunder. If this occurs, we would be in default under our Revolver, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.
Risks Related to Technology, Cybersecurity and Intellectual Property
Social media platforms present risks and challenges that can cause damage to our brand and reputation.
The inappropriate and/or unauthorized use of social media platforms, including weblogs (or blogs), social media websites and other forms of Internet-based communications, which allow individuals access to a broad audience of consumers and other interested persons by our clients or employees could increase our costs, cause damage to our brand, lead to litigation or result in information leakage, including the improper collection and/or dissemination of personally identifiable information of candidates and clients. In addition, negative or inaccurate posts or comments about us on any social networking platforms could damage our reputation, brand image and goodwill.
Technological advances may significantly disrupt the labor market and weaken demand for human capital at a rapid rate.
Our success is directly dependent on our customers’ demands for talent. As technology continues to evolve, more tasks currently performed by people have been and may continue to be replaced by automation, robotics, machine learning, artificial intelligence and other technological advances outside of our control. The human resource industry has been and continues to be impacted by significant technological changes, enabling companies to offer services competitive with ours. Many of those technological changes may (i) reduce demand for our services, (ii) enable the development of competitive products or services, or (iii) enable our current customers to reduce or bypass the use of our services, particularly in lower-skill job categories. Additionally, rapid changes in artificial intelligence and block chain-based technology are increasing the competitiveness landscape. We may not be successful in anticipating or responding to these changes and demand for our services could be further reduced by advanced technologies being deployed by our competitors. The effort to gain technological expertise and develop new technologies in our business may require us to incur significant expenses. In some cases, we depend on key vendors and partners to provide technology and other support. If these third parties fail to perform their obligations or cease to work with us, our ability to execute on our strategic initiatives could be adversely affected.
We have invested in specialized technology and other IP for which we may fail to fully recover our investment, or which may become obsolete.
We have invested in developing specialized technology and IP, including proprietary systems, processes and methodologies, such as Korn Ferry Advance and Talent Hub, that we believe provide us a competitive advantage in serving our current clients and winning new engagements. Many of our service and product offerings rely on specialized technology or IP that is subject to rapid change, and to the extent that this technology and IP is rendered obsolete and of no further use to us or our clients, our ability to continue offering these services, and grow our revenues, has been and may continue to be adversely affected. There is no assurance that we will be able to develop new, innovative or improved technology or IP or that our technology and IP will effectively compete with the IP developed by our competitors. If we are unable to develop new technology and IP or if our competitors develop better technology or IP, our revenues and results of operations could be adversely affected.
We rely heavily on our information systems, and if we lose that technology, or fail to further develop our technology, our business could be harmed.
Our success depends in large part upon our ability to store, retrieve, process, manage and protect substantial amounts of information. To achieve our strategic objectives and to remain competitive, we must continue to develop and enhance our information systems. This may require the acquisition of equipment and software and the development of new proprietary software, either internally or through independent consultants. If we are unable to design, develop, implement and utilize, in a cost-effective manner, information systems that provide the capabilities necessary for us to compete effectively, or for any reason any interruption or loss of our information processing
capabilities occurs, this could harm our business, results of operations and financial condition. We cannot be sure that our current insurance against the effects of a disaster regarding our information technology or our disaster recovery procedures will continue to be available at reasonable prices, cover all our losses or compensate us for the possible loss of clients occurring during any period that we are unable to provide business services.
We are subject to risk as it relates to software that we license from third parties.
We license software from third parties, much of which is integral to our systems and our business. The licenses are generally terminable if we breach our obligations under the license agreements. If any of these relationships were terminated or if any of these parties were to cease doing business or cease to support the applications we currently utilize, we may be forced to spend significant time and money to replace the licensed software. However, we cannot assure you that the necessary replacements will be available on reasonable terms, if at all.
We are dependent on third parties for the execution of certain critical functions.
We do not maintain all of our technology infrastructure, and we have outsourced certain other critical applications or business processes to external providers, including cloud-based services. The failure or inability to perform on the part of one or more of these critical suppliers or partners could cause significant disruptions and increased costs. We are also dependent on security measures that some of our third-party vendors and customers are taking to protect their own systems and infrastructures. If our third-party vendors do not maintain adequate security measures, do not require their sub-contractors to maintain adequate security measures, do not perform as anticipated and in accordance with contractual requirements, or become targets of cyber-attacks, we may experience operational difficulties and increased costs, which could materially and adversely affect our business.
Cyber security vulnerabilities and incidents have and may again lead to the improper disclosure of information obtained from our clients, candidates and employees, which could result in liability and harm to our reputation.
We use information technology and other computer resources to carry out operational and marketing activities and to maintain our business records. We rely on information technology systems to process, transmit, and store electronic information and to communicate among our locations around the world and with our clients, partners, and employees. The breadth and complexity of this infrastructure increases the risk of security breaches which could lead to potential unauthorized disclosure of confidential information. Reliance on trained professionals to configure and operate this infrastructure creates the potential for human error, leading to potential exposure of sensitive or confidential information.
Our systems and networks are vulnerable to computer viruses, malware, worms, hackers and other security issues, including physical and electronic break-ins, router disruption, sabotage or espionage, disruptions from unauthorized access and tampering (including through social engineering such as phishing attacks), impersonation of authorized users and coordinated denial-of-service attacks. For example, in the past we have experienced cyber security incidents resulting from unauthorized access to our systems, which to date have not had a material impact on our business or results of operations; however, there is no assurance that such impacts will not be material in the future.
The continued occurrence of high-profile data breaches against various entities and organizations provides evidence of an external environment that is increasingly hostile to information security. This environment demands that we continuously improve our design and coordination of security controls across our business groups and geographies in order to protect information that we develop or that is obtained from our clients, candidates and employees. Despite these efforts, given the ongoing and increasingly sophisticated attempts to access the information of entities, our security controls over this information, our training of employees, and other practices we follow have not and may not prevent the improper disclosure of such information. Our efforts and the costs incurred to bolster our security against attacks cannot provide absolute assurance that future data breaches will not occur. We depend on our overall reputation and brand name recognition to secure new engagements. Perceptions that we do not adequately protect the privacy of information could inhibit attaining new engagements, qualified consultants and could potentially damage currently existing client relationships.
Data security, data privacy and data protection laws, such as the European Union General Data Protection Regulation (“GDPR”), and other evolving regulations and cross-border data transfer restrictions, may limit the use of our services, increase our costs and adversely affect our business.
We are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect client, colleague, supplier and company data, such as the GDPR, which became effective in May 2018, and requires companies to meet stringent requirements regarding the handling of personal data, including its use, protection and transfer and the ability of persons whose data is stored to correct or delete such data about themselves. Complying with the enhanced obligations imposed by the GDPR has resulted and may continue to result in additional costs to our business and has required and may further require us to amend certain of our business practices. Failure to meet the GDPR requirements could result in significant penalties, including fines up to 4% of annual worldwide revenue. The GDPR also confers a private right of action on certain individuals and associations.
Laws and regulations in this area are evolving and generally becoming more stringent. For example, the New York State Department of Financial Services has issued cybersecurity regulations that outline a variety of required security measures for protection of data. Some U.S. states, including California, have also enacted cybersecurity laws requiring certain security measures of regulated entities that are broadly similar to GDPR requirements, such as the
California Consumer Privacy Act and California Privacy Rights Act, and we expect that other states will continue to do so. As these laws continue to evolve, we may be required to make changes to our services, solutions and/or products so as to enable the Company and/or our clients to meet the new legal requirements, including by taking on more onerous obligations in our contracts, limiting our storage, transfer and processing of data and, in some cases, limiting our service and/or solution offerings in certain locations. Changes in these laws, or the interpretation and application thereof, may also increase our potential exposure through significantly higher potential penalties for non-compliance. The costs of compliance with, and other burdens imposed by, such laws and regulations and client demand in this area may limit the use of, or demand for, our services, solutions and/or products, make it more difficult and costly to meet client expectations, or lead to significant fines, penalties or liabilities for noncompliance, any of which could adversely affect our business, financial condition, and results of operations.
In addition, due to the uncertainty and potentially conflicting interpretations of these laws, it is possible that such laws and regulations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with applicable laws or satisfactorily protect personal information could result in governmental enforcement actions, litigation, or negative publicity, any of which could inhibit sales of our services, solutions and/or products.
Further, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase. It is possible that future enactment of more restrictive laws, rules or regulations and/or future enforcement actions or investigations could have an adverse impact on us through increased costs or restrictions on our businesses and noncompliance could result in regulatory penalties and significant legal liability.
Risks Related to Acquisitions
Acquisitions, or our inability to effect acquisitions, may have an adverse effect on our business.
We have completed several strategic acquisitions of businesses in the last several years, including our acquisition of Miller Heiman Group, AchieveForum and Strategy Execution in fiscal 2020 and Hay Group in fiscal 2016. Targeted acquisitions have been and continue to be part of our growth strategy, and we may in the future selectively acquire businesses that are complementary to our existing service offerings. However, we cannot be certain that we will be able to continue to identify appropriate acquisition candidates or acquire them on satisfactory terms. Our ability to consummate such acquisitions on satisfactory terms will depend on the extent to which acquisition opportunities become available; our success in bidding for the opportunities that do become available; negotiating terms that we believe are reasonable; and regulatory approval, if required.
Our ability to make strategic acquisitions may also be conditioned on our ability to fund such acquisitions through the incurrence of debt or the issuance of equity. Our Credit Agreement limits us from consummating acquisitions unless we are in pro forma compliance with our financial covenants, and our pro forma domestic liquidity after giving effect to the acquisition is at least $50.0 million, and certain other conditions are met. If we are required to incur substantial indebtedness in connection with an acquisition, and the results of the acquisition are not favorable, the increased indebtedness could decrease the value of our equity. In addition, if we need to issue additional equity to consummate an acquisition, doing so would cause dilution to existing stockholders.
If we are unable to make strategic acquisitions, or the acquisitions we do make are not on terms favorable to us or not effected in a timely manner, it may impede the growth of our business, which could adversely impact our profitability and our stock price.
As a result of our acquisitions, we have substantial amounts of goodwill and intangible assets, and changes in business conditions could cause these assets to become impaired, requiring write-downs that would adversely affect our operating results.
All of our acquisitions have been accounted for as purchases and involved purchase prices well in excess of tangible asset values, resulting in the creation of a significant amount of goodwill and other intangible assets. As of April 30, 2021, goodwill and purchased intangibles accounted for approximately 21% and 3%, respectively, of our total assets. Under U.S. generally accepted accounting principles (“GAAP”), we do not amortize goodwill and intangible assets acquired in a purchase business combination that are determined to have indefinite useful lives, but instead review them annually (or more frequently, if impairment indicators arise) for impairment. In fiscal 2019, the Company began to offer substantially all of the Company’s current products and services using the “Korn Ferry” name, branding and trademarks, and has sunset substantially all sub-brands, including Futurestep, Hay Group and Lominger, among others. The Hay Group and Lominger brands came to the Company through acquisitions and, in connection with the accounting for those acquisitions, $106.6 million of the purchase price was allocated to indefinite lived tradename intangible assets. On June 12, 2018, the Company concluded that as a result of the decision to discontinue the use of such sub-brands in the near term, the Company was required under U.S. GAAP to record in the first quarter of fiscal 2019 a one-time, non-cash intangible asset impairment charge of $106.6 million. The discontinuation of such brands could adversely affect our business. Further, future events or changes in circumstances that result in an impairment of goodwill or other intangible assets would have a negative impact on our profitability and operating results.
An impairment in the carrying value of goodwill and other intangible assets could negatively impact our consolidated results of operations and net worth.
Goodwill is initially recorded as the excess of amounts paid over the fair value of net assets acquired. While goodwill is not amortized, it is reviewed for impairment at least annually or more frequently, if impairment indicators are present. In assessing the carrying value of goodwill, we make qualitative and quantitative assumptions and estimates about revenues, operating margins, growth rates and discount rates based on our business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors. Goodwill valuations have been calculated using an income approach based on the present value of future cash flows of each reporting unit and a market approach. We could be required to evaluate the carrying value of goodwill prior to the annual assessment if we experience unexpected, significant declines in operating results or sustained market capitalization declines. These types of events and the resulting analyses could result in goodwill impairment charges in the future. Impairment charges, such as the impairment charge that we recorded in the first quarter of fiscal 2019 related to the discontinuation of the Hay Group and Lominger brands, could substantially affect our results of operations and net worth in the periods of such charges.
Risks Related to Global Operations
We are a cyclical company whose performance is tied to local and global economic conditions.
Demand for our services is affected by global economic conditions and the general level of economic activity in the geographic regions and industries in which we operate. When conditions in the global economy, including the credit markets deteriorate, or economic activity slows, many companies hire fewer permanent employees and some companies, as a cost-saving measure, choose to rely on their own human resources departments rather than third-party search firms to find talent, and under these conditions, companies have cut back on human resource initiatives, all of which negatively affects our financial condition and results of operations. We also experience more competitive pricing pressure during periods of economic decline. If the geopolitical uncertainties result in a reduction in business confidence, when the national or global economy or credit market conditions in general deteriorate, the unemployment rate increases or any changes occur in U.S. trade policy (including any increases in tariffs that result in a trade war), such uncertainty or changes put negative pressure on demand for our services and our pricing, resulting in lower cash flows and a negative effect on our business, financial condition and results of operations. In addition, some of our clients experience reduced access to credit and lower revenues, resulting in their inability to meet their payment obligations to us.
We face risks associated with social and political instability, legal requirements and economic conditions in our international operations.
We operate in 53 countries and, during the year ended April 30, 2021, generated 54% of our fee revenue from operations outside of the U.S. We are exposed to the risk of changes in social, political, legal and economic conditions inherent in international operations. Examples of risks inherent in transacting business worldwide that we are exposed to include:
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changes in and compliance with applicable laws and regulatory requirements, including U.S. laws affecting the activities of U.S. companies abroad, including the Foreign Corrupt Practices Act of 1977 and sanctions programs administered by the U.S. Department of the Treasury Office of Foreign Assets Control, and similar foreign laws such as the U.K. Bribery Act, as well as the fact that many countries have legal systems, local laws and trade practices that are unsettled and evolving, and/or commercial laws that are vague and/or inconsistently applied;
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difficulties in staffing and managing global operations, which could impact our ability to maintain an effective system of internal control;
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difficulties in building and maintaining a competitive presence in existing and new markets;
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social, economic and political instability;
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differences in cultures and business practices;
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statutory equity requirements;
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differences in accounting and reporting requirements;
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repatriation controls;
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differences in labor and market conditions;
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potential adverse tax consequences;
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multiple regulations concerning immigration, pay rates, benefits, vacation, statutory holiday pay, workers’ compensation, union membership, termination pay, the termination of employment, and other employment laws; and
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the introduction of greater uncertainty with respect to trade policies, tariffs, disputes or disruptions, the termination or suspension of treaties, boycotts and government regulation affecting trade between the U.S. and other countries.
One or more of these factors has and may in the future harm our business, financial condition or results of operations.
The United Kingdom’s withdrawal from the E.U. may adversely impact our operations in the United Kingdom and elsewhere.
In fiscal 2021, 10.5% of our fee revenue was recognized in the U.K. In 2020, the U.K. left the E.U. and reached an agreement with the E.U. regarding their future relationship. The political and economic instability created by the United Kingdom’s exit from the EU has caused and may continue to cause significant volatility in global financial markets and uncertainty regarding the regulation of data protection in the U.K. In addition, we could be adversely impacted by changes in trade policies, immigration laws and employment laws, tax or other laws and regulations, IP rights and supply chain logistics. We may incur additional costs as it addresses any such changes. All or any one of these factors could adversely affect our business, revenue, financial condition and results of operations.
The interest rates under our Credit Agreement may be impacted by the phase-out of LIBOR.
LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rates on loans globally. We generally use LIBOR as a reference rate to calculate interest rates under our credit facility. In July 2017, the U.K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. On March 5, 2021, however, the ICE Benchmark Administration (the “IBA”), the administrator of LIBOR, announced its intention to cease the publication of all settings of non-U.S. dollar LIBOR and only the one-week and two-month U.S. dollar LIBOR settings on December 31, 2021, with the publication of the remaining U.S. dollar LIBOR settings being discontinued after June 30, 2023. It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index, the Secured Overnight Financing Rate (“SOFR”), calculated using short-term repurchase agreements backed by U.S. Treasury securities. Whether or not SOFR, or another alternative reference rate, attains market traction as a LIBOR replacement tool remains in question. If LIBOR ceases to exist, we may need to amend our Credit Agreement to replace LIBOR with an agreed upon replacement index, and certain of the interest rates under our Credit Agreement may change. The new rates may not be as favorable to us as those in effect prior to any LIBOR phase-out.
Risks Related to our Dividend Policy
You may not receive the level of dividends provided for in the dividend policy our Board of Directors has adopted or any dividends at all.
We are not obligated to pay dividends on our common stock. Despite our history of paying dividends, the declaration and payment of all future dividends to holders of our common stock are subject to the discretion of our Board of Directors, which may amend, revoke or suspend our dividend policy at any time and for any reason, including earnings, capital requirements, financial conditions and other factors our Board of Directors may deem relevant. The terms of our indebtedness may also restrict us from paying cash dividends on our common stock under certain circumstances. See below “-Our ability to pay dividends is restricted by agreements governing our debt, including our Credit Agreement and the indenture governing our Notes, and by Delaware law.”
Over time, our capital and other cash needs may change significantly from our current needs, which could affect whether we pay dividends and the level of any dividends we may pay in the future. If we were to use borrowings under our Revolver to fund our payment of dividends, we would have less cash and/or borrowing capacity available for future dividends and other purposes, which could negatively affect our financial condition, our results of operations, our liquidity and our ability to maintain and expand our business. Accordingly, you may not receive dividends in the intended amounts, or at all. Any reduction or elimination of dividends may negatively affect the market price of our common stock.
Our ability to pay dividends is restricted by agreements governing our debt, including our Credit Agreement and indenture governing our Notes, and by Delaware law.
Both our Credit Agreement and the indenture governing our Notes restrict our ability to pay dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources,” where we describe the terms of our indebtedness, including provisions limiting our ability to declare and pay dividends. As a result of such restrictions, we may be limited in our ability to pay dividends unless we redeem our Notes and amend our Credit Agreement or otherwise obtain a waiver from our lenders. In addition, as a result of general economic conditions, conditions in the lending markets, the results of our business or for any other reason, we may elect or be required to amend or refinance our Revolver, at or prior to maturity, or enter into additional agreements for indebtedness. Any such amendment, refinancing or additional agreement may contain covenants that could limit in a significant manner or entirely our ability to pay dividends to you. Additionally, under the Delaware General Corporation Law (“DGCL”), our Board of Directors may not authorize payment of a dividend unless it is either paid out of surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, as a result of these restrictions, we are required to reduce or eliminate the payment of dividends, a decline in the market price or liquidity, or both, of our common stock could result. This may in turn result in losses by you.
Our dividend policy may limit our ability to pursue growth opportunities.
If we pay dividends at the level currently anticipated under our dividend policy, we may not retain a sufficient amount of cash to finance growth opportunities, meet any large unanticipated liquidity requirements or fund our operations in the event of a significant business downturn. In addition, because a portion of cash available will be distributed to holders of our common stock under our dividend policy, our ability to pursue any material expansion of our business, including through acquisitions, increased capital spending or other increases of our expenditures, will depend more than it otherwise would on our ability to obtain third party financing. We cannot assure you that such financing will be available to us at all, or at an acceptable cost. If we are unable to take timely advantage of growth opportunities, our future financial condition and competitive position may be harmed, which in turn may adversely affect the market price of our common stock.
Risks Related to our Stockholders
We have provisions that make an acquisition of us more difficult and expensive.
Anti-takeover provisions in our Certificate of Incorporation, our Bylaws and under Delaware law make it more difficult and expensive for us to be acquired in a transaction that is not approved by our Board of Directors. Some of the provisions in our Certificate of Incorporation and Bylaws include: limitations on stockholder actions; advance notification requirements for director nominations and actions to be taken at stockholder meetings; and the ability to issue one or more series of preferred stock by action of our Board of Directors.
These provisions could discourage an acquisition attempt or other transaction in which stockholders could receive a premium over the current market price for the common stock.
General Risk Factors
Failing to retain our executive officers and key personnel or integrate new members of our senior management who are critical to our business may prevent us from successfully managing our business in the future.
Our future success depends upon the continued service of our executive officers and other key management personnel. Competition for qualified personnel is intense, and we may compete with other companies that have greater financial and other resources than we do. If we lose the services of one or more of our executives or key employees, or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with us, or if we are unable to integrate new members of our senior management who are critical to our business, we may not be able to successfully manage our business or achieve our business objectives.
Changes in our accounting estimates and assumptions and other financial and nonfinancial reporting standard could negatively affect our financial position and results of operations.
We prepare our consolidated financial statements in accordance with U.S. GAAP. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements. We are also required to make certain judgments that affect the reported amounts of revenues and expenses during each reporting period. We periodically evaluate our estimates and assumptions, including those relating to revenue recognition, restructuring, deferred compensation, goodwill and other intangible assets, contingent consideration, annual performance-related bonuses, allowance for doubtful accounts, share-based payments and deferred income taxes. Actual results could differ from the estimates we make based on historical experience and various assumptions believed to be reasonable based on specific circumstances, and changes in accounting standards could have an adverse impact on our future financial position and results of operations.
As we endeavor to align with the recommendations of the Sustainability Accounting Standards Board and other standards or materiality assessments related to ESG matters, we have expanded, and may in the future continue to expand, our disclosures in these areas. A failure to accurately report or achieve progress on metrics, targets, or goals on a timely basis or at all could also have an adverse impact on our financial position, reputation, business, and growth.
Unfavorable tax laws, tax law changes and tax authority rulings may adversely affect results.
We are subject to income taxes in the U.S. and in various foreign jurisdictions. Domestic and international tax liabilities are subject to the allocation of income among various tax jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings among countries with differing statutory tax rates or changes in tax laws. The amount of our income taxes and other taxes are subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. authorities. If these audits result in assessments different from estimated amounts recorded, future financial results may include unfavorable tax adjustments.
Future changes in tax laws, treaties or regulations, and their interpretations or enforcement, may be unpredictable, particularly as taxing jurisdictions face an increasing number of political, budgetary and other fiscal challenges. Tax rates in the jurisdictions in which we operate may change as a result of macroeconomic and other factors outside of our control, making it increasingly difficult for multinational corporations like ourselves to operate with certainty about taxation in many jurisdictions. As a result, we have been and may again be materially adversely affected by future changes in tax law or policy (or in their interpretation or enforcement) in the jurisdictions where we operate, including the U.S., which could have a material adverse effect on our business, cash flow, results of operations, financial condition, as well as our effective income tax rate.
Limited protection of our IP could harm our business, and we face the risk that our services or products may infringe upon the IP rights of others.
We cannot guarantee that trade secrets, trademark and copyright law protections are adequate to deter misappropriation of our IP (which has become an important part of our business). Existing laws of some countries in which we provide services or products may offer only limited protection of our IP rights. Redressing infringements may consume significant management time and financial resources. Also, we cannot detect all unauthorized use of our IP and take the necessary steps to enforce our rights, which may have a material adverse impact on our business, financial condition or results of operations. We cannot be sure that our services and products, or the products of others that we offer to our clients, do not infringe on the IP rights of third parties, and we may have infringement claims asserted against us or our clients. These claims may harm our reputation, result in financial liability and prevent us from offering some services or products.
We may not be able to successfully integrate or realize the expected benefits from our acquisitions.
Our future success depends in part on our ability to complete the integration of acquisition targets successfully into our operations. The process of integrating an acquired business subjects us to a number of risks, including:
▪
diversion of management attention;
▪
amortization of intangible assets, adversely affecting our reported results of operations;
▪
inability to retain and/or integrate the management, key personnel and other employees of the acquired business;
▪
inability to properly integrate businesses resulting in operating inefficiencies;
▪
inability to establish uniform standards, disclosure controls and procedures, internal control over financial reporting and other systems, procedures and policies in a timely manner;
▪
inability to retain the acquired company’s clients;
▪
exposure to legal claims for activities of the acquired business prior to acquisition; and
▪
incurrence of additional expenses in connection with the integration process.
If our acquisitions are not successfully integrated, our business, financial condition and results of operations, as well as our professional reputation, could be materially adversely affected.
Further, we cannot assure you that acquisitions will result in the financial, operational or other benefits that we anticipate. Some acquisitions may not be immediately accretive to earnings and some expansion may result in significant expenditures.
Businesses we acquire may have liabilities or adverse operating issues that could harm our operating results.
Businesses we acquire may have liabilities or adverse operating issues, or both, that we either fail to discover through due diligence or underestimate prior to the consummation of the acquisition. These liabilities and/or issues may include the acquired business’ failure to comply with, or other violations of, applicable laws, rules or regulations or contractual or other obligations or liabilities. As the successor owner, we may be financially responsible for, and may suffer harm to our reputation or otherwise be adversely affected by, such liabilities and/or issues. An acquired business also may have problems with internal controls over financial reporting, which could in turn cause us to have significant deficiencies or material weaknesses in our own internal controls over financial reporting. These and any other costs, liabilities, issues, and/or disruptions associated with any past or future acquisitions, and the related integration, could harm our operating results.
We may be subject to the actions of activist stockholders, which could disrupt our business.
We value constructive input from investors and regularly engage in dialogue with our stockholders regarding strategy and performance. Activist stockholders who disagree with the composition of the Board of Directors, our strategy or the way the Company is managed may seek to effect change through various strategies and channels, such as through commencing a proxy contest, making public statements critical of our performance or business or engaging in other similar activities. Responding to stockholder activism can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees from our strategic initiatives. Activist campaigns can create perceived uncertainties as to our future direction, strategy, or leadership and may result in the loss of potential business opportunities, harm our ability to attract new employees, investors, and customers, and cause our stock price to experience periods of volatility or stagnation.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
Our corporate office is in Los Angeles, California. We lease our corporate office and all 101 of our offices located in North America, EMEA, Asia Pacific and Latin America, all of which are used by all of our business segments. As of April 30, 2021, we leased an aggregate of approximately 1.3 million square feet of office space. The leases generally have remaining terms of 1 to 11 years and contain customary terms and conditions. We believe that our facilities are adequate for our current needs, and we do not anticipate any significant difficulty replacing such facilities or locating additional facilities to accommodate any future growth.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, we are involved in litigation both as a plaintiff and a defendant, relating to claims arising out of our operations. As of the date of this report, we are not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or results of operations.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
Information about our Executive Officers
Name
Age as of April 30, 2021
Position
Gary D. Burnison
President and Chief Executive Officer
Robert P. Rozek
Executive Vice President, Chief Financial Officer and Chief Corporate Officer
Mark Arian
Chief Executive Officer, Consulting
Byrne Mulrooney
Chief Executive Officer, RPO Professional Search & Digital
Our executive officers serve at the discretion of our Board of Directors. There is no family relationship between any executive officer or director. The following information sets forth the business experience for at least the past five years for each of our executive officers.
Gary D. Burnison has been President and Chief Executive Officer of the Company since July 2007. He was the Executive Vice President and Chief Financial Officer of the Company from March 2002 until June 30, 2007, and Chief Operating Officer from November 2003 until June 30, 2007. Prior to joining Korn Ferry, Mr. Burnison was Principal
and Chief Financial Officer of Guidance Solutions, a privately held consulting firm, from 1999 to 2001. Prior to that, he served as an executive officer and a member of the board of directors of Jefferies and Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. from 1995 to 1999. Earlier, Mr. Burnison was a Partner at KPMG Peat Marwick. Mr. Burnison earned a bachelor’s degree in business administration from the University of Southern California.
Robert P. Rozek joined the Company in February 2012 as our Executive Vice President and Chief Financial Officer and, in December 2015, also became our Chief Corporate Officer. Prior to joining Korn Ferry, he served as Executive Vice President and Chief Financial Officer of Cushman & Wakefield, Inc., a privately held commercial real estate services firm, from June 2008 to February 2012. Prior to joining Cushman & Wakefield, Inc., Mr. Rozek served as Senior Vice President and Chief Financial Officer of Las Vegas Sands Corp., a leading global developer of destination properties (integrated resorts) that feature premium accommodations, world-class gaming and entertainment, convention and exhibition facilities and many other amenities, from 2006 to 2008. Prior to that, Mr. Rozek held senior leadership positions at Eastman Kodak, and spent five years as a Partner with PricewaterhouseCoopers LLP. Mr. Rozek is a graduate of Canisius College in New York with a bachelor’s degree in accounting.
Mark Arian joined the Company as Chief Executive Officer of Korn Ferry’s Advisory segment in April 2017 and is now the Chief Executive Officer of Consulting. Prior to Korn Ferry, Mr. Arian served as a Managing Principal at Ernst & Young LLP, a multinational professional services firm that provides audit, tax, business risk, technology and security risk services, and human capital services worldwide, from March 2014 until March of 2017. In that capacity, he led the People Advisory Services-Financial Services Sector, and his responsibilities included commercial, people and key account leadership. Between 2008 and 2014, Mr. Arian held various leadership positions at AON and AON Hewitt, a provider of insurance, reinsurance, human capital and management consulting services, serving as an Executive Vice President and leading its strategic Mergers and Acquisitions (“M&A”) and business transformation offering globally. Mr. Arian has also held various leadership positions at Towers Perrin (now Wills Towers Watson) including serving as the Global M&A and Global Change Management leader, and Hewitt Associates, where Mr. Arian built and led the Corporate Restructuring and Change Practice. Mr. Arian is a graduate of Duke University and holds a juris doctorate from Columbia University.
Byrne Mulrooney joined the Company in April 2010 as Chief Executive Officer of RPO & Professional Search and in March 2017 also became the Chief Executive Officer of Digital. Prior to joining Korn Ferry, he was President and Chief Operating Officer of Flynn Transportation Services, a third-party logistics company, from 2007 to 2010. Prior to that, he led Spherion’s workforce solutions business in North America, which provides workforce solutions in professional services and general staffing, including recruitment process outsourcing and managed services, from 2003 to 2007. Mr. Mulrooney held executive positions for almost 20 years at EDS and IBM in client services, sales, marketing and operations. Mr. Mulrooney is a graduate of Villanova University in Pennsylvania. He holds a master’s degree in management from Northwestern University’s J.L. Kellogg Graduate School of Management.
PART II.

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol ‘KFY’. On June 22, 2021, there were approximately 23,128 stockholders of record of the Company’s common stock.
Performance Graph
We have presented below a graph comparing the cumulative total stockholder return of the Company’s shares with the cumulative total stockholder return on (1) the Standard & Poor’s 500 Stock Index and (2) a company-established peer group. Cumulative total return for each of the periods shown in the performance graph is measured assuming an initial investment of $100 on April 30, 2016 and the reinvestment of any dividends paid by the Company and any company in the peer group on the date the dividends were paid.
Our peer group is comprised of a broad number of publicly traded companies, which are principally or in significant part involved in either professional staffing or consulting. The peer group is comprised of the following 12 companies: CBIZ Inc. (CBZ), FTI Consulting Inc. (FCN), Heidrick & Struggles International Inc. (HSII), Huron Consulting Group Inc. (HURN), ICF International Inc. (ICFI), Insperity Inc. (NSP), Kelly Services Inc. (KELYA), Kforce Inc. (KFRC), Resources Connection Inc. (RGP), Robert Half International Inc. (RHI), Willis Towers Watson Plc (WLTW) and TrueBlue Inc. (TBI). We believe this group of professional services firms is reflective of similar sized companies in terms of our market capitalization, revenue or profitability, and therefore provides a more meaningful comparison of stock performance. The returns of each company have been weighted according to their respective stock market capitalization at the beginning of each measurement period for purposes of arriving at a peer group average.
The stock price performance depicted in this graph is not necessarily indicative of future price performance. This graph will not be deemed to be incorporated by reference by any general statement incorporating this Annual Report on Form 10-K into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate this information by reference and shall not otherwise be deemed soliciting material or deemed filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN (*)
Among Korn Ferry, the S&P 500 Index, and a Peer Group
Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved.
(*)
$100 invested on April 30, 2016 in stock or index, including reinvestment of dividends. Fiscal year ended April 30, 2021.
Capital Allocation Approach
The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s first priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and derivative products and services, and the investment in synergistic, accretive M&A transactions that earn a return superior to the Company's cost of capital. Next, the Company’s capital allocation approach contemplates the planned return of a portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to the factors discussed below under “Dividends” and in more detail in the “Risk Factors” section of this Annual Report on Form 10-K. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our Credit Agreement. See Note 11- Long Term Debt for a description of the Credit Agreement.
Dividends
On December 8, 2014, the Board of Directors adopted a dividend policy, reflecting an intention to distribute to our stockholders a regular quarterly cash dividend of $0.10 per share. Every quarter since the adoption of the dividend policy, the Company has declared a quarterly dividend. On June 21, 2021, the Board of Directors approved a 20% increase to our quarterly dividend, which is now at $0.12 per share.
The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board of Directors and will depend upon many factors, including the Company’s earnings, capital requirements, financial conditions, the terms of the Company’s indebtedness and other factors that the Board of Directors may deem to be relevant. The Board of Directors may amend, revoke or suspend the dividend policy at any time and for any reason.
Stock Repurchase Program
On March 6, 2019, the Board of Directors approved an increase in the Company’s stock repurchase program of approximately $200 million, which brought our available capacity to repurchase shares in the open market or privately negotiated transactions to approximately $250 million. Common stock may be repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion subject to market conditions and other factors. The Company repurchased approximately $30.4 million, $92.4 million and $37.4 million of the Company’s common stock during fiscal 2021, 2020 and 2019, respectively. Any decision to execute on our stock repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. The Credit Agreement, dated December 16, 2019, permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under the Credit Agreement, the Company’s total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated net leverage ratio”) is no greater than 4.00 to 1.00, and the pro forma liquidity is at least $50 million. Furthermore, our Notes allow the Company to pay $25.0 million of dividends per fiscal year with no restrictions plus an unlimited amount of dividends so long as the Company’s consolidated total leverage ratio is not greater than 3.50 to 1.00 and the Company is not in default under the indenture governing the Notes.
Issuer Purchases of Equity Securities
The following table summarizes common stock repurchased by us during the fourth quarter of fiscal 2021:
Total Number of
Shares
Purchased (1)
Average
Price Paid
Per Share
Total Number of
Shares
Purchased
as Part of
Publicly-
Announced
Programs (2)
Approximate
Dollar Value of
Shares that
May Yet be
Purchased
under the
Programs (2)
February 1, 2021 - February 28, 2021
-
$
-
-
$127.9 Million
March 1, 2021 - March 31, 2021
3,112
$
62.89
-
$127.9 Million
April 1, 2021 - April 30, 2021
1,296
$
63.05
-
$127.9 Million
Total
4,408
$
62.94
-
(1)
Represents withholding of 4,408 of restricted shares to cover taxes on vested restricted shares.
(2)
On March 6, 2019, our Board of Directors approved an increase to the share repurchase program to an aggregate of $250 million. The shares can be repurchased in open market transactions or privately negotiated transactions at the Company’s discretion. The share repurchase program has no expiration date.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
The following selected financial data are qualified by reference to, and should be read together with, our “Audited Consolidated Financial Statements and Notes to Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. The selected statements of income data set forth below for the fiscal years ended April 30, 2021, 2020 and 2019 and the selected balance sheets data as of April 30, 2021 and 2020 are derived from our audited consolidated financial statements, appearing elsewhere in this Annual Report on Form 10-K. The selected balance sheet data as of April 30, 2019, 2018 and 2017 and the selected statement of income data set forth below for the fiscal years ended April 30, 2018 and 2017 are derived from audited consolidated financial statements and notes thereto which are not included in this Annual Report on Form 10-K.
Year Ended April 30,
2020(1)
(in thousands, except per share data and other operating data)
Selected Consolidated Statements of Income Data:
Fee revenue
$
1,810,047
$
1,932,732
$
1,926,033
$
1,767,217
$
1,565,521
Reimbursed out-of-pocket engagement expenses
9,899
44,598
47,829
52,302
56,148
Total revenue
1,819,946
1,977,330
1,973,862
1,819,519
1,621,669
Compensation and benefits
1,297,880
1,297,994
1,311,240
1,199,057
1,065,659
General and administrative expenses
191,776
258,957
351,991
237,390
226,232
Reimbursed expenses
9,899
44,598
47,829
52,302
56,148
Cost of services
72,030
85,886
75,487
73,658
71,482
Depreciation and amortization
61,845
55,311
46,489
48,588
47,260
Restructuring charges, net (2)
30,732
58,559
-
34,600
Total operating expenses
1,664,162
1,801,305
1,833,036
1,611,073
1,501,381
Operating income
155,784
176,025
140,826
208,446
120,288
Other income (loss), net
37,194
(2,879
)
10,405
11,416
10,661
Interest expense, net
(29,278
)
(22,184
)
(16,891
)
(13,832
)
(14,607
)
Income tax provision
48,138
43,945
29,544
70,133
29,104
Net income
115,562
107,017
104,796
135,897
87,238
Net income attributable to noncontrolling interest
(1,108
)
(2,071
)
(2,145
)
(2,118
)
(3,057
)
Net income attributable to Korn Ferry
$
114,454
$
104,946
$
102,651
$
133,779
$
84,181
Basic earnings per share
$
2.11
$
1.91
$
1.84
$
2.39
$
1.48
Diluted earnings per share
$
2.09
$
1.90
$
1.81
$
2.35
$
1.47
Basic weighted average common shares outstanding
52,928
54,342
55,311
55,426
56,205
Diluted weighted average common shares outstanding
53,405
54,767
56,096
56,254
56,900
Cash dividends declared per common share
$
0.40
$
0.40
$
0.40
$
0.40
$
0.40
Other Operating Data:
Fee revenue by segment:
Consulting
$
515,844
$
543,095
$
568,321
$
540,529
$
497,736
Digital
287,306
292,366
252,727
244,484
226,450
Executive search:
North America
397,275
434,624
455,826
408,098
356,625
EMEA
138,954
170,314
182,829
173,725
146,506
Asia Pacific
83,306
98,132
104,291
96,595
80,169
Latin America
17,500
29,400
31,896
30,624
34,376
Total executive search
637,035
732,470
774,842
709,042
617,676
RPO & Professional Search
369,862
364,801
330,143
273,162
223,659
Total fee revenue
$
1,810,047
$
1,932,732
$
1,926,033
$
1,767,217
$
1,565,521
Number of offices (at period end) (3)
Number of consultants and execution staff (at period end)
2,669
2,979
3,099
2,922
2,900
Number of new engagements opened
8,430
8,808
9,725
9,149
8,126
Number of full-time employees:
Consulting
1,923
2,058
2,416
2,316
2,413
Digital
1,200
1,413
1,187
1,138
1,185
Executive search
1,527
1,686
1,960
1,865
1,791
RPO & Professional Search
3,071
2,891
2,942
2,188
1,710
Corporate
Total full-time employees
7,889
8,198
8,678
7,643
7,232
Selected Consolidated Balance Sheet Data as of April 30:
Cash and cash equivalents
$
850,778
$
689,244
$
626,360
$
520,848
$
410,882
Marketable securities (4)
246,359
174,085
140,751
137,085
119,937
Working capital
737,062
612,876
585,852
455,799
385,095
Total assets
3,056,526
2,743,828
2,334,852
2,287,914
2,062,898
Long-term obligations (5)
937,681
895,930
540,507
509,839
517,271
Total stockholders’ equity
1,368,775
1,223,691
1,243,387
1,219,615
1,087,048
(1)
Due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution on November 1, 2019, which accounted for $53.2 million
and $155.5 million of fee revenue and total assets, respectively, during fiscal 2020, financial data trends for fiscal 2020 are not comparable to the prior period.
(2)
During fiscal 2021, the Company continued the implementation of the restructuring plan that was adopted in the fourth quarter of fiscal 2020 to adjust our cost base to the economic environment that was created as a result of COVID-19 and position the Company to invest into its recovery. This resulted in restructuring charges of $30.7 million in fiscal 2021 related to severance. During fiscal 2020, the Company implemented two restructuring plans in order to rationalize our cost structure by eliminating redundant positions. The first plan was due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution on November 1, 2019, which resulted in restructuring charges of $18.1 million in fiscal 2020 related to severance. The second plan was due to the COVID-19 pandemic that decreased our fee revenue significantly in the fourth quarter of fiscal 2020 and resulted in restructuring charges of $40.5 million in fiscal 2020 related to severance. During fiscal 2018 and 2017, the Company continued to implement a fiscal 2016 restructuring plan in order to integrate the Advisory entities that were acquired in fiscal 2016 by eliminating redundant positions and operational, general and administrative expenses and consolidating office space. This resulted in restructuring charges of $0.1 million and $34.6 million in fiscal 2018 and 2017, respectively. Of the amount recorded in restructuring charges in fiscal 2017, $16.0 million related to severance and $18.6 million related to consolidation of office spaces.
(3)
The number of offices decreased by 10 offices as of April 30, 2021 compared to April 30, 2020 due to cost saving initiatives that the Company implemented as a result of COVID-19. The Company began not to extend office leases in cities where we had multiple offices. The number of offices decreased by eight as of April 30, 2018 compared to April 30, 2017 due to the continued implementation of a 2016 restructuring plan.
(4)
As of April 30, 2021, 2020, 2019, 2018, and 2017, the Company’s marketable securities included $175.6 million, $141.4 million, $140.8 million, $137.1 million, and $119.9 million, respectively, held in trust for settlement of the Company’s obligations under certain of its deferred compensation plans. See Note 5-Financial Instruments in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
(5)
During fiscal 2020 our long- term obligations increased compared to the previous years due to $180.8 million of non-current portion of operating lease liability recognized as a result of the implementation of Accounting Standard Codification 842 -Leases in fiscal 2020 and our new 4.625% Senior Unsecured Notes due 2027 with a $400 million principal amount offset by a decrease in the amount outstanding under our Credit Facility in fiscal 2020 compared to fiscal 2019.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K may contain certain statements that we believe are, or may be considered to be, “forward-looking” statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements generally can be identified by use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “may,” “will,” “likely,” “estimates,” “potential,” “continue” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals, the timing and expected benefits of our completed restructuring plans and the magnitude and duration of the impact of the global (“COVID-19”) pandemic on our business, employees, customers and our ability to provide services in affected regions. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, those relating to the ultimate magnitude and duration of COVID-19 and of any future pandemics or similar outbreaks, and related restrictions and operational requirements that apply to our business and the businesses of our clients, and any related negative impacts on our business, employees, customers and our ability to provide services in affected regions, global and local political and or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, dependence on and costs of attracting and retaining qualified and experienced consultants, maintaining our relationships with customers and suppliers and retaining key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, portability of client relationships, consolidation of or within the industries we serve, changes and developments in governmental laws and regulations, evolving investor and customer expectations with regard to environmental matters, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities or events, changes to data security, data privacy, and data protection laws, dependence on third parties for the execution of critical functions, limited protection of our intellectual property (“IP”), our ability to enhance and develop new technology, our ability to successfully recover from a disaster or other business continuity problems, employment liability risk, an impairment in the carrying value of goodwill and other intangible assets, treaties, or regulations on our business and our Company, deferred tax assets that we may not be able to use, our ability to develop new products and services, the impact of the United Kingdom’s withdrawal from the European Union, changes in our accounting estimates and assumptions, the utilization and billing rates of our consultants, seasonality, the expansion of social media platforms, the ability to effect acquisitions, our indebtedness, the phase-out of LIBOR, and the matters disclosed under the heading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A included in this Annual Report on Form 10-K. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this Annual Report on Form 10-K and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.
The following presentation of management’s discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in this Annual Report on Form 10-K. We also make available on the Investor Relations portion of our website earnings slides and other important information, which we encourage you to review.
Executive Summary
Korn Ferry (referred to herein as the “Company” or in the first-person notations “we,” “our,” and “us”) is a global organizational consulting firm. We help clients synchronize strategy, operations and talent to drive superior business performance. We work with organizations to design their structures, roles and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop and motivate their people.
We are pursuing a strategy that will help Korn Ferry to focus on clients and collaborate intensively across the organization. This approach builds on the best of our past and gives us a clear path to the future with focused initiatives to increase our client and commercial impact. Korn Ferry is transforming how clients address their talent management needs. We have evolved from a mono-line business to a multi-faceted consultancy business, giving our consultants more frequent and expanded opportunities to engage with clients.
Our seven reportable segments operate through the following four lines of business:
1.
Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Total Rewards. This work is supported by a comprehensive range of some of the world’s leading lP and data.
2.
Digital leverages an artificial intelligence (“AI”) powered, machine-learning platform to identify the best structures, roles, capabilities and behaviors needed to drive business forward. The end-to-end system combines Korn Ferry proprietary data, client data, and external market data to generate insight and recommend action.
3.
Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent. Behavioral interviewing and proprietary assessments are used to determine ideal organizational fit, and salary benchmarking builds appropriate frameworks for compensation and retention.
4.
RPO and Professional Search combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to clients. Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions.
Consulting and Digital became reportable segments in the third quarter of fiscal 2020. Previously, these were tracked and reported together as one reportable segment, Korn Ferry Advisory (“Advisory”). We have invested in the Digital business and harmonized the structure of our content and data, building a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement. These investments, combined with the acquisitions of Miller Heiman Group, AchieveForum and Strategy Execution (“the “Acquired Companies”) in November 2019 from TwentyEighty, Inc. for $108.6 million, resulted in us reassessing how we managed our Advisory reportable segment. Therefore, beginning in the third quarter of fiscal 2020, we separated our Advisory reportable segment into two reportable segments to better align with the Company’s strategy (which included the acquisition of the Acquired Companies) and the decisions of the Company’s chief operating decision maker, who had begun to regularly make resource allocation decisions and assess performance separately between Consulting and Digital. As a result, the Company now has seven reportable segments: Consulting, Digital, Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific, Executive Search Latin America and RPO & Professional Search.
The addition of the Acquired Companies has further expanded our vast IP and content and leveraged the firm’s digital delivery platforms. We have invested in our Digital business to digitize and harmonize the structure of our IP content and data and in building a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement.
Highlights of our performance in fiscal 2021 include:
▪
Approximately 75% of the executive searches we performed in fiscal 2021 were for board level, chief executive and other senior executive and general management positions. Our 3,635 search engagement clients in fiscal 2021 included many of the world’s largest and most prestigious public and private companies.
▪
We have built strong client loyalty, with 90% of the assignments performed during fiscal 2021 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years.
▪
Approximately 70% of our revenues were generated from clients that have utilized multiple lines of our business.
▪
A vital pillar of our growth strategy is Digital. Our data and IP are embedded into the core business processes of our clients, helping us generate long-term relationships through large scale and technology-based talent programs.
▪
In fiscal 2021, Korn Ferry was recognized as one of the top RPO providers in the Baker’s Dozen list, marking our 14th consecutive year on the list. We were also named leader on the Everest PEAK Matrix for four years running and achieved star performer status in 2021, with an improved leader position from 2020. Through decades of experience, we have enhanced our RPO solution to deliver quality candidates that drive our clients’ business strategies. We leverage proprietary IP and data sets to guide clients on the critical skills and competencies to look for, compensation information to align with market demand, and assessment tools to ensure candidate fit. In fiscal 2021 we introduced Nimble, a new, fully integrated recruitment technology solution incorporating Candidate Relationship Management, AI Assistance & Screening and Korn Ferry Assessments.
Restructuring and Operational Changes
On June 12, 2018, the Company’s Board of Directors approved the One Korn Ferry rebranding plan for the Company (the “Plan”). The Plan includes going to market under a single, master brand architecture, solely as Korn Ferry and sunsetting all the Company’s sub-brands used at the time, including Futurestep, Hay Group and Lominger, among others. This integrated go-to-market approach was a key driver in our fee revenue growth in fiscal year 2018, which
led to the decision to further integrate our go-to-market activities under one master brand - Korn Ferry. As a result, the Company discontinued the use of all sub-brands and changed its name, effective January 1, 2019, to “Korn Ferry.” Two of the Company’s former sub-brands, Hay Group and Lominger, came to Korn Ferry through acquisitions. In connection with the accounting for these acquisitions, $106.6 million of the purchase price was allocated to indefinite-lived tradename intangible assets. As a result of the decision to discontinue their use, the Company took a one-time, non-cash write-off of tradenames of $106.6 million in fiscal 2019. During fiscal 2020 the Company completed the implementation of this plan.
On November 1, 2019, we adopted a restructuring plan to rationalize our cost structure to realize the efficiencies and operational improvement that the investments in the digital business had enabled, or positioned us to realize. The plan impacted both Consulting and Digital and included the elimination of redundant positions and consolidation of office space. In the third quarter of fiscal 2020, we recognized $18.1 million of restructuring charges associated with severance and recorded $2.8 million of integration/acquisition costs associated with impairment of 16 office leases. The restructuring actions were completed by July 31, 2020.
The Impact of COVID-19
In March 2020, COVID-19 was reported to have spread to over 100 countries, territories or areas, worldwide, and in the fourth quarter of fiscal 2020 the World Health Organization declared it a pandemic. The negative business impact of the coronavirus outbreak was initially most pronounced in the Asia Pacific Region. During fiscal 2021, the impact has been felt throughout all the geographical areas in which we do business. Governments and companies implemented social distancing - limiting either travel or in person individual or group face-to-face interaction as well as working from home to adhere to stay at home orders from national, state and city governments. Such restrictions initially impacted our ability to provide our products and services to our clients with such impact lessening in the second, third and fourth quarters of fiscal 2021 as the world learned to work in different ways. Further, the outbreak has restricted the level of economic activity in the areas in which we operate and has had an adverse impact on demand for and sales of our products and services. All of our reportable segments across all of our geographies have been impacted as fee revenue decreased in the fourth quarter of fiscal 2020 and further decreased in the first quarter of fiscal 2021 due to a decrease in demand as clients responded to the pandemic. As a result of this and, as part of a broader program aimed at further enhancing our strong balance sheet and liquidity position, on April 20, 2020, we initiated a plan that was intended to adjust our cost base to the economic environment at that time and to position us to invest in the recovery. This plan included (i) a reduction in workforce, which was completed by the end of the first quarter of fiscal 2021 and resulted in restructuring charges of $40.5 million and $30.7 million associated with severance during the fourth quarter of fiscal 2020 and fiscal 2021, respectively, (ii) the temporary furlough of certain employees, (iii) subject to certain exceptions and legal requirements, salary reductions across the organization through December 31, 2020, and (iv) other cost saving measures relating to general and administrative expenses.
In the third and fourth quarters of fiscal 2021, the Company saw business conditions improve substantially from where they were in the second and first quarters with fee revenues increasing 27% in the second quarter of fiscal 2021 compared to the first quarter, 9% in the third quarter from the second quarter of fiscal 2021, and 17% in the fourth quarter from the third quarter of fiscal 2021 to $555.2 million, with all reportable segments contributing to the improvement of fee revenue. As such, no new restructuring actions were taken in the last nine months of fiscal 2021. With the sequential improvement in fee revenue and leveraging the restructured cost base, the Company experienced notably better profitability starting in the second quarter of fiscal 2021 compared to sequential quarter. As such, in the second and third quarter of the Company’s 2021 fiscal year, the Company made a decision to pay all colleagues, including our named executive officers, their full salary and non-executive directors their full retainers for both the second and third quarter of the Company’s 2021 fiscal year. With the improvement in the operating results the Company decided to fully reimburse colleagues (except certain executive officers) for the remainder of their pay cuts that were taken in fiscal 2021. Employees will receive their final payment in the first quarter of fiscal 2022. Beginning on January 1, 2021 salaries of our employees were fully reinstated.
While advances have been made in the science and societal and economic consequences of COVID-19, there remains significant uncertainty about the future impacts of COVID-19. On the positive side, governments around the world have begun distributing and administering the vaccine. In addition, the world has adopted new ways of working and interacting with substantial acceptance of business being conducted in a virtual world. On the negative side, there have been challenges in manufacturing the vaccines at scale as well as distributing and administrating to the population at large in many countries around the world. Since the end of the second quarter of fiscal 2021, we saw governments impose additional restrictions on travel and activities, particularly in Europe and in the United States, as the number of COVID-19 cases and hospitalizations continued to increase, reaching all-time highs in the United States. At the end of the third quarter and during the fourth quarter, hospitalizations in the United States started to decrease and restrictions are starting to ease whereas in Brazil, India and in some parts of Europe the opposite is true. The new, more contagious variants of the virus appear to be more resistant to the vaccines and it is unknown how long the antibodies developed by the vaccine will be effective against the virus mutations. Therefore, it is
unknown whether the easing of the restrictions will continue or be reversed. With the implementation of the plan discussed above and the improved business activity we experienced in the second, third and fourth quarters, we believe our costs are in line with our current revenue levels. However, uncertainties such as whether the new variants of the virus become the dominant strain, for how long the vaccine is effective to virus mutations or whether new restrictions are imposed (or prior restrictions re-imposed), make us unable to give assurance that the rate of increase in fee revenue during the three months ended April 30, 2021, will continue in the three months ended July 31, 2021. Given the amount available from our current revolver and the amount of cash and cash equivalents and marketable securities net of amounts held in trust for deferred compensation and accrued bonuses, we believe that we have sufficient liquidity to meet our anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt obligations and dividend payments under our dividend policy in the next 12 months.
Performance Highlights
The Company evaluates performance and allocates resources based on the chief operating decision maker’s review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other than temporary impairments of investments). For fiscal 2021, Adjusted EBITDA excluded $30.7 million of restructuring charges and $0.7 million of integration/acquisition costs. For fiscal 2020, Adjusted EBITDA excluded $58.6 million of restructuring charges, $12.2 million of integration/acquisition costs and $1.8 million of separation costs. For fiscal 2019, Adjusted EBITDA excluded $106.6 million of tradename write-offs and $6.7 million of integration/acquisition costs.
Consolidated and the subtotals of Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. They have limitations as analytical tools, should not be viewed as a substitute for financial information determined in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. In addition, they may not necessarily be comparable to non-GAAP performance measures that may be presented by other companies.
Management believes the presentation of these non-GAAP financial measures provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges, items of income and other items that may not be indicative of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance and the identification of operating trends that may otherwise be distorted by the factors discussed above. Korn Ferry includes these non-GAAP financial measures because management believes it is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies in the accompanying consolidated financial statements, except that the above noted items are excluded to arrive at Adjusted EBITDA. Management further believes that Adjusted EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company.
Fee revenue was $1,810.0 million during fiscal 2021, a decrease of $122.7 million, or 6.3%, compared to $1,932.7 million in fiscal 2020, with decreases in fee revenue in the Consulting, Digital and Executive Search lines of business due to a decline in demand for our products and services as a result of COVID-19, partially offset by an increase in fee revenue in RPO & Professional Search. Net income attributable to Korn Ferry increased by $9.6 million during fiscal 2021 to $114.5 million from $104.9 million in fiscal 2020. Adjusted EBITDA was $286.3 million, a decrease of $14.7 million during fiscal 2021, from Adjusted EBITDA of $301.0 million in fiscal 2020. During fiscal 2021, the Executive Search, Digital, Consulting and RPO & Professional Search lines of business contributed $127.8 million, $86.1 million, $81.5 million and $69.4 million, respectively, offset by Corporate expenses net of other income of $78.5 million.
Our cash, cash equivalents and marketable securities increased by $233.8 million to $1,097.1 million at April 30, 2021, compared to $863.3 million at April 30, 2020. This increase was mainly due to cash flows from operations as a result of cost savings initiatives that were put in place and a positive effect of exchange rate changes on cash and cash equivalents, partially offset by repurchases of our common stock in the open market, purchases of property and equipment, interest payments on the 4.625% Senior Unsecured Notes due 2027 (the “Notes”) and dividends paid to stockholders during fiscal 2021. As of April 30, 2021, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $145.7 million and a fair value of $175.6 million. Our vested obligations for which these assets were held in trust totaled $157.3 million as of April 30, 2021 and our unvested obligations totaled $26.5 million.
Our working capital increased by $124.2 million to $737.1 million in fiscal 2021. We believe that cash on hand and funds from operations and other forms of liquidity will be sufficient to meet our anticipated working capital, capital expenditures, general corporate requirements, repayment of our debt obligations and dividend payments under our dividend policy in the next twelve months. We had $646.0 million available for borrowing under our Revolver (as defined herein) at April 30, 2021 and 2020. As of April 30, 2021 and 2020, there was $4.0 million of standby letters of credit issued, under our long-term debt arrangements. We had a total of $11.0 million and $11.3 million of standby letters of credits with other financial institutions as of April 30, 2021 and 2020, respectively.
Critical Accounting Policies
The following discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements. Preparation of our periodic filings requires us to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions and changes in the estimates are reported in current operations as new information is learned or upon the amounts becoming fixed and determinable. In preparing our consolidated financial statements and accounting for the underlying transactions and balances, we apply our accounting policies as disclosed in the notes to our consolidated financial statements. We consider the policies discussed below as critical to an understanding of our consolidated financial statements because their application places the most significant demands on management’s judgment and estimates. Specific risks for these critical accounting policies are described in the following paragraphs. Senior management has discussed the development, selection and key assumptions of the critical accounting estimates with the Audit Committee of the Board of Directors.
Revenue Recognition. Substantially all fee revenue is derived from talent and organizational consulting services and digital sales, stand-alone or as part of a solution, fees for professional services related to executive and professional recruitment performed on a retained basis and RPO, either stand-alone or as part of a solution.
Revenue is recognized when control of the goods and services is transferred to the customer, in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods and services. Revenue contracts with customers are evaluated based on the five-step model outlined in Accounting Standard Codification 606 (“ASC 606”): 1) identify the contract with a customer; 2) identify the performance obligation(s) in the contract; 3) determine the transaction price; 4) allocate the transaction price to the separate performance obligation(s); and 5) recognize revenue when (or as) each performance obligation is satisfied.
Consulting fee revenue is primarily recognized as services are rendered, measured by total hours incurred as a percentage of total estimated hours at completion. It is possible that updated estimates for consulting engagements may vary from initial estimates with such updates being recognized in the period of determination. Depending on the timing of billings and services rendered, we accrue or defer revenue as appropriate.
Digital revenue is generated from IP platforms enabling large-scale, technology-based talent programs for pay, talent development, engagement, and assessment and is consumed directly by an end user or indirectly through a consulting engagement. Revenue is recognized as services are delivered and we have a legally enforceable right to payment. Revenue also comes from the sale of our proprietary IP subscriptions, which are considered symbolic IP due to the dynamic nature of the content. As a result, revenue is recognized over the term of the contract. Functional IP licenses grant customers the right to use IP content via the delivery of a flat file. Because the IP content license has significant stand-alone functionality, revenue is recognized upon delivery and when an enforceable right to payment exists. Revenue for tangible and digital products sold by the Company, such as books and digital files, is recognized when these products are shipped.
Fee revenue from executive and professional search activities is generally one-third of the estimated first year compensation of the placed candidate plus a percentage of the fee to cover indirect engagement related expenses. In addition to the search retainer, an uptick fee is billed when the actual compensation awarded by the client for a placement is higher than the estimated compensation. In the aggregate, upticks have been a relatively consistent percentage of the original estimated fee; therefore, we estimate upticks using the expected value method based on historical data on a portfolio basis. In a standard search engagement, there is one performance obligation which is the promise to undertake a search. We generally recognize such revenue over the course of a search and when it is legally entitled to payment as outlined in the billing terms of the contract. Any revenues associated with services that are provided on a contingent basis are recognized once the contingency is resolved as this is when control is transferred to the customer. These assumptions determine the timing of revenue recognition for the reported period.
RPO fee revenue is generated through two distinct phases: 1) the implementation phase and 2) the post-implementation recruitment phase. The fees associated with the implementation phase are recognized over the period that the related implementation services are provided. The post-implementation recruitment phase represents end-to-end recruiting services to clients for which there are both fixed and variable fees, which are recognized over the period that the related recruiting services are performed.
Annual Performance-Related Bonuses. Each quarter, management makes its best estimate of its annual performance related bonuses, which requires management to, among other things, project annual consultant productivity (as measured by engagement fees billed and collected by executive search consultants and revenue and other performance/profitability metrics for Consulting, Digital and RPO & Professional Search consultants), the level of engagements referred by a consultant in one line of business to a different line of business, our performance including profitability, competitive forces and future economic conditions and their impact on our results. At the end of each fiscal year, annual performance related bonuses take into account final individual consultant productivity (including referred work), Company/line of business results including profitability, the achievement of strategic objectives, the results of individual performance appraisals, and the current economic landscape. Accordingly, each quarter we reevaluate the assumptions used to estimate annual performance-related bonus liability and adjust the carrying amount of the liability recorded on the consolidated balance sheets and report any changes in the estimate in current operations. Because annual performance-based bonuses are communicated and paid only after we report our full fiscal year results, actual performance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus estimate historically have been immaterial and are recorded in current operations in the period in which they are determined.
Deferred Compensation. Estimating deferred compensation requires assumptions regarding the timing and probability of payments of benefits to participants and the discount rate. Changes in these assumptions could significantly impact the liability and related cost on our consolidated balance sheets and statements of income, respectively. For certain deferred compensation plans, management engages an independent actuary to periodically review these assumptions in order to confirm that they reflect the population and economics of our deferred compensation plans in all material respects and to assist us in estimating our deferred compensation liability and the related cost. The actuarial assumptions we use may differ from actual results due to changing market conditions or changes in the participant population. These differences could have a significant impact on our deferred compensation liability and the related cost.
Carrying Values. Valuations are required under GAAP to determine the carrying value of various assets. Our most significant assets for which management is required to prepare valuations are carrying value of receivables, goodwill, intangible assets and recoverability of deferred income taxes. Management must identify whether events have occurred that may impact the carrying value of these assets and make assumptions regarding future events, such as cash flows and profitability. Differences between the assumptions used to prepare these valuations and actual results could materially impact the carrying amount of these assets and our operating results.
Of the assets mentioned above, goodwill is the largest asset requiring a valuation. Fair value of goodwill for purposes of the goodwill impairment test is determined utilizing (1) a discounted cash flow analysis based on forecasted cash flows (including estimated underlying revenue and operating income growth rates) discounted using an estimated weighted-average cost of capital for market participants and (2) a market approach, utilizing observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). We also reconcile the results of these analyses to its market capitalization. If the carrying amount of a reporting unit exceeds its estimated fair value, goodwill is considered potentially impaired and further tests are performed to measure the amount of impairment loss, if any.
We perform an annual impairment test each year as of January 31, or more frequently if impairment indicators arise. The qualitative and quantitative test performed as of January 31, 2021 did not indicate any impairment. While historical performance and current expectations have resulted in fair values of goodwill in excess of carrying values, if our assumptions are not realized, it is possible that in the future an impairment charge may need to be recorded. However, it is not possible at this time to determine if an impairment charge would result or if such a charge would be material. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. As of our testing date, the fair value of each reporting unit exceeded its carrying amount and as a result, no impairment charge was recognized. There was no indication of potential impairment through April 30, 2021 that would have required further testing.
Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of the reporting units may include such items as follows:
▪
A prolonged downturn in the business environment in which the reporting units operate including a longer than anticipated public health crisis;
▪
An economic climate that significantly differs from our future profitability assumptions in timing or degree;
▪
The deterioration of the labor markets;
▪
Volatility in equity and debt markets; and
▪
Competition and disruption in our core business.
Results of Operations
The following table summarizes the results of our operations as a percentage of fee revenue:
(Numbers may not total exactly due to rounding)
Year Ended April 30,
Fee revenue
100.0
%
100.0
%
100.0
%
Reimbursed out-of-pocket engagement expenses
0.5
2.3
2.5
Total revenue
100.5
102.3
102.5
Compensation and benefits
71.7
67.2
68.1
General and administrative expenses (1)
10.6
13.4
18.3
Reimbursed expenses
0.5
2.3
2.5
Cost of services
4.0
4.4
3.9
Depreciation and amortization
3.4
2.9
2.4
Restructuring charges, net
1.7
3.0
-
Operating income
8.6
9.1
7.3
Net income
6.4
%
5.5
%
5.4
%
Net income attributable to Korn Ferry
6.3
%
5.4
%
5.3
%
(1)
General and administrative expenses for fiscal 2019 includes write-off of tradenames of $106.6 million.
The following tables summarize the results of our operations:
(Numbers may not total exactly due to rounding)
Year Ended April 30,
Dollars
%
Dollars
%
Dollars
%
(dollars in thousands)
Fee revenue
Consulting
$
515,844
28.5
%
$
543,095
28.1
%
568,321
29.5
%
Digital
287,306
15.9
292,366
15.1
252,727
13.1
Executive Search:
North America
397,275
21.9
434,624
22.5
455,826
23.7
EMEA
138,954
7.7
170,314
8.8
182,829
9.5
Asia Pacific
83,306
4.6
98,132
5.1
104,291
5.4
Latin America
17,500
1.0
29,400
1.5
31,896
1.7
Total Executive Search
637,035
35.2
732,470
37.9
774,842
40.3
RPO & Professional Search
369,862
20.4
364,801
18.9
330,143
17.1
Total fee revenue
1,810,047
100.0
%
1,932,732
100.0
%
1,926,033
100.0
%
Reimbursed out-of-pocket engagement expense
9,899
44,598
47,829
Total revenue
$
1,819,946
$
1,977,330
$
1,973,862
In the tables that follow, the Company presents a subtotal for Executive Search Adjusted EBITDA and a single percentage for Executive Search Adjusted EBITDA margin, which reflects the aggregate of all of the individual Executive Search Regions. These figures are non-GAAP financial measures and are presented as they are consistent with the Company’s lines of business and are financial metrics used by the Company’s investor base.
Year Ended April 30, 2021
Executive Search
Consulting
Digital
North
America
EMEA
Asia Pacific
Latin
America
Subtotal
RPO &
Professional
Search
Corporate
Consolidated
(in thousands)
Fee revenue
$
515,844
$
287,306
$
397,275
$
138,954
$
83,306
$
17,500
$
637,035
$
369,862
$
-
$
1,810,047
Total revenue
$
517,046
$
287,780
$
399,104
$
139,213
$
83,463
$
17,500
$
639,280
$
375,840
$
-
$
1,819,946
Net income attributable to Korn Ferry
$
114,454
Net income attributable to noncontrolling interest
1,108
Other income, net
(37,194
)
Interest expense, net
29,278
Income tax provision
48,138
Operating income
$
155,784
Depreciation and amortization
61,845
Other income, net
37,194
Integration/acquisition costs
Restructuring charges, net
30,732
Adjusted EBITDA
$
81,522
$
86,095
$
98,099
$
11,742
$
16,676
$
1,289
$
127,806
$
69,411
$
(78,542
)
$
286,292
Adjusted EBITDA margin
15.8
%
30.0
%
24.7
%
8.5
%
20.0
%
7.4
%
20.1
%
18.8
%
15.8
%
Year Ended April 30, 2020
Executive Search
Consulting
Digital
North
America
EMEA
Asia Pacific
Latin
America
Subtotal
RPO &
Professional
Search
Corporate
Consolidated
(in thousands)
Fee revenue
$
543,095
$
292,366
$
434,624
$
170,314
$
98,132
$
29,400
$
732,470
$
364,801
$
-
$
1,932,732
Total revenue
$
557,255
$
294,261
$
447,528
$
172,978
$
99,209
$
29,493
$
749,208
$
376,606
$
-
$
1,977,330
Net income attributable to Korn Ferry
$
104,946
Net income attributable to noncontrolling interest
2,071
Other loss, net
2,879
Interest expense, net
22,184
Income tax provision
43,945
Operating income
$
176,025
Depreciation and amortization
55,311
Other loss, net
(2,879
)
Integration/acquisition costs
12,152
Restructuring charges, net
58,559
Separation costs
1,783
Adjusted EBITDA
$
61,092
$
83,073
$
120,725
$
31,067
$
22,885
$
6,402
$
181,079
$
60,168
$
(84,461
)
$
300,951
Adjusted EBITDA margin
11.2
%
28.4
%
27.8
%
18.2
%
23.3
%
21.8
%
24.7
%
16.5
%
15.6
%
Year Ended April 30, 2019
Executive Search
Consulting
Digital
North
America
EMEA
Asia
Pacific
Latin
America
Subtotal
RPO &
Professional
Search
Corporate
Consolidated
(in thousands)
Fee revenue
$
568,321
$
252,727
$
455,826
$
182,829
$
104,291
$
31,896
$
774,842
$
330,143
$
-
$
1,926,033
Total revenue
$
585,893
$
252,727
$
469,743
$
186,131
$
105,543
$
31,960
$
793,377
$
341,865
$
-
$
1,973,862
Net income attributable to Korn Ferry
$
102,651
Net income attributable to noncontrolling interest
2,145
Other income, net
(10,405
)
Interest expense, net
16,891
Income tax provision
29,544
Operating income
$
140,826
Depreciation and amortization
46,489
Other income, net
10,405
Integration/acquisition costs
6,746
Tradename write-offs
106,555
Adjusted EBITDA
$
66,531
$
84,455
$
131,343
$
31,660
$
26,073
$
4,730
$
193,806
$
54,407
$
(88,178
)
$
311,021
Adjusted EBITDA margin
11.7
%
33.4
%
28.8
%
17.3
%
25.0
%
14.8
%
25.0
%
16.5
%
16.1
%
Fiscal 2021 Compared to Fiscal 2020
Fee Revenue
Fee Revenue. Fee revenue decreased by $122.7 million, or 6.3%, to $1,810.0 million in fiscal 2021 compared to $1,932.7 million in fiscal 2020. Exchange rates favorably impacted fee revenue by $21.6 million, or 1%, in fiscal 2021 compared to fiscal 2020. The lower fee revenue was attributable to decreases in our Executive Search, Digital and Consulting lines of business primarily due to the impact of COVID-19 on economies in which we operate in fiscal 2021, partially offset by fee revenue generated from the growth in RPO & Professional Search.
Consulting. Consulting reported fee revenue of $515.8 million in fiscal 2021, a decrease of $27.3 million, or 5%, compared to $543.1 million in fiscal 2020. The decrease was primarily due to the contraction in economic activity due to COVID-19. Exchange rates favorably impacted fee revenue by $5.6 million, or 1%, compared to fiscal 2020
Digital. Digital reported fee revenue of $287.3 million in fiscal 2021, a decrease of $5.1 million, or 2%, compared to $292.4 million in fiscal 2020. The lower fee revenue was primarily due to the contraction in economic activity due to COVID-19. Exchange rates favorably impacted fee revenue by $3.0 million, or 1%, compared to fiscal 2020.
Executive Search North America. Executive Search North America reported fee revenue of $397.3 million in fiscal 2021, a decrease of $37.3 million, or 9%, compared to $434.6 million in fiscal 2020. North America’s fee revenue was lower due to a 5% decrease in the number of engagements billed and a 4% decrease in the weighted-average fees billed per engagement (calculated using local currency) in fiscal 2021 compared to fiscal 2020.
Executive Search EMEA. Executive Search EMEA reported fee revenue of $139.0 million in fiscal 2021, a decrease of $31.3 million, or 18%, compared to $170.3 million in fiscal 2020. Exchange rates favorably impacted fee revenue by $8.0 million, or 5%, in fiscal 2021, compared to fiscal 2020. The decrease in fee revenue was due to a 16% decrease in the number of engagements billed and an 8% decrease in the weighted-average fees billed per engagement (calculated using local currency) in fiscal 2021 compared to fiscal 2020. The performance in the United Kingdom, Germany, France, Switzerland, Netherlands and the UAE were the primary contributors to the decrease in fee revenue in fiscal 2021 compared to fiscal 2020.
Executive Search Asia Pacific. Executive Search Asia Pacific reported fee revenue of $83.3 million in fiscal 2021, a decrease of $14.8 million, or 15%, compared to $98.1 million in fiscal 2020. Exchange rates favorably impacted fee revenue by $2.5 million, or 3%, in fiscal 2021, compared to fiscal 2020. The decrease in fee revenue was due to an 11% decrease in the weighted-average fees billed per engagement (calculated using local currency) and a 7% decrease in the number of engagements billed in fiscal 2021 compared to fiscal 2020. The performance in Australia, Hong Kong, and Singapore were the primary contributors to the decrease in fee revenue in fiscal 2021 compared to fiscal 2020.
Executive Search Latin America. Executive Search Latin America reported fee revenue of $17.5 million in fiscal 2021, a decrease of $11.9 million, or 40%, compared to $29.4 million in fiscal 2020. Exchange rates unfavorably impacted fee revenue by $3.6 million, or 12%, in fiscal 2021, compared to fiscal 2020. The decrease in fee revenue was due to a 27% decrease in the number of engagements billed and a 7% decrease in the weighted-average fees billed per engagement (calculated using local currency) in fiscal 2021 compared to fiscal 2020. The decrease in fee revenue was due to lower fee revenue in Mexico, Brazil, Chile and Peru in fiscal 2021 compared to fiscal 2020.
RPO & Professional Search. RPO & Professional Search reported fee revenue of $369.9 million in fiscal 2021, an increase of $5.1 million, or 1%, compared to $364.8 million in fiscal 2020. Exchange rates favorably impacted fee revenue by $5.4 million, or 1%, compared to fiscal 2020. The increase in fee revenue was due to higher fee revenue in RPO of $18.0 million due to a strong demand for our services in the fourth quarter of fiscal 2021, partially offset by lower fee revenue in Professional Search of $12.9 million which was impacted by COVID-19.
Compensation and Benefits
Compensation and benefits expense remained flat at $1,297.9 million in fiscal 2021 and $1,298.0 million in fiscal 2020. Exchange rates unfavorably impacted compensation and benefits by $14.2 million, or 1%, in fiscal 2021 compared to fiscal 2020. The change in compensation and benefits expense was due to lower salaries and related payroll taxes and employer insurance due to a 5% decrease in average headcount as a result of actions taken to align our cost structure with lower-level business demand. This was fully offset by increases in performance-related bonus expense and deferred compensation expense driven by an increase in the fair value of participants’ accounts. Compensation and benefits expense, as a percentage of fee revenue, increased to 72% in fiscal 2021 from 67% in fiscal 2020.
Consulting compensation and benefits expense decreased by $12.8 million, or 3%, to $360.4 million in fiscal 2021 from $373.2 million in fiscal 2020. Exchange rates unfavorably impacted compensation and benefits by $4.0 million, or 1%, in fiscal 2021 compared to fiscal 2020. The change was primarily due to a decrease in salaries and related payroll taxes and employer insurance due to an 11% decline in average headcount as a result of actions taken to align our cost structure with the lower level of business demand, partially offset by higher performance-related bonus expense. Consulting compensation and benefits expense, as a percentage of fee revenue, increased to 70% in fiscal 2021 from 69% in fiscal 2020.
Digital compensation and benefits expense decreased by $3.0 million, or 2%, to $146.7 million in fiscal 2021 from $149.7 million in fiscal 2020. Exchange rates unfavorably impacted compensation and benefits by $1.6 million, or 1%, in fiscal 2021 compared to fiscal 2020. The decrease in compensation and benefits expense was due to a decline in salaries and related payroll taxes as a result of actions taken to align our cost structure with the lower level of business demand. This decrease was also impacted by lower integration/acquisition costs partially offset by increases in performance-related bonus expense and commission expense. Digital compensation and benefits expense, as a percentage of fee revenue, was 51% for both fiscal 2021 and 2020.
Executive Search North America compensation and benefits expense increased by $29.8 million, or 11%, to $299.5 million in fiscal 2021 compared to $269.7 million in fiscal 2020. Exchange rates unfavorably impacted compensation and benefits by $0.3 million in fiscal 2021 compared to fiscal 2020. The increase was due to higher expenses associated with our deferred compensation and retirement plans driven by an increase in the fair value of participants’ accounts and an increase in performance-related bonus expense. These increases were partially offset by a decrease in salaries and related payroll taxes due to a 14% decline in average headcount as a result of actions taken to align our cost structure with the lower level of business demand in fiscal 2021 compared to fiscal 2020. Executive Search North America compensation and benefits expense, as a percentage of fee revenue, increased to 75% in fiscal 2021 from 62% in fiscal 2020.
Executive Search EMEA compensation and benefits expense decreased by $8.6 million, or 7%, to $111.1 million in fiscal 2021 compared to $119.7 million in fiscal 2020. Exchange rates unfavorably impacted compensation and benefits by $5.3 million, or 4%, in fiscal 2021 compared to fiscal 2020. The decrease was due to lower salaries and related payroll taxes due to an 8% decline in average headcount as a result of actions taken to align our cost structure with the lower level of business demand in fiscal 2021 compared to fiscal 2020. Executive Search EMEA compensation and benefits expense, as a percentage of fee revenue, increased to 80% in fiscal 2021 from 70% in fiscal 2020.
Executive Search Asia Pacific compensation and benefits expense decreased by $6.0 million, or 9%, to $58.3 million in fiscal 2021 compared to $64.3 million in fiscal 2020. Exchange rates unfavorably impacted compensation and benefits by $1.7 million, or 3%, in fiscal 2021 compared to fiscal 2020. The decrease was due to a decrease in salaries and related payroll taxes due to 12% decline in average headcount as a result of actions taken to align our cost structure with the lower level of business demand in fiscal 2021 compared to fiscal 2020. The decrease was partially offset by a higher performance-related bonus expense. Executive Search Asia Pacific compensation and benefits expense, as a percentage of fee revenue, increased to 70% in fiscal 2021 from 66% in fiscal 2020.
Executive Search Latin America compensation and benefits expense decreased by $4.6 million, or 25%, to $14.1 million in fiscal 2021 compared to $18.7 million in fiscal 2020. Exchange rates favorably impacted compensation and benefits by $2.7 million, or 14%, in fiscal 2021 compared to fiscal 2020. The decrease was due to lower salaries and related payroll taxes due to a 16% decline in average headcount as a result of actions taken to align our cost structure with the lower level of business demand in fiscal 2021 compared to fiscal 2020. Executive Search Latin
America compensation and benefits expense, as a percentage of fee revenue, increased to 80% in fiscal 2021 from 64% in fiscal 2020.
RPO & Professional Search compensation and benefits expense increased by $3.6 million, or 1%, to $264.6 million in fiscal 2021 from $261.0 million in fiscal 2020. Exchange rates unfavorably impacted compensation and benefits by $4.0 million, or 2%, in fiscal 2021 compared to fiscal 2020. The increase was due to higher performance-related bonus expense, partially offset by a decrease in salaries and related payroll taxes in fiscal 2021 compared to fiscal 2020. RPO & Professional Search compensation and benefits expense, as a percentage of fee revenue, was 72% in both fiscal 2021 and 2020.
Corporate compensation and benefits expense increased by $1.5 million, or 4%, to $43.2 million in fiscal 2021 from $41.7 million in fiscal 2020. The increase was primarily due to higher performance-related bonus expense and an increase in expenses associated with our deferred compensation and retirement plans driven by increases in the fair value of participants’ accounts. These increases were partially offset by lower salaries and related payroll taxes as a result of a 2% decline in headcount as a result of actions taken to align our cost structure with the lower level of business demand in fiscal 2021 compared to fiscal 2020 and an increase in income from company-owned life insurance (“COLI”) policies due to more death benefits recorded in fiscal 2021 compared to fiscal 2020.
General and Administrative Expenses
General and administrative expenses decreased $67.2 million, or 26%, to $191.8 million in fiscal 2021 compared to $259.0 million in fiscal 2020. Exchange rates unfavorably impacted general and administrative expenses by $3.3 million, or 1%, in fiscal 2021 compared to fiscal 2020. The decrease in general and administrative expenses was due to lower marketing and business development expenses, travel related expenses, premise and office expenses and legal and other professional fees as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Also contributing to the decrease in general and administrative expenses was a decrease in integration/acquisition costs related to the purchase of the Acquired Companies. General and administrative expenses, as a percentage of fee revenue, decreased to 11% in fiscal 2021 from 13% in fiscal 2020.
Consulting general and administrative expenses decreased by $18.5 million, or 28%, to $48.6 million in fiscal 2021 compared to $67.1 million in fiscal 2020. The decrease in general and administrative expenses was due to lower marketing and business development expenses, premise and office expenses and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Consulting general and administrative expenses, as a percentage of fee revenue, decreased to 9% in fiscal 2021 from 12% in fiscal 2020.
Digital general and administrative expenses decreased by $9.6 million, or 25%, to $29.1 million in fiscal 2021 compared to $38.7 million in fiscal 2020. The decrease in general and administrative expenses was due to lower travel related expenses, marketing and business development expenses and premise and office expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Also contributing to the decrease in general and administrative expenses was a decrease in integration/acquisition costs related to the purchase of the Acquired Companies. Digital general and administrative expenses, as a percentage of fee revenue, decreased to 10% in fiscal 2021 from 13% in fiscal 2020.
Executive Search North America general and administrative expenses decreased by $12.1 million, or 31%, to $26.9 million in fiscal 2021 from $39.0 million in fiscal 2020. The decrease in general and administrative expenses was due to lower marketing and business development expenses, premise and office expenses and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Executive Search North America general and administrative expenses, as a percentage of fee revenue was 7% in fiscal 2021 compared to 9% in fiscal 2020.
Executive Search EMEA general and administrative expenses decreased by $5.0 million, or 24%, to $16.0 million in fiscal 2021 from $21.0 million in fiscal 2020. The decrease in general and administrative expenses was due to lower marketing and business development expenses and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Also contributing to the decrease in general and administrative expenses was the impact of foreign currency with foreign exchange gains in fiscal 2021 compared to foreign currency losses in fiscal 2020. Executive Search EMEA general and administrative expenses, as a percentage of fee revenue was 12% in both fiscal 2021 and 2020.
Executive Search Asia Pacific general and administrative expenses decreased by $2.0 million, or 19%, to $8.6 million in fiscal 2021 from $10.6 million in fiscal 2020. The decrease in general and administrative expenses was due to lower premise and office expenses, marketing and business development expenses and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions
implemented by various governmental agencies due to COVID-19. Executive Search Asia Pacific general and administrative expenses, as a percentage of fee revenue was 10% in fiscal 2021 compared to 11% in fiscal 2020.
Executive Search Latin America general and administrative expenses decreased by $2.1 million, or 49%, to $2.2 million in fiscal 2021 from $4.3 million in fiscal 2020. The decrease in general and administrative expenses was due to lower premise and office expenses and marketing and business development expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Executive Search Latin America general and administrative expenses, as a percentage of fee revenue was 12% in fiscal 2021 compared to 15% in fiscal 2020.
RPO & Professional Search general and administrative expenses decreased by $6.4 million, or 21%, to $24.8 million in fiscal 2021 from $31.2 million in fiscal 2020. The decrease in general and administrative expenses was due to lower travel related expenses and marketing and business development expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Also contributing to the decrease in general and administrative expenses was the impact of foreign currency with foreign exchange gains in fiscal 2021 compared to foreign currency losses in fiscal 2020. RPO & Professional Search general and administrative expenses, as a percentage of fee revenue, was 7% in fiscal 2021 compared to 9% in fiscal 2020.
Corporate general and administrative expenses decreased by $11.5 million, or 24%, to $35.5 million in fiscal 2021 compared to $47.0 million in fiscal 2020. The decrease in general and administrative expenses was due to lower marketing and business development expenses, legal and other professional fees and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Also contributing to the decrease in general and administrative expenses was a decrease in integration/acquisition costs related to the purchase of the Acquired Companies.
Cost of Services Expense
Cost of services expense consists primarily of contractor and product costs related to the delivery of various services and products, primarily in RPO & Professional Search, Consulting and Digital. Cost of services expense was $72.0 million in fiscal 2021 compared to $85.9 million in fiscal 2020. Cost of services expense, as a percentage of fee revenue, was 4% in both fiscal 2021 and 2020.
Depreciation and Amortization Expenses
Depreciation and amortization expenses were $61.8 million in fiscal 2021, an increase of $6.5 million, or 12%, compared to $55.3 million in fiscal 2020. The increase was primarily from the Digital segment due to the acquisition of the Acquired Companies and technology investments made in the current and prior year in software and computer equipment.
Restructuring Charges, Net
In November 2019, we implemented a restructuring plan to eliminate redundant positions that were created due to investments made in our Digital business and the acquisition of the Acquired Companies. In April 2020, we implemented a second plan in response to the uncertainty caused by COVID-19 that resulted in reductions in our workforce. We continued the implementation of the second plan in fiscal 2021 and as a result of these plans recorded restructuring charges, net of $30.7 million and $58.6 million of severance costs in fiscal 2021 and 2020, respectively.
Net Income Attributable to Korn Ferry
Net income attributable to Korn Ferry increased by $9.6 million to $114.5 million in fiscal 2021 compared to $104.9 million in fiscal 2020. The increase was mainly driven by decreases in general and administrative expenses and cost of services expense associated with actions taken to align our cost structure with the lower level of business demand. A decline in restructuring charges, net and an increase in other income, net contributed to the increase in net income attributable to Korn Ferry as well. These changes were partially offset by a decrease in fee revenue and increases in interest expense, net and depreciation and amortization expense. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 6% in fiscal 2021 as compared to 5% in fiscal 2020.
Adjusted EBITDA
Adjusted EBITDA decreased by $14.7 million to $286.3 million in fiscal 2021 compared to $301.0 million in fiscal 2020. The decrease in Adjusted EBITDA was driven by a decline in fee revenue that resulted from actions taken by various government and other authoritative bodies in response to COVID-19 that caused a contraction in economic activity during the year. This decrease was partially offset by a decline in general and administrative expenses (excluding integration/acquisition costs), which resulted from the cost savings initiatives that were put in place in response to COVID-19. Adjusted EBITDA, as a percentage of fee revenue, was 16% in both fiscal 2021 and 2020.
Consulting Adjusted EBITDA was $81.5 million in fiscal 2021, an increase of $20.4 million, or 33%, compared to $61.1 million in fiscal 2020. The increase was driven by decreases in general and administrative expenses, cost of services expense and compensation and benefits expense, which resulted from the cost savings initiatives that were put in place in response to COVID-19. These changes were partially offset by a decrease to fee revenue that resulted from actions taken by various government and other authoritative bodies in response to COVID-19 that caused a contraction in economic activity during the year. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 16% in fiscal 2021 compared to 11% in fiscal 2020.
Digital Adjusted EBITDA was $86.1 million in fiscal 2021, an increase of $3.0 million, or 4%, compared to $83.1 million in fiscal 2020. The increase was driven by decreases in general and administrative expenses (excluding integration/acquisition costs) and compensation and benefits expense (excluding integration/acquisition costs) in fiscal 2021 compared to fiscal 2020, which resulted from the cost savings initiatives that were put in place in response to COVID-19. These increases were partially offset by lower fee revenue that resulted from actions taken by various government and other authoritative bodies in response to COVID-19 that caused a contraction in economic activity during the year. Digital Adjusted EBITDA, as a percentage of fee revenue, was 30% in fiscal 2021 as compared to 28% in fiscal 2020.
Executive Search North America Adjusted EBITDA decreased by $22.6 million, or 19%, to $98.1 million in fiscal 2021 compared to $120.7 million in fiscal 2020. The decrease was driven by lower fee revenue that resulted from actions taken by various government and other authoritative bodies in response to COVID-19 that caused a contraction in economic activity during the year, as well as an increase in compensation and benefits expense. These changes were partially offset by a decrease in general and administrative expenses, which resulted from the cost savings initiatives that were put in place in response to COVID-19. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, was 25% in fiscal 2021 compared to 28% in fiscal 2020.
Executive Search EMEA Adjusted EBITDA decreased by $19.4 million, or 62%, to $11.7 million in fiscal 2021 compared to $31.1 million in fiscal 2020. The decrease was driven by lower fee revenue that resulted from actions taken by various government and other authoritative bodies in response to COVID-19 that caused a contraction in economic activity during the year. This was partially offset by decreases in compensation and benefits expense (excluding separation costs) and general and administrative expenses, which resulted from the cost savings initiatives that were put in place in response to COVID-19. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 8% in fiscal 2021 compared to 18% in fiscal 2020.
Executive Search Asia Pacific Adjusted EBITDA decreased by $6.2 million, or 27%, to $16.7 million in fiscal 2021 compared to $22.9 million in fiscal 2020. The decrease was driven by lower fee revenue that resulted from actions taken by various government and other authoritative bodies in response to COVID-19 that caused a contraction in economic activity during the year. This decrease was partially offset by decreases in compensation and benefits expense and general and administrative expenses, which resulted from the cost savings initiatives that were put in place in response to COVID-19. Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, was 20% in fiscal 2021 compared to 23% in fiscal 2020.
Executive Search Latin America Adjusted EBITDA decreased by $5.1 million, or 80%, to $1.3 million in fiscal 2021 compared to $6.4 million in fiscal 2020. The decrease was driven by lower fee revenue that resulted from actions taken by various government and other authoritative bodies in response to COVID-19 that caused a contraction in economic activity during the year. This decrease was partially offset by decreases in compensation and benefits expense and general and administrative expenses, which resulted from the cost savings initiatives that were put in place in response to COVID-19. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, was 7% in fiscal 2021 compared to 22% in fiscal 2020.
RPO & Professional Search Adjusted EBITDA was $69.4 million in fiscal 2021, an increase of $9.2 million, or 15%, compared to $60.2 million in fiscal 2020. The increase was driven by higher fee revenue and a decrease in general and administrative expenses, which resulted from cost savings initiatives that were put in place in response to COVID-19. These changes were partially offset by an increase in compensation and benefits expense. RPO & Professional Search Adjusted EBITDA, as a percentage of fee revenue, was 19% in fiscal 2021 compared to 17% in fiscal 2020.
Other Income (Loss), Net
Other income, net was $37.2 million in fiscal 2021 compared to other loss, net of $2.9 million in fiscal 2020. The change from other loss, net to other income, net was primarily due to gains in the fair value of our marketable securities recognized in fiscal 2021 compared to losses in fiscal 2020. These gains recorded in fiscal 2021 were offset by the increases in our deferred compensation liability that were recorded as increases in compensation and benefits expense in fiscal 2021.
Interest Expense, Net
Interest expense, net primarily relates to our Notes issued in December 2019, our prior credit agreement, and borrowings under our COLI policies, which are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $29.3 million in fiscal 2021 compared to $22.2 million in fiscal 2020. The increase in interest expense, net was related to the Notes, which have a higher interest rate than the revolver under our prior credit agreement that was outstanding for most of fiscal 2020.
Income Tax Provision
The provision for income tax was $48.1 million in fiscal 2021 compared to $43.9 million in fiscal 2020. This reflects a 29% effective tax rate in both fiscal 2021 and 2020.
Net Income Attributable to Noncontrolling Interest
Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to shares of such subsidiary not held by Korn Ferry that are included in the consolidated results of operations. Net income attributable to noncontrolling interest was $1.1 million and $2.1 million in fiscal 2021 and 2020, respectively.
Fiscal 2020 Compared to Fiscal 2019
We changed the presentation from the last year’s Form 10-K to reflect the performance of each of our seven reportable segments.
Fee Revenue
Fee Revenue. Fee revenue increased by $6.7 million, or 0.3%, to $1,932.7 million in fiscal 2020 compared to $1,926.0 million in fiscal 2019. Exchange rates unfavorably impacted fee revenue by $36.2 million, or 2%, in fiscal 2020 compared to fiscal 2019. The higher fee revenue was attributable to fee revenue generated from the Acquired Companies and growth in RPO & Professional Search, offset by decreases in Executive Search and Consulting principally impacted by COVID-19 in the fourth quarter of fiscal 2020.
Consulting. Consulting reported fee revenue of $543.1 million in fiscal 2020, a decrease of $25.2 million, or 4%, compared to $568.3 million in fiscal 2019. Exchange rates unfavorably impacted fee revenue by $10.9 million, or 2%, compared to fiscal 2019. The decrease was primarily due to the impact of COVID-19 in the fourth quarter of fiscal 2020.
Digital. Digital reported fee revenue of $292.4 million in fiscal 2020, an increase of $39.7 million, or 16%, compared to $252.7 million in fiscal 2019. The higher fee revenue was attributable to fee revenue generated from the Acquired Companies. Exchange rates unfavorably impacted fee revenue by $6.4 million, or 3%, compared to fiscal 2019.
Executive Search North America reported fee revenue of $434.6 million in fiscal 2020, a decrease of $21.2 million, or 5%, compared to $455.8 million in fiscal 2019. North America’s fee revenue was lower due to a 7% decrease in the number of engagements billed, partially offset by a 3% increase in the weighted-average fees billed per engagement (calculated using local currency) in fiscal 2020 compared to fiscal 2019.
Executive Search EMEA reported fee revenue of $170.3 million in fiscal 2020, a decrease of $12.5 million, or 7%, compared to $182.8 million in fiscal 2019. Exchange rates unfavorably impacted fee revenue by $5.9 million, or 3%, in fiscal 2020, compared to fiscal 2019. The decrease in fee revenue was due to a 3% decrease in the number of engagements billed and a 1% decrease in the weighted-average fees billed per engagement (calculated using local currency) in fiscal 2020 compared to fiscal 2019. The performance in Germany, United Kingdom, Norway, Sweden and Denmark were the primary contributors to the decrease in fee revenue in fiscal 2020 compared to fiscal 2019.
Executive Search Asia Pacific reported fee revenue of $98.1 million in fiscal 2020, a decrease of $6.2 million, or 6%, compared to $104.3 million in fiscal 2019. Exchange rates unfavorably impacted fee revenue by $2.9 million, or 3%, in fiscal 2020, compared to fiscal 2019. The decrease in fee revenue was due to a 5% decrease in the number of engagements billed, partially offset by a 2% increase in the weighted-average fees billed per engagement (calculated using local currency) in fiscal 2020 compared to fiscal 2019. The performance in Australia and China were the primary contributors to the decrease in fee revenue, partially offset by increases in fee revenue in Singapore and Japan in fiscal 2020 compared to fiscal 2019.
Executive Search Latin America reported fee revenue of $29.4 million in fiscal 2020, a decrease of $2.5 million, or 8%, compared to $31.9 million in fiscal 2019. Exchange rates unfavorably impacted fee revenue by $2.6 million, or 8%, in fiscal 2020, compared to fiscal 2019. The decrease in fee revenue was due to lower fee revenue in Brazil, Colombia and Argentina, partially offset by increases in fee revenue in Mexico and Chile in fiscal 2020 compared to fiscal 2019.
RPO & Professional Search. RPO & Professional Search reported fee revenue of $364.8 million in fiscal 2020, an increase of $34.7 million, or 11%, compared to $330.1 million in fiscal 2019. Exchange rates unfavorably impacted fee revenue by $6.9 million, or 2%, compared to fiscal 2019. Higher fee revenues in RPO and professional search of $26.4 million and $8.3 million, respectively, drove the increase in fee revenue.
Compensation and Benefits
Compensation and benefits expense decreased $13.2 million, or 1%, to $1,298.0 million in fiscal 2020 from $1,311.2 million in fiscal 2019. Exchange rates favorably impacted compensation and benefits by $22.6 million, or 2%, in fiscal 2020 compared to fiscal 2019. The decrease in compensation and benefits expense was due to lower performance-related bonus expense due to lower fee revenue as a result of the COVID-19 pandemic, a decrease in expenses associated with our deferred compensation and retirement plans driven by a decrease in the fair value of participants’ accounts and a decrease in integration/ acquisition costs. These decreases in compensation and benefits expense were partially offset by a 3% increase in average headcount, which contributed to an increase in salaries and related payroll taxes in fiscal 2020 compared to fiscal 2019. Compensation and benefits expense, as a percentage of fee revenue, decreased to 67% in fiscal 2020 from 68% in fiscal 2019.
Consulting compensation and benefits expense decreased by $17.8 million, or 5%, to $373.2 million in fiscal 2020 from $391.0 million in fiscal 2019. Exchange rates favorably impacted compensation and benefits by $7.8 million, or 2%, in fiscal 2020 compared to fiscal 2019. The change was primarily due to lower performance-related bonus expense due to lower fee revenue as a result of the COVID-19 pandemic, partially offset by an increase in salaries and related payroll taxes. Consulting compensation and benefits expense, as a percentage of fee revenue, was 69% for both the fiscal 2020 and 2019.
Digital compensation and benefits expense increased by $16.6 million, or 12%, to $149.7 million in fiscal 2020 from $133.1 million in fiscal 2019. Exchange rates favorably impacted compensation and benefits by $2.8 million, or 2%, in fiscal 2020 compared to fiscal 2019. The increase in compensation and benefits expense was due to an increase in salaries and related payroll taxes mainly from the Acquired Companies resulting in a 12% increase in the average headcount in fiscal 2020 compared to fiscal 2019. Digital compensation and benefits expense, as a percentage of fee revenue, decreased to 51% in fiscal 2020 from 53% in fiscal 2019.
Executive Search North America compensation and benefits expense decreased by $16.3 million, or 6%, to $269.7 million in fiscal 2020 compared to $286.0 million in fiscal 2019. The decrease was due to lower performance-related bonus expense due to lower fee revenue as a result of the COVID-19 pandemic. The rest of the change was due to a decrease in the expenses associated with our deferred compensation and retirement plans driven by a decrease in the fair value of participants’ accounts. Executive Search North America compensation and benefits expense, as a percentage of fee revenue, decreased to 62% in fiscal 2020 from 63% in fiscal 2019.
Executive Search EMEA compensation and benefits expense decreased by $9.1 million, or 7%, to $119.7 million in fiscal 2020 compared to $128.8 million in fiscal 2019. Exchange rates favorably impacted compensation and benefits by $3.8 million, in fiscal 2020 compared to fiscal 2019. The decrease was primarily due to lower performance-related bonus expense due to lower fee revenue as a result of the COVID-19 pandemic. Executive Search EMEA compensation and benefits expense, as a percentage of fee revenue, was 70% in both fiscal 2020 and 2019.
Executive Search Asia Pacific compensation and benefits expense decreased by $2.9 million, or 4%, to $64.3 million in fiscal 2020 compared to $67.2 million in fiscal 2019. Exchange rates favorably impacted compensation and benefits by $1.8 million, in fiscal 2020 compared to fiscal 2019. The decrease was due to lower performance-related bonus expense due to lower fee revenue as a result of the COVID-19 pandemic. Executive Search Asia Pacific compensation and benefits expense, as a percentage of fee revenue, increased to 65% in fiscal 2020 from 64% in fiscal 2019.
Executive Search Latin America compensation and benefits expense decreased by $1.8 million, or 9%, to $18.7 million in fiscal 2020 compared to $20.5 million in fiscal 2019. Exchange rates favorably impacted compensation and benefits by $1.6 million, in fiscal 2020 compared to fiscal 2019. The decrease in compensation and benefits expense was due to a decrease in salaries and related payroll taxes as a result of a 5% decrease in the average headcount in fiscal 2020 compared to fiscal 2019. Executive Search Latin America compensation and benefits expense, as a percentage of fee revenue, was 64% for both fiscal 2020 and fiscal 2019.
RPO & Professional Search compensation and benefits expense increased by $26.4 million, or 11%, to $261.0 million in fiscal 2020 from $234.6 million in fiscal 2019. Exchange rates favorably impacted compensation and
benefits by $4.5 million, or 2%, in fiscal 2020 compared to fiscal 2019. The increase was due to a 14% increase in the average headcount in fiscal 2020 compared to fiscal 2019, partially offset by a decrease in lower performance-related bonus expense due to lower fee revenue as a result of the COVID-19 pandemic. RPO & Professional Search compensation and benefits expense, as a percentage of fee revenue, increased to 72% in fiscal 2020 from 71% in fiscal 2019.
Corporate compensation and benefits expense decreased by $8.4 million, or 17%, to $41.7 million in fiscal 2020 from $50.1 million in fiscal 2019. The decrease was primarily due to lower performance-related bonus expense due to lower fee revenue as a result of the COVID-19 pandemic and a decrease in expenses associated with our deferred compensation and retirement plans in fiscal 2020 compared to fiscal 2019.
General and Administrative Expenses
General and administrative expenses decreased $93.0 million, or 26%, to $259.0 million in fiscal 2020 compared to $352.0 million in fiscal 2019. Exchange rates favorably impacted general and administrative expenses by $6.2 million, or 2%, in fiscal 2020 compared to fiscal 2019. The decrease in general and administrative expenses was magnified by a one-time write-off of tradenames of $106.6 million in fiscal 2019 related to the Plan. The decrease in general and administrative expenses was partially offset by increases in marketing and business development expenses and integration/acquisition costs. General and administrative expenses, as a percentage of fee revenue, decreased to 13% in fiscal 2020 from 18% in fiscal 2019, however, excluding the tradename write-offs, general and administrative expenses as a percentage of fee revenue was 13% in both fiscal 2020 and 2019.
Consulting general and administrative expenses decreased by $79.1 million, or 54%, to $67.1 million in fiscal 2020 compared to $146.2 million in fiscal 2019. The decrease in general and administrative expenses was magnified by a one-time write-off of tradenames related to the Plan of $77.0 million in fiscal 2019. Consulting general and administrative expenses, as a percentage of fee revenue, decreased to 12% in fiscal 2020 from 26% in fiscal 2019. Excluding the tradename write-offs, general and administrative expenses as a percentage of fee revenue was 12% in both fiscal 2020 and 2019.
Digital general and administrative expenses decreased by $19.4 million, or 33%, to $38.7 million in fiscal 2020 compared to $58.1 million in fiscal 2019. The decrease in general and administrative expenses was magnified by a one-time write-off of tradenames related to the Plan of $29.6 million in fiscal 2019, partially offset by an increase in integration/acquisition costs and premise and office expenses. Digital general and administrative expenses, as a percentage of fee revenue, decreased to 13% in fiscal 2020 from 23% in fiscal 2019. Excluding the tradename write-offs, general and administrative expenses as a percentage of fee revenue was 13% in fiscal 2020 compared to 11% in fiscal 2019.
Executive Search North America general and administrative expenses decreased by $2.9 million, or 7%, to $39.0 million in fiscal 2020 from $41.9 million in fiscal 2019. The decrease in general and administrative expenses was primarily due to decreases in legal and other professional fees and travel related expenses in fiscal 2020 compared to fiscal 2019. Executive Search North America general and administrative expenses, as a percentage of fee revenue, was 9% for both fiscal 2020 and 2019.
Executive Search EMEA general and administrative expenses decreased by $1.3 million, or 6%, to $21.0 million in fiscal 2020 from $22.3 million in fiscal 2019. The decrease in general and administrative expenses was primarily due to decreases in travel related expenses and premise and office expenses, partially offset by an increase in foreign currency losses in fiscal 2020 compared to fiscal 2019. Executive Search EMEA general and administrative expenses, as a percentage of fee revenue, was 12% for both fiscal 2020 and 2019.
Executive Search Asia Pacific general and administrative expenses decreased by $0.3 million, or 3%, to $10.6 million in fiscal 2020 from $10.9 million in fiscal 2019. The decrease in general and administrative expenses was primarily due to decreases in legal and other professional fees, travel related expenses and foreign currency gains in fiscal 2020 compared to foreign currency losses in fiscal 2019. This was partially offset by an increase in bad debt expense in fiscal 2020 compared to fiscal 2019. Executive Search Asia Pacific general and administrative expenses, as a percentage of fee revenue, increased to 11% in fiscal 2020 from 10% in fiscal 2019.
Executive Search Latin America general and administrative expenses decreased by $2.7 million, or 39%, to $4.3 million in fiscal 2020 from $7.0 million in fiscal 2019. The decrease in general and administrative expenses was primarily due to a decrease in premise and office expenses and to a lesser extent foreign currency gains in fiscal 2020 compared foreign currency losses in fiscal 2019. Executive Search Latin America general and administrative expenses, as a percentage of fee revenue, decreased to 15% in fiscal 2020 from 22% in fiscal 2019.
RPO & Professional Search general and administrative expenses increased by $3.1 million, or 11%, to $31.2 million in fiscal 2020 from $28.1 million in fiscal 2019. The increase was primarily due to an increase in premise and office expense and to a lesser extent foreign exchange loss in fiscal 2020 compared to foreign exchange gain in fiscal
2019. RPO & Professional Search general and administrative expenses, as a percentage of fee revenue, was 9% in both fiscal 2020 and 2019.
Corporate general and administrative expenses increased by $9.5 million, or 25%, to $47.0 million in fiscal 2020 compared to $37.5 million in fiscal 2019. The increase was due to integration/acquisition costs incurred in fiscal 2020 related to the purchase of the Acquired Companies and increases in marketing and business development expenses in fiscal 2020 compared to fiscal 2019.
Cost of Services Expense
Cost of services expense consists primarily of contractor and product costs related to the delivery of various services and products, primarily in RPO & Professional Search, Consulting and Digital. Cost of services expense was $85.9 million in fiscal 2020 compared to $75.5 million in fiscal 2019. Cost of services expense, as a percentage of fee revenue, was 4% in both the fiscal 2020 and 2019.
Depreciation and Amortization Expenses
Depreciation and amortization expenses were $55.3 million in fiscal 2020, an increase of $8.8 million, or 19%, compared to $46.5 million in fiscal 2019. The increase was related primarily to the Acquired Companies and technology investments made in the current and prior year in software and computer equipment, in addition to increases in leasehold improvement and furniture and fixtures.
Restructuring Charges, Net
In November 2019, we implemented a restructuring plan to eliminate redundant positions that were created due to investments made in our digital business and the acquisition of the Acquired Companies. In April 2020, we implemented a second plan in response to the uncertainty caused by COVID-19 that resulted in reductions in our workforce. As a result of these two plans, we recorded restructuring charges of $58.6 million of severance costs in fiscal 2020. There were no restructuring charges in fiscal 2019.
Net Income Attributable to Korn Ferry
Net income attributable to Korn Ferry increased by $2.2 million to $104.9 million in fiscal 2020 compared $102.7 million in fiscal 2019. The increase was primarily driven by lower operating expenses of $31.7 million, partially offset by an increase in income tax expense of $14.4 million and losses in the fair value of our marketable securities incurred in fiscal 2020 compared to gains in fiscal 2019. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 5% in both the fiscal 2020 and 2019.
Adjusted EBITDA
Adjusted EBITDA decreased by $10.0 million to $301.0 million in fiscal 2020 compared to $311.0 million in fiscal 2019. Adjusted EBITDA, as a percentage of fee revenue, was 16% in both the fiscal 2020 and 2019.
Consulting Adjusted EBITDA was $61.1 million in fiscal 2020, a decrease of $5.4 million, or 8%, compared to $66.5 million in fiscal 2019. The decrease was driven by lower fee revenue of $25.2 million largely due to the impact of COVID-19 in the fourth quarter of fiscal 2020. The decrease in adjusted EBITDA was partially offset by decreases of $12.5 million in compensation and benefits expense (excluding integration/acquisition costs), $6.0 million in cost of services expense and $2.1 million in general and administrative expenses (excluding tradename write-offs in fiscal 2019) in fiscal 2020 compared to fiscal 2019. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 11% in fiscal 2020 compared to 12% in fiscal 2019.
Digital Adjusted EBITDA was $83.1 million in fiscal 2020, a decrease of $1.4 million, or 2%, compared to $84.5 million in fiscal 2019. The decrease was driven by higher compensation and benefits expense (excluding integration/acquisition costs) of $15.5 million, higher cost of service expenses of $18.3 million and an increase of $6.7 million in general and administrative expenses (excluding integration/acquisition costs in fiscal 2020 and write-off of tradenames in fiscal 2019). This was partially offset by an increase of $39.7 million in fee revenue in fiscal 2020 compared to fiscal 2019. Digital Adjusted EBITDA, as a percentage of fee revenue, was 28% in fiscal 2020 as compared to 33% in fiscal 2019.
Executive Search North America Adjusted EBITDA decreased by $10.6 million, or 8%, to $120.7 million in fiscal 2020 compared to $131.3 million in fiscal 2019. The decrease was driven by lower fee revenue of $21.2 million in fiscal 2020 compared to fiscal 2019 largely due to the impact of COVID-19 in the fourth quarter of fiscal 2020 and losses in the fair value of our marketable securities incurred in fiscal 2020 compared to gains in fiscal 2019. The decrease in Adjusted EBITDA was partially offset by a decrease of $16.3 million in compensation and benefits expense and $2.9 million in general and administrative expenses. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, decreased to 28% in fiscal 2020 from 29% in fiscal 2019.
Executive Search EMEA Adjusted EBITDA decreased by $0.6 million, or 2%, to $31.1 million in fiscal 2020 compared to $31.7 million in fiscal 2019. The decrease was driven by lower fee revenue of $12.5 million in fiscal 2020 compared
to fiscal 2019 largely due to the impact of COVID-19 in the fourth quarter of fiscal 2020. The decrease in Adjusted EBITDA was partially offset by a decrease of $10.9 million in compensation and benefits expense (excluding separation costs in fiscal 2020) and $1.3 million in general and administrative expenses. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, increased to 18% in fiscal 2020 from 17% in fiscal 2019.
Executive Search Asia Pacific Adjusted EBITDA decreased by $3.2 million, or 12%, to $22.9 million in fiscal 2020 compared to $26.1 million in fiscal 2019. The decrease was driven by lower fee revenue of $6.2 million in fiscal 2020 compared to fiscal 2019 largely due to the impact of COVID-19 in the fourth quarter of fiscal 2020. The decrease in Adjusted EBITDA was partially offset by a decrease of $2.9 million in compensation and benefits expense and $0.3 million in general and administrative expenses. Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, decreased to 23% in fiscal 2020 from 25% in fiscal 2019.
Executive Search Latin America Adjusted EBITDA increased by $1.7 million, or 36%, to $6.4 million in fiscal 2020 compared to $4.7 million in fiscal 2019. The increase was driven by decreases of $2.7 million in general and administrative expenses and $1.8 million in compensation and benefits expense. The increase was partially offset by lower fee revenue of $2.5 million in fiscal 2020 compared to fiscal 2019 largely due to the impact of COVID-19 in the fourth quarter of fiscal 2020. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, increased to 22% in fiscal 2020 from 15% in fiscal 2019.
RPO & Professional Search Adjusted EBITDA was $60.2 million in fiscal 2020, an increase of $5.8 million, or 11%, compared to $54.4 million in fiscal 2019. The increase was driven by higher fee revenue of $34.7 million driven by higher fee revenues in RPO and professional search of $26.4 million and $8.3 million, respectively. The increase in adjusted EBITDA was partially offset by increases of $26.4 million in compensation and benefits expense and $3.1 million in general and administrative expenses, in fiscal 2020 compared to fiscal 2019. RPO & Professional Search Adjusted EBITDA, as a percentage of fee revenue, was 17% in fiscal 2020 compared to 16% in fiscal 2019.
Other (Loss) Income, Net
Other loss, net was $2.9 million in fiscal 2020 compared to other income, net of $10.4 million in fiscal 2019. The change from other income, net to other loss, net was primarily due to losses in the fair value of our marketable securities incurred in fiscal 2020 compared to gains in fiscal 2019. These losses were offset by the decreases in our deferred compensation liability that are recorded as decreases in compensation and benefits expense in fiscal 2020.
Interest Expense, Net
Interest expense, net primarily relates to the 4.625% Senior Unsecured Notes due 2027 (the “Notes”) issued in December 2019, our prior credit agreement, and borrowings under our COLI policies, which are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $22.2 million in fiscal 2020 compared to $16.9 million in fiscal 2019. The increase in interest expense, net was related to the newly issued Notes, which have a higher interest rate and a higher principal balance than the revolver under our prior credit agreement.
Income Tax Provision
The provision for income tax was $43.9 million in fiscal 2020 compared to $29.5 million in fiscal 2019. This reflects a 29% and 22% effective tax rate for fiscal 2020 and 2019, respectively. The higher effective tax rate in fiscal 2020 is partially attributable to state income tax on a higher domestic income and a lower tax benefit recorded in connection with stock-based compensation than during fiscal 2019.
Net Income Attributable to Noncontrolling Interest
Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to shares of such subsidiary not held by Korn Ferry that are included in the consolidated results of operations. Net income attributable to noncontrolling interest was $2.1 million in both fiscal 2020 and 2019.
Liquidity and Capital Resources
The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s long-term priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and derivative products and services, and the investment in synergistic, accretive merger and acquisition transactions that earn a return that is superior to the Company's cost of capital. Next, the Company’s capital allocation approach contemplates the return of a portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to the factors discussed below and in the “Risk Factors” section of this Annual Report on Form 10-K. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our Credit Agreement (defined below) as well as using excess cash to repay the Notes.
On November 1, 2019, we completed the acquisition of the Acquired Companies in the leadership development area for $108.6 million, net of cash acquired. Actual results of operations of the Acquired Companies are included in our consolidated financial statements from November 1, 2019, the effective date of the acquisition. On November 1, 2019, we also adopted a restructuring plan to rationalize our cost structure to position us to realize efficiencies and operational improvements.
As previously discussed under the heading “Impact of COVID-19”, with the implementation of the restructuring plan that was initiated on April 20, 2020 to reduce, in part, our human capital expenditures, and the improved business activity we experienced in the second, third, and fourth quarter demonstrated by an increase in fee revenue compared to the first quarter of fiscal 2021, we believe our costs are in line with our current revenue levels, but given the unpredictable and fluid nature of the pandemic and its economic consequences our revenue levels could fall below our current levels. Given the amount available from our current revolver and the amount of cash and cash equivalents and marketable securities net of amounts held in trust for deferred compensations and accrued bonuses, we believe that we have sufficient liquidity to meet our anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt obligations and dividend payments under our dividend policy in the next 12 months.
On December 16, 2019, we completed a private placement of the Notes with a $400 million principal amount pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes were issued with a $4.5 million discount and will mature December 15, 2027, with interest payable semi-annually in arrears on June 15 and December 15 of each year, that commenced on June 15, 2020. The Notes represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. We may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture governing the Notes. The Notes are guaranteed by each of our existing and future wholly owned domestic subsidiaries to the extent such subsidiaries guarantee our revolving credit facility under the Credit Agreement (defined below). The indenture governing the Notes requires that, upon the occurrence of both a Change of Control and a Rating Decline (each as defined in the indenture), we shall make an offer to purchase all of the Notes at 101% of their principal amount, and accrued and unpaid interest. We used the proceeds from the offering of the Notes to repay $276.9 million outstanding under our prior revolving credit facility (the “Prior Credit Agreement”) and to pay expenses and fees in connection therewith. As of April 30, 2021, the fair value of the Notes is $416.5 million, which is based on borrowing rates currently required of notes with similar terms, maturity and credit risk.
On December 16, 2019, we also entered into a senior secured $650.0 million credit agreement (the “Credit Agreement”) with a syndicate of banks and Bank of America, National Association as administrative agent to among other things, provide for enhanced financial flexibility. See Note 11-Long-Term Debt for a description of the Credit Agreement. We had a total of $646.0 million available under our $650.0 million five-year senior secured revolving credit facility (the “Revolver”) after $4.0 million of standby letters of credit had been issued as of April 30, 2021 and 2020. We had a total of $11.0 million and $11.3 million of standby letters of credits with other financial institutions as of April 30, 2021 and 2020, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases.
On December 8, 2014, the Board of Directors adopted a dividend policy to distribute to our stockholders a regular quarterly cash dividend of $0.10 per share. Every quarter since the adoption of the dividend policy, the Company has declared a quarterly dividend. On June 21, 2021, the Board of Directors approved a 20% increase to our quarterly dividend, which is now at $0.12 per share. The declaration and payment of future dividends under the quarterly dividend program will be at the discretion of the Board of Directors and will depend upon many factors, including our earnings, capital requirements, financial conditions, the terms of our indebtedness and other factors our Board of Directors may deem to be relevant. Our Board of Directors may, however, amend, revoke or suspend our dividend policy at any time and for any reason.
On March 6, 2019, our Board of Directors approved an increase to the share repurchase program of approximately $200 million, which at the time brought our available capacity to repurchase shares in the open market or privately negotiated transactions to approximately $250 million. The Company repurchased approximately $30.4 million and $92.4 million of the Company’s stock during fiscal 2021 and 2020, respectively. As of April 30, 2021, $127.9 million remained available for common stock repurchases under our share repurchase program. Any decision to continue to execute our currently outstanding share repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. The Credit Agreement permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under the Credit Agreement, our total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated net leverage ratio”) is no greater than 4.00 to 1.00, and pro forma liquidity is at least $50 million, including the revolving credit commitment minus amounts outstanding on the Revolver, issued letters of credit and swing loans. Furthermore, our Notes allow us to pay $25 million of dividends per fiscal year with no restrictions plus an unlimited amount of dividends so long as our consolidated total leverage ratio is not greater than 3.50 to 1.00, and there is no default under the indenture governing the Notes.
Our performance is subject to the general level of economic activity in the geographic regions and the industries we service. We believe, based on current economic conditions, that our cash on hand and funds from operations and the Credit Agreement will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt, share repurchases and dividend payments under our dividend policy during the next 12 months. However, if COVID-19 continues to persist or worsen, or the national or global economy, credit market conditions and/or labor markets were to deteriorate in the future, such changes could put negative pressure on demand for our services and affect our operating cash flows. If these conditions were to persist over an extended period of time, we may incur negative cash flows and it might require us to access additional borrowings under the Credit Agreement to meet our capital needs and/or discontinue our share repurchases and dividend policy.
Cash and cash equivalents and marketable securities were $1,097.1 million and $863.3 million as of April 30, 2021 and 2020, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and marketable securities were $642.1 million and $531.9 million at April 30, 2021 and 2020, respectively. As of April 30, 2021 and 2020, we held $382.8 million and $308.2 million, respectively of cash and cash equivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay fiscal 2021 annual bonuses. Cash and cash equivalents consist of cash and highly liquid investments purchased with original maturities of three months or less. Marketable securities consist of mutual funds and investments in commercial paper, corporate notes/bonds and US Treasury and Agency securities. The primary objectives of our investment in mutual funds are to meet the obligations under certain of our deferred compensation plans, while the commercial paper, corporate notes/bonds and U.S. Treasury and Agency securities are available for general corporate purposes.
As of April 30, 2021 and 2020, marketable securities of $246.4 million and $174.1 million, respectively, included equity securities of $175.6 million (net of gross unrealized gains of $30.0 million and gross unrealized losses of $0.1 million) and $141.4 million (net of gross unrealized gains of $3.6 million and gross unrealized losses of $6.5 million), respectively, were held in trust for settlement of our obligations under certain deferred compensation plans, of which $166.5 million and $132.1 million, respectively, are classified as non-current. These marketable securities were held to satisfy vested obligations totaling $157.3 million and $124.6 million as of April 30, 2021 and 2020, respectively. Unvested obligations under the deferred compensation plans totaled $26.5 million and $21.7 million as of April 30, 2021 and 2020, respectively.
The net increase in our working capital of $124.2 million as of April 30, 2021 compared to April 30, 2020 is primarily attributable to increases in cash and cash equivalents and accounts receivables, partially offset by increases in compensation and benefits payable. Cash and cash equivalents increased due to cash flows from operations and positive effect of exchange rate changes on cash and cash equivalents, partially offset by capital expenditures, net purchases of marketable securities, repurchases of common stock and dividends to shareholders. The increase in compensation and benefits payable was primarily due to an increase in bonus liability on April 30, 2021 compared to April 30, 2020 and to a lesser extent an increase in the deferred compensation amounts due within a year. The increase in accounts receivable was due to higher fee revenue in the fourth quarter of fiscal 2021 compared to year-ago period and the timing of when the revenue was recognized during the quarter. In fiscal 2021 more revenue was generated towards the end of the quarter whereas in fiscal 2020 more revenue was generated at the beginning of the quarter. Cash provided by operating activities was $251.4 million in fiscal 2021, an increase of $15.1 million, compared to $236.3 million in fiscal 2020.
Cash used in investing activities was $61.4 million in fiscal 2021 compared to $198.8 million in fiscal 2020. A decrease in cash used in investing activities was primarily due to cash paid for the acquisition of the Acquired Companies of $108.6 million in fiscal 2020 and an increase in the proceeds received from life insurance policies. Also contributing to a lower amount of cash used in investing activity was a decrease in the purchase of property and equipment in fiscal 2021 compared to fiscal 2020.
Cash used in financing activities was $66.9 million in fiscal 2021 compared to cash provided by financing activities of $43.7 million in fiscal 2020. The change from cash provided to cash used in financing activities was primarily due to net proceeds from long term debt of $168.6 million in fiscal 2020 as a result of issuing the Notes in the year-ago period and paying off the amount outstanding under the prior revolving credit facility and an increase in payments on life insurance policy loans of $11.3 million. This was partially offset by lower cash used to repurchase shares of common stock of $62.1 million.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated, special purpose entities.
Contractual Obligations
Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent liabilities for which we cannot reasonably predict future payment. The following table represents our contractual obligations as of April 30, 2021:
Payments Due in:
Note (1)
Total
Less Than
1 Year
1-3 Years
3-5 Years
More Than
5 Years
(in thousands)
Operating lease commitments
$
230,681
$
56,636
$
89,308
$
64,003
$
20,734
Finance lease commitments
2,437
1,084
1,223
-
Accrued restructuring charges
6,985
6,410
-
-
Interest payments on COLI loans (2)
37,927
4,432
8,855
8,727
15,913
Long-term debt
400,000
-
-
-
400,000
Estimated interest on long-term debt (3)
129,500
18,500
37,000
37,000
37,000
Total
$
807,530
$
87,062
$
136,386
$
109,860
$
474,222
(1)
See the corresponding Note in the accompanying consolidated financial statements in Item 15.
(2)
Assumes COLI loans remain outstanding until receipt of death benefits on COLI policies and applies current interest rates on COLI loans ranging from 4.76% to 8.00% with total death benefits payable, net of loans under COLI contracts of $443.9 million at April 30, 2021.
(3)
Interest on the Notes payable semi-annually in arrears on June 15 and December 15 of each year, commenced on June 15, 2020.
In addition to the contractual obligations above, we have liabilities related to certain employee benefit plans. These liabilities are recorded in our consolidated balance sheets. The obligations related to these employee benefit plans are described in Note 6-Deferred Compensation and Retirement Plans, in the Notes to our Consolidated Financial Statements in this Annual Report on Form 10-K.
Lastly, we have contingent commitments under certain employment agreements that are payable upon involuntary termination without cause, as described in Note 17-Commitments and Contingencies, in the Notes to our Consolidated Financial Statements in this Annual Report on Form 10-K.
Cash Surrender Value of Company Owned Life Insurance Policies, Net of Loans
We purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plans as a means of funding benefits under such plans. As of April 30, 2021 and 2020, we held contracts with gross cash surrender value (“CSV”) of $241.3 million and $238.7 million, respectively. Total outstanding borrowings against the CSV of COLI contracts were $80.0 million and $92.3 million as of April 30, 2021 and 2020, respectively. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and are secured by the CSV of COLI contracts. At April 30, 2021 and 2020, the net cash value of these policies was $161.3 million and $146.4 million, respectively. Total death benefits payable, net of loans under COLI contracts, were $443.9 million and $451.7 million at April 30, 2021 and 2020, respectively.
Long-Term Debt
On December 16, 2019, we completed a private placement of the Notes with a $400 million principal amount. We may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture governing the Notes. At any time prior to December 15, 2022, we may redeem at a redemption price equal to 100% of the principal plus the Applicable Premium (as defined in the indenture), and accrued and unpaid interest. At any time prior to December 15, 2022, we may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the Notes, including any permitted additional Notes, at a redemption price equal to 104.625% of the principal amount and accrued and unpaid interest. At any time and from time to time on or after December 15, 2022, we may redeem the Notes at the applicable redemption prices set forth in the table below, plus accrued and unpaid interest, if redeemed during the 12-month period beginning on December 15 of each of the years indicated:
Year
Percentage
102.313%
101.156%
2024 and thereafter
100.000%
The fair value of the Notes is classified as a Level 2 measurement in the fair value hierarchy.
The pay-off of the term loan outstanding under our Prior Credit Agreement is considered a debt modification and therefore, the previously incurred unamortized and current debt issuance costs is amortized over the life of the new issuance.
The principal balance of the Revolver is due on the date of its termination. The Revolver matures on December 16, 2024 and any unpaid principal balance is payable on this date. The Revolver may also be prepaid and terminated early by us at any time without premium or penalty (subject to customary LIBOR breakage fees).
At our option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Agreement may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.125% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon our total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated net leverage ratio”) at such time. In addition, we will be required to pay to the lenders a quarterly commitment fee ranging from 0.175% to 0.35% per annum on the average daily unused amount of the Revolver, based upon our consolidated net leverage ratio at such time, and fees relating to the issuance of letters of credit. During fiscal 2020, the average interest rate on amounts outstanding under the current Revolver and the prior revolver was 3.34%.
As of April 30, 2021 and 2020, there was no outstanding liability under the Revolver. The unamortized debt issuance costs associated with the Credit Agreement were $3.3 million and $4.2 million as of April 30, 2021 and 2020, respectively. As of April 30, 2021, we were in compliance with our debt covenants.
We had a total of $646.0 million available under the Revolver after $4.0 million of standby letters of credit had been issued as of April 30, 2021 and 2020. We had a total of $11.0 million and $11.3 million of standby letters of credits with other financial institutions as of April 30, 2021 and 2020, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases.
Other than the factors discussed in this section and the potential impacts of the COVID-19 on our business, we are not aware of any other trends, demands or commitments that would materially affect liquidity or those that relate to our resources as of April 30, 2021.
Accounting Developments
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance on accounting for measurement of credit losses on financial instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The standard became effective for fiscal years beginning after December 15, 2019. We adopted this guidance as of May 1, 2020. The adoption of this guidance did not have a material impact on the consolidated financial statements.
In January 2017, FASB issued guidance simplifying the test for goodwill impairment. The new guidance simplified the test for goodwill impairment by removing Step 2 from the goodwill impairment test. Companies now perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments of this standard became effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. We adopted this guidance as of May 1, 2020. The adoption of this guidance did not have a material impact on the consolidated financial statements.
In August 2018, FASB issued guidance amending the disclosure requirements for fair value measurements. The amendment removed and modified disclosures that are currently required and added additional disclosures that are deemed relevant. The amendments of this standard became effective for fiscal years beginning after December 15, 2019. We adopted this guidance as of May 1, 2020. The adoption of this guidance did not have a material impact on the consolidated financial statements.
In August 2018, FASB also issued guidance amending accounting for internal-use software. The new guidance aligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with developing or obtaining internal-use software. The amendments of this standard became effective for fiscal years beginning after December 15, 2019, with early adoption permitted. We adopted this guidance as of May 1, 2020. The adoption of this guidance did not have a material impact on the consolidated financial statements.
In December 2019, FASB issued guidance on Simplifying the Accounting for Income Taxes. This update eliminated certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income
taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The update also simplified aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarified the accounting for transactions that result in a step-up in the tax basis of goodwill. The amendments of this standard are effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We early adopted this guidance in fiscal year beginning May 1, 2020. The adoption of this guidance did not have a material impact on the consolidated financial statements.
Recently Proposed Accounting Standards - Not Yet Adopted
In March 2020, FASB issued guidance on Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional expedients and exceptions to the guidance on contract modifications and hedge accounting related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative rates. Entities can elect to adopt this guidance as of any date within an interim period that includes or is subsequent to March 12, 2020 and can adopt it for new contracts and contract modifications entered into through December 31, 2022. We will adopt this guidance in our fiscal year beginning May 1, 2022 and we may elect to apply the amendments prospectively through December 12, 2022. We are currently evaluating the impact of this accounting guidance, but do not anticipate that it will have a material impact on the consolidated financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a result of our global operating activities, we are exposed to certain market risks, including foreign currency exchange fluctuations and fluctuations in interest rates. We manage our exposure to these risks in the normal course of our business as described below.
Foreign Currency Risk
Substantially all our foreign subsidiaries’ operations are measured in their local currencies. Assets and liabilities are translated into U.S. dollars at the rates of exchange in effect at the end of each reporting period and revenue and expenses are translated at average rates of exchange during the reporting period. Resulting translation adjustments are reported as a component of accumulated other comprehensive loss, net on our consolidated balance sheets.
Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to foreign currency gains or losses that impact our results of operations. Historically, we have not realized significant foreign currency gains or losses on such transactions. During fiscal 2021, 2020 and 2019, we recorded foreign currency losses of $2.7 million, $4.1 million and $1.7 million, respectively, in general and administrative expenses in the consolidated statements of income.
Our exposure to foreign currency exchange rates is primarily driven by fluctuations involving the following currencies - U.S. Dollar, Pound Sterling, Euro, Singapore Dollar, Canadian Dollar, Swiss Franc, Korean Won, Brazilian Real, and South African Rand. Based on balances exposed to fluctuation in exchange rates between these currencies as of April 30, 2021, a 10% increase or decrease in the value of these currencies could result in a foreign exchange gain or loss of $12.0 million. We have a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. These foreign currency forward contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to Accounting Standards Codification 815, Derivatives and Hedging.
Interest Rate Risk
Our exposure to interest rate risk is limited to our Revolver, borrowings against the CSV of COLI contracts and to a lesser extent our fixed income debt securities. As of April 30, 2021, there were no amounts outstanding under the Revolver. At our option, loans issued under the Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Agreement may fluctuate between LIBOR plus 1.125% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.125% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon our total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated net leverage ratio”) at such time. In addition, we are required to pay the lenders a quarterly commitment fee ranging from 0.175% to 0.35% per annum on the average daily unused amount of the Revolver, based upon our consolidated net leverage ratio at such time, and fees relating to the issuance of letters of credit. During fiscal 2020, the average interest rate on current and previous term loans was 3.34%. The average interest rate on our previous term loan for 2019 was 3.50%.
We had $80.0 million and $92.3 million of borrowings against the CSV of COLI contracts as of April 30, 2021 and 2020, respectively, bearing interest primarily at variable rates. The risk of fluctuations in these variable rates is minimized by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate which has the effect of increasing the CSV on our COLI contracts.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
See Consolidated Financial Statements beginning on page of this Annual Report on Form 10-K.
Supplemental Financial Information regarding quarterly results is contained in Note 18-Quarterly Results, in the Notes to our Consolidated Financial Statements in this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
a)
Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this Annual Report on Form 10-K, management, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures and internal controls over financial reporting. Based on their evaluation of our disclosure controls and procedures conducted as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (the “Exchange Act”)) are effective as of April 30, 2021.
b)
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting during the fourth fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. See Management’s Report on Internal Control Over Financial Reporting and Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting on pages and, respectively.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Named Executive Officer Employment Agreements
On June 28, 2021, the Company entered into (1) an amended and restated employment agreement with Gary Burnison (the “Burnison Agreement”), (2) an amended and restated employment agreement with Robert Rozek (the “Rozek Agreement”), (3) an employment agreement with Byrne Mulrooney (the “Mulrooney Agreement”) and (4) an employment agreement with Mark Arian (the “Arian Agreement” and collectively, the “NEO Agreements” and each, an “NEO Agreement”). Each NEO Agreement supersedes the executive’s prior employment agreement or letter, as the case may be.
The NEO Agreements are terminable on notice by either party (on ninety days’ notice if by the executive or 30 days’ notice in the case of termination for “Good Reason”, as defined in the applicable NEO Agreement). The NEO Agreements provide for the following annual compensation: (1) an annual base salary, effective July 1, 2021, of $1,000,000 for Mr. Burnison, $625,000 for Mr. Rozek and $550,000 for each of Messrs. Mulrooney and Arian; (2) participation in the Company’s annual cash incentive plan with an annual target award of 150% of annual base salary for Mr. Burnison, 120% of annual base salary for Mr. Rozek and 100% of annual base salary for Messrs. Mulrooney and Arian, and the ability to earn additional amounts up to a maximum cash award of 200% of the applicable target bonus opportunity for each executive; and (3) subject to approval of the Compensation and Personnel Committee of the Board of Directors, participation in the Company’s equity incentive program. In addition, the executives are eligible to participate in employee benefit plans, arrangements and programs maintained from time to time by the Company for the benefit of senior executives.
The Burnison Agreement provides for continuation of the Retention Award originally granted under his previous employment agreement with the Company dated March 30, 2018 in the amount of $5 million, which cliff vests on March 30, 2022 (the “Retention Vesting Date”). Under the Burnison Agreement, interest will accrue on the Retention Award from March 30, 2022 until Mr. Burnison’s termination of employment at 120% of the long-term Applicable Federal Rate as in effect from time to time. The Retention Award, together with accrued interest, will be paid in equal monthly installments in cash (without further interest) over twelve months following Mr. Burnison’s termination of employment for any reason (other than termination by the Company for “Cause”, as defined in the Burnison Agreement) on or after the Retention Vesting Date. Payment of the Retention Award will be conditioned on Mr. Burnison’s execution and delivery of a general release of claims and his compliance with restrictive covenants relating to confidentiality, nonsolicitation and noncompetition. Upon any termination of Mr. Burnison’s employment on or after the Retention Vesting Date (other than by the Company for Cause or due to death or Disability (as defined in the NEO Agreements)), all unvested equity awards granted on or after March 30, 2018 (and at least 90 days prior to such termination, other than with respect to a termination by the Company without Cause or a termination by Mr. Burnison for Good Reason (as defined in the Burnison Agreement) (an “Involuntary Termination”) during such 90-day period, in which case, there shall be no such 90-day requirement) will continue to vest in accordance with their terms, disregarding such termination. Such continued vesting will be conditioned on Mr. Burnison’s execution and delivery of a general release of claims and his compliance with restrictive covenants relating to confidentiality,
nonsolicitation and noncompetition. As an exception, the post-Change in Control double trigger equity severance vesting rules described below would continue to apply in the event of an Involuntary Termination within 24 months after a Change in Control (as defined in the NEO Agreements).
Under each NEO Agreement, if the executive’s employment terminates due to death or Disability, then he, or his legal representatives, would receive: (1) all accrued compensation as of the date of termination; (2) full vesting of all outstanding stock options, other equity-type incentives (excluding performance shares) and benefits under the Executive Capital Accumulation Plan (“ECAP”); (3) a pro rata portion of his target annual cash incentive award for the fiscal year in which his employment terminated; (4) the number of performance shares that would have been earned if he had served the Company for the entire performance period and the target performance had been achieved; and (5) reimbursement of COBRA coverage premiums for the executive and his dependents for as long as such coverage was available under COBRA. In addition, for Mr. Burnison, any unvested amount of the Retention Award would vest.
If the Company terminates the executive’s employment for Cause at any time or he voluntarily terminates his employment without Good Reason, then the Company would pay him accrued compensation through the date of termination.
If the executive’s employment is Involuntarily Terminated prior to a Change in Control or more than 24 months after a Change in Control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his annual cash incentive award, based on actual Company performance, for the year in which his employment terminated; (3) in the case of Mr. Burnison, solely if such termination occurs prior to the Retention Vesting Date, cash payments equal to the greater of (i) the sum of one and one-half times his then current annual base salary and one and one-half times his target annual cash incentive award, or (ii) the prorated amount of the Retention Award based on days worked from March 30, 2018 until the date of termination; and in the case of the other executives, cash payments equal to one and one-half times his then current annual base salary and one and one-quarter times his target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for the executive and his dependents for as long as such coverage was available under COBRA; (5) in the case of Mr. Burnison, solely if such termination occurs prior to the Retention Vesting Date, and Mr. Rozek, all outstanding stock options, other equity-type incentives, other long term awards and all benefits held under the ECAP (excluding performance awards) (collectively, the “Time Vested Awards”) will continue to vest in accordance with their terms (disregarding such termination) and, in the case of Messrs. Mulrooney and Arian, the Time Vested Awards that would have vested within 12 months of termination will become fully vested as of the date of such termination; and (6) in the case of Mr. Burnison, solely if such termination occurs prior to the Retention Vesting Date, and Mr. Rozek, the performance awards will vest based on actual performance through the entire performance period and, in the case of Messrs. Mulrooney and Arian, a pro rata portion of the performance awards will vest based on actual performance during the entire performance period and the number of days the executive was employed during the performance period plus an additional year (provided this number of days does not exceed the number of days in the performance period).
If the executive’s employment is Involuntarily Terminated within 24 months following a Change in Control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his target annual cash incentive award; (3) in the case of Mr. Burnison, cash payments equal to three times his current annual base salary, three times his target annual cash incentive award and the amount of the Retention Award (to the extent not yet paid) and, in the case of Messrs. Rozek, Mulrooney and Arian, cash payments equal to two and one-half times the executive’s current annual base salary and two and one-half times the executive’s target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for him and his dependents for so long as such coverage is available under COBRA and for six months thereafter, reimbursement of a portion of the cost of healthcare coverage for him and his dependents; (5) vesting on the date of termination of all outstanding Time Vesting Awards; and (6) a number of performance awards equal to the greater of (i) the performance awards that would have been earned if the executive had served for the Company for the entirety of any open performance period and the Company’s performance during such period had been the Company’s actual performance through the date of the Change in Control and at the target level for the period subsequent to the Change in Control and (ii) the performance awards that would have been earned if the executive had served the Company for the entirety of any open performance period and the Company’s performance during such period had been at the target level of performance for the entire performance period.
If Mr. Rozek terminates his employment due to Retirement (as defined in the Rozek Agreement), he will be entitled to the following: (1) his accrued compensation; (2) Time Vested Awards that have been outstanding for more than 90 days will continue to vest in accordance with their terms (disregarding such termination); and (3) performance awards that have been outstanding for more than 90 days will vest based on actual performance through the entire performance period. Mr. Rozek is required to provide six months’ notice prior to terminating his employment due to Retirement.
Under the NEO Agreements, the severance benefits described above are conditioned on the executive’s execution and delivery of a general release and compliance with covenants relating to confidentiality, nonsolicitation and noncompetition.
In addition, in the event of a Change in Control, the NEO Agreements provide that any payments contingent on a Change in Control that would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code will be reduced by an amount equal to the smallest amount possible such that no payment would be subject to such excise tax; provided that if, without any reduction in payments, the net amount retained by the executive, after subtracting all taxes imposed thereon, would exceed the after-tax amount that would be retained by him after the reduction described above, then no reduction in payments will be made. The NEO Agreements also provide for indemnification of the executives to the fullest extent permitted by applicable law and the Company’s governing instruments in connection with suits or proceedings arising by reason of the fact that he is or was a director, officer or employee of the Company.
A copy of the NEO Agreements are attached as Exhibits 10.53, 10.54, 10.55 and 10.56 to this Annual Report.
Long-Term Performance Unit Plan and Executive Capital Accumulation Plan
On June 24, 2021, the Compensation and Personnel Committee (the “Committee”) of the Board of Directors of the Company amended and restated the Company’s Long-Term Performance Unit Plan (the “LTPUP”) and Executive Capital Accumulation Plan (the “ECAP”), effective as of July 1, 2021. The Committee amended and restated the LTPUP to provide that unit awards made thereunder on or after July 1, 2021 will have a total value upon becoming fully vested of $62,500, generally payable over five years in equal annual installments subject to the terms and conditions of the LTPUP, including the alternate payment provisions provided therein. The Committee amended and restated both the LTPUP and the ECAP to provide that, following the occurrence of a Change in Control Event (as defined in the applicable plan), a participant’s rights with respect to vested benefits under the plans may not be terminated due to the participant engaging in Detrimental Activity (as defined in the applicable plan). In addition, under the ECAP, if a participant’s employment is terminated on or following a Change in Control Event by the Company for any reason (other than for Cause, as defined in the ECAP) or due to the Participant’s retirement on or after attaining age 65, then the participant will become 100% vested in all amounts under the ECAP. A copy of the ECAP and the LTPUP are attached as Exhibits 10.50 and 10.51 to this Annual Report.
PART III.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item will be included under the captions “The Board of Directors” and, when applicable, “Delinquent Section 16(a) Reports” and elsewhere in our 2021 Proxy Statement and is incorporated herein by reference. The information under the heading “Information about our Executive Officers” in Part I of this Annual Report on Form 10-K is also incorporated by reference in this section.
We have adopted a “Code of Business Conduct and Ethics” that applies to all of our directors, officers and employees, including our principal executive officer (who is our Chief Executive Officer), principal financial officer, and principal accounting officer (who is our Chief Financial Officer) and senior financial officers, or persons performing similar functions. The Code of Business Conduct and Ethics is available on the Investor Relations portion of our website at http://ir.kornferry.com. If, or when, applicable we will disclose amendments to certain provisions of the Code of Business Conduct and Ethics and waivers of the Code of Business Conduct and Ethics granted to executive officers and directors on our website within four business days following the date of the amendment or waiver.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this Item will be included under the captions “Compensation Discussion and Analysis” and “Compensation of Executive Officers and Directors” and elsewhere in our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be included under the caption “Security Ownership of Certain Beneficial Owners and Management” and elsewhere in our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be included under the caption “Certain Relationships and Related Transactions” and elsewhere in our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required by this Item will be included under the captions “Fees Paid to Ernst & Young LLP” and “Audit Committee Pre-Approval Policies and Procedures,” and elsewhere in our 2021 Proxy Statement, and is incorporated herein by reference.
PART IV.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
Financial Statements.
a)
The following documents are filed as part of this report:
1.
Index to Financial Statements:
Page
See Consolidated Financial Statements included as part of this Annual Report on Form 10-K and Schedule II - Valuation and Qualifying Accounts. Pursuant to Rule 7-05 of Regulation S-X, the other schedules have been omitted as the information to be set forth therein is included in the notes of the audited consolidated financial statements.
Exhibits:
Exhibit
Number
Description
2.1+
Stock Purchase Agreement by and between HG (Bermuda) Limited and Korn/Ferry International, dated as of September 23, 2015, filed as Exhibit 2.1 to the Company’s Form 8-K, filed September 24, 2015.
2.2+
Letter Agreement dated November 30, 2015, by and between Korn/Ferry International and HG (Bermuda) Limited, filed as Exhibit 2.1 to the Company’s Form 8-K, filed December 2, 2015.
2.3+
Letter Agreement dated April 19, 2018, by and between Korn/Ferry International and HG (Bermuda) Limited.
3.1+
Restated Certificate of Incorporation of the Company, dated January 7, 2019, filed as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q, filed March 11, 2019.
3.2+
Seventh Amended and Restated Bylaws, effective January 1, 2019, filed as Exhibit 3.2 to the Company’s Report on Form 8-K, filed December 13, 2018.
4.1+
Form of Common Stock Certificate of the Company, filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
4.2+
Description of Securities, filed as Exhibit 4.2 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
4.3+
Indenture, dated as of December 16, 2019, by and among Korn Ferry, an issuer, certain subsidiaries of Korn Ferry, as guarantors thereto, and Wells Fargo Bank, National Association, as trustee, filed as Exhibit 4.1 to the Company’s Form 8-K, filed December 16, 2019.
10.1*+
Form of Indemnification Agreement between the Company and some of its executive officers and directors, filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1/A (No. 333-61697), filed December 24, 1998.
10.2*+
Form of U.S. and International Worldwide Executive Benefit Retirement Plan, filed as Exhibit 10.3 to the Company’s Registration Statement on Form S-1/A (No. 333-61697), filed September 4, 1998.
10.3*+
Form of U.S. and International Worldwide Executive Benefit Life Insurance Plan, filed as Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.4*+
Worldwide Executive Benefit Disability Plan (in the form of Long-Term Disability Insurance Policy), filed as Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.5*+
Form of U.S. and International Enhanced Executive Benefit and Wealth Accumulation Plan, filed as Exhibit 10.6 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.6*+
Form of U.S. and International Senior Executive Incentive Plan, filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.7*+
Executive Salary Continuation Plan, filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.8*+
Form of Amended and Restated Stock Repurchase Agreement, filed as Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.9*+
Form of Standard Employment Agreement, filed as Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.10*+
Form of U.S. and Foreign Executive Participation Program, filed as Exhibit 10.27 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.
10.11*+
Korn/Ferry International Second Amended and Restated Performance Award Plan, filed as Appendix A to the Company’s Definitive Proxy Statement, filed August 12, 2004.
10.12*+
Form of Indemnification Agreement between the Company and some of its executive officers and directors, filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed March 12, 2004.
10.13*+
Form of Restricted Stock Unit Award Agreement to Directors Under the Performance Award Plan, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed December 10, 2007.
10.14*+
Form of Stock Option Agreement to Employees and Non-Employee Directors Under the Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.3 to the Company’s Form 8-K, filed June 12, 2009.
10.15*+
Korn/Ferry International Executive Capital Accumulation Plan, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (No. 333-111038), filed December 10, 2003.
10.16*+
Korn Ferry Amended and Restated Employee Stock Purchase Plan, filed as Exhibit 10.17 to the Company’s Annual Report on Form 10-K, filed June 28, 2019.
10.17*+
Employment Agreement between the Company and Robert Rozek, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed February 21, 2012.
10.18*+
Second Amended and Restated Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.1 to the Company’s Form 8-K, filed October 2, 2012.
10.19*+
Form of Restricted Stock Unit Award Agreement to Non-Employee Directors Under the 2008 Stock Incentive Plan, filed as Exhibit 10.38 to the Company’s Annual Report on Form 10-K, filed June 25, 2013.
10.20*+
Form of Restricted Stock Unit Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as Exhibit 10.39 to the Company’s Annual Report on Form 10-K, filed June 25, 2013.
10.21*+
Letter Agreement between the Company and Byrne Mulrooney dated June 26, 2014, filed as Exhibit 10.33 to the Company’s Annual Report on Form 10-K, filed June 27, 2014.
10.22*+
Amended and Restated Korn Ferry Executive Capital Accumulation Plan, as of January 1, 2019, filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K, filed June 28, 2019.
10.23*+
Amended and Restated Korn Ferry Executive Capital Accumulation Plan, as of December 4, 2019, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed March 11, 2020.
10.24*+
Form of Indemnification Agreement between the Company and some of its directors and executive officers, filed as Exhibit 10.1 to the Company’s Form 8-K, filed June 15, 2015.
10.25*+
Amendment to Employment Agreement dated December 28, 2015 between the Company and Robert Rozek, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed March 10, 2016.
10.26*+
Korn Ferry Long Term Performance Unit Plan, filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
10.27*+
Korn Ferry Long Term Performance Unit Plan Form of Unit Award Agreement, filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K, filed June 28,2019.
10.28*+
Amended and Restated Korn Ferry Long Term Performance Unit Plan, as of December 4, 2019, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed March 11, 2020.
10.29*+
Third Amendment and Restated Korn Ferry 2008 Stock Incentive Plan, filed as Exhibit 10.28 to the Company’s Annual Report on Form 10-K, filed June 28, 2019.
10.30*+
Fourth Amended and Restated Korn Ferry 2008 Stock Incentive Plan, filed as Exhibit 10.1 to the Company's Form 8-K, filed October 7, 2019.
10.31*+
Summary of Non-Employee Director Compensation Program Effective December 7, 2016, filed as Exhibit 10.1 to the Company’s 10-Q, filed March 10, 2017.
10.32*+
Letter Agreement between the Company and Mark Arian, dated March 17, 2017, filed as Exhibit 10.48 to the Company’s Annual Report on Form 10-K, filed June 28, 2017.
10.33*+
Form of Restricted Stock Unit Award Agreement to Non-Employee Directors under the 2008 Stock Incentive Plan, filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
10.34*+
Form of Performance Restricted Stock Unit Award Agreement Under the 2008 Stock Incentive Plan, filed as Exhibit 10.32 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
10.35*+
Form of Restricted Stock Unit Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
10.36*+
Form of Restricted Stock Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as Exhibit 10.34 to the Company's Annual Report on Form 10-K, filed June 28, 2019.
10.37*+
Amended and Restated Employment Agreement dated March 30, 2018 between the Company and Gary Burnison, filed as Exhibit 10.1 to the Company’s Form 8-K, filed April 4, 2018.
10.38+
Amended and Restated Credit Agreement, dated December 19, 2018, by and among the Company and Wells Fargo, National Association, as administrative agent and other lender parties thereto, filed as Exhibit 10.1 to the Company’s Form 8-K, filed December 20, 2018.
10.39+
Credit Agreement, dated December 16, 2019, by and among Korn Ferry, Bank of America, N.A., as administrative agent, and other lender parties thereto, filed as Exhibit 10.1 to the Company’s Form 8-K, filed December 16, 2019.
10.40*+
Amendment to Amended and Restated Employment Agreement dated March 30, 2018 between the Company and Gary Burnison, filed as Exhibit 10.1 to the Company’s Form 8-K, filed April 17, 2020.
10.41*+
Amendment to Employment Agreement dated February 6, 2012 between the Company and Robert Rozek, as amended by that Amendment thereto dated December 28, 2015, filed as Exhibit 10.2 to the Company’s Form 8-K, filed April 17, 2020.
10.42*+
Amendment to Employment Letter dated June 26, 2014 between the Company and Byrne Mulrooney, filed as Exhibit 10.3 to the Company’s Form 8-K, filed April 17, 2020.
10.43*+
Amendment to Employment Letter dated March 17,2017 between the Company and Mark Arian, filed as Exhibit 10.4 to the Company’s Form 8-K, filed April 17, 2020.
10.44*+
Amended and Restated Korn Ferry Long Term Performance Unit Plan, effective June 1, 2020, filed as Exhibit 10.44 to the Company’s Annual Report on Form 10-K, filed July 15, 2020.
10.45*+
Korn Ferry Amended and Restated Employee Stock Purchase Plan, effective July 1, 2020, filed as Exhibit 10.45 to the Company’s Annual Report on Form 10-K, filed July 15, 2020.
10.46*+
Amendment to Amended and Restated Employment Agreement dated March 30, 2018 between the Company and Gary Burnison and the Letter Agreement dated April 14, 2020, filed as Exhibit 10.1 to the Company’s Form 8-K, filed July 10, 2020.
10.47*+
Amendment to Employment Agreement dated February 6, 2012 between the Company and Robert Rozek, as amended by that Amendment thereto dated December 28, 2015 and the Letter Agreement dated as of April 14, 2020, filed as Exhibit 10.2 to the Company’s Form 8-K, filed July 10, 2020.
10.48*+
Amendment to Employment Letter dated June 26, 2014 between the Company and Byrne Mulrooney and the Letter Agreement dated as of April 14, 2020, filed as Exhibit 10.3 to the Company’s Form 8-K, filed July 10, 2020.
10.49*+
Amendment to Employment Letter dated March 17, 2017 between the Company and Mark Arian and the Letter Agreement dated as of April 14, 2020, filed as Exhibit 10.4 to the Company’s Form 8-K, filed July 10, 2020.
10.50*
Amended and Restated Korn Ferry Executive Capital Accumulation Plan, effective July 1, 2021.
10.51*
Amended and Restated Korn Ferry Long Term Performance Unit Plan, effective July 1, 2021.
10.52*
Form of Unit Award Agreement under Amended and Restated Korn Ferry Long Term Performance Unit Plan.
10.53*
Amended and Restated Employment Agreement dated June 28, 2021 between the Company and Gary Burnison.
10.54*
Amended and Restated Employment Agreement dated June 28, 2021 between the Company and Robert Rozek.
10.55*
Employment Agreement dated June 28, 2021 between the Company and Byrne Mulrooney.
10.56*
Employment Agreement dated June 28, 2021 between the Company and Mark Arian.
21.1
Subsidiaries of Korn Ferry.
23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1
Power of Attorney (contained on signature page).
31.1
Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
31.2
Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
32.1
Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
This cover page from the Company’s Annual Report on Form 10-K for the year ended April 30, 2021, had been formatted in Inline XBRL and included as Exhibit 101.
*
Management contract, compensatory plan or arrangement.
+
Incorporated herein by reference.