KORN FERRY 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 as well as the expected benefits of the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution (collectively, the “Acquired Companies”), the timing and expected benefits of our recently adopted restructuring plans and the magnitude and duration of the impact of the global (“COVID-19”) pandemic on our business, employees, customers and our ability to provide services in affected regions. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, those relating to the magnitude and duration of the negative impact of the COVID -19 outbreak on our business, employees, customers and our ability to provide services in affected regions, global and local political and or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, dependence on and costs of attracting and retaining qualified and experienced consultants, maintaining our relationships with customers and suppliers and retaining key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, portability of client relationships, consolidation of or within the industries we serve, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy, and data protection laws, dependence on third parties for the execution of critical functions, limited protection of our intellectual property (“IP”), our ability to enhance and develop new technology, our ability to successfully recover from a disaster or other business continuity problems, employment liability risk, an impairment in the carrying value of goodwill and other intangible assets, treaties, or regulations on our business and our company, deferred tax assets that we may not be able to use, our ability to develop new products and services, the impact of the withdrawal of the United Kingdom from the European Union, changes in our accounting estimates and assumptions, the utilization and billing rates of our consultants, seasonality, the expansion of social media platforms, the ability to effect acquisitions and integrate the Acquired Companies , the ability to recognize the anticipated benefits of the acquisition of the Acquired Companies, the costs related to the acquisition of the Acquired Companies, our indebtedness, the phase-out of LIBOR, and the matters disclosed under the heading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A included in the Annual Report on Form 10-K for the fiscal year ended April 30, 2020 (“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 and talent to drive superior performance. We work with organizations to design their structures, roles and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop and motivate their people. We are pursuing a strategy that will help Korn Ferry to focus on clients and collaborate intensively across the organization. This approach builds on the best of our past and gives us a clear path to the future with focused initiatives to increase our client and commercial impact. Korn Ferry is transforming how clients address their talent management needs. We have evolved from a mono-line to a diversified business, giving our consultants more frequent and expanded opportunities to engage with clients. 24 We operate through four global segments: 1. Consulting helps clients synchronize their strategy and their talent by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Rewards and Benefits. This work is supported and underpinned by a comprehensive range of some of the world’s leading lP and data. 2. Digital leverages an artificial intelligence (“AI”) powered platform to identify structure, roles, capabilities and behaviors needed to drive business forward. The end-to-end system gives clients one enterprise-wide talent framework and delivers an achievable blueprint for success, along with the guidance and tools to deliver it. 3. Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent. Behavioral interviewing and proprietary assessments are used to determine ideal organizational fit, and salary benchmarking builds appropriate frameworks for compensation and retention. 4. RPO and Professional Search combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to clients. Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions. Consulting and Digital are new reporting segments implemented in the third quarter of fiscal 2020. Previously, these were tracked and reported together as Korn Ferry Advisory (“Advisory”). Over the past year, we have invested in the digital business and harmonized the structure of our content and data, building a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement. These investments combined with the acquisitions of the Acquired Companies in November 2019 from TwentyEighty, Inc. for $108.6 million, resulted in a reassessment of how we managed our Advisory business. Therefore, beginning in the third quarter of fiscal 2020, we separated Advisory into two segments in order to better align with the Company’s strategy (which included the acquisition of the Acquired Companies) and the decisions of the Company’s chief operating decision maker, who had begun to regularly make resource allocation decisions and assess performance separately between consulting and digital within Advisory. The addition of the Acquired Companies has further expanded our vast IP and content and leveraged the firm’s digital delivery platforms. We have invested in our digital business to digitize and harmonize the structure of our IP content and data and in building a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement. ▪ Approximately 70% of the executive searches we performed in fiscal 2020 were for board level, chief executive and other senior executive and general management positions. Our 3,968 search engagement clients in fiscal 2020 included many of the world’s largest and most prestigious public and private companies. ▪ We have built strong client loyalty, with 90% of the assignments performed during fiscal 2020 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years. ▪ Approximately 71% of our revenues were generated from clients that utilized multiple lines of our business. ▪ A vital pillar of our growth strategy is our Digital business. Our data and IP are embedded into the core business processes of our clients, helping us generate long-term relationships through large scale and technology-based talent programs. ▪ In fiscal 2020, Korn Ferry was recognized as one of the top RPO providers in the Baker’s Dozen list, marking our 13th consecutive year on the list. We were also named leader on the Everest PEAK Matrix for three years running and achieved star performer status in fiscal 2020. Through decades of experience, we have enhanced our RPO solution to deliver quality candidates that drive our clients’ business strategies. We leverage proprietary IP and data sets to guide clients on the critical skills and competencies to look for, compensation information to align with market demand, and assessment tools to ensure candidate fit. The Impact of COVID-19 Initially, the negative business impact of the coronavirus outbreak was most pronounced in the Asia Pacific Region, and in particular China and Hong Kong. In March 2020, COVID-19 was reported to have spread to over 100 countries, territories or areas, worldwide, and in the fourth quarter of fiscal 2020 the World Health Organization declared it a pandemic. Governments and companies have implemented social distancing - limiting either travel or in person individual or group face-to-face interaction as well as working from home to adhere to stay at home orders from national, state and city governments. The outbreak has severely restricted the level of economic activity in affected areas and has had an adverse impact on demand for and sales of our products and services. All of our business segments across all of our geographies have been impacted as fee revenue decreased significantly in the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021 due to a decrease in demand as clients respond to the pandemic. In light of the continuing uncertainty in worldwide economic conditions caused by 25 the COVID-19 pandemic and, as part of a broader program aimed at further enhancing our strong balance sheet and liquidity position, on April 20, 2020, we initiated a plan intended to adjust our cost base to the current economic environment and to position us to invest in the recovery. This plan includes (i) a reduction in workforce, which was completed by the end of the first quarter of fiscal 202 1 and resulted in restructuring charges of $40.5 million and $27.5 million associated with severance during the three months ended April 30, 2020 and the three months ended July 31, 2020 , (ii) the temporary furlough of certain employees, (iii) subject to certain exceptions and legal requirements, salary reductions across the organization, and (iv) other cost saving measures relating to general and administrative expenses. 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 costs or charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other than temporary impairments of investments). In the three months ended July 31, 2020, Adjusted EBITDA excluded $27.5 million of restructuring charges and $0.7 million of integration/acquisition costs. Earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures. They have limitations as analytical tools, should not be viewed as a substitute for financial information determined in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. In addition, they may not necessarily be comparable to non-GAAP performance measures that may be presented by other companies. Management believes the presentation of these non-GAAP financial measures provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges, items of income and other items that may not be indicative of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance and the identification of operating trends that may otherwise be distorted by the factors discussed above. Korn Ferry includes these non-GAAP financial measures because management believes it is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies in the accompanying consolidated financial statements, except that the above noted items are excluded from EBITDA to arrive at Adjusted EBITDA. Management further believes that 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 $344.1 million during the three months ended July 31, 2020, a decrease of $140.4 million, or 29%, compared to $484.5 million in the three months ended July 31, 2019 with decreases in fee revenue in all business segments due to the reductions in demand for our products and services as a result of COVID-19. Exchange rates unfavorably impacted fee revenue by $8.1 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. During the three months ended July 31, 2020, we recorded an operating loss of $43.8 million with the Corporate, Executive Search, Consulting and Digital segments contributing expenses of $20.1 million, $12.3 million, $10.9 million and $2.6 million, respectively, offset by operating income from the RPO & Professional Search segment of $2.2 million. Net loss attributable to Korn Ferry in the three months ended July 31, 2020 was $30.8 million, a decrease of $73.8 million as compared to net income attributable to Korn Ferry of $43.0 million in the year-ago quarter. Adjusted EBITDA in the three months ended July 31, 2020 was $10.6 million, a decrease of $64.3 million as compared to $74.9 million in the year-ago quarter. During the three months ended July 31, 2020, the Executive Search, Digital, Consulting, and RPO & Professional Search segments contributed $8.1 million, $7.9 million, $6.6 million, and $6.0 million, respectively, offset by Corporate expenses net of other income of $18.0 million. Our cash, cash equivalents and marketable securities decreased by $130.3 million to $733.0 million at July 31, 2020, compared to $863.3 million at April 30, 2020. This decrease was mainly due to annual bonuses earned in fiscal 2020 and paid during the first quarter of fiscal 2021, retention payments, capital expenditures, our first semi-annual interest payment on the $400 million senior notes and dividends paid to stockholders during the three months ended July 31, 2020. As of July 31, 2020, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $143.3 million and a fair value of $151.8 million. Our vested obligations for which these assets were held in trust totaled $137.4 million as of July 31, 2020 and our unvested obligations totaled $24.1 million. Our working capital decreased by $10.9 million to $602.0 million as of July 31, 2020, as compared to $612.9 million at April 30, 2020. 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 the debt obligations and dividend payments under our dividend policy in the next 12 months. We had $646.0 million available for borrowing under our 26 current r evolver at July 31, 2020 and April 30, 2020 . As of July 31, 2020 and April 30, 2020 , there was $4.0 million of standby letters of credit issued, under our credit agreement. We had a total of $11. 5 million and $ 11 . 3 million of standby letters of credits with other financial institutions as of July 31, 2020 and April 30, 2020 , respectively . 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, 2020 2019 Fee revenue 100.0 % 100.0 % Reimbursed out-of-pocket engagement expenses 0.8 2.4 Total revenue 100.8 102.4 Compensation and benefits 82.5 67.8 General and administrative expenses 13.7 13.6 Reimbursed expenses 0.8 2.4 Cost of services 4.1 3.5 Depreciation and amortization 4.4 2.6 Restructuring charges, net 8.0 — Operating (loss) income (12.7 ) 12.5 Net (loss) income (9.0 %) 9.0 % Net (loss) income attributable to Korn Ferry (9.0 %) 8.9 % The following tables summarize the results of our operations by segment: (Numbers may not total exactly due to rounding) Three Months Ended July 31, 2020 2019 Dollars % Dollars % (dollars in thousands) Fee revenue Consulting (1) $ 99,318 28.9 % $ 137,542 28.4 % Digital (1) 55,973 16.3 57,984 11.9 Executive Search: North America 69,315 20.1 111,722 23.1 EMEA 30,081 8.8 46,530 9.6 Asia Pacific 17,252 5.0 27,362 5.6 Latin America 3,495 1.0 7,585 1.6 Total Executive Search 120,143 34.9 193,199 39.9 RPO & Professional Search 68,663 19.9 95,824 19.8 Total fee revenue 344,097 100.0 % 484,549 100.0 % Reimbursed out-of-pocket engagement expense 2,786 11,649 Total revenue $ 346,883 $ 496,198 (1) The Consulting and Digital segment data for fiscal 2020 has been recast to reflect the division of the former Advisory segment into the Consulting and Digital segments. 27 Three Months Ended July 31, 2020 2019 Dollars Margin (1) Dollars Margin (1) (dollars in thousands) Operating (loss) income Consulting (2) $ (10,927 ) (11.0 %) $ 11,783 8.6 % Digital (2) (2,627 ) (4.7 ) 14,008 24.2 Executive Search: North America (5,735 ) (8.3 ) 30,322 27.1 EMEA (6,219 ) (20.7 ) 7,311 15.7 Asia Pacific 861 5.0 6,993 25.6 Latin America (1,217 ) (34.8 ) 1,010 13.3 Total Executive Search (12,310 ) (10.2 ) 45,636 23.6 RPO & Professional Search 2,165 3.2 15,041 15.7 Corporate (20,096 ) (26,134 ) Total operating (loss) income $ (43,795 ) (12.7 %) $ 60,334 12.5 % (1) Margin calculated as a percentage of fee revenue by segment. (2) The Consulting and Digital segment data for fiscal 2020 has been recast to reflect the division of the former Advisory segment into the Consulting and Digital segments . Three Months Ended July 31, 2020 Executive Search Consulting Digital North America EMEA Asia Pacific Latin America Subtotal RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 99,318 $ 55,973 $ 69,315 $ 30,081 $ 17,252 $ 3,495 $ 120,143 $ 68,663 $ — $ 344,097 Total revenue $ 99,590 $ 56,022 $ 69,856 $ 30,195 $ 17,340 $ 3,495 $ 120,886 $ 70,385 $ — $ 346,883 Net loss attributable to Korn Ferry $ (30,833 ) Net loss attributable to noncontrolling interest (22 ) Other income net (11,162 ) Interest expense, net 6,894 Income tax benefit (8,672 ) Operating (loss) income $ (10,927 ) $ (2,627 ) $ (5,735 ) $ (6,219 ) $ 861 $ (1,217 ) $ (12,310 ) $ 2,165 $ (20,096 ) $ (43,795 ) Depreciation and amortization 4,009 6,726 730 362 275 202 1,569 940 1,791 15,035 Other income, net 788 418 9,342 19 226 48 9,635 196 125 11,162 EBITDA (6,130 ) 4,517 4,337 (5,838 ) 1,362 (967 ) (1,106 ) 3,301 (18,180 ) (17,598 ) Integration/acquisition costs — 556 — — — — — — 181 737 Restructuring, charges, net 12,734 2,870 975 7,548 232 405 9,160 2,723 — 27,487 Adjusted EBITDA $ 6,604 $ 7,943 $ 5,312 $ 1,710 $ 1,594 $ (562 ) $ 8,054 $ 6,024 $ (17,999 ) $ 10,626 Operating margin (11.0 %) (4.7 %) (8.3 %) (20.7 %) 5.0 % (34.8 %) (10.2 %) 3.2 % (12.7 %) Adjusted EBITDA margin 6.6 % 14.2 % 7.7 % 5.7 % 9.2 % (16.1 %) 6.7 % 8.8 % 3.1 % 28 Three Months Ended July 31, 2019 Executive Search Consulting (1) Digital (1) North America EMEA Asia Pacific Latin America Subtotal RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 137,542 $ 57,984 $ 111,722 $ 46,530 $ 27,362 $ 7,585 $ 193,199 $ 95,824 $ — $ 484,549 Total revenue $ 141,336 $ 57,984 $ 115,446 $ 47,312 $ 27,668 $ 7,587 $ 198,013 $ 98,865 $ — $ 496,198 Net income attributable to Korn Ferry $ 42,951 Net income attributable to noncontrolling interest 699 Other income, net (1,826 ) Interest expense, net 4,057 Income tax provision 14,453 Operating income (loss) $ 11,783 $ 14,008 $ 30,322 $ 7,311 $ 6,993 $ 1,010 $ 45,636 $ 15,041 $ (26,134 ) $ 60,334 Depreciation and amortization 4,414 3,639 901 456 346 328 2,031 992 1,701 12,777 Other income (loss), net 525 201 1,140 12 15 57 1,224 74 (198 ) 1,826 EBITDA and Adjusted EBITDA $ 16,722 $ 17,848 $ 32,363 $ 7,779 $ 7,354 $ 1,395 $ 48,891 $ 16,107 $ (24,631 ) $ 74,937 Operating margin 8.6 % 24.2 % 27.1 % 15.7 % 25.6 % 13.3 % 23.6 % 15.7 % 12.5 % EBITDA and Adjusted EBITDA margin 12.2 % 30.8 % 29.0 % 16.7 % 26.9 % 18.4 % 25.3 % 16.8 % 15.5 % (1) The Consulting and Digital segment data for fiscal 2020 has been recast to reflect the division of the former Advisory segment into the Consulting and Digital segments. Three Months Ended July 31, 2020 Compared to Three Months Ended July 31, 2019 During fiscal 2020, the Company changed the composition of its global segments. The Consulting and Digital segment were previously included in the former Advisory segment. Segment data for fiscal 2020 has been recast to reflect the division of the Advisory segment into the Consulting and Digital segments. Fee Revenue Fee Revenue. Fee revenue decreased by $140.4 million, or 29%, to $344.1 million in the three months ended July 31, 2020 compared to $484.5 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $8.1 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. The decrease in fee revenue across all our segments was primarily due to the impact of COVID-19 on economies in which we operate, reducing demand for our products and services. Consulting. Consulting reported fee revenue of $99.3 million, a decrease of $38.2 million, or 28%, in the three months ended July 31, 2020 compared to $137.5 million in the year-ago quarter. The decrease in fee revenue was due to the contraction in economic activity due to the COVID-19 pandemic. Exchange rates unfavorably impacted fee revenue by $2.7 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. Digital. Digital reported fee revenue of $56.0 million, a decrease of $2.0 million, or 3%, in the three months ended July 31, 2020 compared to $58.0 million in the year-ago quarter. The decrease in fee revenue was due to the contraction in economic activity due to the COVID-19 pandemic, partially offset by fee revenue generated by the Acquired Companies. Exchange rates unfavorably impacted fee revenue by $1.1 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. Executive Search. Executive Search reported fee revenue of $120.1 million, a decrease of $73.1 million, or 38%, in the three months ended July 31, 2020 compared to $193.2 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $2.6 million, or 1%, in the three months ended July 31, 2020 compared to the year-ago quarter. As detailed below, Executive Search fee revenue was lower in all regions in the three months ended July 31, 2020 as compared to the year-ago quarter. The decline in fee revenue was driven by decreases in fee revenue in all sectors due to a decrease in demand for our products and services as a result of the worldwide economic downturn associated with COVID-19 with industrial, consumer, technology and financial services having the greatest impact. North America reported fee revenue of $69.3 million, a decrease of $42.4 million, or 38%, in the three months ended July 31, 2020 compared to $111.7 million in the year-ago quarter. The decrease in fee revenue was due to a 30% decrease in the number of engagements billed and an 11% decrease in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended July 31, 2020 compared to the year-ago quarter. EMEA reported fee revenue of $30.1 million, a decrease of $16.4 million, or 35%, in the three months ended July 31, 2020 compared to $46.5 million in the year-ago quarter. The decrease in fee revenue was due to a 27% decrease in the number of engagements billed and an 11% decrease in the weighted-average fee billed per engagement (calculated using local 29 currency) during the three months ended July 31, 2020 compared to the year-ago quarter. Pe rformance in the United Kingdom, Germany and France were the primary contributors to the decrease in fee revenue in the three months ended July 31, 2020 compared to the year-ago quarter. Asia Pacific reported fee revenue of $17.3 million, a decrease of $10.1 million, or 37%, in the three months ended July 31, 2020 compared to $27.4 million in the year-ago quarter. The decrease in fee revenue was due to a 31% decrease in the number of engagements billed and a 6% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the three months ended July 31, 2020 compared to the year-ago quarter. The performance in Australia, China, and Singapore were the primary contributors to the decrease in fee revenue in the three months ended July 31, 2020 compared to the year-ago quarter. Latin America reported fee revenue of $3.5 million, a decrease of $4.1 million, or 54%, in the three months ended July 31, 2020 compared to $7.6 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.4 million, or 18%, in the three months ended July 31, 2020 compared to the year-ago quarter. The decrease in fee revenue in the region was due to lower fee revenue in Brazil and Mexico in the three months ended July 31, 2020 compared to the year-ago quarter. RPO & Professional Search. RPO & Professional Search reported fee revenue of $68.7 million, a decrease of $27.1 million, or 28%, in the three months ended July 31, 2020 compared to $95.8 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.7 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. The decrease in fee revenue was due to the worldwide downturn associated with COVID-19 that resulted in lower fee revenues in Professional Search of $13.6 million and RPO of $13.5 million. Compensation and Benefits Compensation and benefits expense decreased $44.5 million, or 14%, to $284.0 million in the three months ended July 31, 2020 from $328.5 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $5.2 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. The decrease in compensation and benefits expense was primarily due to lower salaries and related payroll taxes and lower employer insurance due to an 11% decrease in average headcount and a decrease in the use of contractors as a result of actions taken to align our cost structure with the lower level of business demand. These changes were partially offset by increases in performance-related bonus expense and amounts owed under certain deferred compensation and retirement plans driven by increases in the fair value of participants’ accounts in the three months ended July 31, 2020 compared to the year-ago quarter. Consulting compensation and benefits expense decreased by $15.6 million, or 17%, to $76.9 million in the three months ended July 31, 2020 from $92.5 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $1.8 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes and employer insurance due to a 19% decrease in average headcount, partially offset by an increase in performance-related bonus expense in the three months ended July 31, 2020 compared to the year-ago quarter. Consulting compensation and benefits expense, as a percentage of fee revenue, increased to 77% in the three months ended July 31, 2020 from 67% in the year-ago quarter. Digital compensation and benefits expense increased by $4.9 million, or 16% to $35.9 million in the three months ended July 31, 2020 from $31.0 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.6 million, or 2% in the three months ended July 31, 2020 compared to the year-ago quarter. The increase in compensation and benefits expense was due to increases in performance-related bonus expense and salaries and related payroll taxes due to an increase in average headcount of 12% driven by the acquisition of the Acquired Companies. Digital compensation and benefits expense, as a percentage of fee revenue, increased to 64% in the three months ended July 31, 2020 from 54% in the year-ago quarter. Executive Search compensation and benefits expense decreased by $17.8 million, or 14%, to $107.1 million in the three months ended July 31, 2020 from $124.9 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $1.7 million, or 1%, in the three months ended July 31, 2020 compared to the year-ago quarter. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes and employer insurance due to an 18% decrease in average headcount as a result of actions taken to align our cost structure with the lower level of business demand. These changes were partially offset by an increase in expenses associated with our deferred compensation and retirement plans driven by increases in the fair value of participants’ accounts in the three months ended July 31, 2020 compared to the year-ago quarter. Executive Search compensation and benefits expense, as a percentage of fee revenue, increased to 89% in the three months ended July 31, 2020 from 65% in the year-ago quarter. RPO & Professional Search compensation and benefits expense decreased by $14.0 million, or 20%, to $54.7 million in the three months ended July 31, 2020 from $68.7 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $1.1 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. 30 The de crease was due to lower salaries and related payroll taxes and employer insurance due to a 7 % de crease in the average headcount in the three months ended July 31, 2020 compared to the year-ago quarter and a decrease in the use contractors as a result of actions taken to align our cost structure with the lower level of business demand. RPO & Professional Search compensation and benefits expense, as a percentage of fee revenue, increased to 80% in the three months ended July 31, 2020 from 72% in the year-ago quarter. Corporate compensation and benefits expense decreased by $1.8 million, or 16%, to $9.5 million in the three months ended July 31, 2020 from $11.3 million in the year-ago quarter. The decrease was due to lower salaries and related payroll taxes due to a 14% decrease in the average headcount in the three months ended July 31, 2020 compared to the year-ago quarter. General and Administrative Expenses General and administrative expenses decreased $18.7 million, or 28%, to $47.1 million in the three months ended July 31, 2020 from $65.8 million in the year-ago quarter. Exchange rates favorably impacted general and administrative expenses by $1.3 million, or 2%, in the three months ended July 31, 2020 compared to the year-ago quarter. The decrease in general and administrative expenses was due to lower marketing and business development expenses, premise and office expenses, legal and professional fees and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand. General and administrative expenses, as a percentage of fee revenue, was 14% in both the three months ended July 31, 2020 and 2019. Consulting general and administrative expenses decreased by $5.9 million, or 33%, to $11.8 million in the three months ended July 31, 2020 compared to $17.7 million in the year-ago quarter. The decrease was mainly due to decreases in marketing and business development expenses, premise and office expenses and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand. Consulting general and administrative expenses, as a percentage of fee revenue, decreased to 12% in the three months ended July 31, 2020 from 13% in the year-ago quarter. Digital general and administrative expenses was $7.3 million in the three months ended July 31, 2020 compared to $7.4 million in the year-ago quarter, essentially flat. Digital general and administrative expenses, as a percentage of fee revenue, was 13% for both the three months ended July 31, 2020 and 2019. Executive Search general and administrative expenses decreased by $6.4 million, or 32%, to $13.5 million, in the three months ended July 31, 2020 compared to $19.9 million in the year-ago quarter. The decrease was mainly due to decreases in marketing and business development expenses, premise and office expenses and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand. Executive Search general and administrative expenses, as a percentage of fee revenue, increased to 11% in the three months ended July 31, 2020 from 10% in the year-ago quarter. RPO & Professional Search general and administrative expenses decreased by $2.0 million, or 26%, to $5.7 million in the three months ended July 31, 2020 compared to $7.7 million in the year-ago quarter. The decrease was primarily due to lower travel related expenses and decreases in marketing and business development expenses and premise and office expenses due to working from home plans in place and restrictions on employee travel. RPO & Professional Search general and administrative expenses, as a percentage of fee revenue, was 8% for both the three months ended July 31, 2020 and 2019. Corporate general and administrative expenses decreased $4.3 million, or 33%, to $8.8 million in the three months ended July 31, 2020 compared to $13.1 million in the year-ago quarter. The decrease was primarily due to a decrease in legal and professional fees and lower marketing and business development expenses during the three months ended July 31, 2020 compared to the year-ago quarter. Cost of Services Expense Cost of services expense consists primarily of contractor and product costs related to the delivery of various services and products, primarily in RPO & Professional Search, Consulting and Digital. Cost of services expense decreased by $2.8 million, or 16% to $14.3 million in the three months ended July 31, 2020 compared to $17.1 million in the year-ago quarter. The decrease was due to the decline in fee revenue. Cost of services expense, as a percentage of fee revenue, was 4% in both the three months ended July 31, 2020 and 2019. Depreciation and Amortization Expenses Depreciation and amortization expenses were $15.0 million, an increase of $2.2 million, or 17%, in the three months ended July 31, 2020 compared to $12.8 million in the year-ago quarter. The increase was primarily from the Digital segment due to the acquisition of the Acquired Companies and technology investments made in the current and prior year in software and computer equipment. 31 Restructuring Charges, Net In April 2020, we implemented a restructuring plan in response to the uncertainty caused by COVID-19 that resulted in reductions in our workforce in the fourth quarter of fiscal 2020. As part of this plan, we continued to reduce our workforce during the first quarter of fiscal 2021 and recorded restructuring charges of $27.5 million of severance costs during the three months ended July 31, 2020. There were no restructuring charges, net during the three months ended July 31, 2019. Operating (Loss) Income Operating loss was $43.8 million in the three months ended July 31, 2020, a decrease of $104.1 million, or 173%, as compared to operating income of $60.3 million in the year-ago quarter. The change in operating (loss) income was primarily driven by a decrease in fee revenue due to the decrease in demand for our products and services as a result of the COVID-19 pandemic and an increase in restructuring charges, net, partially offset by decreases in compensation and benefits expense and general and administrative expenses due to actions taken to align our cost structure with the lower level of business demand. Consulting operating loss was $10.9 million in the three months ended July 31, 2020, a decrease of $22.7 million, or 192%, as compared to operating income of $11.8 million in the year-ago quarter. The change in Consulting operating (loss) income was mainly driven by a decrease in fee revenue and an increase in restructuring charges, net incurred during the three months ended July 31, 2020 compared to the year-ago quarter. This was partially offset by decreases in compensation and benefits expense, cost of services expense and general and administrative expenses due to actions taken to align our cost structure with the lower level of business demand. Consulting operating loss, as a percentage of fee revenue, was 11% in the three months ended July 31, 2020 compared to operating income, as a percentage of fee revenue, of 9% in the year-ago quarter. Digital operating loss was $2.6 million in the three months ended July 31, 2020, a decrease of $16.6 million, or 119%, as compared to operating income of $14.0 million in the year-ago quarter. The change in Digital operating (loss) income was mainly driven by a decrease in fee revenue and an increase in restructuring charges, net incurred during the three months ended July 31, 2020 compared to the year-ago quarter. Also, contributing to the decline in operating income was an increase in compensation and benefits expense and cost of services expense, which increased due to the Acquired Companies. These expenses were partially offset from the cost saving initiatives that were put in place. Digital operating loss, as a percentage of fee revenue, was 5% in the three months ended July 31, 2020 compared to operating income, as a percentage of fee revenue, of 24% in the year-ago quarter. Executive Search operating loss decreased $57.9 million, or 127% to $12.3 million in the three months ended July 31, 2020, as compared to operating income of $45.6 million in the year-ago quarter. The change in Executive Search operating (loss) income was mainly driven by lower fee revenue and an increase in restructuring charges, net incurred during the three months ended July 31, 2020 compared to the year-ago quarter. These changes were partially offset by decreases in compensation and benefits expense and general and administrative expenses, all of which resulted from cost savings initiatives that were put in place. Executive Search operating loss, as a percentage of fee revenue, was 10% in the three months ended July 31, 2020 compared to operating income, as a percentage of fee revenue, of 24% in the year-ago quarter. RPO & Professional Search operating income was $2.2 million in the three months ended July 31, 2020, a decrease of $12.8 million, or 85% compared to $15.0 million in the year-ago quarter. The decrease in operating income was mainly driven by lower fee revenue and an increase in restructuring charges, net. The decrease in operating income was partially offset by decreases in compensation and benefits expense and general and administrative expenses, all of which resulted from cost savings initiatives that were put in place. RPO & Professional Search operating income, as a percentage of fee revenue, was 3% in the three months ended July 31, 2020 compared to 16% in the year-ago quarter. Net (Loss) Income Attributable to Korn Ferry Net loss attributable to Korn Ferry decreased by $73.8 million, or 172% to $30.8 million in the three months ended July 31, 2020, as compared to a net income attributable to Korn Ferry of $43.0 million in the year-ago quarter. Actions taken by various government and other authoritative bodies in response to the COVID-19 pandemic caused a severe contraction in economic activity during the quarter which translated in a decrease to fee revenue. This decline in fee revenue was partially offset by decreases in compensation and benefits expense and general and administrative expenses associated with actions taken to align our cost structure with the lower level of business demand that resulted in a net loss attributable to Korn Ferry in three months ended July 31, 2020. Net loss attributable to Korn Ferry, as a percentage of fee revenue, was 9% in the three months ended July 31, 2020 compared to net income attributable to Korn Ferry, as a percentage of fee revenue, of 9% in the year-ago quarter. Adjusted EBITDA Adjusted EBITDA decreased by $64.3 million, or 86%, to $10.6 million in the three months ended July 31, 2020 as compared to $74.9 million in the year-ago quarter. The decrease in Adjusted EBITDA was driven by a decrease in fee revenue, partially 32 offset by decreases in compensation and benefits expense (excluding integration/acquisition costs) and general and administrative expenses (excluding integration/ acquisition costs) due to actions taken to align our cost structure with the lower level of business demand. Adjusted EBITDA, as a percentage of fee revenue, was 3% in the three months ended July 31, 2020 compared to 15% in the year-ago quarter. Consulting Adjusted EBITDA was $6.6 million in the three months ended July 31, 2020, a decrease of $10.1 million, or 60%, as compared to $16.7 million in the year-ago quarter. This decrease was driven by lower fee revenue partially offset by decreases in compensation and benefits expense, cost of services expense and general and administrative expenses. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 7% and 12% in the three months ended July 31, 2020 and 2019, respectively. Digital Adjusted EBITDA was $7.9 million in the three months ended July 31, 2020, a decrease of $9.9 million, or 56%, as compared to $17.8 million in the year-ago quarter. This decrease in Digital operating income was mainly driven by a decrease in fee revenue and increases in compensation and benefits expense (excluding integration/acquisition costs) and cost of services expense, during the three months ended July 31, 2020 compared to the year-ago quarter. Digital Adjusted EBITDA, as a percentage of fee revenue, was 14% and 31% in the three months ended July 31, 2020 and 2019, respectively. Executive Search Adjusted EBITDA decreased $40.8 million, or 83%, to $8.1 million in the three months ended July 31, 2020 as compared to $48.9 million in the year-ago quarter. The decrease was mainly driven by lower fee revenue, partially offset by decreases in compensation and benefits expense and general and administrative expenses all of which resulted from cost savings initiatives that were put in place. Executive Search Adjusted EBITDA, as a percentage of fee revenue, was 7% and 25% in the three months ended July 31, 2020 and 2019, respectively. RPO & Professional Search Adjusted EBITDA was $6.0 million in the three months ended July 31, 2020, a decrease of $10.1 million, or 63%, as compared to $16.1 million in the year-ago quarter. The decrease in operating income was mainly driven by lower fee revenue, offset by decreases in compensation and benefits expense and general and administrative expenses all of which resulted from cost savings initiatives that were put in place . RPO & Professional Search Adjusted EBITDA, as a percentage of fee revenue, was 9% and 17% in the three months ended July 31, 2020 and 2019, respectively. Other Income, Net Other income, net was $11.2 million in the three months ended July 31, 2020 compared to $1.8 million in the year-ago quarter. The difference was primarily due to larger gains from the fair value of our marketable securities. These gains were offset by the increases in our deferred compensation liability that are recorded in compensation and benefits expense during the three months ended July 31, 2020 compared to the year-ago quarter. Interest Expense, Net Interest expense, net primarily relates to our 4.625% Senior Unsecured Notes due 2027 (the “Notes”) issued in December 2019, our prior credit agreement and borrowings under company-owned life insurance (“COLI”) policies, which are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $6.9 million in the three months ended July 31, 2020 compared to $4.1 million in the year-ago quarter. The increase in interest expense, net was related to the newly issued Notes, which have a higher interest rate and a higher principal balance than the amount that was outstanding in the year-ago quarter under the revolver under our prior credit agreement. Income Tax (Benefit) Provision The benefit for income tax was $8.7 million in the three months ended July 31, 2020, compared to an expense of $14.5 million in the three months ended July 31, 2019. This reflects a 21.9% and 24.9% effective tax rate for the three months ended July 31, 2020 and 2019, respectively. The variability in effective tax rate is primarily due to the impact of U.S. state income taxes and the jurisdictional mix of earnings. Net (Loss) Income Attributable to Noncontrolling Interest Net (loss) income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to shares of a subsidiary not held by Korn Ferry that are included in the consolidated results of operations. Net loss attributable to noncontrolling interest for the three months ended July 31, 2020 was break-even as compared to net income attributable to noncontrolling interest of $0.7 million the three months ended July 31, 2019. 33 Liquidity and Capital Resources The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s long-term priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and derivative products and services, and the investment in synergistic, accretive merger and acquisition transactions that earn a return that is superior to the Company's cost of capital. Next, the Company’s capital allocation approach contemplates the return of a portion of excess capital to stockholders in the form of a regular quarterly dividend, subject to the factors discussed below and in the “Risk Factors” section of the Annual Report on Form 10-K for the fiscal year ended April 30,2020. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our Credit Agreement (defined below) as well as using excess cash to repay the Notes. On November 1, 2019, we completed the acquisition of the Acquired Companies in the leadership development area for $108.6 million, net of cash acquired and actual results of operations of the Acquired Companies are included in our consolidated financial statements from November 1, 2019, the effective date of the acquisition. On November 1, 2019, we also adopted a restructuring plan to rationalize our cost structure to realize the efficiencies and operational improvement that these investments have enabled us to, or positioned us to, realize. Initially, the negative business impact of the coronavirus outbreak was most pronounced in the Asia Pacific Region, and in particular China and Hong Kong. In March 2020, COVID-19 was reported to have spread to over 100 countries, territories, or areas, worldwide, and in the fourth quarter of fiscal 2020 the World Health Organization declared it a pandemic. Governments and companies have implemented social distancing - limiting either travel or in person individual or group face-to-face interaction as well as working from home to adhere to stay at home orders from national, state and city governments. The outbreak has severely restricted the level of economic activity in affected areas and has had an adverse impact on demand for and sales of our products and services. All of our business segments across all of our geographies have been impacted as fee revenue decreased significantly in the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021 due to a decrease in demand as clients respond to the pandemic. In light of the continuing uncertainty in worldwide economic conditions caused by the COVID-19 pandemic and, as part of a broader program aimed at further enhancing our strong balance sheet and liquidity position, on April 20, 2020, we initiated a plan intended to adjust our cost base to the current economic environment and to position us to invest in the recovery. This plan includes (i) a reduction in workforce, which was completed by the end of the first quarter of fiscal 2021 and resulted in restructuring charges of $40.5 million and $27.5 million associated with severance during the three months ended April 30, 2020 and the three months ended July 31, 2020, (ii) the temporary furlough of certain employees, (iii) subject to certain exceptions and legal requirements, salary reductions across the organization, and (iv) other cost saving measures relating to general and administrative expenses. 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, commencing on June 15, 2020. The Notes represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. We may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture governing the Notes. The Notes are guaranteed by each of our existing and future wholly owned domestic subsidiaries to the extent such subsidiaries guarantee our revolving credit facility under the Credit Agreement (defined below). The indenture governing the Notes requires that, upon the occurrence of both a Change of Control and a Rating Decline (each as defined in the indenture), we shall make an offer to purchase all of the Notes at 101 % of their principal amount, and accrued and unpaid interest. As of July 31, 2020, the fair value of the Notes is $410.5 million, which is based on borrowing rates currently required of notes with similar terms, maturity and credit risk. On December 16, 2019, we also entered into a senior secured $650.0 million credit agreement (the “Credit Agreement”) with a syndicate of banks and Bank of America, National Association as administrative agent to among other things, provide for enhanced financial flexibility. See Note 12— Long-Term Debt for a description of the Credit Agreement. We have a total of $ 646.0 million available under our $ 650.0 million five-year senior secured revolving credit facility (the “Revolver”) as of July 31, 2020 after $4.0 million of standby letters of credit had been issued as of July 31, 2020 . We had $ 4.0 million in standby letters of credit issued under our Revolver as of July 31, 2020 and April 30, 2020. We had a total of $ 11.5 million and $ 11.3 million of standby letters of credits with other financial institutions as of July 31, 2020 and April 30, 2020, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases. The Board of Directors has 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. 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. 34 On March 6, 2019, our Board of Directors approved an increase to the share repurchase program of approximately $200 million, which at the time brought our available capacity to repurchase shares in the open market or privately negotiated transactions to approximately $250 million. The Company did not repurchase any of the Company’s stock during the three months ended July 31, 2020 compared to repurchasing $12.7 million of the Company’s stock in the year-ago quarter. As of July 31, 2020 , $ 158.3 million remained available for common stock repurchases under our share repurchase program. Any decision to continue to execute our currently outstanding share repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. The Credit Agreement permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under the Credit Agreement, the consolidated net leverage ratio , which used adjusted EBITDA is no greater than 4. 25 to 1.00, and the pro forma liquidity is at least $50 million , including the revolving credit commitment minus amounts outstanding on the Revolver, issued letters of credit and swing loans . Furthermore, our Notes allow us to pay $25 million of dividends per fiscal year with no restrictions plus an unlimited amount of dividends so long as our consolidated total leverage ratio is not greater than 3.50 to 1.00 , and there is no default under the i ndenture governing the Note s . Our performance is subject to the general level of economic activity in the geographic regions and the industries we service. We believe, based on current economic conditions, that our cash on hand and funds from operations and the Credit Agreement will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt, share repurchases and dividend payments under our dividend policy during the next 12 months. However, if COVID-19 continues to persist or worsen, or the national or global economy, credit market conditions and/or labor markets were to deteriorate in the future, such changes could put negative pressure on demand for our services and affect our operating cash flows. If these conditions were to persist over an extended period of time, we may incur negative cash flows and it might require us to access additional borrowings under the Credit Agreement to meet our capital needs and/or discontinue our share repurchases and dividend policy. Cash and cash equivalents and marketable securities were $733.0 million and $863.3 million as of July 31, 2020 and April 30, 2020, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and marketable securities were $ 510.8 million and $ 531.9 million at July 31, 2020 and April 30, 2020, respectively. As of July 31, 2020 and April 30, 2020, we held $336.6 million and $ 308.2 million, respectively of cash and cash equivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay fiscal 2021 and 2020 annual bonuses. Cash and cash equivalents consist of cash and highly liquid investments purchased with original maturities of three months or less. Marketable securities consist of mutual funds and investments in commercial paper 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, 2020 and April 30, 2020, marketable securities of $ 190.2 million and $ 174.1 million, respectively, included equity securities of $151.8 million (net of gross unrealized gains of $ 11.2 million and gross unrealized losses of $ 2.7 million) and $ 141.4 million (net of gross unrealized gains of $ 3.6 million and gross unrealized losses of $ 6.5 million), respectively, were held in trust for settlement of our obligations under certain deferred compensation plans, of which $140.3 million and $132.1 million, respectively, are classified as non-current. These marketable securities were held to satisfy vested obligations totaling $137.4 million and $ 124.6 million as of July 31, 2020 and April 30, 2020, respectively. Unvested obligations under the deferred compensation plans totaled $24.1 million and $ 21.7 million as of July 31, 2020 and April 30, 2020, respectively. The net decrease in our working capital of $ 10.9 million as of July 31, 2020 compared to April 30, 2020 is primarily attributable to decreases in accounts receivable and cash and cash equivalents offset by a decrease in compensation and benefits payable. The decrease in cash and cash equivalents and compensation and benefits payable was primarily due to payments of annual bonuses earned in fiscal 2020 and paid during the first quarter of fiscal 2021. The decrease in accounts receivable was due to a decline in fee revenue due to the contraction in economic activity due to the COVID-19 pandemic. Cash used by operating activities was $144.3 million in the three months ended July 31, 2020, a decrease of $17.6 million, compared to $161.9 million in the three months ended July 31, 2019. Cash used in investing activities was $13.2 million in the three months ended July 31, 2020 compared to $9.2 million in the year-ago quarter. An increase in cash used in investing activities was primarily due to an increase in the purchase of marketable securities net of sale/maturities of $4.7 million and a decrease in proceeds from life insurance policies of $1.0 million, partially offset by a decrease in purchase of property and equipment of $1.9 million during the three months ended July 31, 2020 compared to the year-ago quarter. Cash used in financing activities was $7.8 million in the three months ended July 31, 2020 compared to cash used of $24.9 million in the three months ended July 31, 2019. The decrease in cash used in financing activities was primarily due to $12.7 million repurchases of the Company’s common stock in three months ended July 31, 2019 compared to none in the current quarter. The rest of the change is due to lower cash used to repurchase shares of common stock to satisfy tax withholding requirements upon the vesting of restricted stock of $ 4.4 million in the three months ended July 31, 2020 compared to $ 8.6 million in the year-ago quarter. 35 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, 2020 and April 30, 2020, we held contracts with gross CSV of $ 240.1 million and $ 238.7 million, respectively. Total outstanding borrowings against the CSV of COLI contracts were $ 91.7 million and $ 92.3 million as of July 31, 2020 and April 30, 2020, respectively. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and are secured by the CSV of COLI contracts. At July 31, 2020 and April 30, 2020, the net cash value of these policies was $ 148.4 million and $ 146.4 million, respectively. Long-Term Debt On December 16, 2019, we completed a private placement of the Notes with a $400 million principal amount. We may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture governing the Notes. At any time prior to December 15, 2022, we may redeem at a redemption price equal to 100 % of the principal plus the Applicable Premium (as defined in the indenture), and accrued and unpaid interest. At any time prior to December 15, 2022, we may use the proceeds of certain equity offerings to redeem up to 35 % of the aggregate principal amount of the Notes, including any permitted additional Notes, at a redemption price equal to 104.625 % of the principal amount and accrued and unpaid interest. At any time and from time to time on or after December 15, 2022, we may redeem the Notes at the applicable redemption prices set forth in the table below, plus accrued and unpaid interest, if redeemed during the 12-month period beginning on December 15 of each of the years indicated: Year Percentage 2022 102.313% 2023 101.156% 2024 and thereafter 100.000% The fair value of the Notes is classified as a Level 2 measurement in the fair value hierarchy. The principal balance of the Revolver is due on the date of its termination. The Revolver matures on December 16, 2024 and any unpaid principal balance is payable on this date. The Revolver may also be prepaid and terminated early by us at any time without premium or penalty (subject to customary LIBOR breakage fees). At our option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Agreement may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.125% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon our total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated net leverage ratio”) at such time. In addition, we will be required to pay to the lenders a quarterly commitment fee ranging from 0.175% to 0.35% per annum on the average daily unused amount of the Revolver, based upon our consolidated net leverage ratio at such time, and fees relating to the issuance of letters of credit. T he average interest rate on amounts outstanding under the prior revolver was 3.69% for the three months ended July 31, 2019 . As of July 31, 2020 and April 30, 2020, there was no outstanding liability under the Revolver. The unamortized debt issuance costs associated with the Credit Agreement were $4.0 million as of July 31, 2020 and $4.2 million as of April 30, 2020 . As of July 31, 2020, we were in compliance with our debt covenants. We had a total of $ 646.0 million available under the Revolver after $ 4.0 million of standby letters of credit had been issued as of July 31, 2020 and April 30, 2020. We had a total of $ 11.5 million and $11.3 million of standby letters of credits with other financial institutions as of July 31, 2020 and April 30, 2020, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases. Other than the factors discussed in this section and the potential impacts of the COVID-19 on our business, we are not aware of any other trends, demands or commitments that would materially affect liquidity or those that relate to our resources as of July 31, 2020 . 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, 2020 , 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 36 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. We consider the policies related to revenue recognition, performance related bonuses, deferred compensation, carrying values of receivables, goodwill, intangible assets , leases and recoverability of deferred income taxes as critical to an understanding of our interim consolidated financial statements because their application places the most significant demands on management’s judgment and estimates. Specific risks for these critical accounting policies are described in our Form 10-K filed with the Securities Exchange Commission. There have been no material changes in our critical accounting policies since the end of fiscal 2020 .