# Korn Ferry: Form 10-Q for the period ended Jul 31, 2023

- Company: [Korn Ferry](/companies/kfy.md) (CIK 56679)
- Form: 10-Q
- Filed: 2023-09-08
- Accepted by EDGAR: Sep 8, 2023, 15:54 ET
- Period: 2023-07-31
- Accession: 0001628280-23-031840
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/56679/000162828023031840/kfy-20230731.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/56679/000162828023031840/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-07-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-05-01 to 2023-07-31 | $706.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-05-01 to 2023-07-31 | $56.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-05-01 to 2023-07-31 | $18.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-05-01 to 2023-07-31 | $46.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-05-01 to 2023-07-31 | $0.89 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-05-01 to 2023-07-31 | $0.89 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-05-01 to 2023-07-31 | 51,082,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-05-01 to 2023-07-31 | −$274.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-05-01 to 2023-07-31 | $15.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-05-01 to 2023-07-31 | $9.6m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2023-05-01 to 2023-07-31 | $5.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-07-31 | $562.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-07-31 | $1.37bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-07-31 | $3.31bn | us-gaap:Assets |
| Current liabilities | at 2023-07-31 | $655.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-07-31 | $1.62bn | us-gaap:Liabilities |
| Long-term debt | at 2023-07-31 | $396.4m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-07-31 | $1.69bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 71,219 characters.

### Forward-Looking Statements

*This Quarterly Report on Form 10-Q 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, including the timing and anticipated impacts of our restructuring plans and business strategy, are also forward-looking statements. 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 global and local political and or economic developments in or affecting countries where we have operations, such as inflation, interest rates, global slowdowns, or recessions, competition, geopolitical tensions, shifts in global trade patterns, changes in demand for our services as a result of automation, dependence on and costs of attracting and retaining qualified and experienced consultants, impact of inflationary pressures on our profitability, 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, social and governance matters, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, including as a result of recent workforce, real estate, and other restructuring initiatives, 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, develop and respond to new technology, including artificial intelligence, 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, 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 and integrate acquired businesses, including Salo LLC ("Salo"), resulting organizational changes, our indebtedness, those relating to the ultimate magnitude and duration of any pandemic or outbreaks, and the matters disclosed under the heading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A included in the Annual Report on Form 10-K for the fiscal year ended April 30, 2023 (the “Form 10-K”). Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q. 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 to help Korn Ferry focus on clients and collaborate intensively across the organization. This approach is intended to build on the best of our past and give 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.

The Company services its clients with a core set of solutions that are anchored around talent and talent management – essentially touching every aspect of an employer’s engagement with their employees. Our five core solutions are as follows: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, Total Rewards, and Talent Acquisition. Our colleagues engage with our clients through the delivery of one of our core solutions as a point solution sale or through combining component parts of our core solutions into an integrated solution. In either case, we are solving our clients’ most challenging business and human capital issues.

Further differentiating our service offerings from our competitors is the unique combination of IP, content, and data sets that we have, which permeate all of our solution areas. For many years, we have been accumulating data around assessments of executives and professionals, pay, success profiles, organizational engagement and design, job architecture, and candidates. Integrating this unique collection of data into our service offerings provides our colleagues with differentiated points of view and solutions, as well as the ability to demonstrate the efficacy of all of our offerings.

Over the last three and one-half years, we have seen more change in the workplace than we did in the previous 15 years. Today, we find ourselves doing different work and working differently. Employees want to and they are working remotely. People don’t want to be tethered to a single company for their entire career. Rather, they want to have many new and unique experiences across many different employers – a career nomad of sorts. There is growing demand for companies to have responsibilities that go beyond delivering profits to shareholders, covering areas such as Environmental, Social and Governance. The continual advancement of technologies like Generative AI creates a constant demand for workers to be upskilled or reskilled. All of these changes and disruptions lead to opportunities for Korn Ferry and make us more relevant than at any time in our history. We have core and integrated solutions that line up to these issues and help our clients solve their most pressing business and Human Capital challenges.

Leveraging the strong connection between our various service offering and our lines of business, we have an integrated go-to-market strategy. As we drive this strategy, a focal point for us is our Marquee and Regional account program which is comprised of about 340 of our top clients that generate in excess of 35% of our consolidated fee revenue. These accounts have Global Account Leaders assigned who help to orchestrate the delivery of core and integrated solutions that cut across multiple lines of business – effectively making all of the Firm’s resources available as our clients tackle their business and Human Capital issues. Korn Ferry is poised for continued growth. We are capitalizing on the current and growing relevance of our core and integrated solutions which, in combination with the strong connections amongst all of our service offerings and our M&A activities, drives top-line synergies that have resulted in double digit fee revenue growth rates (CAGR) over the past twenty years.

Our eight reportable segments operate through the following five lines of business:

1\. **Consulting** aligns organizational 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. We enable this work with a comprehensive set of Digital Performance Management Tools, based on some of the world’s leading lP and data. The Consulting teams employ an integrated approach across core solutions, each one intended to strengthen our work and thinking in the next, to help clients execute their strategy in a digitally enabled world.

2\. **Digital** develops technology-enabled Performance Management Tools that empower our clients. Our digital products give clients direct access to our proprietary data, client data and analytics to deliver clear insights with the training and tools needed to align organizational structure with business strategy.

3\. **Executive Search** helps organizations recruit board level, chief executive and other senior executive and general management talent to deliver lasting impact. Our approach to placing talent brings together research-based IP, proprietary assessments, and behavioral interviewing with our practical experience to determine the ideal organizational fit. Salary benchmarking then builds appropriate frameworks for compensation and retention. This business is managed and reported on a geographical basis and represents four of the Company’s reportable segments (Executive Search North America, Executive Search Europe, the Middle East and Africa (“EMEA”), Executive Search Asia Pacific (“APAC”), and Executive Search Latin America).

4\. **Professional Search & Interim** delivers enterprise talent acquisition solutions for professional level middle and upper management. We help clients source high-quality candidates at speed and scale globally, covering single-hire to multi-hire permanent placements and interim contractors.

5\. **Recruitment Process Outsourcing (“RPO”)** offers scalable recruitment outsourcing solutions leveraging customized technology and talent insights. Our scalable solutions, built on science and powered by best-in-class technology and consulting expertise, enable us to act as a strategic partner in clients’ quest for superior recruitment outcomes and better candidate fit.

Highlights of our performance in fiscal 2023 include:

- Approximately 78% of the executive searches we performed in fiscal 2023 were for board level, chief executive and other senior executive and general management positions. Our more than 4,000 search engagement clients in fiscal 2023 included many of the world’s largest and most prestigious public and private companies.
- We have built strong client loyalty, with nearly 80% of the assignments performed during fiscal 2023 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years.
- Approximately 80% of our revenues were generated from clients that have utilized multiple lines of our business.
- In fiscal 2023, we acquired Infinity Consulting Solutions ("ICS") and Salo. ICS is a provider of senior-level IT interim professional solutions with additional expertise in the area of compliance and legal, accounting and finance, and human resources. Salo is a leading provider of finance, accounting and human resources ("HR") interim talent.

#### 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 impairments charges). For the three months ended July 31, 2023, Adjusted EBITDA excluded $4.1 million of integration, $1.6 million impairment of right-of-use assets, $0.4 million of restructuring charges, net and $0.1 million impairment of fixed assets. For the three months ended July 31, 2022, Adjusted EBITDA excluded $3.6 million of integration/acquisition costs.

Consolidated and the subtotals of Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and have limitations as analytical tools. They 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 $699.2 million during the three months ended July 31, 2023, an increase of $3.3 million, compared to $695.9 million in the three months ended July 31, 2022. Fee revenue increased primarily due to an increase in the interim portion of the Professional Search & Interim segment as a result of the acquisitions of ICS and Salo (collectively, the "acquisitions"). This was partially offset by decreases in fee revenue from Executive Search, RPO, and the permanent placement portion of Professional Search & Interim primarily due to a decline in demand driven by global economic slowdown and other factors. Exchange rates favorably impacted fee revenue by $1.0 million in the three months ended July 31, 2023 compared to the year-ago quarter. Net income attributable to Korn Ferry in the three months ended July 31, 2023 was $46.6 million, which decreased by $30.6 million as compared to $77.2 million in the year-ago quarter. The decrease in net income attributable to Korn Ferry was primarily due to a higher cost of service expense associated with the acquisitions in the Interim businesses, and an increase in compensation and benefits expense. These increases were partially offset by an increase in other income, and a decrease in income tax provision. Adjusted EBITDA in the three months ended July 31, 2023 was $95.7 million, which decreased by $36.5 million as compared to $132.2 million in the year-ago quarter. During the three months ended July 31, 2023, the Executive Search, Consulting, Digital, Professional Search & Interim, and RPO lines of business contributed $42.5 million, $25.2 million, $24.3 million, $24.3 million, and $10.5 million, respectively, to Adjusted EBITDA, which was partially offset by Corporate expenses net of other income of $31.1 million.

Our cash, cash equivalents and marketable securities decreased by $286.8 million to $781.1 million at July 31, 2023, compared to $1,067.9 million at April 30, 2023. This decrease was mainly due to annual bonuses earned in fiscal 2023 and paid during the first quarter of fiscal 2024, long-term retention awards, the semi-annual interest payment on the 4.625% Senior Unsecured Notes due 2027 (the “Notes”), capital expenditures, stock repurchases and dividends paid to stockholders during the three months ended July 31, 2023. As of July 31, 2023, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $187.1 million and a fair value of $199.7 million. Our vested obligations for which these assets were held in trust totaled $192.5 million as of July 31, 2023 and our unvested obligations totaled $16.8 million.

Our working capital increased by $48.4 million to $710.8 million as of July 31, 2023, as compared to $662.4 million at April 30, 2023. 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 debt obligations and dividend payments under our dividend policy in the next 12 months. We had a total of $645.4 million and $1,145.4 million available under the Credit Facilities (defined in Liquidity and Capital Resources) after $4.6 million and $4.6 million of standby letters of credit issued as of July 31, 2023 and April 30, 2023, respectively. Of the amount available under the Credit Facilities as of April 30, 2023, $500.0 million was under the Delayed Draw Facility that expired on June 24, 2023 and is no longer available as a source of liquidity. We had a total of $10.9 million and $11.5 million of standby letters of credit with other financial institutions as of July 31, 2023 and April 30, 2023, respectively. The standby letters of credit were generally issued as a result of entering into office premise leases.

### 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)

|  | Three Months Ended July 31, 2023 | 2022 |
| --- | ---: | ---: |
| Fee revenue | 100.0% | 100.0% |
| Reimbursed out-of-pocket engagement expenses | 1.0 | 1.0 |
| Total revenue | 101.0 | 101.0 |
| Compensation and benefits | 68.6 | 66.9 |
| General and administrative expenses | 9.4 | 9.3 |
| Reimbursed expenses | 1.0 | 1.0 |
| Cost of services | 11.0 | 5.5 |
| Depreciation and amortization | 2.7 | 2.3 |
| Restructuring charges, net | 0.1 | — |
| Operating income | 8.1 | 16.0 |
| Net income | 6.7% | 11.3% |
| Net income attributable to Korn Ferry | 6.7% | 11.1% |

The following tables summarize the results of our operations:

(Numbers may not total exactly due to rounding)

*(dollars in thousands)*

| Fee revenue | Three Months Ended July 31, 2023 Dollars% |  | 2022 Dollars% |  |
| --- | ---: | ---: | ---: | ---: |
| **Consulting** | $168,088 | 24.0% | $166,484 | 23.9% |
| **Digital** | 87,986 | 12.6 | 83,761 | 12.0 |
| **Executive Search:** |  |  |  |  |
| North America | 127,498 | 18.2 | 151,544 | 21.8 |
| EMEA | 46,776 | 6.7 | 47,056 | 6.8 |
| Asia Pacific | 24,539 | 3.5 | 26,381 | 3.8 |
| Latin America | 6,421 | 0.9 | 7,808 | 1.1 |
| **Total Executive Search** | 205,234 | 29.4 | 232,789 | 33.5 |
| **Professional Search & Interim** | 142,179 | 20.3 | 98,947 | 14.2 |
| **RPO** | 95,702 | 13.7 | 113,922 | 16.4 |
| **Total fee revenue** | 699,189 | 100.0% | 695,903 | 100.0% |
| Reimbursed out-of-pocket engagement expense | 7,073 |  | 7,245 |  |
| **Total revenue** | $706,262 |  | $703,148 |  |

30

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.

*(in thousands)*

|  | Three Months Ended July 31, 2023 Consolidated | 2022 |
| --- | ---: | ---: |
| Fee revenue | $699,189 | $695,903 |
| Total revenue | $706,262 | $703,148 |
| Net income attributable to Korn Ferry | $46,605 | $77,247 |
| Net income attributable to noncontrolling interest | 580 | 1,289 |
| Other income, net | (13,577) | (775) |
| Interest expense, net | 4,740 | 7,612 |
| Income tax provision | 18,420 | 26,226 |
| Operating income | 56,768 | 111,599 |
| Depreciation and amortization | 19,012 | 16,229 |
| Other income, net | 13,577 | 775 |
| Integration/acquisition costs | 4,128 | 3,605 |
| Impairment of fixed assets | 123 | — |
| Impairment of right-of-use assets | 1,629 | — |
| Restructuring charges, net | 421 | — |
| Adjusted EBITDA | $95,658 | $132,208 |
| Adjusted EBITDA margin | 13.7% | 19.0% |

*(dollars in thousands)*

|  | Three Months Ended July 31, 2023 Fee revenue | Total revenue | Adjusted EBITDA | Adjusted EBITDA margin | 2022 Fee revenue | Total revenue | Adjusted EBITDA | Adjusted EBITDA margin |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| **Consulting** | $168,088 | $170,793 | $25,180 | 15.0% | $166,484 | $168,735 | $29,550 | 17.7% |
| **Digital** | 87,986 | 88,012 | 24,325 | 27.6% | 83,761 | 83,815 | 24,178 | 28.9% |
| **Executive Search:** |  |  |  |  |  |  |  |  |
| North America | 127,498 | 129,413 | 28,756 | 22.6% | 151,544 | 152,884 | 43,749 | 28.9% |
| EMEA | 46,776 | 47,135 | 5,638 | 12.1% | 47,056 | 47,329 | 8,515 | 18.1% |
| Asia Pacific | 24,539 | 24,610 | 6,315 | 25.7% | 26,381 | 26,452 | 7,351 | 27.9% |
| Latin America | 6,421 | 6,422 | 1,741 | 27.1% | 7,808 | 7,809 | 2,617 | 33.5% |
| **Total Executive Search** | 205,234 | 207,580 | 42,450 | 20.7% | 232,789 | 234,474 | 62,232 | 26.7% |
| **Professional Search & Interim** | 142,179 | 143,069 | 24,329 | 17.1% | 98,947 | 100,052 | 29,161 | 29.5% |
| **RPO** | 95,702 | 96,808 | 10,471 | 10.9% | 113,922 | 116,072 | 17,709 | 15.5% |
| **Corporate** | — | — | (31,097) |  | — | — | (30,622) |  |
| **Consolidated** | $699,189 | $706,262 | $95,658 | 13.7% | $695,903 | $703,148 | $132,208 | 19.0% |

31

### Three Months Ended July 31, 2023 Compared to Three Months Ended July 31, 2022

### Fee Revenue

*Fee Revenue.* Fee revenue was $699.2 million in the three months ended July 31, 2023, an increase of $3.3 million compared to $695.9 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $1.0 million, in the three months ended July 31, 2023 compared to the year-ago quarter. Fee revenue remained constant primarily due to an increase in the Interim portion of the Professional Search & Interim segment resulting from the acquisitions, partially offset by decreases in Executive Search, RPO and permanent placements of Professional Search & Interim due to a decline in demand for such services driven by the global economic slowdown.

*Consulting.* Consulting reported fee revenue of $168.1 million, an increase of $1.6 million, or 1%, in the three months ended July 31, 2023 compared to $166.5 million in the year-ago quarter. The slight increase in fee revenue was primarily driven by growth in assessment & succession. Exchange rates favorably impacted fee revenue by $0.3 million in the three months ended July 31, 2023 compared to the year-ago quarter.

*Digital.* Digital reported fee revenue of $88.0 million, an increase of $4.2 million, or 5%, in the three months ended July 31, 2023 compared to $83.8 million in the year-ago quarter. The increase in fee revenue was primarily due to growth in subscription-based fee revenue. Exchange rates unfavorably impacted fee revenue by $0.1 million in the three months ended July 31, 2023 compared to the year-ago quarter.

*Executive Search North America*. Executive Search North America reported fee revenue of $127.5 million, a decrease of $24.0 million, or 16%, in the three months ended July 31, 2023 compared to $151.5 million in the year-ago quarter driven by a decline in demand for executive searches as a result of clients being affected by the uncertain economic environment. North America’s fee revenue decreased primarily due to a 16% decrease in the number of engagements billed during the three months ended July 31, 2023 compared to the year-ago quarter driven by a decline in demand for executive searches as a result of clients being affected by the uncertain economic environment.

*Executive Search EMEA*. Executive Search EMEA reported fee revenue of $46.8 million, a decrease of $0.3 million, or 1%, in the three months ended July 31, 2023 compared to $47.1 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $1.5 million, or 3%, in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease in fee revenue was primarily due to a 4% decrease in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended July 31, 2023 compared to the year-ago quarter. Performance in France and United Arab Emirates were the primary contributors to the decrease in fee revenue in the three months ended July 31, 2023 compared to the year-ago quarter, partially offset by an increase in fee revenue in United Kingdom and Denmark.

*Executive Search Asia Pacific.* Executive Search Asia Pacific reported fee revenue of $24.5 million, a decrease of $1.9 million, or 7%, in the three months ended July 31, 2023 compared to $26.4 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.9 million, or 3%, in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease in fee revenue was due to a 15% decrease in the number of engagements billed, due to a decline in demand for executive searches as a result of clients being affected by the uncertain economic environment. This was partially offset by a 13% increase in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended July 31, 2023 compared to the year-ago quarter. The performance in China and Singapore were the primary contributors to the decrease in fee revenue in the three months ended July 31, 2023 compared to the year-ago quarter, partially offset by an increase in fee revenue in Japan.

*Executive Search Latin America.* Executive Search Latin America reported fee revenue of $6.4 million, a decrease of $1.4 million, or 18%, in the three months ended July 31, 2023 compared to $7.8 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $0.6 million, or 8%, in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease in fee revenue was primarily driven by a 24% decrease in the number of engagements billed, due to a decline in demand for executive searches as a result of clients being affected by the uncertain economic environment during the three months ended July 31, 2023 compared to the year-ago quarter. The performance in Brazil was the primary contributor to the decrease in fee revenue in the three months ended July 31, 2023 compared to the year-ago quarter, partially offset by an increase in fee revenue in Colombia.

*Professional Search & Interim.* Professional Search & Interim reported fee revenue of $142.2 million, an increase of $43.3 million, or 44%, in the three months ended July 31, 2023 compared to $98.9 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $0.2 million in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in fee revenue was due to an increase in interim fee revenue of $59.1 million mainly driven by the acquisitions. This increase was partially offset by a decrease in permanent placement fee revenue of $15.8 million.

*RPO.* RPO reported fee revenue of $95.7 million, a decrease of $18.2 million, or 16%, in the three months ended July 31, 2023 compared to $113.9 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.1 million in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease in fee revenue was primarily due to a decline in the number of placements being requested by existing clients.

### Compensation and Benefits

Compensation and benefits expense increased by $14.3 million, or 3%, to $479.9 million in the three months ended July 31, 2023 from $465.6 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $1.1 million in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to higher deferred compensation expenses of $12.8 million as a result of an increase in the fair value of participants' accounts compared to the year-ago quarter and an increase in severance expense of $5.2 million due to lay-offs that took place during the quarter. Also contributing to the increase in compensation and benefits were increases in salaries and related payroll taxes of $4.4 million and $2.6 million more in integration/acquisition costs in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was partially offset by lower performance-related bonus expense of $9.7 million and a decrease of $1.2 million in costs associated with the use of outside contractors in the three months ended July 31, 2023 compared to the year-ago quarter. Compensation and benefits expense, as a percentage of fee revenue, increased to 69% in the three months ended July 31, 2023 from 67% in the year-ago quarter.

Consulting compensation and benefits expense increased by $7.3 million, or 6%, to $121.1 million in the three months ended July 31, 2023 from $113.8 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.3 million in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to increases in performance-related bonus expense of $2.1 million due to higher segment fee revenue, and salaries and related payroll taxes of $2.0 million in the three months ended July 31, 2023 compared to the year-ago quarter. Additionally, an increase in deferred compensation expense of $1.4 million due to an increase in the fair value of participants' accounts also contributed to the increase in compensation and benefits expense. Consulting compensation and benefits expense, as a percentage of fee revenue, increased to 72% in the three months ended July 31, 2023 from 68% in the year-ago quarter.

Digital compensation and benefits expense increased by $3.0 million, or 7%, to $46.7 million in the three months ended July 31, 2023 from $43.7 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.2 million in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to increases in performance-related bonus expense of $2.7 million and to a lesser extent an increase in salaries and related payroll taxes of $1.8 million due to an increase in average headcount in the three months ended July 31, 2023 compared to the year-ago quarter, partially offset by a decrease in stock-based compensation of $0.8 million. Digital compensation and benefits expense, as a percentage of fee revenue, increased to 53% in the three months ended July 31, 2023 from 52% in the year-ago quarter.

Executive Search North America compensation and benefits expense increased by $0.7 million, or 1%, to $98.6 million in the three months ended July 31, 2023 compared to $97.9 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.3 million in the three months ended July 31, 2023 compared to the year-ago quarter. Compensation and benefits expense increased primarily due to an increase in deferred compensation expense of $8.8 million as a result of an increase in the fair value of the participants' accounts, partially offset by a decrease in performance-related bonus expense of $7.8 million driven by the lower segment fee revenue in the three months ended July 31, 2023 compared to the year-ago quarter. Executive Search North America compensation and benefits expense, as a percentage of fee revenue, increased to 77% in the three months ended July 31, 2023 from 65% in the year-ago quarter.

Executive Search EMEA compensation and benefits expense increased by $2.7 million, or 8%, to $37.3 million in the three months ended July 31, 2023 compared to $34.6 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.8 million, or 2%, in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to increases in severance expense of $3.9 million, amortization of long-term incentive awards of $1.8 million, and salaries and related payroll taxes of $1.4 million due to an increase in average headcount of 4% in the three months ended July 31, 2023 compared to the year-ago quarter and wage inflation. The increase in compensation and benefits expense was partially offset by a decrease in performance-related bonus expense of $3.6 million as a result of the lower segment fee revenue and profitability. Executive Search EMEA compensation and benefits expense, as a percentage of fee revenue, increased to 80% in the three months ended July 31, 2023 from 74% in the year-ago quarter.

Executive Search Asia Pacific compensation and benefits expense decreased by $0.6 million, or 4%, to $16.1 million in the three months ended July 31, 2023 compared to $16.7 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.4 million, or 2%, in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease in compensation and benefits expense was primarily due to a decrease in performance-related bonus expense of $0.3 million driven by lower segment fee in the three months ended July 31, 2023 compared to the year-ago quarter. Executive Search Asia Pacific compensation and benefits expense, as a percentage of fee revenue, increased to 66% in the three months ended July 31, 2023 from 63% in the year-ago quarter.

Executive Search Latin America compensation and benefits expense increased by $0.2 million, or 4%, to $4.9 million in the three months ended July 31, 2023 compared to $4.7 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.3 million, or 6%, in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to increases in deferred compensation expenses of $0.3 million as a result of an increase in the fair value of participants' accounts compared to the year-ago quarter, and salaries and payroll taxes of $0.3 million due to an increase in average headcount of 3% in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was partially offset by lower performance-related bonus expense of $0.4 million. Executive Search Latin America compensation and benefits expense, as a percentage of fee revenue, increased to 76% in the three months ended July 31, 2023 from 60% in the year-ago quarter.

Professional Search & Interim compensation and benefits expense increased by $9.4 million, or 19%, to $59.4 million in the three months ended July 31, 2023 from $50.0 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.1 million in the three months ended July 31, 2023 compared to the year-ago quarter. The increase was primarily due to increases in salaries and related payroll taxes of $5.4 million and integration/acquisition costs of $2.6 million due to the acquisitions, which resulted in an increase in average headcount of 16% in the three months ended July 31, 2023 compared to the year-ago quarter. Also contributing to higher compensation and benefit expense was an increase in performance-related bonus expense of $0.8 million and an increase in deferred compensation expenses of $0.8 million as a result of an increase in the fair value of participants' accounts compared to the year-ago quarter. Professional Search & Interim compensation and benefits expense, as a percentage of fee revenue, decreased to 42% in the three months ended July 31, 2023 from 51% in the year-ago quarter.

RPO compensation and benefits expense decreased by $10.8 million, or 12%, to $77.6 million in the three months ended July 31, 2023 from $88.4 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.2 million in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease in compensation and benefits expense was primarily due to a decrease in salaries and related payroll taxes of $7.1 million as a result of a 16% decrease in average headcount in the three months ended July 31, 2023 compared to the year-ago quarter. Also contributing to the lower compensation and benefits expense were decreases of $3.2 million in performance-related bonus expense due to lower segment fee revenue, and $1.5 million associated with the use of outside contractors, partially offset by an increase in severance expense of $1.0 million. RPO compensation and benefits expense, as a percentage of fee revenue, increased to 81% in the three months ended July 31, 2023 from 78% in the year-ago quarter.

Corporate compensation and benefits expense increased by $2.5 million, or 16%, to $18.2 million in the three months ended July 31, 2023 from $15.7 million in the year-ago quarter. The increase in compensation and benefits expense was primarily due to higher deferred compensation expenses of $1.0 million due to an increase in the fair value of participants' accounts in the three months ended July 31, 2023 compared to the year-ago quarter, combined with an increase in stock-based compensation expense of $1.0 million.

### General and Administrative Expenses

General and administrative expenses increased by $1.4 million, or 2%, to $65.9 million in the three months ended July 31, 2023 from $64.5 million in the year-ago quarter. Exchange rates favorably impacted general and administrative expenses by $0.5 million, or 1%, in the three months ended July 31, 2023 compared to the year-ago quarter. The increase in general and administrative expenses was primarily due to increases of $1.8 million in marketing and business development expense and $1.4 million in computer software licenses expense. Further contributing to the increase in general and administrative expenses was the impairment of right-of-use assets of $1.6 million associated with the reduction of the Company's real estate footprint in the three months ended July 31, 2023. These increases were partially offset by decreases in integration/acquisition costs of $2.0 million and in legal and other professional fees of $1.4 million. General and administrative expenses, as a percentage of fee revenue, were 9% for both the three months ended July 31, 2023 and 2022.

Consulting general and administrative expenses increased by $1.7 million, or 13%, to $14.6 million in the three months ended July 31, 2023 compared to $12.9 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to an increase in legal and other professional fees of $0.9 million and a higher bad debt expense of $0.8 million. Further contributing to the increase in general and administrative expenses was an impairment of right-of-use assets of $0.6 million as a result of the reduction of the Company's real estate footprint in the three months ended July 31, 2023 compared to the year-ago quarter. Consulting general and administrative expenses, as a percentage of fee revenue, increased to 9% in the three months ended July 31, 2023 from 8% in the year-ago quarter.

Digital general and administrative expenses increased by $0.4 million, or 4%, to $9.5 million in the three months ended July 31, 2023 from $9.1 million in the year-ago quarter. The increase in general and administrative expenses was primarily driven by increases in computer software licenses expense of $0.7 million and foreign exchange loss of $0.3 million in the three months ended July 31, 2023 compared to the year-ago quarter. The increase was partially offset by decreases of $0.2 million in marketing and business development and $0.2 million in legal and other professional fees. Digital general and administrative expenses, as a percentage of fee revenue, were 11% for both the three months ended July 31, 2023 and 2022.

Executive Search North America general and administrative expenses increased by $0.6 million, or 7%, to $9.0 million in the three months ended July 31, 2023 compared to $8.4 million in the year-ago quarter. The increase in general and administrative expenses was primarily due the impairment of right-of-use assets of $0.5 million associated with the reduction of the Company's real estate footprint in the three months ended July 31, 2023 compared to the year-ago quarter. Executive Search North America general and administrative expenses, as a percentage of fee revenue, increased to 7% in the three months ended July 31, 2023 from 6% in the year-ago quarter.

Executive Search EMEA general and administrative expenses increased by $0.3 million, or 8%, to $4.1 million in the three months ended July 31, 2023 from $3.8 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to an increase in impairment of right-of-use assets of $0.4 million associated with the reduction of the Company's real estate footprint. Executive Search EMEA general and administrative expenses, as a percentage of fee revenue, increased to 9% in the three months ended July 31, 2023 from 8% in the year-ago quarter.

Executive Search Asia Pacific general and administrative expenses were $2.4 million in the three months ended July 31, 2023 compared to $2.5 million in the year-ago quarter, essentially flat. Executive Search Asia Pacific general and administrative expenses, as a percentage of fee revenue, increased to 10% in the three months ended July 31, 2023 from 9% in the year-ago quarter.

Executive Search Latin America recognized a reduction in general and administrative expenses of $0.7 million in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease in general and administrative expenses was primarily due to an increase in foreign exchange gain of $0.5 million in the three months ended July 31, 2023 compared to the year-ago quarter.

Professional Search & Interim general and administrative expenses increased by $0.4 million, or 6%, to $6.7 million in the three months ended July 31, 2023 compared to $6.3 million in the year-ago quarter. The increase in general and administrative expense was primarily due to increases in premise and office expense of $0.8 million and marketing and business development expense of $0.4 million compared to the year-ago quarter. The increase was partially offset by a decrease in integration/acquisition costs of $1.1 million. Professional Search & Interim general and administrative expenses, as a percentage of fee revenue, decreased to 5% in the three months ended July 31, 2023 from 6% in the year-ago quarter.

RPO general and administrative expenses increased by $0.8 million, or 17%, to $5.6 million in the three months ended July 31, 2023 compared to $4.8 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to the change in foreign exchange loss of $0.8 million in the three months ended July 31, 2023 compared to a foreign exchange gain of $0.3 million in the year-ago quarter. RPO general and administrative expenses, as a percentage of fee revenue, increased to 6% in the three months ended July 31, 2023 from 4% in the year-ago quarter.

Corporate general and administrative expenses decreased by $2.1 million, or 13%, to $14.1 million in the three months ended July 31, 2023 compared to $16.2 million in the year-ago quarter. The decrease was primarily due to decreases in legal and other professional fees of $2.5 million and integration/acquisition costs of $1.0 million. The decrease was partially offset by an increase in marketing and business development expense of $1.0 million in the three months ended July 31, 2023 compared to the year-ago quarter.

### Cost of Services Expense

Cost of services expense consists of contractor and product costs related to delivery of various services and products through Consulting, Digital, Professional Search & Interim and RPO. Cost of services expense increased by $39.2 million, or 103%, to $77.2 million in the three months ended July 31, 2023 compared to $38.0 million in the year-ago quarter. Professional Search & Interim account for $40.0 million of the increase due to the acquisitions, which perform a significant amount of interim services. Interim services have a higher cost of service expense as compared to the Company's other segments. Cost of services expense, as a percentage of fee revenue, increased to 11% in the three months ended July 31, 2023 from 5% in the year-ago quarter.

### Depreciation and Amortization Expenses

Depreciation and amortization expenses were $19.0 million, an increase by $2.8 million, or 17%, in the three months ended July 31, 2023 compared to $16.2 million in the year-ago quarter. The increase was primarily due to technology investments made in the current and prior year, and an increase in amortization of intangible assets due to the acquisitions.

### Restructuring Charges, Net

During fiscal 2023, we implemented a restructuring plan to realign our workforce with our business needs and objectives. In the three months ended July 31, 2023, the Company made adjustments to previously recorded restructuring accruals resulting in restructuring charges of $0.4 million. There were no restructuring charges, net during the three months ended July 31, 2022.

### Net Income Attributable to Korn Ferry

Net income attributable to Korn Ferry decreased by $30.6 million, or 40%, to $46.6 million in the three months ended July 31, 2023, as compared to $77.2 million in the year-ago quarter. The decrease in net income attributable to Korn Ferry was primarily due to increases of cost of services expense of $39.2 million driven by the acquisitions and compensation and benefits expense of $14.3 million in the three months ended July 31, 2023 compared to the year-ago quarter. The decrease was partially offset by an increase in other income of $12.8 million driven by the increase in the fair value of our marketable securities (that are held in trust to satisfy obligations under our deferred compensation plan) due to market movements and a decrease in income tax provision of $7.8 million. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 7% and 11% in the three months ended July 31, 2023 and 2022, respectively.

### Adjusted EBITDA

Adjusted EBITDA decreased by $36.5 million, or 28%, to $95.7 million in the three months ended July 31, 2023 as compared to $132.2 million in the year-ago quarter. The decrease in Adjusted EBITDA was driven by an increase in cost of services expense associated with the acquisitions, higher compensation and benefit expense (excluding integration/acquisition costs), and an increase in general and administrative expenses (excluding impairment charges and integration/acquisition costs), partially offset by increases in fee revenue and other income, net. Adjusted EBITDA, as a percentage of fee revenue, was 14% in the three months ended July 31, 2023 compared to 19% in the year-ago quarter. Adjusted EBITDA margin decreased primarily due to a change in fee revenue mix, with a decrease in Executive Search and Permanent Placement, which have higher margins, being replaced with fee revenue from Interim, which has lower margins.

Consulting Adjusted EBITDA was $25.2 million in the three months ended July 31, 2023, a decrease of $4.4 million, or 15%, as compared to $29.6 million in the year-ago quarter. This decrease in Adjusted EBITDA was driven by increases in compensation and benefits expense and general and administrative expenses (excluding impairment charges), partially offset by higher fee revenue, an increase in the value of our marketable securities (that are held in trust to satisfy obligations under our deferred compensation plans) due to market movements that generated an increase in other income for the three months ended July 31, 2023 compared the year-ago quarter and a decrease in cost of services expense. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 15% and 18% in the three months ended July 31, 2023 and 2022, respectively.

Digital Adjusted EBITDA was $24.3 million in the three months ended July 31, 2023 compared to $24.2 million in the year-ago quarter, essentially flat. Digital Adjusted EBITDA, as a percentage of fee revenue, was 28% and 29% in the three months ended July 31, 2023 and 2022, respectively.

Executive Search North America Adjusted EBITDA decreased by $14.9 million, or 34%, to $28.8 million in the three months ended July 31, 2023 compared to $43.7 million in the year-ago quarter. The decrease was mainly driven by lower fee revenue in the segment combined with a slight increase in compensation and benefits expense, partially offset by an increase in the value of our marketable securities (that are held in trust to satisfy obligations under our deferred compensation plans) due to market movements that generated an increase in other income for the three months ended July 31, 2023 compared the year-ago quarter. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, was 23% and 29% in the three months ended July 31, 2023 and 2022, respectively.

Executive Search EMEA Adjusted EBITDA decreased by $2.9 million, or 34%, to $5.6 million in the three months ended July 31, 2023 compared to $8.5 million in the year-ago quarter. The decrease was primarily driven by an increase in compensation and benefits expense and a decrease in segment fee revenue. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 12% and 18% in the three months ended July 31, 2023 and 2022, respectively.

Executive Search Asia Pacific Adjusted EBITDA decreased by $1.1 million, or 15%, to $6.3 million in the three months ended July 31, 2023 compared to $7.4 million in the year-ago quarter. The decrease in Adjusted EBITDA was driven by lower fee revenue in the segment, partially offset by a decrease in compensation and benefits expense. Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, was 26% and 28% in the three months ended July 31, 2023 and 2022, respectively.

Executive Search Latin America Adjusted EBITDA decreased by $0.9 million, or 35%, to $1.7 million in the three months ended July 31, 2023 compared to $2.6 million in the year-ago quarter. The decrease in Adjusted EBITDA was primarily driven by lower fee revenue in the segment, partially offset by a decrease in general and administrative expenses. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, was 27% and 34% in the three months ended July 31, 2023 and 2022, respectively.

Professional Search & Interim Adjusted EBITDA was $24.3 million in the three months ended July 31, 2023, a decrease of $4.9 million, or 17%, as compared to $29.2 million in the year-ago quarter. The decrease in Adjusted EBITDA was mainly driven by increases in cost of services expense, compensation and benefits expense (excluding integration/acquisition costs), and general and administrative expenses (excluding integration/acquisition costs). This decrease was partially offset by higher fee revenue in the segment as a result of the acquisitions. Professional Search & Interim Adjusted EBITDA, as a percentage of fee revenue, was 17% and 29% in the three months ended July 31, 2023 and 2022, respectively.

RPO Adjusted EBITDA was $10.5 million in the three months ended July 31, 2023, a decrease of $7.2 million, or 41%, as compared to $17.7 million in the year-ago quarter. The decrease in Adjusted EBITDA was mainly driven by lower fee revenue in the segment coupled with an increase in general and administrative expenses (excluding impairment charges), partially offset by a decrease in compensation and benefits expense. RPO Adjusted EBITDA, as a percentage of fee revenue, was 11% and 16% in the three months ended July 31, 2023 and 2022, respectively.

### Other Income, Net

Other income, net was $13.6 million in the three months ended July 31, 2023 compared to $0.8 million in the year-ago quarter. The difference was primarily due to more gains from the increase in the fair value of our marketable securities that are held in trust for the settlement of the Company's obligation under the ECAP during the three months ended July 31, 2023 compared to the year-ago quarter.

### Interest Expense, Net

Interest expense, net primarily relates to the Notes issued in December 2019, borrowings under company-owned life insurance ("COLI") policies and interest cost related to our deferred compensation plans, which are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $4.7 million in the three months ended July 31, 2023 compared to $7.6 million in the year-ago quarter. Interest expense, net decreased due to an increase in interest income earned on cash and cash equivalent balances as a result of higher interest rates in the three months ended July 31, 2023 compared to the year-ago quarter.

### Income Tax Provision

The provision for income tax was $18.4 million in the three months ended July 31, 2023, with an effective tax rate of 28.1%, compared to $26.2 million in the three months ended July 31, 2022, with an effective rate of 25.0%. In addition to the impact of U.S. state income taxes and the jurisdictional mix of earnings, which generally create variability in our effective tax rate over time, the tax benefit recorded in the three months ended July 31, 2023 in connection with the windfall from stock-based awards that vested during the three months ended July 31, 2023, which was less than the benefit recorded for the three months ended July 31, 2022 in connection with the windfall from stock-based awards that vested during the year-ago quarter. The windfall is the amount by which the Company’s tax deduction for these awards, based on the fair market value of the awards on the date of vesting, is greater than the expense recorded in the Company’s financial statements over the awards’ vesting period.

### 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 for the three months ended July 31, 2023 was $0.6 million, as compared to $1.3 million in the three months ended July 31, 2022.

### 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 are expected to 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 the Form 10-K. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our Amended Credit Agreement (defined below), as well as using excess cash to repay the Notes.

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 obligations under the Amended 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 and to pay expenses and fees in connection therewith. As of July 31, 2023, the fair value of the Notes was $377.0 million, which is based on borrowing rates currently required of notes with similar terms, maturity and credit risk.

On June 24, 2022, we entered into an amendment (the “Amendment”) to our December 16, 2019 Credit Agreement (the "Credit Agreement"; as amended by the Amendment, the "Amended Credit Agreement") with the lenders party thereto and Bank of America, National Association as administrative agent, to, among other things (i) extend the existing maturity date of the revolving facility to June 24, 2027, (ii) provide for a new delayed draw term loan facility as described below, (iii) replace the London interbank offered rate with Term SOFR, and (iv) replace the existing financial covenants with financial covenants described below. The Amended Credit Agreement provides for five-year senior secured credit facilities in an aggregate amount of $1,150 million comprised of a $650.0 million revolving credit facility (the “Revolver”) and a $500 million delayed draw term loan facility with the delayed draw having expired on June 23, 2023 (the “Delayed Draw Facility”, and together with the Revolver, the “Credit Facilities”). The Amended Credit Agreement also provides that, under certain circumstances, the Company may incur term loans or increase the aggregate principal amount of revolving commitments by an aggregate amount of up to $250 million plus an unlimited amount subject to a consolidated secured net leverage ratio of 3.25 to 1.00. See Note 11 —*Long-Term Debt* for a further description of the Amended Credit Agreement. The Company has a total of $645.4 million and $1,145.4 million available under the Credit Facilities after $4.6 million and $4.6 million of standby letters of credit have been issued as of July 31, 2023 and April 30, 2023. Of the amount available under the Credit Facilities as of April 30, 2023, $500.0 million was under the Delayed Draw Facility that expired on June 24, 2023. The Company had a total of $10.9 million and $11.5 million of standby letters with other financial institutions as of July 31, 2023 and April 30, 2023, respectively. The standby letters of credit 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 and 2022, the Board of Directors increased the quarterly dividend to $0.12 per share and $0.15 per share, respectively. On June 26, 2023, the Board of Directors approved an increase of 20% in the quarterly dividend, which increased the quarterly dividend to $0.18 per share. The Amended Credit Agreement permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under the Amended Credit Agreement, our total funded debt to adjusted EBITDA ratio (as set forth in the Amended Credit Agreement, the “consolidated net leverage ratio”) is no greater than 5.00 to 1.00, and we are in pro forma compliance with our financial covenant. 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. 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 June 21, 2022, our Board of Directors approved an increase to the share repurchase program of approximately $300 million, which at the time brought our available capacity to repurchase shares in the open market or privately negotiated transactions to $318 million. The Company repurchased approximately $4.2 million and $22.4 million of the Company’s stock during the three months ended July 31, 2023 and 2022, respectively. As of July 31, 2023, $231.0 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.

Our primary source of liquidity is the fee revenue generated from our operations, supplemented by our borrowing capacity under our Amended Credit Agreement. 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 Amended Credit Agreement will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, debt repayments, share repurchases and dividend payments under our dividend policy during the next 12 months and thereafter for the foreseeable future. However, if the national or global economy, credit market conditions and/or labor markets were to deteriorate in the future, including as a result of ongoing macroeconomic uncertainty due to inflation and a potential recession, such changes have and could put further 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 Amended Credit Agreement to meet our capital needs and/or discontinue our share repurchases and dividend policy.

Cash and cash equivalents and marketable securities were $781.1 million and $1,067.9 million as of July 31, 2023 and April 30, 2023, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and marketable securities were $480.7 million and $488.2 million at July 31, 2023 and April 30, 2023, respectively. As of July 31, 2023 and April 30, 2023, we held $387.3 million and $395.2 million, respectively of cash and cash equivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay accrued 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 and corporate notes/bonds. 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 and corporate notes/bonds are available for general corporate purposes.

As of July 31, 2023 and April 30, 2023, marketable securities of $218.8 million and $223.9 million, respectively, included equity securities of $199.7 million (net of gross unrealized gains of $17.2 million and gross unrealized losses of $4.6 million) and $187.8 million (net of gross unrealized gains of $9.5 million and gross unrealized losses of $8.7 million), respectively, were held in trust for settlement of our obligations under certain deferred compensation plans, of which $189.4 million and $176.1 million, respectively, are classified as non-current. These marketable securities were held to satisfy vested obligations totaling $192.5 million and $172.2 million as of July 31, 2023 and April 30, 2023, respectively. Unvested obligations under the deferred compensation plans totaled $16.8 million and $21.9 million as of July 31, 2023 and April 30, 2023, respectively.

The net increase in our working capital of $48.4 million as of July 31, 2023 compared to April 30, 2023 is primarily attributable to decreases in compensation and benefit payable and deferred revenue and an increase in accounts receivable, partially offset by a decrease in cash and cash equivalents. The decrease in cash and cash equivalents and compensation and benefits payable was primarily due to payments of annual bonuses earned in fiscal 2023 and paid during the first quarter of fiscal 2024. The increase in accounts receivable is due to an increase in days of sales outstanding, which went from 56 days to 65 days (which is consistent with historical experience). Cash used in operating activities was $274.5 million in the three months ended July 31, 2023, compared to the cash used in operating activities of $231.9 million in the three months ended July 31, 2022.

Cash provided by investing activities was $11.4 million in the three months ended July 31, 2023 compared to cash used in investing activities of $40.4 million in the year-ago quarter. The change from cash used in investing activities to cash provided by investing activities was primarily due to $18.0 million in proceeds from marketable securities during the three months ended July 31, 2023, compared to $23.7 million in purchases of marketable securities net of proceeds in the year-ago quarter. Also contributing to this increase was higher proceeds received from life insurance policies of $9.3 million, during the three months ended July 31, 2023 compared to the year-ago quarter.

Cash used in financing activities was $20.6 million in the three months ended July 31, 2023 compared to $51.0 million in the three months ended July 31, 2022. The decrease in cash used in financing activities was primarily due to lower repurchases of the Company’s common stock and lower shares of common stock to satisfy tax withholding requirements upon the vesting of restricted stock of $19.2 million and $11.7 million, respectively, in the three months ended July 31, 2023 compared to the year-ago quarter.

### 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 July 31, 2023 and April 30, 2023, we held contracts with gross cash surrender value of $277.2 million and $275.1 million, respectively. Total outstanding borrowings against the CSV of COLI contracts was $77.1 million as of both July 31, 2023 and April 30, 2023. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and are secured by the CSV of COLI contracts. At July 31, 2023 and April 30, 2023, the net cash surrender value of these policies was $200.1 million and $198.0 million, respectively.

Other than the factors discussed in this section, 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 July 31, 2023.

### Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated, special purpose entities. We had no material changes in contractual obligations as of July 31, 2023, as compared to those disclosed in our table of contractual obligations included in our Annual Report.

### Critical Accounting Policies

Preparation of this Quarterly Report on Form 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, 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 or determinable. In preparing our interim 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. There have been no material changes in our critical accounting policies since the end of fiscal 2023.

## Market risk

As filed, 4,019 characters.

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 daily 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 the three months ended July 31, 2023 and 2022, we recorded foreign currency losses of $0.9 million and $0.3 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, Canadian Dollar, Pound Sterling, Euro, Swiss Franc, Danish Krone, Polish Zloty, Singapore Dollar, and Mexican Peso. Based on balances exposed to fluctuation in exchange rates between these currencies as of July 31, 2023, a 10% increase or decrease in the value of these currencies could result in a foreign exchange gain or loss of $11.6 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 Credit Facilities, borrowings against the CSV of COLI contracts and to a lesser extent our fixed income debt securities. As of July 31, 2023, there were no amounts outstanding under the Credit Facilities. At our option, loans issued under the Amended Credit Agreement bear interest at either Term Secured Overnight Financing Rate ("SOFR") or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Amended Credit Agreement may fluctuate between Term SOFR plus a SOFR adjustment of 0.10%, plus 1.125% per annum to 2.00% per annum, in the case of Term SOFR 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 Amended 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 0.300% per annum on the average daily unused amount of the Revolver, based upon our consolidated net leverage ratio at such time, a ticking fee of 0.20% per annum on the actual daily unused portion of the Delayed Draw Facility during the availability period of the Delayed Draw Facility (the availability of this facility expired on June 24, 2023), and fees relating to the issuance of letters of credit.

We had $77.1 million of borrowings against the CSV of COLI contracts as of both July 31, 2023 and April 30, 2023, bearing interest primarily at variable rates. We have sought to minimize the risk of fluctuations in these variable rates 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.

## Controls and procedures

As filed, 1,041 characters.

a) Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q, 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”)) were effective as of July 31, 2023.

b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting during the three months ended July 31, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

## Risk factors

As filed, 574 characters.

In our Form 10-K, we described the material factors, events, and uncertainties that make an investment in our securities risky. Those risk factors should be considered carefully, together with all other information in that Form 10-K and our subsequent filings with the SEC. 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. As of the date of this report, there have been no material changes to the risk factors described in our Form 10-K.

Filed Sep 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-031840. Last ingested by Listed: Oct 30, 2026, 12:03 ET. No prices; not investment advice.