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, the timing of our 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 pandemic 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 or events, changes to data security, data privacy, and data protection laws, dependence on third parties for the execution of critical functions, limited protection of our intellectual property (“IP”), our ability to enhance and develop new technology, our ability to successfully recover from a disaster or other business continuity problems, employment liability risk, an impairment in the carrying value of goodwill and other intangible assets, treaties, or regulations on our business and our Company, deferred tax assets that we may not be able to use, our ability to develop new products and services, the impact of the United Kingdom’s withdrawal from the European Union, changes in our accounting estimates and assumptions, the utilization and billing rates of our consultants, seasonality, the expansion of social media platforms, the ability to effect acquisitions, our indebtedness, the phase-out of LIBOR, and the matters disclosed under the heading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A included in 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. 28 We operate through four lines of business : 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 Miller Heiman Group, AchieveForum and Strategy Execution (collectively, 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 In March 2020, COVID-19 was reported to have spread to over 100 countries, territories or areas, worldwide, and in the fourth quarter of fiscal 2020 the World Health Organization declared it a pandemic. The negative business impact of the coronavirus outbreak was initially most pronounced in the Asia Pacific region. During the first three quarters of fiscal 2021 the impact has been felt throughout all the geographical areas in which we do business. 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. Such restrictions initially impacted our ability to provide our products and services to our clients with such impact lessening in the second and third quarters of fiscal 2021 as the world learned to work in different ways. Further, the outbreak has restricted the level of economic activity in the areas in which we operate and has had an adverse impact on demand for and sales of our products and services. All of our business 29 segments across all of our geographies have been impacted as fee revenue decreased in the fourth quarter of fiscal 2020 and further decreased in the first quarter of fiscal 2021 due to a decrease in demand as clients respond ed to the pandemic . As a result of this and, as part of a broader program aimed at further enhancing our strong balance sheet and liquidity position, on April 20, 2020, we initiated a plan that was intended to adjust our cost base to the current economic environment and to position us to invest in the recovery. This plan include d (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 $ 30.7 million associated with severance during the three months ended April 30, 2020 and the nine months ended January 31, 2021 , respectively, (ii) the temporary furlough of certain employees, (iii) subject to certain exceptions and legal requirements, salary reductions across the organization through December 31, 2020 , and (iv) other cost saving measures relating to general and administrative expenses . In the third quarter of fiscal 2021, the Company saw business conditions improve substantially from where they were in the second and first quarter with fee revenues increasing 27% in the second quarter of fiscal 2021 compared to the first quarter, and 9% in the third quarter from the second quarter of fiscal 2021 to $475.4 million, with all lines of business contributing to the improvement of fee revenue. As such, no further restructuring actions were taken in the quarter. With the sequential improvement in fee revenue and leveraging the restructured cost base, the Company experienced notably better profitability in the three months ended January 31, 2021 compared to the second quarter of fiscal 2021. As such, and similar to the decision that was made in the second quarter of the Company’s 2021 fiscal year, the Company made a decision to pay all colleagues, including our named executive officers, their full salary and non-executive directors their full retainers for the third quarter of the Company’s 2021 fiscal year as well. Employees have received such payments, subject in each case to such employee’s or director’s continued employment or service with the Company on date of payment. Beginning on January 1, 2021 salaries of our employees were fully reinstated. While advances have been made in the science and societal and economic consequences of COVID-19, there remains significant uncertainty about the future impacts of COVID-19. On the positive side, there have been several announcements around vaccines and governments around the world have begun distributing and administering the vaccine to designated high risk individuals. In addition, the world has adopted new ways of working and interacting with substantial acceptance of business being conducted in a virtual world. On the negative side, there have been challenges in manufacturing the vaccines at scale as well as distributing and administrating to the population at large. Since the end of the second quarter of fiscal 2021, we saw governments impose additional restrictions on travel and activities, particularly in Europe and in the United States, as the number of COVID-19 cases and hospitalizations continued to increase, reaching all-time highs in the United States. At the end of the third quarter, hospitalizations started to decrease and restrictions are starting to ease in some of the jurisdictions where we operate. However, there are also new, more contagious variants of the virus that preliminarily appear to be more resistant to the vaccines. It is therefore unknown whether the easing of the restrictions will continue or be reversed. With the implementation of the plan discussed above and the improved business activity we experienced in the second and third quarter, we believe our costs are in line with our current revenue levels. However, uncertainties such as whether the new variants of the virus become the dominant strain, or whether new restrictions are imposed (or prior restrictions re-imposed), make us unable to give assurance that the rate of increase in fee revenue during the three months ended January 31, 2021, will continue in the three months ended April 30, 2021. Given the amount available from our current revolver and the amount of cash and cash equivalents and marketable securities net of amounts held in trust for deferred compensation and accrued bonuses, we believe that we have sufficient liquidity to meet our anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt obligations and dividend payments under our dividend policy in the next 12 months. Performance Highlights The Company evaluates performance and allocates resources based on the chief operating decision maker’s review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such 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 nine months ended January 31, 2021, Adjusted EBITDA excluded $30.7 million of restructuring charges and $0.7 million of integration/acquisition costs. In the three months ended January 31, 2021, Adjusted EBITDA excluded $0.8 million in restructuring charges, net. 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 30 of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance and the identification of operating trends that may otherwise be distorted by the factors discussed above. Korn Ferry includes these non-GAAP financial measures because management believes it is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies in the accompanying consolidated financial statements, except that the above noted items are excluded to arrive at Adjusted EBITDA. Management further believes that Adjusted EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company. Fee revenue was $475.4 million during the three months ended January 31, 2021, a decrease of $39.9 million, or 8%, compared to $515.3 million in the three months ended January 31, 2020 with decreases in fee revenue across Digital, Executive Search and Consulting due to a decline in demand for our products and services as a result of COVID-19, partially offset by an increase in fee revenue in RPO and Professional Search. Exchange rates favorably impacted fee revenue by $8.5 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. During the three months ended January 31, 2021, we recorded operating income of $65.2 million with the Executive Search, Consulting, Digital and RPO & Professional Search segments contributing income of $26.9 million, $22.2 million, $19.2 million, and $18.4 million, respectively, partially offset by Corporate expenses of $21.5 million. Net income attributable to Korn Ferry in the three months ended January 31, 2021 was $51.3 million, an increase of $31.3 million as compared to net income attributable to Korn Ferry of $20.0 million in the year-ago quarter. Adjusted EBITDA in the three months ended January 31, 2021 was $96.7 million, an increase of $18.6 million as compared to $78.1 million in the year-ago quarter. During the three months ended January 31, 2021, the Executive Search, Consulting, Digital, and RPO & Professional Search segments contributed to Adjusted EBITDA of $41.7 million, $27.5 million, $27.1 million and $19.6 million, respectively, partially offset by Corporate expenses net of other income of $19.3 million. Our cash, cash equivalents and marketable securities increased by $33.8 million to $897.1 million at January 31, 2021, compared to $863.3 million at April 30, 2020. This increase was mainly due to cash from operations as a result of cost savings initiatives that were put in place, a positive effect of exchange rate changes on cash and cash equivalents and proceeds from life insurance policies, partially offset by annual bonuses earned in fiscal 2020 and paid during the first quarter of fiscal 2021, retention payments, repurchases of our common stock in the open market, capital expenditures, interest payments on the 4.625% Senior Unsecured Notes due 2027 (the “Notes”) and dividends paid to stockholders during the nine months ended January 31, 2021. As of January 31, 2021, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $145.2 million and a fair value of $164.6 million. Our vested obligations for which these assets were held in trust totaled $147.1 million as of January 31, 2021 and our unvested obligations totaled $25.4 million. Our working capital increased by $67.3 million to $680.2 million as of January 31, 2021, 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 current revolver at January 31, 2021 and April 30, 2020. As of January 31, 2021 and April 30, 2020, there was $4.0 million of standby letters of credit issued, under our credit agreement. We had a total of $10.7 million and $11.3 million of standby letters of credits with other financial institutions as of January 31, 2021 and April 30, 2020, respectively . 31 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 January 31, Nine Months Ended January 31, 2021 2020 2021 2020 Fee revenue 100.0 % 100.0 % 100.0 % 100.0 % Reimbursed out-of-pocket engagement expenses 0.5 2.5 0.6 2.4 Total revenue 100.5 102.5 100.6 102.4 Compensation and benefits 68.6 67.6 73.1 68.0 General and administrative expenses 9.9 13.8 11.2 13.3 Reimbursed expenses 0.5 2.5 0.6 2.4 Cost of services 4.2 6.0 4.0 4.4 Depreciation and amortization 3.3 2.9 3.7 2.7 Restructuring charges, net 0.2 3.5 2.4 1.2 Operating income 13.7 6.1 5.5 10.3 Net income 10.9 % 4.1 % 3.9 % 7.2 % Net income attributable to Korn Ferry 10.8 % 3.9 % 3.8 % 7.1 % The following tables summarize the results of our operations by segment: (Numbers may not total exactly due to rounding) Three Months Ended January 31, Nine Months Ended January 31, 2021 2020 2021 2020 Dollars % Dollars % Dollars % Dollars % (dollars in thousands) Fee revenue Consulting $ 136,268 28.7 % $ 140,525 27.3 % $ 362,271 28.9 % $ 422,103 28.3 % Digital 75,791 15.9 99,389 19.3 206,807 16.5 223,097 15.0 Executive Search: North America 106,002 22.3 106,888 20.7 266,485 21.2 332,428 22.3 EMEA 35,991 7.6 44,301 8.6 97,701 7.8 130,652 8.8 Asia Pacific 21,643 4.6 25,089 4.9 59,702 4.8 78,395 5.3 Latin America 4,468 0.9 7,283 1.4 12,419 1.0 23,140 1.6 Total Executive Search 168,104 35.4 183,561 35.6 436,307 34.8 564,615 37.8 RPO & Professional Search 95,197 20.0 91,850 17.8 249,511 19.9 282,448 18.9 Total fee revenue 475,360 100.0 % 515,325 100.0 % 1,254,896 100.0 % 1,492,263 100.0 % Reimbursed out-of-pocket engagement expense 2,520 12,654 7,656 36,091 Total revenue $ 477,880 $ 527,979 $ 1,262,552 $ 1,528,354 Three Months Ended January 31, Nine Months Ended January 31, 2021 2020 2021 2020 Dollars Margin (1) Dollars Margin (1) Dollars Margin (1) Dollars Margin (1) (dollars in thousands) Operating income Consulting $ 22,175 16.3 % $ 2,663 1.9 % $ 25,869 7.1 % $ 24,272 5.8 % Digital 19,214 25.4 8,463 8.5 32,410 15.7 41,036 18.4 Executive Search: North America 17,655 16.7 21,808 20.4 32,411 12.2 80,254 24.1 EMEA 3,114 8.7 4,644 10.5 (1,596 ) (1.6 ) 18,466 14.1 Asia Pacific 5,844 27.0 5,070 20.2 9,958 16.7 17,866 22.8 Latin America 264 5.9 1,198 16.4 (578 ) (4.7 ) 2,999 13.0 Total Executive Search 26,877 16.0 32,720 17.8 40,195 9.2 119,585 21.2 RPO & Professional Search 18,360 19.3 14,144 15.4 33,027 13.2 44,279 15.7 Corporate (21,471 ) (26,395 ) (61,969 ) (75,374 ) Total operating income $ 65,155 13.7 % $ 31,595 6.1 % $ 69,532 5.5 % $ 153,798 10.3 % (1) Margin calculated as a percentage of fee revenue by segment. 32 Three Months Ended January 31, 2021 Executive Search Consulting Digital North America EMEA Asia Pacific Latin America Subtotal RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 136,268 $ 75,791 $ 106,002 $ 35,991 $ 21,643 $ 4,468 $ 168,104 $ 95,197 $ — $ 475,360 Total revenue $ 136,593 $ 75,967 $ 106,325 $ 36,016 $ 21,680 $ 4,468 $ 168,489 $ 96,831 $ — $ 477,880 Net income attributable to Korn Ferry $ 51,319 Net income attributable to noncontrolling interest 269 Other income, net (14,935 ) Interest expense, net 7,298 Income tax provision 21,204 Operating income (loss) $ 22,175 $ 19,214 $ 17,655 $ 3,114 $ 5,844 $ 264 $ 26,877 $ 18,360 $ (21,471 ) $ 65,155 Depreciation and amortization 4,051 7,403 680 345 231 193 1,449 929 1,903 15,735 Other income, net 943 494 12,611 61 323 1 12,996 242 260 14,935 Restructuring, charges, net 346 23 (5 ) 398 (23 ) — 370 99 — 838 Adjusted EBITDA $ 27,515 $ 27,134 $ 30,941 $ 3,918 $ 6,375 $ 458 $ 41,692 $ 19,630 $ (19,308 ) $ 96,663 Operating margin 16.3 % 25.4 % 16.7 % 8.7 % 27.0 % 5.9 % 16.0 % 19.3 % 13.7 % Adjusted EBITDA margin 20.2 % 35.8 % 29.2 % 10.9 % 29.5 % 10.3 % 24.8 % 20.6 % 20.3 % Three Months Ended January 31, 2020 Executive Search Consulting Digital North America EMEA Asia Pacific Latin America Subtotal RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 140,525 $ 99,389 $ 106,888 $ 44,301 $ 25,089 $ 7,283 $ 183,561 $ 91,850 $ — $ 515,325 Total revenue $ 144,298 $ 100,663 $ 110,230 $ 45,077 $ 25,365 $ 7,351 $ 188,023 $ 94,995 $ — $ 527,979 Net income attributable to Korn Ferry $ 19,993 Net income attributable to noncontrolling interest 963 Other income, net (5,055 ) Interest expense, net 6,919 Income tax provision 8,775 Operating income (loss) $ 2,663 $ 8,463 $ 21,808 $ 4,644 $ 5,070 $ 1,198 $ 32,720 $ 14,144 $ (26,395 ) $ 31,595 Depreciation and amortization 4,417 5,832 847 422 329 295 1,893 979 1,742 14,863 Other income (loss), net 558 193 3,963 29 106 162 4,260 88 (44 ) 5,055 Integration/acquisition costs — 4,332 — — — — — — 2,372 6,704 Restructuring, charges, net 11,061 7,032 — — — — — — — 18,093 Separation costs — — — 1,783 — — 1,783 — — 1,783 Adjusted EBITDA $ 18,699 $ 25,852 $ 26,618 $ 6,878 $ 5,505 $ 1,655 $ 40,656 $ 15,211 $ (22,325 ) $ 78,093 Operating margin 1.9 % 8.5 % 20.4 % 10.5 % 20.2 % 16.4 % 17.8 % 15.4 % 6.1 % Adjusted EBITDA margin 13.3 % 26.0 % 24.9 % 15.5 % 21.9 % 22.7 % 22.1 % 16.6 % 15.2 % Nine Months Ended January 31, 2021 Executive Search Consulting Digital North America EMEA Asia Pacific Latin America Subtotal RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 362,271 $ 206,807 $ 266,485 $ 97,701 $ 59,702 $ 12,419 $ 436,307 $ 249,511 $ — $ 1,254,896 Total revenue $ 363,234 $ 207,027 $ 267,790 $ 97,925 $ 59,840 $ 12,419 $ 437,974 $ 254,317 $ — $ 1,262,552 Net income attributable to Korn Ferry $ 48,264 Net income attributable to noncontrolling interest 547 Other income, net (26,374 ) Interest expense, net 21,686 Income tax provision 25,409 Operating income (loss) $ 25,869 $ 32,410 $ 32,411 $ (1,596 ) $ 9,958 $ (578 ) $ 40,195 $ 33,027 $ (61,969 ) $ 69,532 Depreciation and amortization 12,123 21,134 2,126 1,062 756 597 4,541 2,814 5,456 46,068 Other income (loss), net 2,067 1,114 21,944 111 715 56 22,826 462 (95 ) 26,374 Integration/acquisition costs — 556 — — — — — — 181 737 Restructuring charges, net 14,223 2,947 958 8,868 181 405 10,412 3,150 — 30,732 Adjusted EBITDA $ 54,282 $ 58,161 $ 57,439 $ 8,445 $ 11,610 $ 480 $ 77,974 $ 39,453 $ (56,427 ) $ 173,443 Operating margin 7.1 % 15.7 % 12.2 % (1.6 %) 16.7 % (4.7 %) 9.2 % 13.2 % 5.5 % Adjusted EBITDA margin 15.0 % 28.1 % 21.6 % 8.6 % 19.4 % 3.9 % 17.9 % 15.8 % 13.8 % 33 Nine Months Ended January 31, 2020 Executive Search Consulting Digital North America EMEA Asia Pacific Latin America Subtotal RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 422,103 $ 223,097 $ 332,428 $ 130,652 $ 78,395 $ 23,140 $ 564,615 $ 282,448 $ — $ 1,492,263 Total revenue $ 433,832 $ 224,371 $ 342,753 $ 132,830 $ 79,201 $ 23,211 $ 577,995 $ 292,156 $ — $ 1,528,354 Net income attributable to Korn Ferry $ 105,748 Net income attributable to noncontrolling interest 1,890 Other income, net (8,014 ) Interest expense, net 15,186 Income tax provision 38,988 Operating income (loss) $ 24,272 $ 41,036 $ 80,254 $ 18,466 $ 17,866 $ 2,999 $ 119,585 $ 44,279 $ (75,374 ) $ 153,798 Depreciation and amortization 13,188 13,156 2,617 1,328 1,004 938 5,887 2,961 5,163 40,355 Other income (loss), net 1,469 528 5,740 148 193 249 6,330 216 (529 ) 8,014 Integration/acquisition costs — 4,332 — — — — — — 4,987 9,319 Restructuring charges, net 11,061 7,032 — — — — — — — 18,093 Separation costs — — — 1,783 — — 1,783 — — 1,783 Adjusted EBITDA $ 49,990 $ 66,084 $ 88,611 $ 21,725 $ 19,063 $ 4,186 $ 133,585 $ 47,456 $ (65,753 ) $ 231,362 Operating margin 5.8 % 18.4 % 24.1 % 14.1 % 22.8 % 13.0 % 21.2 % 15.7 % 10.3 % Adjusted EBITDA margin 11.8 % 29.6 % 26.7 % 16.6 % 24.3 % 18.1 % 23.7 % 16.8 % 15.5 % Three Months Ended January 31, 2021 Compared to Three Months Ended January 31, 2020 Fee Revenue Fee Revenue. Fee revenue decreased by $39.9 million, or 8%, to $475.4 million in the three months ended January 31, 2021 compared to $515.3 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $8.5 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. The decrease in fee revenue across Digital, Executive Search and Consulting was primarily due to the impact of COVID-19 on economies in which we operate, reducing demand for our products and services. The decrease in fee revenue was partially offset by higher fee revenue in RPO and Professional Search. Consulting. Consulting reported fee revenue of $136.3 million, a decrease of $4.2 million, or 3%, in the three months ended January 31, 2021 compared to $140.5 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 favorably impacted fee revenue by $2.2 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. Digital. Digital reported fee revenue of $75.8 million, a decrease of $23.6 million, or 24%, in the three months ended January 31, 2021 compared to $99.4 million in the year-ago quarter. The decrease in fee revenue was due to a decline in demand for pay data and professional development products and services as a result of the contraction in economic activity primarily due to COVID-19. In addition, fee revenue was impacted by the Company’s ongoing transition to selling subscriptions and licenses as the associated revenues are recognized over a period of time versus at a point in time. Exchange rates favorably impacted fee revenue by $1.5 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. Executive Search. Executive Search reported fee revenue of $168.1 million, a decrease of $15.5 million, or 8%, in the three months ended January 31, 2021 compared to $183.6 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $2.9 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. As detailed below, Executive Search fee revenue was lower in all regions in the three months ended January 31, 2021 as compared to the year-ago quarter. The decline in fee revenue was primarily driven by the decreases in fee revenue in the consumer, industrial, financial and technology sectors due to a decrease in demand for our products and services as a result of the worldwide economic downturn associated with COVID-19. North America reported fee revenue of $106.0 million, a decrease of $0.9 million, or 1%, in the three months ended January 31, 2021 compared to $106.9 million in the year-ago quarter. The decrease in fee revenue was due to an 8% decrease in the number of engagements billed, partially offset by a 7% increase in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended January 31, 2021 compared to the year-ago quarter. EMEA reported fee revenue of $36.0 million, a decrease of $8.3 million, or 19%, in the three months ended January 31, 2021 compared to $44.3 million in the year-ago quarter. The decrease in fee revenue was due to a 20% decrease in the number of engagements billed and a 4% decrease in the weighted-average fee billed per engagement (calculated using local currency) during the three months ended January 31, 2021 compared to the year-ago quarter. Exchange rates favorably impacted fee revenue by $2.4 million, or 5%, in the three months ended January 31, 2021 compared to the year-ago quarter. Performance 34 in the United Kingdom, Switzerland, Germany and France were the primary contributors to the decrease in fee revenue in the three months ended January 31, 2021 compared to the year-ago quarter. Asia Pacific reported fee revenue of $21.6 million, a decrease of $3.5 million, or 14%, in the three months ended January 31, 2021 compared to $25.1 million in the year-ago quarter. The decrease in fee revenue was due to a 17% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the three months ended January 31, 2021 compared to the year-ago quarter. Exchange rates favorably impacted fee revenue by $1.0 million, or 4%, in the three months ended January 31, 2021 compared to the year-ago quarter. The performance in Australia, Singapore and Hong Kong were the primary contributors to the decrease in fee revenue in the three months ended January 31, 2021 compared to the year-ago quarter. Latin America reported fee revenue of $4.5 million, a decrease of $2.8 million, or 38%, in the three months ended January 31, 2021 compared to $7.3 million in the year-ago quarter. The decrease in fee revenue was due to a 39% 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, 2021 compared to the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.7 million, or 10%, in the three months ended January 31, 2021 compared to the year-ago quarter. The decrease in fee revenue in the region was due to lower fee revenue in Mexico, Chile and Brazil in the three months ended January 31, 2021 compared to the year-ago quarter. RPO & Professional Search. RPO & Professional Search reported fee revenue of $95.2 million, an increase of $3.3 million, or 4%, in the three months ended January 31, 2021 compared to $91.9 million in the year-ago quarter. Exchange rates favorably impacted fee revenue by $1.9 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. The increase in fee revenue was due to higher fee revenue in RPO of $4.1 million, partially offset by lower fee revenue in Professional Search of $0.7 million. Compensation and Benefits Compensation and benefits expense decreased $22.3 million, or 6%, to $326.3 million in the three months ended January 31, 2021 from $348.6 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $5.5 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. The decrease in compensation and benefits expense was primarily due to lower salaries and related payroll taxes due to a 17% decrease in average headcount as a result of actions taken to align our cost structure with the lower level of business demand. The decrease in compensation and benefits expense was also driven by a lower severance expense due to management separation costs incurred in the year-ago quarter, a decrease in integration and acquisition costs, and an increase in income from company-owned life insurance (“COLI”) policies due to death benefits recorded in three months ended January 31, 2021. These changes were partially offset by increases in performance-related bonus and 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 January 31, 2021 compared to the year-ago quarter. Consulting compensation and benefits expense decreased by $4.3 million, or 5%, to $89.2 million in the three months ended January 31, 2021 from $93.5 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $1.5 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes due to a 20% decrease in average headcount, partially offset by an increase in performance-related bonus expense in the three months ended January 31, 2021 compared to the year-ago quarter. Consulting compensation and benefits expense, as a percentage of fee revenue, decreased to 65% in the three months ended January 31, 2021 from 67% in the year-ago quarter. Digital compensation and benefits expense decreased by $14.3 million, or 30%, to $33.9 million in the three months ended January 31, 2021 from $48.2 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.8 million, or 2% in the three months ended January 31, 2021 compared to the year-ago quarter. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes due to a decrease in average headcount of 10%. The decrease in compensation and benefits expense was also driven by a decrease performance-related bonus expense and integration and acquisition costs that were incurred in the year-ago quarter as a result of the acquisition of the Acquired Companies. Digital compensation and benefits expense, as a percentage of fee revenue, decreased to 45% in the three months ended January 31, 2021 from 49% in the year-ago quarter. Executive Search compensation and benefits expense decreased by $3.3 million, or 3%, to $125.4 million in the three months ended January 31, 2021 from $128.7 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $2.0 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes due to a 22% 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 in the three months ended January 31, 2021 compared to the year-ago quarter. The rest of the change was due to lower severance expense due to management separation costs incurred in the year-ago quarter, partially offset by 35 an increase in expenses associated with our deferred compensation and retirement plans driven by increases in the fair value of participants’ accounts and increase in performance-related bonus expense in the three months ended January 31, 2021 compared to the year-ago quarter. Executive Search compensation and benefits expense, as a percentage of fee revenue, increased to 75% in the three months ended January 31, 2021 from 70% in the year-ago quarter. RPO & Professional Search compensation and benefits expense increased by $1.0 million, or 2%, to $66.9 million in the three months ended January 31, 2021 from $65.9 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $1.3 million, or 2%, in the three months ended January 31, 2021 compared to the year-ago quarter. The increase was due to higher performance-related bonus expense due to an increase in profitability and an increase in the use of contractors due to an increase in demand in RPO in the three months ended January 31, 2021 compared to the year-ago quarter. These changes were partially offset by a decrease in salaries and related payroll taxes and employer insurance due to a 14% decrease in the average headcount in the three months ended January 31, 2021 compared to the year-ago quarter 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, decreased to 70% in the three months ended January 31, 2021 from 72% in the year-ago quarter. Corporate compensation and benefits expense decreased by $1.4 million, or 11%, to $10.9 million in the three months ended January 31, 2021 from $12.3 million in the year-ago quarter. The decrease was due to an increase in income from COLI policies due to death benefits recorded in three months ended January 31, 2021, partially offset by increases in performance-related bonus expense and 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 January 31, 2021 compared to the year-ago quarter. General and Administrative Expenses General and administrative expenses decreased by $24.1 million, or 34%, to $47.3 million in the three months ended January 31, 2021 from $71.4 million in the year-ago quarter. Exchange rates unfavorably impacted general and administrative expenses by $1.6 million, or 2%, in the three months ended January 31, 2021 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 and travel related expenses as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Also contributing to the decrease were integration/acquisition costs incurred in the year-ago quarter due to the acquisition of the Acquired Companies. General and administrative expenses, as a percentage of fee revenue, was 10% in the three months ended January 31, 2021 compared to 14% in the year-ago quarter. Consulting general and administrative expenses decreased by $4.2 million, or 25%, to $12.5 million in the three months ended January 31, 2021 compared to $16.7 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 because 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 9% in the three months ended January 31, 2021 from 12% in the year-ago quarter. Digital general and administrative expenses decreased by $7.8 million, or 52%, to $7.2 million in the three months ended January 31, 2021 compared to $15.0 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 because of actions taken to align our cost structure with the lower level of business demand. The rest of the decrease was primarily due integration/acquisition costs incurred in the year-ago quarter due to the acquisition of the Acquired Companies. Digital general and administrative expenses, as a percentage of fee revenue, decreased to 10% in the three months ended January 31, 2021 from 15% in the year-ago quarter. Executive Search general and administrative expenses decreased by $6.4 million, or 33%, to $12.8 million, in the three months ended January 31, 2021 compared to $19.2 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, decreased to 8% in the three months ended January 31, 2021 from 10% in the year-ago quarter. RPO & Professional Search general and administrative expenses decreased by $1.9 million, or 24%, to $6.1 million in the three months ended January 31, 2021 compared to $8.0 million in the year-ago quarter. The decrease was primarily due to decreases in marketing and business development expenses and lower travel related expenses due to working from home plans in place and restrictions on employee travel. The rest of the decrease was primarily due to foreign exchange gain in the three months ended January 31, 2021 compared to foreign currency losses in the year-ago quarter. RPO & Professional Search general and administrative expenses, as a percentage of fee revenue, decreased to 6% in the three months ended January 31, 2021 from 9% in the year-ago quarter. 36 Corporate general and administrative expenses decreased by $3.8 million, or 31% , to $8.6 million in the three months ended January 31, 2021 compared to $12.4 million in the year-ago quarter. The de crease was primarily due integration/acquisition costs incurred in the year-ago quarter due to the acquisition of the Acquired Companies. Also contributing to the decrease were decreases i n marketing and business development expenses and travel related expenses as a result of actions taken to align our cost structure in the three months ended January 31, 2021 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 $10.8 million, or 35% to $20.0 million in the three months ended January 31, 2021 compared to $30.8 million in the year-ago quarter. The decrease was due to the overall decline in fee revenue. Cost of services expense, as a percentage of fee revenue, decreased to 4% in the three months ended January 31, 2021 from 6% in the three months ended January 31, 2020. Depreciation and Amortization Expenses Depreciation and amortization expenses were $15.7 million, an increase of $0.8 million, or 5%, in the three months ended January 31, 2021 compared to $14.9 million in the year-ago quarter. The increase was primarily from the Digital segment due to technology investments made in the current and prior year in software. 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. We continued the implementation of this plan in the first quarter of fiscal 2021 and made adjustments to previously recorded restructuring accruals in the second and third quarter of fiscal 2021, and this resulted in restructuring charges of $0.8 million of severance costs during the three months ended January 31, 2021. During the three months ended January 31, 2020, we implemented a restructuring plan in order to eliminate redundant positions that were created due to the investments made in our digital business and the acquisition of the Acquired Companies. As a result, we recorded restructuring charges of $18.1 million of severance costs during the three months ended January 31, 2020. Operating Income Operating income increased $33.6 million, or 106% to $65.2 million in the three months ended January 31, 2021, as compared to $31.6 million in the year-ago quarter, despite the decline in fee revenue from lower demand for our products and services as a result of the COVID-19 pandemic. The increase in operating income was primarily driven by lower general and administrative expenses, compensation and benefits expense and cost of services expense due to actions taken to align our cost structure with the lower level of business demand. The increase in operating income was also driven by a decrease in restructuring charges, net, as compared to the year-ago quarter. Consulting operating income was $22.2 million in the three months ended January 31, 2021, an increase of $19.5 million, as compared to operating income of $2.7 million in the year-ago quarter. The increase in Consulting operating income was mainly driven by lower compensation and benefits expense, general and administrative expenses and cost of services expense due to actions taken to align our cost structure with the lower level of business demand. The increase in operating income was also driven by a decrease in restructuring charges, net, partially offset by a decline in fee revenue during the three months ended January 31, 2021 compared to the year-ago quarter. Consulting operating income, as a percentage of fee revenue, was 16% and 2% in the three months ended January 31, 2021 and 2020, respectively. 37 Digital operating income was $19.2 million in the three months ended January 31, 2021, an increase of $10.7 million, or 126%, as compared to operating income of $8.5 million in the year-ago quarter. The increase in Digital operating income was mainly driven by lower compensation and benefits expense, general and administrative expenses and cost of services expense due to actions taken to align our cost structure with the lower level of business demand. The increase in operating income was also driven by decreases in restructuring charges, net and integration/acquisition costs, partially offset by a decline in fee revenue during the three months ended January 31, 2021 compared to the year-ago quarter. Digital operating income, as a percentage of fee revenue, was 25% and 9% in the three months ended January 31, 2021 and 2020, respectively. Executive Search operating income decreased $5.8 million, or 18% to $26.9 million in the three months ended January 31, 2021, as compared to operating income of $32.7 million in the year-ago quarter. The decrease in Executive Search operating income was mainly driven by lower fee revenue incurred during the three months ended January 31, 2021 compared to the year-ago quarter. These changes were partially offset by decreases in general and administrative expenses and compensation and benefits expenses, all of which resulted from cost savings initiatives that were put in place in response to the COVID-19 pandemic. Executive Search operating income, as a percentage of fee revenue, was 16% and 18% in the three months ended January 31, 2021 and 2020, respectively. RPO & Professional Search operating income was $18.4 million in the three months ended January 31, 2021, an increase of $4.3 million, or 30% compared to $14.1 million in the year-ago quarter. The increase in operating income was mainly driven by higher fee revenue and a decrease in general and administrative expenses, which resulted from cost savings initiatives that were put in place in response to the COVID-19 pandemic. The changes were partially offset by an increase in compensation and benefits expense. RPO & Professional Search operating income, as a percentage of fee revenue, was 19% in the three months ended January 31, 2021 compared to 15% in the year-ago quarter. Net Income Attributable to Korn Ferry Net income attributable to Korn Ferry increased by $31.3 million, or 157% to $51.3 million in the three months ended January 31, 2021, as compared to a net income attributable to Korn Ferry of $20.0 million in the year-ago quarter. The increase was mainly driven by decreases in general and administrative expenses, compensation and benefits expense and cost of services expense associated with actions taken to align our cost structure with the lower level of business demand. Also contributing to the increase in net income attributable to Korn Ferry was a decline in restructuring charges, net in the three months ended January 31, 2021 compared to the year-ago quarter. These changes were partially offset by a decrease to fee revenue that resulted from actions taken by various government and other authoritative bodies in response to the COVID-19 pandemic that caused a contraction in economic activity during the quarter. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 11% and 4% in the three months ended January 31, 2021 and 2020, respectively. Adjusted EBITDA Adjusted EBITDA increased by $18.6 million, or 24%, to $96.7 million in the three months ended January 31, 2021 as compared to $78.1 million in the year-ago quarter. The increase in Adjusted EBITDA was driven by decreases in compensation and benefits expense (excluding integration/acquisition costs and separation costs), general and administrative expenses (excluding integration/acquisition costs) and cost of services expense due to actions taken to align our cost structure with the lower level of business demand. These changes were partially offset 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. Adjusted EBITDA, as a percentage of fee revenue, was 20% in the three months ended January 31, 2021 compared to 15% in the year-ago quarter. Consulting Adjusted EBITDA was $27.5 million in the three months ended January 31, 2021, an increase of $8.8 million, or 47%, as compared to $18.7 million in the year-ago quarter. This increase in Consulting Adjusted EBITDA was driven by decreases in compensation and benefits expense, general and administrative expenses and cost of services expense, partially offset by lower fee revenue. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 20% and 13% in the three months ended January 31, 2021 and 2020, respectively. Digital Adjusted EBITDA was $27.1 million in the three months ended January 31, 2021, an increase of $1.2 million, or 5%, as compared to $25.9 million in the year-ago quarter. This increase was mainly driven by decreases in compensation and benefits expense (excluding integration/acquisition costs), cost of services expense and general and administrative expenses (excluding integration/acquisition costs), partially offset by a decrease in fee revenue during the three months ended January 31, 2021 compared to the year-ago quarter. Digital Adjusted EBITDA, as a percentage of fee revenue, was 36% and 26% in the three months ended January 31, 2021 and 2020, respectively. Executive Search Adjusted EBITDA increased $1.0 million, or 2%, to $41.7 million in the three months ended January 31, 2021 as compared to $40.7 million in the year-ago quarter. The increase was mainly driven by decreases in general and administrative expenses and compensation and benefits expense (excluding separation costs), all of which resulted from cost savings initiatives that were put in place in response to the COVID-19 pandemic. These changes were partially offset by lower 38 fee revenue . Executive Search Adjusted EBITDA, as a percentage of fee revenue, was 25% and 22% in the three months ended January 31, 2021 and 2020, respectively. RPO & Professional Search Adjusted EBITDA was $19.6 million in the three months ended January 31, 2021, an increase of $4.4 million, or 29%, as compared to $15.2 million in the year-ago quarter. The increase was mainly driven by higher fee revenue and a decrease in general and administrative expenses, which resulted from cost savings initiatives that were put in place in response to the COVID-19 pandemic. The changes were partially offset by an increase in compensation and benefits expense. RPO & Professional Search Adjusted EBITDA, as a percentage of fee revenue, was 21% and 17% in the three months ended January 31, 2021 and 2020, respectively. Other Income, Net Other income, net was $14.9 million in the three months ended January 31, 2021 compared to $5.1 million in the year-ago quarter. The difference was primarily due to higher gains from the fair value of our marketable securities. These gains were offset by the larger increases in our deferred compensation liability that are recorded in compensation and benefits expense during the three months ended January 31, 2021 compared to the year-ago quarter. Interest Expense, Net Interest expense, net primarily relates to our Notes issued in December 2019, our prior credit agreement and borrowings under the COLI policies, which are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $7.3 million in the three months ended January 31, 2021 compared to $6.9 million in the year-ago quarter. The increase in interest expense, net was related to the Notes, which have a higher interest rate and a higher principal balance than the revolver under our prior credit agreement. Income Tax Provision The provision for income tax was $21.2 million in the three months ended January 31, 2021, compared to $8.8 million in the three months ended January 31, 2020. This reflects a 29.1% and 29.5 % effective tax rate for the three months ended January 31, 2021 and 2020, respectively. The variability in effective tax rate is primarily due to the impact of the jurisdictional mix of earnings. Net Income Attributable to Noncontrolling Interest Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to shares of a 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, 2021 was $0.3 million as compared to $1.0 million the three months ended January 31, 2020. Nine Months Ended January 31, 2021 Compared to Nine Months Ended January 31, 2020 Fee Revenue Fee Revenue. Fee revenue decreased by $237.4 million, or 16%, to $1,254.9 million in the nine months ended January 31, 2021 compared to $1,492.3 million in the year-ago period. Exchange rates favorably impacted fee revenue by $4.9 million in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in fee revenue across all lines of business 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 $362.3 million, a decrease of $59.8 million, or 14%, in the nine months ended January 31, 2021 compared to $422.1 million in the year-ago period. The decrease in fee revenue was primarily due to the contraction in economic activity due to the COVID-19 pandemic. Exchange rates favorably impacted fee revenue by $0.9 million in the nine months ended January 31, 2021 compared to the year-ago period. Digital. Digital reported fee revenue of $206.8 million, a decrease of $16.3 million, or 7%, in the nine months ended January 31, 2021 compared to $223.1 million in the year-ago period. The decrease in fee revenue was primarily due to the contraction in economic activity due to the COVID-19 pandemic. Exchange rates favorably impacted fee revenue by $0.5 million in the nine months ended January 31, 2021 compared to the year-ago period. Executive Search. Executive Search reported fee revenue of $436.3 million, a decrease of $128.3 million, or 23%, in the nine months ended January 31, 2021 compared to $564.6 million in the year-ago period. Exchange rates favorably impacted fee revenue by $2.0 million in the nine months ended January 31, 2021 compared to the year-ago period. As detailed below, Executive Search fee revenue was lower in all regions in the nine months ended January 31, 2021 compared to the year-ago period. 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, financial services, and technology having the greatest impact. 39 North America reported fee revenue of $266.5 million, a decrease of $65.9 million, or 20% , in the nine months ended January 31, 2021 compared to $332.4 million in the year-ago period. The decrease in fee revenue was due to a 1 7 % decrease in the number of engagements billed and a 3 % decrease in the weighted-average fees billed per engagement (calculated using local currency) during the nine months ended January 31, 2021 compared to the year-ago period. EMEA reported fee revenue of $97.7 million, a decrease of $33.0 million, or 25%, in the nine months ended January 31, 2021 compared to $130.7 million in the year-ago period. The decrease in fee revenue was due to a 22% decrease in the number of engagements billed and an 8% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the nine months ended January 31, 2021 compared to the year-ago period. Exchange rates favorably impacted fee revenue by $4.6 million, or 4%, in the nine months ended January 31, 2021 compared to the year-ago period. Performance in the United Kingdom, Germany, France, Netherlands and the United Arab Emirates were the primary contributors to the decrease in fee revenue in the nine months ended January 31, 2021 compared to the year-ago period. Asia Pacific reported fee revenue of $59.7 million, a decrease of $18.7 million, or 24%, in the nine months ended January 31, 2021 compared to $78.4 million in the year-ago period. The decrease in fee revenue was due to a 15% decrease in the number of engagements billed and an 11% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the nine months ended January 31, 2021 compared to the year-ago period. The performance in Australia, Hong Kong and Singapore were the primary contributors to the decrease in fee revenue in the nine months ended January 31, 2021 compared to the year-ago period. Latin America reported fee revenue of $12.4 million, a decrease of $10.7 million, or 46%, in the nine months ended January 31, 2021 compared to $23.1 million in the year-ago period. The decrease in fee revenue was due to a 34% decrease in the number of engagements billed and a 4% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the nine months ended January 31, 2021 compared to the year-ago period. Exchange rates unfavorably impacted fee revenue by $3.4 million, or 15%, in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in fee revenue in the region was due to lower fee revenue in Mexico, Brazil and Chile in the nine months ended January 31, 2021 compared to the year-ago period. RPO & Professional Search. RPO & Professional Search reported fee revenue of $249.5 million, a decrease of $32.9 million, or 12%, in the nine months ended January 31, 2021 compared to $282.4 million in the year-ago period. Exchange rates favorably impacted fee revenue by $1.6 million, or 1% in the nine months ended January 31, 2021 compared to the year-ago period. 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 $22.0 million and RPO of $10.9 million. Compensation and Benefits Compensation and benefits expense decreased by $97.0 million, or 10%, to $917.5 million in the nine months ended January 31, 2021 from $1,014.5 million in the year-ago period. Exchange rates unfavorably impacted compensation and benefits by $3.2 million in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in compensation and benefits expense was primarily due to lower salaries and related payroll taxes and a decrease in employer insurance due to an 11% decrease in average headcount and pay cuts implemented during the first quarter of fiscal 2021. Also contributing to the decrease in compensation and benefits expenses was 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, a decrease in severance expense due to management separation costs that were incurred in the year-ago period and a decrease in integration/acquisition costs in the nine months ended January 31, 2021 compared to the year-ago period. 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 nine months ended January 31, 2021 compared to the year-ago period. Consulting compensation and benefits expense decreased by $32.1 million, or 11%, to $254.1 million in the nine months ended January 31, 2021 from $286.2 million in the year-ago period. Exchange rates unfavorably impacted compensation and benefits by $0.5 million, in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes and employer insurance due to a 16% decrease in average headcount and pay cuts implemented during the first quarter of fiscal 2021, 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 an increase in performance-related bonus expense in the nine months ended January 31, 2021 compared to the year-ago period. Consulting compensation and benefits expense as a percentage of fee revenue increased to 70% in the nine months ended January 31, 2021 from 68% in the year-ago period. Digital compensation and benefits expense decreased by $4.6 million, or 4%, to $108.8 million in the nine months ended January 31, 2021 from $113.4 million in the year-ago period. Exchange rates unfavorably impacted compensation and benefits by $0.2 million in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes and employer insurance due to a 3% 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. The decrease in compensation and benefits expense was also impacted by 40 a decrease in integration / acquisition costs. These changes were partially offset by a n in crease in commission expense . Digital compensation and benefits expense as a percentage of fee revenue increased to 53% in the nine months ended January 31, 2021 from 51% in the year-ago period. Executive Search compensation and benefits expense decreased by $38.7 million, or 10% to $339.2 million in the nine months ended January 31, 2021 from $377.9 million in the year-ago period. Exchange rates unfavorably impacted compensation and benefits by $1.1 million in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in compensation and benefits expense was due to lower salaries and related payroll taxes, performance-related bonus expense, and employer insurance due to a 17% decrease in average headcount and pay cuts implemented during the first quarter of fiscal 2021, and a decrease in severance costs due to management separation costs that were incurred in the year-ago period. 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 nine months ended January 31, 2021 compared to the year-ago period. Executive Search compensation and benefits expense, as a percentage of fee revenue, increased to 78% in the nine months ended January 31, 2021 from 67% in the year-ago period. RPO & Professional Search compensation and benefits expense decreased by $17.5 million, or 9%, to $184.4 million in the nine months ended January 31, 2021 from $201.9 million in the year-ago period. The decrease was due to lower salaries and related payroll taxes and employer insurance due to a 7% decrease in the average headcount and pay cuts implemented during the first quarter of fiscal 2021 in the nine months ended January 31, 2021 compared to the year-ago period 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. These changes were partially offset by an increase in performance-related bonus expense. RPO & Professional Search compensation and benefits expense, as a percentage of fee revenue, increased to 74% in the nine months ended January 31, 2021 from 71% in the year-ago period. Corporate compensation and benefits expense decreased by $3.9 million, or 11%, to $31.2 million in the nine months ended January 31, 2021 from $35.1 million in the year-ago period. The decrease was due to lower salaries and related payroll taxes due to a 9% decrease in the average headcount and pay cuts implemented during the first quarter of fiscal 2021 in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in compensation and benefits expense was also impacted by an increase in income from COLI policies due to death benefits recorded in the nine months ended January 31, 2021 compared to the year-ago period. 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. General and Administrative Expenses General and administrative expenses decreased by $58.4 million, or 29%, to $140.8 million in the nine months ended January 31, 2021 compared to $199.2 million in the year-ago period. Exchange rates unfavorably impacted general and administrative expenses by $0.8 million in the nine months ended January 31, 2021 compared to the year-ago period. The decrease in general and administrative expenses was due to lower marketing and business development expenses, premise and office expenses, travel and related expenses and legal and other professional fees as a result of actions taken to align our cost structure with the lower level of business demand and restrictions implemented by various governmental agencies due to COVID-19. Also contributing to the decrease in general and administrative expenses was a decrease in integration/acquisition costs. General and administrative expenses, as a percentage of fee revenue, was 11% in the nine months ended January 31, 2021 as compared to 13% in the nine months ended January 31, 2020. Consulting general and administrative expenses decreased by $15.8 million, or 30%, to $36.8 million in the nine months ended January 31, 2021 compared to $52.6 million in the year-ago period. The decrease was mainly due to decreases in marketing and business development expenses, premise and office expenses and travel related expenses because 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, was 10% in the nine months ended January 31, 2021 as compared to 12% in the nine months ended January 31, 2020. Digital general and administrative expenses was $22.0 million in the nine months ended January 31, 2021 compared to $29.7 million in the year-ago period. The decrease was mainly due to decreases in travel related expenses and marketing and business development expenses because of actions taken to align our cost structure with the lower level of business demand. The decrease in compensation and benefits expense was also impacted by a decrease in integration/acquisition costs. Digital general and administrative expenses, as a percentage of fee revenue, was 11% in the nine months ended January 31, 2021 as compared to 13% in the nine months ended January 31, 2020. Executive Search general and administrative expenses decreased by $19.5 million, or 34% to $38.5 million in the nine months ended January 31, 2021 compared to $58.0 million in the year-ago period. The decrease was mainly due to decreases in marketing and business development expenses, premise and office expenses and travel related expenses because of actions taken to align our cost structure with the lower level of business demand. Executive Search general and administrative 41 expenses, as a percentage of fee revenue, was 9% in the nine months ended January 31, 2021 compared to 10% in the year-ago period. RPO & Professional Search general and administrative expenses decreased by $5.7 million, or 24%, to $18.2 million in the nine months ended January 31, 2021 compared to $23.9 million in the year-ago period. The decrease was primarily due to lower travel related expenses due to employees working from home, restrictions on employee travel and a decrease in marketing and business development expenses. RPO & Professional Search general and administrative expenses, as a percentage of fee revenue, was 7% in the nine months ended January 31, 2021 compared to 8% in the year-ago period. Corporate general and administrative expenses decreased by $9.7 million, or 28%, to $25.4 million in the nine months ended January 31, 2021 compared to $35.1 million in the year-ago period. The decrease was primarily due to decreases in integration/acquisition costs, legal and professional fees and lower marketing and business development expenses, partially offset by foreign currency losses during the nine months ended January 31, 2021 compared to foreign currency gains recorded in the year-ago period. 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 $16.2 million, or 24%, to $50.2 million in the nine months ended January 31, 2021 compared to $66.4 million in the year-ago period. 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 nine months ended January 31, 2021 and 2020. Depreciation and Amortization Expenses Depreciation and amortization expenses were $46.1 million, an increase of $5.7 million, or 14%, in the nine months ended January 31, 2021 compared to $40.4 million in the year-ago period. The increase was primarily from the Digital segment due to the acquisition of the Acquired Companies and technology investments made in the current and prior year in software and computer equipment. Restructuring Charges, Net In 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. We continued the implementation of this plan in fiscal 2021 and as a result recorded restructuring charges, net of $30.7 million of severance costs during the nine months ended January 31, 2021. During the nine months ended January 31, 2020, we implemented a restructuring plan in order to eliminate redundant positions that were created due to the investments made in our digital business and the acquisition of the Acquired Companies. As a result, we recorded restructuring charges of $18.1 million of severance costs during the nine months ended January 31, 2020. Operating Income Operating income decreased by $84.3 million to $69.5 million in the nine months ended January 31, 2021, compared to operating income of $153.8 million in the year-ago period. The change in operating 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 increases in restructuring charges, net, and depreciation and amortization expenses, 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 income was $25.9 million in the nine months ended January 31, 2021, an increase of $1.6 million, or 7%, compared to operating income of $24.3 million in the year-ago period. The change in Consulting operating income was mainly driven by decreases in compensation and benefits expense, general and administrative expenses and cost of services expense due to actions taken to align our cost structure with the lower level of business demand. The changes were partially offset by a decrease in fee revenue and an increase in restructuring charges, net during the nine months ended January 31, 2021 compared to the year-ago period. Consulting operating income, as a percentage of fee revenue, was 7% and 6% in the nine months ended January 31, 2021 and 2020, respectively. 42 Digital operating inc ome was $32.4 million in the nine months ended January 31, 2021 , a decrease of $8.6 million, or 21% , compared to operating income of $41.0 million in the year-ago period. The change in Digital operating income was mainly driven by a decrease in fee revenue and an increase in d epreciation and a mortization e xpenses , partially offset by decreases in restructuring charges, net , compensation and benefits expense and general and administrative expenses during the nine months ended January 31, 2021 compared to the year-ago period. Digital operating income, as a percentage of fee revenue was 16% and 18% in the nine months ended January 31, 2021 and 2020, respectively . Executive Search operating income decreased $79.4 million, or 66%, to $40.2 million in the nine months ended January 31, 2021 compared to operating income of $119.6 million in the year-ago period. The change in Executive Search operating income was mainly driven by lower fee revenue and an increase in restructuring charges, net during the nine months ended January 31, 2021 compared to the year-ago period. 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 in response to the COVID-19 pandemic. Executive Search operating income, as a percentage of fee revenue was 9% and 21% in the nine months ended January 31, 2021 and 2020, respectively. RPO & Professional Search operating income was $33.0 million, in the nine months ended January 31, 2021, a decrease of $11.3 million, or 26% compared to $44.3 million in the year-ago period. The decrease in operating income was mainly driven by lower fee revenue and an increase in restructuring charges, net, partially offset by decreases in compensation and benefits expense, general and administrative expenses and cost of services expense, all of which resulted from cost savings initiatives that were put in place in response to the COVID-19 pandemic. RPO & Professional Search operating income, as a percentage of fee revenue, was 13% in the nine months ended January 31, 2021 compared to 16% in the year-ago period. Net Income Attributable to Korn Ferry Net income attributable to Korn Ferry decreased by $57.4 million to $48.3 million in the nine months ended January 31, 2021 compared to a net income attributable to Korn Ferry of $105.7 million in the year-ago period. 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 period, which translated into a decrease to fee revenue. This decline in fee revenue and an increase in restructuring charges, net, were partially offset by an increase in other income, net and decreases in compensation and benefits expense, general and administrative expenses and cost of services expense associated with actions taken to align our cost structure with the lower level of business demand that resulted in lower net income attributable to Korn Ferry in the nine months ended January 31, 2021 compared to the year-ago period. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 4% in the nine months ended January 31, 2021 as compared to 7% in the nine months ended January 31, 2020. Adjusted EBITDA Adjusted EBITDA decreased by $58.0 million to $173.4 million in the nine months ended January 31, 2021 compared to $231.4 million in the year-ago period. The decrease in Adjusted EBITDA was driven by a decrease in fee revenue, partially offset by decreases in compensation and benefits expense (excluding integration/acquisition costs and separation costs), general and administrative expenses (excluding integration/acquisition costs) and cost of services expense 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 14% and 16% in the nine months ended January 31, 2021 and 2020. Consulting Adjusted EBITDA was $54.3 million in the nine months ended January 31, 2021, an increase of $4.3 million, or 9%, compared to $50.0 million in the year-ago period. This increase was driven by decreases in compensation and benefits expense, general and administrative expenses and cost of services expense. Also contributing to the increase in Adjusted EBITDA was an increase in other income, net, partially offset by lower fee revenue. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 15% in the nine months ended January 31, 2021 compared to 12% in the year-ago period. Digital Adjusted EBITDA was $58.2 million in the nine months ended January 31, 2021, a decrease of $7.9 million, or 12%, compared to $66.1 million in the year-ago period. This decrease in Digital Adjusted EBITDA was mainly driven by a decrease in fee revenue, partially offset by decreases in compensation and benefits expense (excluding integration/acquisition costs) and general and administrative expenses (excluding integration/acquisition costs) during the nine months ended January 31, 2021 compared to the year-ago period. Digital Adjusted EBITDA, as a percentage of fee revenue, was 28% in the nine months ended January 31, 2021 as compared to 30% in the nine months ended January 31, 2020. Executive Search Adjusted EBITDA decreased $55.6 million, or 42%, to $78.0 million in the nine months ended January 31, 2021 compared to $133.6 million in the nine months ended January 31, 2020. The decrease was mainly driven by lower fee revenue, partially offset by decreases in compensation and benefits expense (excluding separation costs) and general and administrative expenses, all of which resulted from cost savings initiatives that were put in place in response to the COVID-19 pandemic. Executive Search Adjusted EBITDA, as a percentage of fee revenue, was 18% in the nine months ended January 31, 2021 as compared to 24% in the nine months ended January 31, 2020. 43 RPO & Professional Search Adjusted EBITDA was $39.5 million in the nine months ended January 31, 2021 , a decrease of $8.0 million, or 17% , compared to $47.5 million in the year-ago period. The decrease was mainly driven by lower fee revenue, partially offset by decreases in compensation and benefits expense , general and administrative expenses and cost of services expense , all of which resulted from cost savings initiatives that were put in place in response to the COVID-19 pandemic . RPO & Professional Search Adjusted EBITDA, as a percentage of fee revenue, was 16% in the nine months ended January 31, 2021 compared to 17% in the year-ago period . Other Income, Net Other income, net was $26.4 million in the nine months ended January 31, 2021 compared to $8.0 million in the year-ago period. The difference was primarily due to larger gains from the fair value of our marketable securities. These gains were offset by larger increases in our deferred compensation liability that are recorded in compensation and benefits expense during the nine months ended January 31, 2021 compared to the year-ago period. Interest Expense, Net Interest expense, net primarily relates to the Notes issued in December 2019, our prior credit agreement and borrowings under COLI policies, which are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $21.7 million in the nine months ended January 31, 2021 compared to $15.2 million in the year-ago period. The increase in interest expense, net was related to the Notes, which have a higher interest rate than the revolver under our prior credit agreement that was outstanding for most of the nine months ended January 31, 2020. Income Tax Provision The provision for income tax was $25.4 million in the nine months ended January 31, 2021 compared to $ 39.0 million in the year-ago period. This reflects a 34.2% and 26.6 % effective tax rate for the nine months ended January 31, 2021 and 2020, respectively. In addition to the impact of the jurisdictional mix of earnings, which generally create variability in our effective tax rate over time, the effective tax rate in the nine months ended January 31, 2021 was affected by a tax expense recorded for withholding taxes on intercompany dividends that are not eligible for credit and a shortfall recorded in connection with stock-based awards that vested in the three months ended July 31, 2020. The shortfall 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 less than the expense recorded in the Company’s financial statements over the awards’ vesting period. Net Income Attributable to Noncontrolling Interest Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to shares of a subsidiary not held by Korn Ferry that are included in the consolidated results of operations. Net income attributable to noncontrolling interest for the nine months ended January 31, 2021 was $0.5 million as compared to $1.9 million during the nine months ended January 31, 2020. 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 position us to realize efficiencies and operational improvements. As previously discussed under the heading “Impact of COVID-19”, with the implementation of the restructuring plan that was initiated on April 20, 2020 to reduce, in part, our human capital expenditures, and the improved business activity we experienced in the second and third quarter demonstrated by an increase in fee revenue compared to the first quarter of fiscal 2021, we believe our costs are in line with our current revenue levels, but given the unpredictable and fluid nature of the pandemic and its economic consequences our revenue levels could fall below our current levels. Given the amount available from our current revolver and the amount of cash and cash equivalents and marketable securities net of amounts held in trust for deferred compensations and accrued bonuses, we believe that we have sufficient liquidity to meet our anticipated working 44 capital , capital expenditures, general corporate requirements, repayment of the debt obligations and dividend payments under our dividend policy in the next 12 months. On December 16, 2019, we completed a private placement of the Notes with a $400 million principal amount pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes were issued with a $4.5 million discount and will mature December 15, 2027, with interest payable semi-annually in arrears on June 15 and December 15 of each year that commenced on June 15, 2020. The Notes represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. We may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture governing the Notes. The Notes are guaranteed by each of our existing and future wholly owned domestic subsidiaries to the extent such subsidiaries guarantee our revolving credit facility under the Credit Agreement (defined below). The indenture governing the Notes requires that, upon the occurrence of both a Change of Control and a Rating Decline (each as defined in the indenture), we shall make an offer to purchase all of the Notes at 101 % of their principal amount and accrued and unpaid interest. As of January 31, 2021, the fair value of the Notes is $420.5 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 January 31, 2021 after $4.0 million of standby letters of credit had been issued as of January 31, 2021 and April 30, 2020. We had a total of $ 10.7 million and $ 11.3 million of standby letters of credits with other financial institutions as of January 31, 2021 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. On March 6, 2019, our Board of Directors approved an increase to the share repurchase program of approximately $200 million, which at the time brought our available capacity to repurchase shares in the open market or privately negotiated transactions to approximately $250 million. The Company repurchased approximately $ 30.4 million and $68.1 million of the Company’s stock during the nine months ended January 31, 2021 and 2020, respectively. As of January 31, 2021 , $ 127.9 million remained available for common stock repurchases under our share repurchase program. Any decision to continue to execute our currently outstanding share repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. The Credit Agreement permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under the Credit Agreement, the consolidated net leverage ratio, which uses adjusted EBITDA (a measure used by our lenders and is defined in the credit agreement) is no greater than 4.00 to 1.00, and pro forma liquidity is at least $50 million, including the revolving credit commitment minus amounts outstanding on the Revolver, issued letters of credit and swing loans. Furthermore, our Notes allow us to pay $25 million of dividends per fiscal year with no restrictions plus an unlimited amount of dividends so long as our consolidated total leverage ratio is not greater than 3.50 to 1.00, and there is no default under the indenture governing the Notes. Our performance is subject to the general level of economic activity in the geographic regions and the industries we service. We believe, based on current economic conditions, that our cash on hand and funds from operations and the Credit Agreement will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt, share repurchases and dividend payments under our dividend policy during the next 12 months. However, if COVID-19 continues to persist or worsen, or the national or global economy, credit market conditions and/or labor markets were to deteriorate in the future, such changes could put negative pressure on demand for our services and affect our operating cash flows. If these conditions were to persist over an extended period of time, we may incur negative cash flows and it might require us to access additional borrowings under the Credit Agreement to meet our capital needs and/or discontinue our share repurchases and dividend policy. Cash and cash equivalents and marketable securities were $897.1 million and $863.3 million as of January 31, 2021 and April 30, 2020, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and cash equivalents and marketable securities were $ 534.3 million and $ 531.9 million at January 31, 2021 and April 30, 2020, respectively. As of January 31, 2021 and April 30, 2020, we held $340.5 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, corporate notes/bonds and U.S. Treasury and Agency securities. The primary objectives of our investment in mutual funds are 45 to meet the obligations under certain of our deferred compensation plans , while the commercial paper , corporate notes/bonds and U.S. Treasury and Agency securities are available for general corporate purposes. As of January 31, 2021 and April 30, 2020, marketable securities of $ 203.0 million and $ 174.1 million, respectively, included equity securities of $164.6 million (net of gross unrealized gains of $ 19.4 million with no unrealized losses) 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 $157.0 million and $132.1 million, respectively, are classified as non-current. These marketable securities were held to satisfy vested obligations totaling $147.1 million and $ 124.6 million as of January 31, 2021 and April 30, 2020, respectively. Unvested obligations under the deferred compensation plans totaled $25.4 million and $ 21.7 million as of January 31, 2021 and April 30, 2020, respectively. The net increase in our working capital of $ 67.3 million as of January 31, 2021 compared to April 30, 2020 is primarily attributable to increases in accounts receivable, partially offset by increases in compensation and benefits payable. The increase in accounts receivable was due to an increase in days of sales outstanding, which went from 70 days to 72 days (which is consistent with historical experience) from April 30, 2020 to January 31, 2021 . The increase in compensation and benefits payable was primarily due to an increase in deferred compensation plan amount due within a year and to a lesser extent an increase in our bonus liability from April 30, 2020 to January 31, 2021. Cash provided by operating activities was $54.3 million in the nine months ended January 31, 2021, a decrease of $2.8 million, compared to $57.1 million in the nine months ended January 31, 2020. Cash used in investing activities was $30.3 million in the nine months ended January 31, 2021 compared to $191.1 million in the year-ago period. A decrease in cash used in investing activities was primarily due cash paid for the acquisition of the Acquired Companies of $108.6 million in the year-ago period, an increase in proceeds from sale/maturities net of the purchase of marketable securities of $34.2 million and a decrease in capital expenditures of $10.9 million during the nine months ended January 31, 2021 compared to the year-ago period. Cash used in financing activities was $55.8 million in the nine months ended January 31, 2021 compared to cash provided by financing activities of $74.1 million in the nine months ended January 31, 2020. The change in cash used in financing activities was primarily due to $168.6 million in proceeds received from long term debt, net of principal payments in the nine months ended January 31, 2020 compared to none in the current period, partially offset by a decrease of $37.7 million in repurchases of the Company’s common stock in nine months ended January 31, 2021 compared to the year-ago period. 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 January 31, 2021 and April 30, 2020, we held contracts with gross CSV of $ 247.0 million and $ 238.7 million, respectively. Total outstanding borrowings against the CSV of COLI contracts were $ 84.4 million and $ 92.3 million as of January 31, 2021 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 January 31, 2021 and April 30, 2020, the net cash value of these policies was $ 162.5 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. 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 46 between the alternate base rate plus 0. 1 25% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon our total funded debt to a djusted 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 2 . 94 % and 3. 44 % for the three and nine months ended January 31, 2020 . As of January 31, 2021 and April 30, 2020, there was no outstanding liability under the Revolver. The unamortized debt issuance costs associated with the Credit Agreement were $3.5 million as of January 31, 2021 and $4.2 million as of April 30, 2020 . As of January 31, 2021, we were in compliance with our debt covenants. We had a total of $ 646.0 million available under the Revolver after $ 4.0 million of standby letters of credit had been issued as of January 31, 2021 and April 30, 2020. We had a total of $ 10.7 million and $11.3 million of standby letters of credits with other financial institutions as of January 31, 2021 and April 30, 2020, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases. 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). 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 January 31, 2021 . 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 January 31, 2021 , as compared to those disclosed in our table of contractual obligations included in our Annual Report. Critical Accounting Policies Preparation of this Quarterly Report on Form 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions and changes in the estimates are reported in current operations as new information is learned or upon the amounts becoming fixed or determinable. In preparing our interim consolidated financial statements and accounting for the underlying transactions and balances, we apply our accounting policies as disclosed in the notes to our consolidated financial statements. 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.