KORN FERRY

Previous wording

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 work force realignment plan 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 n…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 business strategy, expected demand for and relevance of our products and services, and expected results of our business diversification 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, 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 workforce, real estate, and other restructuring initiatives, restrictions imposed by off-limits agreements, reliance on information processing systems, cybersecurity 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, including artificial intelligence ("AI"), 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 …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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.

Current wording

Korn Ferry (referred to herein as the “Company” or in the first-person notations “we,” “our” and “us”) is a leading 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.

Previous wording

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.

Current wording

We are pursuing a strategy designed to help our colleagues focus on clients, by bringing all of our resources together to solve their human capital issues. 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.

Previous wording

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.

Current wording

The Company services its clients with a core set of solutions that are anchored around talent and talent management – touching nearly 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 helping to solve our clients’ most challenging business and human capital issues.

Previous wording

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.

Current wording

Further differentiating our service offerings from our competitors is the unique combination of IP, content, and data sets that we have, which permeate throughout 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.

Previous wording

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 350 of our top clients that generate approximately 38% of our year-to-date 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. Despite near-term headwinds, we believe 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.

Current wording

Leveraging the strong connection between our various service offerings 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 more than 340 of our top clients. 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. Despite near-term headwinds, such as economic uncertainty, we believe 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 our service offerings and our acquisition activities, drives top-line synergies that have resulted in double digit fee revenue growth rates (CAGR) over the past twenty years.

Previous wording

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.

Current wording

Consulting aligns organizational structure, culture, performance, development and people to drive sustainable growth by addressing four fundamental organizational and talent needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Total Rewards. The Consulting teams work across our core capabilities, architecting integrated solutions and technology products to help clients execute their strategy in a digitally enabled world.

Previous wording

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).

Current wording

Executive Search helps organizations recruit board level, chief executive and other C-suite/senior executive and general management talent to deliver lasting impact. Our approach to placing talent brings together our research-based IP, proprietary assessments, and behavioral interviewing with our practical experience to determine the ideal organizational fit. Salary benchmarking then helps us build appropriate frameworks for compensation and attraction. 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 Europe, the Middle East and Africa (“EMEA”), Executive Search Asia Pacific (“APAC”), and Executive Search Latin America).

Previous wording

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.

Current wording

Professional Search & Interim delivers enterprise talent acquisition solutions for permanent placements at the professional level middle and upper management, and, for interim, those same levels plus senior executives. We help clients source high-quality candidates at speed and scale globally, covering single-hire to multi-hire permanent placements and interim contractors (that are focused on senior executive, information technology ("IT"), Finance & Accounting and human resources roles).

Previous wording

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.

Current wording

Recruitment Process Outsourcing (“RPO”)offers scalable recruitment outsourcing and project solutions leveraging a customized technology enabled service delivery platform and talent insights. Our scalable solutions, built on our IP, science, and data 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.

Previous wording

•We reported Q3 FY'24 fee revenue of $668.7 million, a year-over-year decrease of 2%.

Current wording

•We reported Q1 FY'25 fee revenue of $674.9 million, a year-over-year decrease of 3%.

Previous wording

•Net income attributable to Korn Ferry was $59.1 million with a margin of 8.8%, a 710bps increase compared to the year-ago quarter, while diluted earnings per share was $1.13 in Q3 FY'24.

Current wording

•Net income attributable to Korn Ferry was $62.6 million with a margin of 9.3%, a 260bps increase compared to the year-ago quarter, while diluted earnings per share was $1.17 in Q1 FY'25.

Previous wording

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 January 31, 2024, Adjusted EBITDA excluded $4.6 million of restructuring charges, net, and $3.9 million of integration/acquisition costs. For the nine months ended January 31, 2024, Adjusted EBITDA excluded $68.6 million of restructuring charges, net, $13.1 million of integration/acquisition costs, $1.6 million of impairment of right-of-use assets, and $1.6 million impairment of fixed assets. For the three and nine months ended January 31, 2023, Adjusted EBITDA excluded $41.2 million of restructuring charges, net, $5.5 million impairment of right-of-use assets, and $4.4 million impairment of fixed assets. In addition, for the three and nine months ended January 31, 2023, Adjusted EBITDA further excluded $2.5 million and $9.5 million of integration/acquisition costs, respectively.

Current wording

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, 2024, Adjusted EBITDA excluded $1.1 million of integration/acquisition costs. For the three months ended July 31, 2023, Adjusted EBITDA excluded $4.1 million of integration/acquisition costs, $1.6 million impairment of right-of-use assets, $0.4 million of restructuring charges, net and $0.1 million impairment of fixed assets.

Previous wording

Fee Revenue. Fee revenue was $668.7 million in the three months ended January 31, 2024, a decrease of $12.1 million, or 2% compared to $680.8 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $3.1 million, or 1%, in the three months ended January 31, 2024 compared to the year-ago quarter. Fee revenue decreased primarily due to decreases in our permanent placement talent acquisition offerings. This decrease was primarily due to a decline in demand driven by uncertain challenging global economic environment and other factors. This was partially offset by increases in Consulting and Digital fee revenue, as well as in the interim portion of Professional Search & Interim fee revenue, resulting from the acquisition of Salo ("the Acquisition") which was effective February 1, 2023.

Current wording

Fee Revenue. Fee revenue was $674.9 million in the three months ended July 31, 2024, a decrease of $24.3 million, or 3% compared to $699.2 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $7.6 million, or 1%, in the three months ended July 31, 2024 compared to the year-ago quarter. Fee revenue decreased primarily due to lower fee revenues in Professional Search & Interim and RPO mainly driven by the global economic environment, partially offset by an increase in fee revenue in Executive Search North America.

Previous wording

Consulting. Consulting reported fee revenue of $512.8 million, an increase of $11.1 million, or 2%, in the nine months ended January 31, 2024 compared to $501.7 million in the year-ago period. The increase in fee revenue was mainly driven by growth in demand for our organizational strategy and assessment & succession solutions. Exchange rates favorably impacted fee revenue by $3.3 million, or 1%, in the nine months ended January 31, 2024 compared to the year-ago period.

Current wording

Consulting. Consulting reported fee revenue of $167.9 million in the three months ended July 31, 2024, essentially flat compared to $168.1 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $2.5 million, or 1%, in the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

Executive Search EMEA. Executive Search EMEA reported fee revenue of $49.0 million in both the three months ended January 31, 2024 and 2023. Exchange rates favorably impacted fee revenue by $1.6 million, or 3%, in the three months ended January 31, 2024 compared to the year-ago quarter.

Current wording

Executive Search EMEA. Executive Search EMEA reported fee revenue of $46.0 million, a decrease of $0.8 million, or 2%, in the three months ended July 31, 2024 compared to $46.8 million in the year-ago quarter.

Previous wording

Executive Search Asia Pacific. Executive Search Asia Pacific reported fee revenue of $21.3 million, a decrease of $1.3 million, or 6%, in the three months ended January 31, 2024 compared to $22.6 million in the year-ago quarter. The decrease in fee revenue was due to a 13% decrease in the number of engagements billed, partially offset by a 10% increase in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended January 31, 2024 compared to the year-ago quarter.

Current wording

Executive Search Asia Pacific. Executive Search Asia Pacific reported fee revenue of $20.6 million, a decrease of $3.9 million, or 16%, in the three months ended July 31, 2024 compared to $24.5 million in the year-ago quarter. The decrease in fee revenue was primarily due to a 14% decrease in the number of engagements billed.

Previous wording

Executive Search Latin America. Executive Search Latin America reported fee revenue of $7.5 million, a decrease of $0.2 million, or 3%, in the three months ended January 31, 2024 compared to $7.7 million in the year-ago quarter.

Current wording

Executive Search Latin America. Executive Search Latin America reported fee revenue of $7.3 million, an increase of $0.9 million, or 14%, in the three months ended July 31, 2024 compared to $6.4 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.6 million, or 9%, in the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

Professional Search & Interim. Professional Search & Interim reported fee revenue of $130.9 million, an increase of $12.9 million, or 11%, in the three months ended January 31, 2024 compared to $118.0 million in the year-ago quarter. The increase in fee revenue was due to an increase in interim fee revenue of $25.5 million primarily due to the Acquisition. This increase was partially offset by a decrease in permanent placement fee revenue of $12.6 million.

Current wording

Professional Search & Interim. Professional Search & Interim reported fee revenue of $121.7 million, a decrease of $20.5 million, or 14%, in the three months ended July 31, 2024 compared to $142.2 million in the year-ago quarter. The decrease in fee revenue was due to a decrease in interim fee revenue of $14.4 million as well as a decrease in permanent placement fee revenue of $6.1 million, each of which resulted from lower demand in the current economic environment.

Previous wording

Consulting compensation and benefits expense decreased by $2.6 million, or 2%, to $115.5 million in the three months ended January 31, 2024 from $118.1 million in the year-ago quarter. The decrease in compensation and benefits expense was primarily due to a decrease in salaries and related payroll taxes of $5.9 million due to a 10% decrease in average headcount as a result of the implementation of the Plan. This was partially offset by an increase of $1.5 million in deferred compensation expense due to an increase in the fair value of participants' accounts in the three months ended January 31, 2024 compared to the year-ago quarter.

Current wording

Consulting compensation and benefits expense decreased by $6.4 million, or 5%, to $114.7 million in the three months ended July 31, 2024 from $121.1 million in the year-ago quarter. The decrease in compensation and benefits expense was primarily due to lower salaries and related payroll taxes of $7.0 million as a result of a 10% decrease in average headcount in the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

Executive Search Asia Pacific compensation and benefits expense decreased by $2.2 million, or 5%, to $44.1 million in the nine months ended January 31, 2024 compared to $46.3 million in the year-ago period. The decrease in compensation and benefits expense was primarily due to a decrease in performance-related bonus expense of $1.4 million in the nine months ended January 31, 2024 compared to the year-ago period due to lower segment fee revenue.

Current wording

Executive Search Asia Pacific compensation and benefits expense decreased by $1.7 million, or 11%, to $14.4 million in the three months ended July 31, 2024 compared to $16.1 million in the year-ago quarter. The decrease in compensation and benefits expense was primarily due to decreases in performance-related bonus expense of $1.2 million driven by lower segment fee revenue, and a decrease in salaries and related payroll taxes of $1.0 million due to a 9% decrease in average headcount in the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

Executive Search Latin America compensation and benefits expense decreased by $0.5 million, or 10%, to $4.6 million in the three months ended January 31, 2024 compared to $5.1 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.3 million, or 6% in the three months ended January 31, 2024 compared to the year-ago quarter.

Current wording

Executive Search Latin America compensation and benefits expense decreased by $0.5 million, or 10%, to $4.4 million in the three months ended July 31, 2024 compared to $4.9 million in the year-ago quarter. The decrease in compensation and benefits expense was primarily due to a decrease in salaries and related payroll taxes of $0.5 million in the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

Professional Search & Interim general and administrative expenses decreased by $1.6 million, or 21%, to $6.0 million in the three months ended January 31, 2024 compared to $7.6 million in the year-ago quarter. The decrease in general and administrative expense was primarily due to an impairment charge for right-of-use assets of $0.6 million in the year-ago quarter and a foreign exchange gain of $0.3 million in the three months ended January 31, 2024 compared to a foreign exchange loss of $0.4 million in the year-ago quarter.

Current wording

Executive Search North America general and administrative expenses decreased by $1.4 million, or 16%, to $7.6 million in the three months ended July 31, 2024 compared to $9.0 million in the year-ago quarter. The decrease in general and administrative expenses was primarily due to a decrease in premise and office expense of $1.0 million primarily due to a $0.5 million right-of-use assets impairment charged incurred in the year-ago quarter and a decrease in legal and other professional fees of $0.3 million in the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

Executive Search EMEA general and administrative expenses increased by $0.3 million, or 8%, to $4.3 million in the three months ended January 31, 2024 from $4.0 million in the year-ago quarter.

Current wording

Executive Search EMEA general and administrative expenses were $4.1 million in both the three months ended July 31, 2024 and the year-ago quarter.

Previous wording

Executive Search Asia Pacific general and administrative expenses decreased by $0.1 million, or 4%, to $2.5 million in the three months ended January 31, 2024 compared to $2.6 million in the year-ago quarter.

Current wording

Executive Search Asia Pacific general and administrative expenses were $2.2 million in the three months ended July 31, 2024, essentially flat compared to $2.4 million in the year-ago quarter.

Previous wording

Professional Search & Interim general and administrative expenses decreased by $1.5 million, or 7%, to $19.5 million in the nine months ended January 31, 2024 compared to $21.0 million in the year-ago period. The decrease in general and administrative expenses was primarily due to a decrease of integration/acquisition costs of $1.4 million in the nine months ended January 31, 2024 compared to the year-ago period.

Current wording

Professional Search & Interim general and administrative expenses decreased by $1.5 million, or 22%, to $5.2 million in the three months ended July 31, 2024 compared to $6.7 million in the year-ago quarter. The decrease in general and administrative expenses was primarily due to decreases in premise and office expense of $0.9 million and marketing and business development expense of $0.3 million compared to the year-ago quarter.

Previous wording

Executive Search Latin America general and administrative expenses increased by $2.4 million, or 218%, to $3.5 million in the nine months ended January 31, 2024 compared to $1.1 million in the year-ago period. The increase in general and administrative expenses was primarily due to a change to a foreign exchange loss of $0.7 million in the nine months ended January 31, 2024 from a foreign exchange gain of $1.0 million in the year-ago period.

Current wording

RPO general and administrative expenses decreased by $0.9 million, or 16%, to $4.7 million in the three months ended July 31, 2024 compared to $5.6 million in the year-ago quarter. The decrease in general and administrative expenses was primarily due to a decrease in foreign exchange loss of $0.7 million in the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

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 $17.9 million, or 31%, to $75.8 million in the three months ended January 31, 2024 compared to $57.9 million in the year-ago quarter. Professional Search & Interim accounts for $13.5 million of the increase due to the Acquisition, which performs a significant portion of interim services. Interim services have a higher cost of service expense as compared to the Company's other segments.

Current wording

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 decreased by $9.7 million, or 13%, to $67.5 million in the three months ended July 31, 2024 compared to $77.2 million in the year-ago quarter. Professional Search & Interim accounted for $13.1 million of the decrease due to a decline in fee revenue in the segment as the significant amount of interim services that they perform have a higher cost of service expense as compared to the Company's other segments. The decrease was partially offset by an increase in cost of services expense from the Consulting segment.

Previous wording

Digital Adjusted EBITDA was $27.4 million in the three months ended January 31, 2024, an increase of $5.2 million, or 23%, as compared to $22.2 million in the year-ago quarter. This increase in Adjusted EBITDA was mainly driven by higher fee revenue during the three months ended January 31, 2024 compared to the year-ago quarter. Digital Adjusted EBITDA, as a percentage of fee revenue, was 30% and 26% in the three months ended January 31, 2024 and 2023, respectively.

Current wording

Digital Adjusted EBITDA was $26.6 million in the three months ended July 31, 2024, an increase of $2.3 million, or 9%, as compared to $24.3 million in the year-ago quarter. This increase in Adjusted EBITDA was driven by improved consultant productivity and strong cost management. Digital Adjusted EBITDA, as a percentage of fee revenue, was 30% and 28% in the three months ended July 31, 2024 and 2023, respectively.

Previous wording

Executive Search North America Adjusted EBITDA decreased by $1.0 million, or 3%, to $29.4 million in the three months ended January 31, 2024 compared to $30.4 million in the year-ago quarter. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, was 24% and 23% in the three months ended January 31, 2024 and 2023, respectively.

Current wording

Executive Search North America Adjusted EBITDA increased by $6.3 million, or 22%, to $35.1 million in the three months ended July 31, 2024 compared to $28.8 million in the year-ago quarter. The increase was mainly driven by higher fee revenue in the segment, partially offset by an increase in compensation and benefits expense for the three months ended July 31, 2024 compared the year-ago quarter. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, was 26% and 23% in the three months ended July 31, 2024 and 2023, respectively.

Previous wording

Executive Search EMEA Adjusted EBITDA decreased by $0.2 million, or 3%, to $7.8 million in the three months ended January 31, 2024 compared to $8.0 million in the year-ago quarter. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 16% in both the three months ended January 31, 2024 and 2023.

Current wording

Executive Search EMEA Adjusted EBITDA increased by $1.7 million, or 30%, to $7.3 million in the three months ended July 31, 2024 compared to $5.6 million in the year-ago quarter. The increase was primarily driven by a decrease in compensation and benefits expense, partially offset by a decrease in segment fee revenue. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 16% and 12% in the three months ended July 31, 2024 and 2023, respectively.

Previous wording

Executive Search Asia Pacific Adjusted EBITDA decreased by $4.0 million, or 21%, to $14.7 million in the nine months ended January 31, 2024 compared to $18.7 million in the year-ago period. The decrease in Adjusted EBITDA was driven by lower fee revenue in the segment, partially offset by decreases in compensation and benefits expense and general and administrative expenses. Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, was 23% in the nine months ended January 31, 2024 as compared to 26% in the nine months ended January 31, 2023.

Current wording

Executive Search Asia Pacific Adjusted EBITDA decreased by $2.1 million, or 33%, to $4.2 million in the three months ended July 31, 2024 compared to $6.3 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 20% and 26% in the three months ended July 31, 2024 and 2023, respectively.

Previous wording

Executive Search Latin America general and administrative expenses increased by $1.1 million, or 550%, to $1.3 million in the three months ended January 31, 2024 compared to $0.2 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to a foreign exchange loss of $0.2 million in the three months ended January 31, 2024 compared to a foreign exchange gain of $0.5 million in the year-ago quarter.

Current wording

Executive Search Latin America Adjusted EBITDA increased by $1.1 million, or 65%, to $2.8 million in the three months ended July 31, 2024 compared to $1.7 million in the year-ago quarter. The increase in Adjusted EBITDA was primarily driven by higher fee revenue in the segment. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, was 38% and 27% in the three months ended July 31, 2024 and 2023, respectively.

Previous wording

Other income, net was $23.8 million in the three months ended January 31, 2024 compared to $13.1 million in the year-ago quarter. The difference was primarily due to greater gains from the increase in the fair value of our marketable securities that are held in trust to for the settlement of the Company's obligation under the Executive Capital Accumulation Plan ("ECAP") during the three months ended January 31, 2024 compared to the year-ago quarter.

Current wording

Other income, net was $14.5 million in the three months ended July 31, 2024 compared to $13.6 million in the year-ago quarter. The difference was primarily due to greater 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 Executive Capital Accumulation Plan ("ECAP") during the three months ended July 31, 2024 compared to the year-ago quarter.

Previous wording

Interest expense, net primarily relates to the Company's 4.625% Senior Unsecured Notes due 2027 ("Notes") issued in December 2019, borrowings under Company purchased 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 $4.9 million in the three months ended January 31, 2024 compared to $5.4 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 January 31, 2024 compared to the year-ago quarter.

Current wording

Interest expense, net primarily relates to the Company's 4.625% Senior Unsecured Notes due 2027 ("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 $3.9 million in the three months ended July 31, 2024 compared to $4.7 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, 2024 compared to the year-ago quarter.

Previous wording

The provision for income tax was $9.0 million in the three months ended January 31, 2024, with an effective tax rate of 13.1%, compared to $8.5 million in the three months ended January 31, 2023, with an effective rate of 41.8%. 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 decrease in the effective tax rate for the three months ended January 31, 2024 was due to a $9.7 million non-recurring tax benefit from actions taken in connection with the worldwide minimum tax that resulted in a release of a valuation allowance. The effective tax rate in the three months ended January 31, 2023 was elevated due to common permanent tax adjustments being applied to lower earnings resulting from restructuring charges recorded in the quarter, and by a tax expense recorded for withholding taxes that are not eligible for credit.

Current wording

The provision for income tax was $22.4 million in the three months ended July 31, 2024, with an effective tax rate of 25.8%, compared to $18.4 million in the three months ended July 31, 2023, with an effective rate of 28.1%. 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 lower effective tax rate for the three months ended July 31, 2024 was primarily due to the windfall from stock-based awards that vested during the three months ended July 31, 2024, which was greater than the benefit recorded for the three months ended July 31, 2023 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.

Previous wording

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 January 31, 2024 was $0.6 million, as compared to $0.5 million in the three months ended January 31, 2023.

Current wording

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 condensed consolidated results of operations. Net income attributable to noncontrolling interest for the three months ended July 31, 2024 was $1.7 million, as compared to $0.6 million in the three months ended July 31, 2023.

Previous wording

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.

Current wording

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) and Notes, as well as using excess cash to repay the Notes.

Previous wording

On December 16, 2019, we completed a private placement of the Notes with a $400.0 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 January 31, 2024, the fair value of the Notes was $381.0 million, which is based on borrowing rates currently required of notes with similar terms, maturity and credit risk.

Current wording

On December 16, 2019, we completed a private placement of the Notes with a $400.0 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 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, 2024, the fair value of the Notes was $386.5 million, which is based on borrowing rates currently required of notes with similar terms, maturity and credit risk.

Previous wording

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 $1,150.0 million comprised of a $650.0 million revolving credit facility (the “Revolver”) and a $500.0 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 $250.0 million plus an unlimited amount subject to a consolidated secured net leverage ratio of 3.25 to 1.00. 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 January 31, 2024 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

Current wording

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) replace the London interbank offered rate with Term SOFR, and (iii) replace the existing financial covenants with financial covenants described below. The Amended Credit Agreement provides for five-year senior secured credit facilities comprised of a $650.0 million revolving credit facility (the “Revolver”). 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 Debtfor a further description of the Amended Credit Agreement. The Company has a total of $645.4 million and $645.5 million available under the Revolver after $4.6 million and $4.5 million of standby letters of credit have been issued as of July 31, 2024 and April 30, 2024, respectively. The Company had a total of $12.3 million and $13.2 million of standby letters with other financial institutions as of July 31, 2024 and April 30, 2024, respectively. The standby letters of credit were generally issued as a result of entering into office premise leases.