Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol ‘KFY’. On June 22, 2021, there were approximately 23,128 stockholders of record of the Company’s common stock.
Performance Graph
We have presented below a graph comparing the cumulative total stockholder return of the Company’s shares with the cumulative total stockholder return on (1) the Standard & Poor’s 500 Stock Index and (2) a company-established peer group. Cumulative total return for each of the periods shown in the performance graph is measured assuming an initial investment of $100 on April 30, 2016 and the reinvestment of any dividends paid by the Company and any company in the peer group on the date the dividends were paid.
Our peer group is comprised of a broad number of publicly traded companies, which are principally or in significant part involved in either professional staffing or consulting. The peer group is comprised of the following 12 companies: CBIZ Inc. (CBZ), FTI Consulting Inc. (FCN), Heidrick & Struggles International Inc. (HSII), Huron Consulting Group Inc. (HURN), ICF International Inc. (ICFI), Insperity Inc. (NSP), Kelly Services Inc. (KELYA), Kforce Inc. (KFRC), Resources Connection Inc. (RGP), Robert Half International Inc. (RHI), Willis Towers Watson Plc (WLTW) and TrueBlue Inc. (TBI). We believe this group of professional services firms is reflective of similar sized companies in terms of our market capitalization, revenue or profitability, and therefore provides a more meaningful comparison of stock performance. The returns of each company have been weighted according to their respective stock market capitalization at the beginning of each measurement period for purposes of arriving at a peer group average.
The stock price performance depicted in this graph is not necessarily indicative of future price performance. This graph will not be deemed to be incorporated by reference by any general statement incorporating this Annual Report on Form 10-K into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate this information by reference and shall not otherwise be deemed soliciting material or deemed filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN ( *)
Among Korn Ferry, the S&P 500 Index, and a Peer Group
Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved.
(*)
$100 invested on April 30, 2016 in stock or index, including reinvestment of dividends. Fiscal year ended April 30, 2021.
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Capital Allocation Approach
The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s first priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and derivative products and services, and the investment in synergistic, accretive M&A transactions that earn a return superior to the Company's cost of capital. Next, the Company’s capital allocation approach contemplates the planned return of a portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to the factors discussed below under “Dividends” and in more detail in the “Risk Factors” section of this Annual Report on Form 10-K. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our Credit Agreement. See Note 11— Long Term Debt for a description of the Credit Agreement.
Dividends
On December 8, 2014, the Board of Directors adopted a dividend policy, reflecting an intention to distribute to our stockholders a regular quarterly cash dividend of $0.10 per share. Every quarter since the adoption of the dividend policy, the Company has declared a quarterly dividend. On June 21, 2021, the Board of Directors approved a 20% increase to our quarterly dividend, which is now at $0.12 per share.
The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board of Directors and will depend upon many factors, including the Company’s earnings, capital requirements, financial conditions, the terms of the Company’s indebtedness and other factors that the Board of Directors may deem to be relevant. The Board of Directors may amend, revoke or suspend the dividend policy at any time and for any reason.
Stock Repurchase Program
On March 6, 2019, the Board of Directors approved an increase in the Company’s stock repurchase program of approximately $200 million, which brought our available capacity to repurchase shares in the open market or privately negotiated transactions to approximately $250 million. Common stock may be repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion subject to market conditions and other factors. The Company repurchased approximately $30.4 million, $92.4 million and $37.4 million of the Company’s common stock during fiscal 2021, 2020 and 2019, respectively. Any decision to execute on our stock repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. The Credit Agreement, dated December 16, 2019, permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under the Credit Agreement, the Company’s total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated net leverage ratio”) is no greater than 4.00 to 1.00, and the pro forma liquidity is at least $50 million. Furthermore, our Notes allow the Company to pay $25.0 million of dividends per fiscal year with no restrictions plus an unlimited amount of dividends so long as the Company’s consolidated total leverage ratio is not greater than 3.50 to 1.00 and the Company is not in default under the indenture governing the Notes.
Issuer Purchases of Equity Securities
The following table summarizes common stock repurchased by us during the fourth quarter of fiscal 2021:
Total Number of
Shares
Purchased (1)
Average
Price Paid
Per Share
Total Number of
Shares
Purchased
as Part of
Publicly-
Announced
Programs (2)
Approximate
Dollar Value of
Shares that
May Yet be
Purchased
under the
Programs (2)
February 1, 2021 — February 28, 2021
—
$
—
—
$127.9 Million
March 1, 2021 — March 31, 2021
3,112
$
62.89
—
$127.9 Million
April 1, 2021 — April 30, 2021
1,296
$
63.05
—
$127.9 Million
Total
4,408
$
62.94
—
(1)
Represents withholding of 4,408 of restricted shares to cover taxes on vested restricted shares.
(2)
On March 6, 2019, our Board of Directors approved an increase to the share repurchase program to an aggregate of $250 million. The shares can be repurchased in open market transactions or privately negotiated transactions at the Company’s discretion. The share repurchase program has no expiration date.
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Item 6. Selected Financial Data
The following selected financial data are qualified by reference to, and should be read together with, our “Audited Consolidated Financial Statements and Notes to Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. The selected statements of income data set forth below for the fiscal years ended April 30, 2021, 2020 and 2019 and the selected balance sheets data as of April 30, 2021 and 2020 are derived from our audited consolidated financial statements, appearing elsewhere in this Annual Report on Form 10-K. The selected balance sheet data as of April 30, 2019, 2018 and 2017 and the selected statement of income data set forth below for the fiscal years ended April 30, 2018 and 2017 are derived from audited consolidated financial statements and notes thereto which are not included in this Annual Report on Form 10-K.
Year Ended April 30,
2021
2020 (1)
2019
2018
2017
(in thousands, except per share data and other operating data)
Selected Consolidated Statements of Income Data:
Fee revenue
$
1,810,047
$
1,932,732
$
1,926,033
$
1,767,217
$
1,565,521
Reimbursed out-of-pocket engagement expenses
9,899
44,598
47,829
52,302
56,148
Total revenue
1,819,946
1,977,330
1,973,862
1,819,519
1,621,669
Compensation and benefits
1,297,880
1,297,994
1,311,240
1,199,057
1,065,659
General and administrative expenses
191,776
258,957
351,991
237,390
226,232
Reimbursed expenses
9,899
44,598
47,829
52,302
56,148
Cost of services
72,030
85,886
75,487
73,658
71,482
Depreciation and amortization
61,845
55,311
46,489
48,588
47,260
Restructuring charges, net (2)
30,732
58,559
—
78
34,600
Total operating expenses
1,664,162
1,801,305
1,833,036
1,611,073
1,501,381
Operating income
155,784
176,025
140,826
208,446
120,288
Other income (loss), net
37,194
(2,879
)
10,405
11,416
10,661
Interest expense, net
(29,278
)
(22,184
)
(16,891
)
(13,832
)
(14,607
)
Income tax provision
48,138
43,945
29,544
70,133
29,104
Net income
115,562
107,017
104,796
135,897
87,238
Net income attributable to noncontrolling interest
(1,108
)
(2,071
)
(2,145
)
(2,118
)
(3,057
)
Net income attributable to Korn Ferry
$
114,454
$
104,946
$
102,651
$
133,779
$
84,181
Basic earnings per share
$
2.11
$
1.91
$
1.84
$
2.39
$
1.48
Diluted earnings per share
$
2.09
$
1.90
$
1.81
$
2.35
$
1.47
Basic weighted average common shares outstanding
52,928
54,342
55,311
55,426
56,205
Diluted weighted average common shares outstanding
53,405
54,767
56,096
56,254
56,900
Cash dividends declared per common share
$
0.40
$
0.40
$
0.40
$
0.40
$
0.40
Other Operating Data:
Fee revenue by segment:
Consulting
$
515,844
$
543,095
$
568,321
$
540,529
$
497,736
Digital
287,306
292,366
252,727
244,484
226,450
Executive search:
North America
397,275
434,624
455,826
408,098
356,625
EMEA
138,954
170,314
182,829
173,725
146,506
Asia Pacific
83,306
98,132
104,291
96,595
80,169
Latin America
17,500
29,400
31,896
30,624
34,376
Total executive search
637,035
732,470
774,842
709,042
617,676
RPO & Professional Search
369,862
364,801
330,143
273,162
223,659
Total fee revenue
$
1,810,047
$
1,932,732
$
1,926,033
$
1,767,217
$
1,565,521
Number of offices (at period end) (3)
101
111
104
106
114
Number of consultants and execution staff (at period end)
2,669
2,979
3,099
2,922
2,900
Number of new engagements opened
8,430
8,808
9,725
9,149
8,126
Number of full-time employees:
Consulting
1,923
2,058
2,416
2,316
2,413
Digital
1,200
1,413
1,187
1,138
1,185
Executive search
1,527
1,686
1,960
1,865
1,791
RPO & Professional Search
3,071
2,891
2,942
2,188
1,710
Corporate
168
150
173
136
133
Total full-time employees
7,889
8,198
8,678
7,643
7,232
Selected Consolidated Balance Sheet Data as of April 30:
Cash and cash equivalents
$
850,778
$
689,244
$
626,360
$
520,848
$
410,882
Marketable securities (4)
246,359
174,085
140,751
137,085
119,937
Working capital
737,062
612,876
585,852
455,799
385,095
Total assets
3,056,526
2,743,828
2,334,852
2,287,914
2,062,898
Long-term obligations (5)
937,681
895,930
540,507
509,839
517,271
Total stockholders’ equity
1,368,775
1,223,691
1,243,387
1,219,615
1,087,048
(1)
Due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution on November 1, 2019, which accounted for $53.2 million
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and $ 155.5 million of fee revenue and total assets, respectively, during fiscal 2020, financial data trends for fiscal 2020 are not comparable to the prior period.
( 2 )
During fiscal 2021, the Company continued the implementation of the restructuring plan that was adopted in the fourth quarter of fiscal 2020 to adjust our cost base to the economic environment that was created as a result of COVID-19 and position the Company to invest into its recovery. This resulted in restructuring charges of $30.7 million in fiscal 2021 related to severance. During fiscal 2020, the Company implemented two restructuring plans in order to rationalize our cost structure by eliminating redundant positions. The first plan was due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution on November 1, 2019, which resulted in restructuring charges of $18.1 million in fiscal 2020 related to severance. The second plan was due to the COVID-19 pandemic that decreased our fee revenue significantly in the fourth quarter of fiscal 2020 and resulted in restructuring charges of $40.5 million in fiscal 2020 related to severance. During fiscal 2018 and 2017, the Company continued to implement a fiscal 2016 restructuring plan in order to integrate the Advisory entities that were acquired in fiscal 2016 by eliminating redundant positions and operational, general and administrative expenses and consolidating office space. This resulted in restructuring charges of $0.1 million and $34.6 million in fiscal 2018 and 2017, respectively. Of the amount recorded in restructuring charges in fiscal 2017, $16.0 million related to severance and $18.6 million related to consolidation of office spaces.
( 3 )
The number of offices decreased by 10 offices as of April 30, 2021 compared to April 30, 2020 due to cost saving initiatives that the Company implemented as a result of COVID-19. The Company began not to extend office leases in cities where we had multiple offices. The number of offices decreased by eight as of April 30, 2018 compared to April 30, 2017 due to the continued implementation of a 2016 restructuring plan.
( 4 )
As of April 30, 2021, 2020, 2019, 2018, and 2017, the Company’s marketable securities included $175.6 million, $141.4 million, $140.8 million, $137.1 million, and $119.9 million, respectively, held in trust for settlement of the Company’s obligations under certain of its deferred compensation plans. See Note 5— Financial Instruments in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
( 5 )
During fiscal 2020 our long- term obligations increased compared to the previous years due to $180.8 million of non-current portion of operating lease liability recognized as a result of the implementation of Accounting Standard Codification 842 -Leases in fiscal 2020 and our new 4.625% Senior Unsecured Notes due 2027 with a $400 million principal amount offset by a decrease in the amount outstanding under our Credit Facility in fiscal 2020 compared to fiscal 2019.
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