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Item 5. Market for Registrant’s Common Equity

2022-06-28 compared with 2021-06-28 · 27 added, 81 removed, 45 unchanged (71% of the section changed)

3 unchanged sentences

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, 2017 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.

In fiscal 2022, we established a new peer group 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 11 companies:

(CBZ), FTI Consulting Inc.

(ASGN), Cushman & Wakefield Plc.

(CWK), FTI Consulting Inc.

(FCN), Heidrick & Struggles International Inc.

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(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.

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.

(NSP), Jones Lang Lasalle Inc.

(JLL), ManpowerGroup Inc.

(MAN), PageGroup Plc.

(MPGPF) and Robert Half International Inc.

We believe this group of professional services firms is reflective of similar sized companies in terms of our market capitalization, with significant global exposure that mirrors our global footprint 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 2021 peer group, presented for comparative purposes, consisted of Heidrick & Struggles International Inc.

(HSII), Robert Half International Inc, (RHI), Willis Towers Watson Plc, (WLTW), Kforce Inc.

(KFRC), Kelly Services Inc.

(KELYA), TrueBlue Inc.

(TBI), Insperity Inc.

(NSP), FTI Consulting Inc.

(FCN), CBIZ Inc.

(CBZ), ICF International Inc.

(ICFI), Huron Consulting Group Inc, (HURN) and Resources Connection Inc.

The stock price performance depicted in this graph is not necessarily indicative of future price performance.

1 unchanged sentence

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN ( *)

Among Korn Ferry, the S&P 500 Index, and a Peer Group

Among Korn Ferry, the S&P 500 Index, 2021 Peer Group and 2022 Peer Group

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Capital Allocation Approach

The Company and its Board of Directors endorse a balanced approach to capital allocation.

The Company and its Board of Directors endorse a balanced approach to capital allocation that contemplates debt service cost.

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.

Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our indebtedness.

See Note 11— Long Term Debt for a description of the Credit Agreement and indenture governing the Notes and Note 18 — Subsequent Events – Credit Facility for a description of the Amended Credit Agreement.

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.

On June 21, 2021, the Board of Directors increased the quarterly dividends to $0.12 per share for fiscal 2021.

On June 21, 2022, the Board of Directors approved a 25% increase to our quarterly dividends to $0.15 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.

1 unchanged sentence

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.

On June 21, 2022, the Board of Directors approved an increase in the Company’s stock repurchase program of approximately $300 million, which brought our available capacity to repurchase shares in the open market or privately negotiated transactions to $318 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.

1 unchanged sentence

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.

The Amended Credit Agreement permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under the Amended Credit Agreement, the Company’s total funded debt to adjusted EBITDA ratio (as set forth in the Amended Credit Agreement, the “consolidated net leverage ratio”) is no greater than 5.00 to 1.00, and we are in pro forma compliance with our financial covenant.

Furthermore, our Notes allow 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.

12 unchanged sentences

Represents withholding of 4,478 of restricted shares to cover taxes on vested restricted shares.

On March 6, 2019, our Board of Directors approved an increase to the share repurchase program to an aggregate of $250 million.

On June 21, 2022, our Board of Directors approved an increase to the share repurchase program to an aggregate of $318 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.

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,

(in thousands, except per share data and other operating data)

Selected Consolidated Statements of Income Data:

Reimbursed out-of-pocket engagement expenses

Total revenue

Compensation and benefits

General and administrative expenses

Reimbursed expenses

Cost of services

Depreciation and amortization

Restructuring charges, net (2)

Total operating expenses

Operating income

Other income (loss), net

Interest expense, net

Income tax provision

Net income attributable to noncontrolling interest

Net income attributable to Korn Ferry

Basic earnings per share

Diluted earnings per share

Basic weighted average common shares outstanding

Diluted weighted average common shares outstanding

Cash dividends declared per common share

Other Operating Data:

Fee revenue by segment:

Executive search:

North America

Latin America

Total executive search

RPO & Professional Search

Total fee revenue

Number of offices (at period end) (3)

Number of consultants and execution staff (at period end)

Number of new engagements opened

Number of full-time employees:

Executive search

RPO & Professional Search

Total full-time employees

Selected Consolidated Balance Sheet Data as of April 30:

Cash and cash equivalents

Marketable securities (4)

Working capital

Long-term obligations (5)

Total stockholders’ equity

Due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution on November 1, 2019, which accounted for $53.2 million

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.

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.

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.

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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity