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 are also forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, those relating to the ultimate magnitude and duration of any future pandemics or similar outbreaks, and related restrictions and operational requirements that apply to our business and the businesses of our clients, and any related negative impacts 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, impact of inflationary pressures on our profitability, maintaining our relationships with customers and suppliers and retaining key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, portability of client relationships, consolidation of or within the industries we serve, changes and developments in governmental laws and regulations, evolving investor and customer expectations with regard to environmental, social and governance matters, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, 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, changes in our accounting estimates and assumptions, the utilization and billing rates of our consultants, seasonality, the expansion of social media platforms, the ability to effect acquisitions and resulting organizational changes, our indebtedness, 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, 2022 (the “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, operations and talent to drive superior business performance. We work with organizations to design their structures, roles and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop and motivate their people. We are pursuing a strategy designed to help Korn Ferry to focus on clients and collaborate intensively across the organization. This approach is intended to build on the best of our past and give us a clear path to the future with focused initiatives to increase our client and commercial impact. Korn Ferry is transforming how clients address their talent management needs. We have evolved from a mono-line business to a multi-faceted consultancy business, giving our consultants more frequent and expanded opportunities to engage with clients. Our eight reportable segments operate through the following five lines of business: 1. Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Total Rewards. We support this work with a comprehensive range of some of the world’s leading lP and data. The Consulting teams employ an integrated approach across core solutions, each one intended to strengthen our work and thinking in the next, to help clients execute their strategy in a digitally enabled world. 25 2. Digital delivers scalable tech-enabled solutions designed to identify the best structure s , roles, capabilities and behavior s to drive business es forward. Our digital products give clients direct access to our proprietary data, client data and analytics to deliver clear insights with the training and tools needed to align organizational structure with business strategy. 3. Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent to deliver lasting impact. Our approach to placing talent that brings together research-based IP, proprietary assessments, and behavioral interviewing with our practical experience to determine the ideal organizational fit. Salary benchmarking then builds appropriate frameworks for compensation and retention. This business is managed and reported on a geographical basis and represents four of the Company’s reportable segments (Executive Search North America, Executive Search Europe, the Middle East and Africa (“EMEA”), Executive Search Asia Pacific (“APAC”), and Executive Search Latin America). 4. Professional Search & Interim delivers enterprise talent acquisition solutions for professional level middle and upper management. We to help clients source high-quality candidates at speed and at scale globally, covering single hire to multi hire permanent placements and interim contractors. 5 . Recruitment Process Outsourcing (“RPO”) offers scalable recruitment outsourcing solutions leveraging customized technology and talent insights. Our scalable solutions, built on science and powered by best-in-class technology and consulting expertise, enable us to act as a strategic partner in clients’ quest for superior recruitment outcomes and better candidate fit. Professional Search & Interim and RPO were formerly referred to, and reported together, as Korn Ferry RPO & Professional Search (“RPO & Professional Search”). Over the past year we acquired companies that have added critical mass to our professional search and interim operations. These acquisitions provided us the opportunity to reassess how we manage our RPO & Professional Search segment. Therefore, beginning in fiscal 2023, we separated RPO & Professional Search into two segments to align with the Company’s strategy and the decisions of the Company’s chief operating decision maker, who has begun to regularly make separate resource allocation decisions and assess performance separately between our Professional Search & Interim business and RPO business. Highlights of our performance in fiscal 2022 include: ▪ Approximately 76% of the executive searches we performed in fiscal 2022 were for board level, chief executive and other senior executive and general management positions. Our more than 4,300 search engagement clients in fiscal 2022 included many of the world’s largest and most prestigious public and private companies. ▪ We have built strong client loyalty, with nearly 90% of the assignments performed during fiscal 2022 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years. ▪ Approximately 70% of our revenues were generated from clients that have utilized multiple lines of our business. ▪ In fiscal 2022, we acquired the Lucas Group and Patina Solutions Group (the “Acquired Companies”). The Lucas Group brings substantial professional search and interim placement expertise to Korn Ferry and has enhanced our industry-leading search portfolio. Patina Solutions Group, an interim executive search firm brings access to a vast network of C-suite, top-tier, and professional interim talent. 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 charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other impairments charges). For the three months ended July 31, 2022, Adjusted EBITDA excluded $3.6 million of integration/acquisition costs. For the three months ended July 31, 2021, there was no adjustments. Consolidated and the subtotals of Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and have limitations as analytical tools. They should not be viewed as a substitute for financial information determined in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. In addition, they may not necessarily be comparable to non-GAAP performance measures that may be presented by other companies. Management believes the presentation of these non-GAAP financial measures provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges, items of income and other items that may not be indicative of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance and the identification of operating trends that may otherwise be distorted by the factors 26 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 $695.9 million during the three months ended July 31, 2022, an increase of $110.5 million, or 19%, compared to $585.4 million in the three months ended July 31, 2021, with increases in fee revenue across all lines of business. Exchange rates unfavorably impacted fee revenue by $24.4 million, or 4%, in the three months ended July 31, 2022 compared to the year-ago quarter. Net income attributable to Korn Ferry in the three months ended July 31, 2022 was $77.2 million, an increase of $2.4 million as compared to $74.8 million in the year-ago quarter. Adjusted EBITDA in the three months ended July 31, 2022 was $132.2 million, an increase of $10.9 million as compared to $121.3 million in the year-ago quarter. During the three months ended July 31, 2022, the Executive Search, Consulting, Professional Search & Interim, Digital and RPO lines of business contributed $62.2 million, $29.6 million, $29.2 million, $24.2 million and $17.7 million, respectively, to Adjusted EBITDA, which was offset by Corporate expenses net of other income of $30.6 million. Our cash, cash equivalents and marketable securities decreased by $314.7 million to $896.4 million at July 31, 2022, compared to $1,211.1 million at April 30, 2022. This decrease was mainly due to annual bonuses earned in fiscal 2022 and paid during the first quarter of fiscal 2023, retention payments, the semi-annual interest payment on the 4.625% Senior Unsecured Notes due 2027 (the “Notes”), capital expenditures, stock repurchases and dividends paid to stockholders during the three months ended July 31, 2022. As of July 31, 2022, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $172.9 million and a fair value of $177.0 million. Our vested obligations for which these assets were held in trust totaled $178.8 million as of July 31, 2022 and our unvested obligations totaled $17.5 million. Our working capital increased by $35.5 million to $811.2 million as of July 31, 2022, as compared to $775.7 million at April 30, 2022. 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 debt obligations and dividend payments under our dividend policy in the next 12 months. We had a total of $1,145.3 million under the Credit Facilities (defined in Liquidity and Capital Resources) and $645.3 million available under the previous credit facilities after $4.7 million of standby letters of credit issued as of both July 31, 2022 and April 30, 2022. We had a total of $10.3 million and $10.0 million of standby letters of credit with other financial institutions as of July 31, 2022 and April 30, 2022, respectively . The standby letters of credit were generally issued as a result of entering into office premise leases. Results of Operations The following table summarizes the results of our operations as a percentage of fee revenue: (Numbers may not total exactly due to rounding) Three Months Ended July 31, 2022 2021 Fee revenue 100.0 % 100.0 % Reimbursed out-of-pocket engagement expenses 1.0 0.5 Total revenue 101.0 100.5 Compensation and benefits 66.9 67.7 General and administrative expenses 9.3 8.6 Reimbursed expenses 1.0 0.5 Cost of services 5.5 3.8 Depreciation and amortization 2.3 2.7 Operating income 16.0 17.3 Net income 11.3 % 13.1 % Net income attributable to Korn Ferry 11.1 % 12.8 % 27 The operating results prior to May 1, 2022 have been revised to conform to the new segment reporting. The following tables summarize the results of our operations: (Numbers may not total exactly due to rounding) Three Months Ended July 31, 2022 2021 Dollars % Dollars % (dollars in thousands) Fee revenue Consulting $ 166,484 23.9 % $ 148,478 25.3 % Digital 83,761 12.0 80,671 13.8 Executive Search: North America 151,544 21.8 138,678 23.7 EMEA 47,056 6.8 42,747 7.3 Asia Pacific 26,381 3.8 28,703 4.9 Latin America 7,808 1.1 6,776 1.2 Total Executive Search 232,789 33.5 216,904 37.1 Professional Search & Interim 98,947 14.2 51,837 8.9 RPO 113,922 16.4 87,505 14.9 Total fee revenue 695,903 100.0 % 585,395 100.0 % Reimbursed out-of-pocket engagement expense 7,245 2,703 Total revenue $ 703,148 $ 588,098 In the tables that follow, the Company presents a subtotal for Executive Search Adjusted EBITDA and a single percentage for Executive Search Adjusted EBITDA margin, which reflects the aggregate of all of the individual Executive Search Regions. These figures are non-GAAP financial measures and are presented as they are consistent with the Company’s lines of business and are financial metrics used by the Company’s investor base. Three Months Ended July 31, 2022 2021 Consolidated (in thousands) Fee revenue $ 695,903 $ 585,395 Total revenue $ 703,148 $ 588,098 Net income attributable to Korn Ferry $ 77,247 $ 74,823 Net income attributable to noncontrolling interest 1,289 1,574 Other income, net (775 ) (4,447 ) Interest expense, net 7,612 5,426 Income tax provision 26,226 23,879 Operating income 111,599 101,255 Depreciation and amortization 16,229 15,644 Other income, net 775 4,447 Integration/acquisition costs 3,605 — Adjusted EBITDA $ 132,208 $ 121,346 Adjusted EBITDA margin 19.0 % 20.7 % 28 Three Months Ended July 31, 2022 2021 Fee revenue Total revenue Adjusted EBITDA Adjusted EBITDA margin Fee revenue Total revenue Adjusted EBITDA Adjusted EBITDA margin (dollars in thousands) Consulting $ 166,484 $ 168,735 $ 29,550 17.7 % $ 148,478 $ 149,007 $ 26,841 18.1 % Digital 83,761 83,815 24,178 28.9 % 80,671 80,681 25,632 31.8 % Executive Search: North America 151,544 152,884 43,749 28.9 % 138,678 139,300 43,330 31.2 % EMEA 47,056 47,329 8,515 18.1 % 42,747 42,843 7,585 17.7 % Asia Pacific 26,381 26,452 7,351 27.9 % 28,703 28,732 8,320 29.0 % Latin America 7,808 7,809 2,617 33.5 % 6,776 6,779 2,354 34.7 % Total Executive Search 232,789 234,474 62,232 26.7 % 216,904 217,654 61,589 28.4 % Professional Search & Interim 98,947 100,052 29,161 29.5 % 51,837 51,932 19,439 37.5 % RPO 113,922 116,072 17,709 15.5 % 87,505 88,824 14,528 16.6 % Corporate — — (30,622 ) — — (26,683 ) Consolidated $ 695,903 $ 703,148 $ 132,208 19.0 % $ 585,395 $ 588,098 $ 121,346 20.7 % Three Months Ended July 31, 2022 Compared to Three Months Ended July 31, 2021 Fee Revenue Fee Revenue. Fee revenue increased by $110.5 million, or 19%, to $695.9 million in the three months ended July 31, 2022 compared to $585.4 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $24.4 million, or 4%, in the three months ended July 31, 2022 compared to the year-ago quarter. The higher fee revenue was attributable to increases in all lines of business primarily due to the increased demand for the Company’s integrated service offerings and the acquisitions of the Acquired Companies in the Professional Search & Interim segment. Consulting. Consulting reported fee revenue of $166.5 million, an increase of $18.0 million, or 12%, in the three months ended July 31, 2022 compared to $148.5 million in the year-ago quarter. The increase in fee revenue was mainly driven by increased demand from large workforce transformation initiatives delivered through our Organization Strategy, Assessment and Succession, and Leadership Development solutions. We also saw significant growth in Organization Design, Change Management, and Workforce Sales Compensation demand as clients aligned their structures to new market opportunities and addressed compensation and retention issues associated with labor market dislocation. Exchange rates unfavorably impacted fee revenue by $7.2 million, or 5%, in the three months ended July 31, 2022 compared to the year-ago quarter. Digital. Digital reported fee revenue of $83.8 million, an increase of $3.1 million, or 4%, in the three months ended July 31, 2022 compared to $80.7 million in the year-ago quarter. The increase in fee revenue was primarily due to growth in Total Rewards and Leadership Development offerings as companies try to reward and retain employees in a changing labor market and invest in sales effectiveness tools to enable their commercial teams to maximize revenue growth. Exchange rates unfavorably impacted fee revenue by $4.7 million, or 6%, in the three months ended July 31, 2022 compared to the year-ago quarter. Executive Search North America . Executive Search North America reported fee revenue of $151.5 million, an increase of $12.8 million, or 9%, in the three months ended July 31, 2022 compared to $138.7 million in the year-ago quarter. North America’s fee revenue was higher due to an 18% increase in the weighted-average fee billed per engagement (calculated using local currency) offset by a 7% decrease in the number of engagements billed during the three months ended July 31, 2022 compared to the year-ago quarter. Executive Search EMEA . Executive Search EMEA reported fee revenue of $47.1 million, an increase of $4.4 million, or 10%, in the three months ended July 31, 2022 compared to $42.7 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $4.3 million, or 10%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in fee revenue was due to a 14% increase in the weighted-average fee billed per engagement (calculated using local currency) and an 8% increase in the number of engagements billed during the three months ended July 31, 2022 compared to the year-ago quarter. Performance in France, Belgium, the United Arab Emirates, and Germany were the primary contributors to the increase in fee revenue in the three months ended July 31, 2022 compared to the year-ago quarter. 29 Executive Search Asia Pacific . Executive Search Asia Pacific reported fee revenue of $26.4 million, a decrease of $2.3 million, or 8% , in the three months ended July 31, 2022 compared to $28.7 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.6 million, or 6% , in the three months ended July 31, 2022 compared to the year-ago quarter . The de crease in fee revenue was due to a 3 % de crease in the number of engagements billed during the three months ended July 31, 2022 compared to the year-ago quarter. The performance in China , Australia and Korea were the primary contributors to the de crease in fee revenue in the three months ended July 31, 2022 compared to the year-ago quarter , partially offset by increase in fee revenue in Malaysia and India. Executive Search Latin America. Executive Search Latin America reported fee revenue of $7.8 million, an increase of $1.0 million, or 15%, in the three months ended July 31, 2022 compared to $6.8 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.1 million, or 1%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in fee revenue was due to a 9% increase in the number of engagements billed and a 7% increase in the weighted-average fees billed per engagement (calculated using local currency) during the three months ended July 31, 2022 compared to the year-ago quarter. The increase in fee revenue was due to higher fee revenue in Mexico and Chile in the three months ended July 31, 2022 compared to the year-ago quarter. Professional Search & Interim. Professional Search & Interim reported fee revenue of $98.9 million, an increase of $47.1 million, or 91% , in the three months ended July 31, 2022 compared to $51.8 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $2.0 million, or 4%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in fee revenue was due to an increase in interim fee revenue and permanent placement fee revenue of $24.8 million and $22.3 million, respectively, primarily due to the Acquired Companies. RPO. RPO reported fee revenue of $113.9 million, an increase of $26.4 million, or 30%, in the three months ended July 31, 2022 compared to $87.5 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $4.3 million, or 5%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in fee revenue was due to wider adoption of RPO services in the market in combination with our differentiated solutions. Compensation and Benefits Compensation and benefits expense increased by $69.4 million, or 18%, to $465.6 million in the three months ended July 31, 2022 from $396.2 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $14.7 million, or 4%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in compensation and benefits expense was due to increases in salaries and related payroll taxes of $49.8 million, performance-related bonus expense of $5.8 million, employee insurance of $4.9 million and amortization of long-term incentive awards of $1.4 million. These increases were due to the increase in fee revenue growth from an increase in average headcount of 33% in the three months ended July 31, 2022 compared to the year-ago quarter. Also contributing to higher compensation and benefit expense was an increase in commission expense of $9.8 million due to higher fee revenue and integration/acquisition costs of $1.3 million, partially offset by a decrease in deferred compensation expenses of $2.5 million as a result of a smaller increase in the fair value of participants' accounts in the three months ended July 31, 2022 compared to the year-ago quarter. Compensation and benefits expense, as a percentage of fee revenue, decreased to 67% in the three months ended July 31, 2022 from 68% in the year-ago quarter. Consulting compensation and benefits expense increased by $11.6 million, or 11%, to $113.8 million in the three months ended July 31, 2022 from $102.2 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $4.6 million, or 5%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to increases in salaries and related payroll taxes of $7.8 million, employee insurance of $0.7 million and performance-related bonus expense of $2.1 million. These increases were due to the segment’s revenue growth with an increase in average headcount of 15% in the three months ended July 31, 2022 compared to the year-ago quarter. Consulting compensation and benefits expense, as a percentage of fee revenue, decreased to 68% in the three months ended July 31, 2022 from 69% in the year-ago quarter. Digital compensation and benefits expense increased by $2.9 million, or 7%, to $43.7 million in the three months ended July 31, 2022 from $40.8 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $2.1 million, or 5%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in compensation and benefits expense was due to increases in salaries and related payroll taxes of $2.2 million and performance-related bonus expense of $0.6 million associated with the increased investment made on product development initiatives and an increase in commercial salesforce. Digital compensation and benefits expense, as a percentage of fee revenue, increased to 52% in the three months ended July 31, 2022 from 51% in the year-ago quarter. Executive Search North America compensation and benefits expense increased by $6.4 million, or 7%, to $97.9 million in the three months ended July 31, 2022 compared to $91.5 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.2 million, in the three months ended July 31, 2022 compared to the year-ago quarter. The change was due to increases in performance-related bonus expense of $5.3 million and salaries and related payroll taxes of 30 $4.0 million. These increases were due to the segment’s revenue growth with an increase in average headcoun t of 19% in the three months ended July 31, 2022 compared to the year-ago quarter. The increase was partially offset by a decrease in deferred compensation expenses of $3.4 million as a result of a smaller increase in the fair value of participants’ accounts in the three months ended July 31, 2022 compared to the year-ago quarter. Executive Search North America compensation and benefits expense, as a percentage of fee revenue, decreased to 65% in the three months ended July 31, 2022 from 66% in the year-ago quarter. Executive Search EMEA compensation and benefits expense increased by $3.7 million, or 12%, to $34.6 million in the three months ended July 31, 2022 compared to $30.9 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $2.9 million, or 9%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in compensation and benefits expense was due to increases in performance-related bonus expense of $2.5 million and amortization of long-term incentive awards of $0.7 million. These increases were due to the segment’s revenue growth in the three months ended July 31, 2022 compared to the year-ago quarter. Executive Search EMEA compensation and benefits expense, as a percentage of fee revenue, increased to 74% in the three months ended July 31, 2022 from 72% in the year-ago quarter. Executive Search Asia Pacific compensation and benefits expense decreased by $1.3 million, or 7%, to $16.7 million in the three months ended July 31, 2022 compared to $18.0 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.9 million, or 5%, in the three months ended July 31, 2022 compared to the year-ago quarter. The decrease in compensation and benefits expense was due to a decrease in performance-related bonus expense of $1.2 million in the three months ended July 31, 2022 compared to the year-ago quarter due to lower segment fee revenue. Executive Search Asia Pacific compensation and benefits expense, as a percentage of fee revenue, was 63% for both the three months ended July 31, 2022 and 2021. Executive Search Latin America compensation and benefits expense decreased by $0.3 million, or 6%, to $4.7 million in the three months ended July 31, 2022 compared to $5.0 million in the year-ago quarter. Exchange rates did not have an impact in the three months ended July 31, 2022 compared to the year-ago quarter. Executive Search Latin America compensation and benefits expense, as a percentage of fee revenue, decreased to 60% in the three months ended July 31, 2022 from 74% in the year-ago quarter. Professional Search & Interim compensation and benefits expense increased by $22.5 million, or 82%, to $50.0 million in the three months ended July 31, 2022 from $27.5 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.8 million, or 3%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase was primarily due to higher salaries and related payroll taxes of $13.1 million, commission expense of $9.9 million, employee insurance of $1.4 million and integration/acquisition costs of $1.3 million due to the acquisition of the Acquired Companies which resulted in a 117% increase in the average headcount in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in compensation and benefits expense was partially offset a decrease in performance-related bonus expense of $3.9 million. Professional Search & Interim compensation and benefits expense, as a percentage of fee revenue, decreased to 51% in the three months ended July 31, 2022 from 53% in the year-ago quarter. RPO compensation and benefits expense increased by $22.8 million, or 35%, to $88.4 million in the three months ended July 31, 2022 from $65.6 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $3.2 million, or 5%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase was primarily due to higher salaries and related payroll taxes of $21.0 million as a result of the segment’s fee revenue growth with an increase in average headcount of 51% in the three months ended July 31, 2022 compared to the year-ago quarter. RPO compensation and benefits expense, as a percentage of fee revenue, increased to 78% in the three months ended July 31, 2022 from 75% in the year-ago quarter. Corporate compensation and benefits expense increased by $0.9 million, or 6%, to $15.7 million in the three months ended July 31, 2022 from $14.8 million in the year-ago quarter. The increase was due to higher perform ance-related bonus expense of $1.0 million and higher salaries and related payroll taxes of $1.3 million due to a 25% increase in the average headcount in the three months ended July 31, 2022 compared to the year-ago quarter. These were partially offset by an increase in the cash surrender value (“CSV”) of company-owned life insurance (“COLI”) of $1.5 million as a result of increased death benefits in the three months ended July 31, 2022 compared to the year-ago quarter. 31 General and Administrative Expenses General and administrative expenses increased by $14.2 million, or 28%, to $64.5 million in the three months ended July 31, 2022 from $50.3 million in the year-ago quarter. Exchange rates favorably impacted general and administrative expenses by $2.8 million, or 6%, in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in general and administrative expenses was due to higher marketing and business development expenses of $4.3 million, which contributed to the increase in fee revenue in the three months ended July 31, 2022, as well as an increase in legal and other professional fees of $3.3 million and premise and office expenses of $3.0 million due to technology cost associated with an increase in headcount. In addition, the Company incurred integration/acquisition costs of $2.3 million due to the acquisition of the Acquired Companies. General and administrative expenses, as a percentage of fee revenue, was 9% in both the three months ended July 31, 2022 and 2021. Consulting general and administrative expenses increased by $0.9 million, or 8%, to $12.9 million in the three months ended July 31, 2022 compared to $12.0 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to an increase of $0.6 million in foreign exchange losses in the three months ended July 31, 2022 compared to the year-ago quarter. Consulting general and administrative expenses, as a percentage of fee revenue, were 8% for both the three months ended July 31, 2022 and 2021. Digital general and administrative expenses increased by $2.0 million, or 28%, to $9.1 million in the three months ended July 31, 2022 from $7.1 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to higher marketing and business development expenses of $1.0 million and increases in technology cost of $0.4 million associated with an increase in headcount and legal and other professional fees of $0.3 million. Digital general and administrative expenses, as a percentage of fee revenue, increased to 11% in the three months ended July 31, 2022 from 9% in the year-ago quarter. Executive Search North America general and administrative expenses increased by $1.7 million, or 25%, to $8.4 million in the three months ended July 31, 2022 compared to $6.7 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to higher business development expenses of $0.6 million and legal and other professional fees of $0.7 million. Executive Search North America general and administrative expenses, as a percentage of fee revenue, increased to 6% in the three months ended July 31, 2022 from 5% in the year-ago quarter. Executive Search EMEA general and administrative expenses decreased by $0.5 million, or 12%, to $3.8 million in the three months ended July 31, 2022 from $4.3 million in the year-ago quarter. The decrease in general and administrative expenses was due to a decrease in premise and office expense of $0.6 million from the reduction of the Company’s real estate footprint in fiscal 2022. Executive Search EMEA general and administrative expenses, as a percentage of fee revenue, decreased to 8% in the three months ended July 31, 2022 from 10% in the year-ago quarter. Executive Search Asia Pacific general and administrative expenses were $2.5 million in the three months ended July 31, 2022 compared to $2.6 million in the year-ago quarter, essentially flat. Executive Search Asia Pacific general and administrative expenses, as a percentage of fee revenue, were 9% for both the three months ended July 31, 2022 and 2021. Executive Search Latin America recognized an increase in general and administrative expenses of $2.0 million in the three months ended July 31, 2022 compared to the year-ago quarter. The increase in general and administrative expenses was primarily due to a gain recorded in the three months ended July 31, 2021 due to the termination of a lease agreement Mexico thereby increasing premise and office of $1.5 million and a decrease in foreign currency gains of $0.3 million in the three months ended July 31, 2022 compared to the year-ago quarter. Professional Search & Interim general and administrative expenses increased by $3.5 million, or 125%, to $6.3 million in the three months ended July 31, 2022 compared to $2.8 million in the year-ago quarter. The increase in general and administrative expense was primarily due to higher bad debt expense of $1.0 million, premise and office expenses of $1.0 million and integration/acquisition costs of $1.2 million. Profession Search & Interim general and administrative expenses, as a percentage of fee revenue, increased to 6% in the three months ended July 31, 2022 from 5% in the year-ago quarter. RPO general and administrative expenses increased by $0.7 million, or 17%, to $4.8 million in the three months ended July 31, 2022 compared to $4.1 million in the year-ago quarter. The increase in general and administrative expenses was primarily due to an increase in technology cost of $0.7 million associated with an increase in headcount. RPO general and administrative expenses, as a percentage of fee revenue, decreased to 4% in the three months ended July 31, 2022 from 5% in the year-ago quarter. Corporate general and administrative expenses increased by $4.1 million, or 34%, to $16.2 million in the three months ended July 31, 2022 compared to $12.1 million in the year-ago quarter. The increase was primarily due to higher legal and other professional fees of $2.1 million and increases in marketing expenses and integration/acquisition costs of $1.2 million and $1.1 million, respectively, during the three months ended July 31, 2022 compared to the year-ago quarter. 32 Cost of Services Expense Cost of services expense consist of contractor and product costs related to delivery of various services and products through Consulting, Digital, Professional Search & Interim and RPO. Cost of services expense increased by $16.0 million, or 73%, to $38.0 million in the three months ended July 31, 2022 compared to $22.0 million in the year-ago quarter. The increase of $14.0 million is from Professional Search & Interim which is due the acquisition of the Acquired Companies which includes a significant amount of interim business as part of the services they perform that has higher cost of service expense. The rest of the increase is from Consulting due to an increase in fee revenue in that segment. Cost of services expense, as a percentage of fee revenue, increased to 5% in the three months ended July 31, 2022 from 4% in the three months ended July 31, 2021. Depreciation and Amortization Expenses Depreciation and amortization expenses were $16.2 million, an increase of $0.6 million, or 4%, in the three months ended July 31, 2022 compared to $15.6 million in the year-ago quarter. The increase was primarily due to the amortization of intangible assets due to the acquisition of the Acquired Companies. Net Income Attributable to Korn Ferry Net income attributable to Korn Ferry increased by $2.4 million, or 3%, to $77.2 million in the three months ended July 31, 2022, as compared to $74.8 million in the year-ago quarter. The increase in net income attributable to Korn Ferry was driven by the increase in fee revenue, which was driven by the factors discussed above. The increase in fee revenue was partially offset by increases in compensation and benefits expense and cost of services expense associated with the higher levels of business demand and increases in general and administrative expenses and income tax provision in the three months ended July 31, 2022 compared to the year-ago quarter. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 11% and 13% in the three months ended July 31, 2022 and 2021, respectively. Adjusted EBITDA Adjusted EBITDA increased by $10.9 million, or 9%, to $132.2 million in the three months ended July 31, 2022 as compared to $121.3 million in the year-ago quarter. The increase in Adjusted EBITDA was driven by an increase in fee revenue, partially offset by increases in compensation and benefits expense (excluding integration/acquisition costs), cost of services expense, and general and administrative expenses (excluding integration/acquisition costs). Adjusted EBITDA, as a percentage of fee revenue, was 19% in the three months ended July 31, 2022 compared to 21% in the year-ago quarter. Consulting Adjusted EBITDA was $29.6 million in the three months ended July 31, 2022, an increase of $2.8 million, or 10%, as compared to $26.8 million in the year-ago quarter. This increase in Adjusted EBITDA was driven by higher fee revenue in the segment, partially offset by increases in compensation and benefits expense, cost of services expense and general and administrative expenses. Consulting Adjusted EBITDA, as a percentage of fee revenue, was 18% in both the three months ended July 31, 2022 and 2021. Digital Adjusted EBITDA was $24.2 million in the three months ended July 31, 2022, a decrease of $1.4 million, or 5%, as compared to $25.6 million in the year-ago quarter. This decrease in Adjusted EBITDA was mainly driven by increases in compensation and benefits expense and general and administrative expenses partially offset by an increase in fee revenue in the segment, during the three months ended July 31, 2022 compared to the year-ago quarter. Digital Adjusted EBITDA, as a percentage of fee revenue, was 29% and 32% in the three months ended July 31, 2022 and 2021, respectively. Executive Search North America Adjusted EBITDA increased by $0.4 million, or 1%, to $43.7 million in the three months ended July 31, 2022 compared to $43.3 million in the year-ago quarter. The increase was driven by higher fee revenue in the segment, partially offset by an increase in compensation and benefits expense and general and administrative expenses. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, was 29% and 31% in the three months ended July 31, 2022 and 2021, respectively. Executive Search EMEA Adjusted EBITDA increased by $0.9 million, or 12%, to $8.5 million in the three months ended July 31, 2022 compared to $7.6 million in the year-ago quarter. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment, partially offset by an increase in compensation and benefits expense. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 18% in both the three months ended July 31, 2022 and 2021. Executive Search Asia Pacific Adjusted EBITDA decreased $0.9 million, or 11%, to $7.4 million in the three months ended July 31, 2022 compared to $8.3 million in the year-ago quarter. The decrease in Adjusted EBITDA was driven by lower fee revenue in the segment, partially offset by a decrease in compensation and benefits expense . Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, was 28% and 29% in the three months ended July 31, 2022 and 2021, respectively. 33 Executive Search Latin America Adjusted EBITDA increased by $0.2 million to $2.6 million in the three months ended July 31, 2022 compared to $2.4 million in the year-ago quarter. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, was 34% and 35% in the three months ended July 31, 2022 and 2021, respectively. Professional Search & Interim Adjusted EBITDA was $29.2 million in the three months ended July 31, 2022, an increase of $9.8 million, or 51%, as compared to $19.4 million in the year-ago quarter. The increase in Adjusted EBITDA was mainly driven by higher fee revenue in the segment as a result of the acquisitions of the Acquired Companies, partially offset by increases in compensation and benefits expense (excluding integration/acquisition costs), cost of services expense, and general and administrative expenses (excluding integration/acquisition costs). Professional Search & Interim Adjusted EBITDA, as a percentage of fee revenue, was 29% and 38% in the three months ended July 31, 2022 and 2021, respectively. RPO Adjusted EBITDA was $17.7 million in the three months ended July 31, 2022, an increase of $3.2 million, or 22%, as compared to $14.5 million in the year-ago quarter. The increase in Adjusted EBITDA was mainly driven by higher fee revenue in the segment, partially offset by increases in compensation and benefits expense and general and administrative expenses. RPO Adjusted EBITDA, as a percentage of fee revenue, was 16% and 17% in the three months ended July 31, 2022 and 2021, respectively. Other Income, Net Other income, net was $0.8 million in the three months ended July 31, 2022 compared to $4.4 million in the year-ago quarter. The difference was primarily due to smaller gains from the fair value of our marketable securities during the three months ended July 31, 2022 compared to the year-ago quarter. Interest Expense, Net Interest expense, net primarily relates to the Notes issued in December 2019 and borrowings under COLI policies, which are partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $7.6 million in the three months ended July 31, 2022 compared to $5.4 million in the year-ago quarter. Interest expense, net increased due to smaller interest income earned as a result of death benefits received from our COLI policies in three months ended July 31, 2022 compared to the year-ago quarter. Income Tax Provision The provision for income tax was $26.2 million in the three months ended July 31, 2022, with an effective tax rate of 25.0%, compared to $23.9 million in the three months ended July 31, 2021, with an effective rate of 23.8%. In addition to the impact of U.S. state income taxes and the jurisdictional mix of earnings, which generally create variability in our effective tax rate over time, the effective tax rate in the three months ended July 31, 2022 was affected by a tax expense recorded for withholding taxes that are not eligible for credit. 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 such subsidiary not held by Korn Ferry that are included in the consolidated results of operations. Net income attributable to noncontrolling interest for the three months ended July 31, 2022 was $1.3 million, as compared to $1.6 million in the three months ended July 31, 2021. 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 are expected to earn a return that is superior to the Company's cost of capital. Next, the Company’s capital allocation approach contemplates the return of a portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to the factors discussed below and in the “Risk Factors” section of the Form 10-K. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our Amended Credit Agreement (defined below), as well as using excess cash to repay the Notes. On August 1, 2022, we completed the acquisition of Infinity Consulting Solutions (“ICS”) for approximately $100 million, net of cash acquired. ICS will be part of our rapidly growing Interim business, which is a part of our Professional Search & Interim segment. 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 34 all existing and future senior unsecured indebtedness. We may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture governing the Notes. The Notes are guaranteed by each of our existing and future wholly owned domestic subsidiaries to the extent such subsidiaries guarantee our obligations under the Amended Credit Agreement (defined below) . The indenture governing the Notes requires that, upon the occurrence of both a Change of Control and a Rating Decline (each as defined in the indenture), we shall make an offer to purchase all of the Notes at 101 % of their principal amount, and accrued and unpaid interest. We used the proceeds from the offering of the Notes to repay $276.9 million outstanding under our prior revolving credit facility and to pay expenses and fees in connection therewith. As of July 31, 2022 , the fair value of the Notes was $ 382 .5 million, which is based on borrowing rates currently required of notes with similar terms, maturity and credit risk. On June 24, 2022, we entered into an Amendment to the Credit Agreement (as amended by the Amendment, the “Amended Credit Agreement”) with the lenders party thereto and Bank of America, National Association as administrative agent, to, among other things (i) extend the existing maturity date of the revolving facility to June 24, 2027, (ii) provide for a new delayed draw term loan facility as described below, (iii) replace the London interbank offered rate with Term SOFR, and (iv) replace the existing financial covenants with financial covenants described below. The Amended Credit Agreement provides for five-year senior secured credit facilities in an aggregate amount of $1,150 million comprised of a $650.0 million revolving credit facility (the “Revolver”) and a $500 million delayed draw term loan facility (the “Delayed Draw Facility”, and together with the Revolver, the “Credit Facilities”). The Amended Credit Agreement also provides that, under certain circumstances, the Company may incur term loans or increase the aggregate principal amount of revolving commitments by an aggregate amount of up to $250 million plus an unlimited amount subject to a consolidated secured net leverage ratio of 3.25 to 1.00. See Note 11 — Long-Term Debt for a further description of the Amended Credit Agreement. T he Company had a total of $1,145.3 million available under the Credit Facilities and $645.3 million available under the previous credit facilities after $4.7 million of standby letters of credit have been issued as of both July 31, 2022 and April 30, 2022, respectively. The Company had a total of $10.3 million and $10.0 million of standby letters with other financial institutions as of July 31, 2022 and April 30, 2022, respectively. The standby letters of credit were generally issued as a result of entering into office premise leases. On December 8, 2014, the Board of Directors 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. On June 21, 2021, the Board of Directors increased the quarterly dividend to $0.12 per share. On June 21, 2022, the Board of Directors approved a 25% increase in the quarterly dividend, which increased the quarterly dividend to $0.15 per share. 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, our 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 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. 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 June 21, 2022, our Board of Directors approved an increase to the share repurchase program of approximately $300 million, which at the time brought our available capacity to repurchase shares in the open market or privately negotiated transactions to $318 million. The Company repurchased approximately $22.4 million and $2.5 million of the Company’s stock during three months ended July 31, 2022 and 2021, respectively. As of July 31, 2022, $306.7 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. Our primarily source of liquidity is the fee revenue generated from our operations, supplemented by our borrowing capacity under our Amended Credit Agreement. 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 Amended Credit Agreement will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, debt repayments, share repurchases and dividend payments under our dividend policy during the next 12 months. However, if the national or global economy, credit market conditions and/or labor markets were to deteriorate in the future, including as a result of ongoing macroeconomic uncertainty due to inflation and a potential recession, 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 Amended Credit Agreement to meet our capital needs and/or discontinue our share repurchases and dividend policy. 35 Cash and cash equivalents and marketable securities were $896.4 million and $1,211.1 million as of July 31, 2022 and April 30, 2022 , respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and marketable securities were $ 61 3 . 9 million and $ 6 05 . 4 million at July 31, 2022 and April 30, 2022 , respectively. As of July 31, 2022 and April 30, 2022 , we held $ 414 .4 million and $ 416 . 7 million, respectively of cash and cash equivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay accrued 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 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 July 31, 2022 and April 30, 2022, marketable securities of $ 256.7 million and $233.0 million, respectively, included equity securities of $177.0 million (net of gross unrealized gains of $10.0 million and gross unrealized losses of $5.9 million) and $ 168.7 million (net of gross unrealized gains of $ 10.7 million and gross unrealized losses of $ 6.1 million), respectively, were held in trust for settlement of our obligations under certain deferred compensation plans, of which $166.5 million and $158.7 million, respectively, are classified as non-current. These marketable securities were held to satisfy vested obligations totaling $178.8 million and $ 160.8 million as of July 31, 2022 and April 30, 2022, respectively. Unvested obligations under the deferred compensation plans totaled $17.5 million and $ 24.0 million as of July 31, 2022 and April 30, 2022, respectively. The net increase in our working capital of $ 35.5 million as of July 31, 2022 compared to April 30, 2022 is primarily attributable to a decrease in compensation and benefits payable and an increase in accounts receivable, partially offset by a decrease in cash and cash equivalents. The decrease in cash and cash equivalents and compensation and benefits payable was primarily due to payments of annual bonuses earned in fiscal 2022 and paid during the first quarter of fiscal 2023. The increase in accounts receivable was due to an increase in fee revenue and an increase in days of sales outstanding, which went from 58 days to 69 days (which is consistent with historical experience) from April 30, 2022 to July 31, 2022. Cash used by operating activities was $231.9 million in the three months ended July 31, 2022, an increase in cash used of $71.4 million, compared to $160.5 million in the three months ended July 31, 2021. Cash used in investing activities was $40.4 million in the three months ended July 31, 2022 compared to $10.4 million in the year-ago quarter. An increase in cash used in investing activities was primarily due to an increase in the purchase of marketable securities net of sale/maturities of $20.2 million, an increase in purchase of property, plant and equipment of $7.6 million and $2.2 million less in proceeds from life insurance policies during the three months ended July 31, 2022 compared to the year-ago quarter. Cash used in financing activities was $51.0 million in the three months ended July 31, 2022 compared to $23.7 million in the three months ended July 31, 2021. The increase in cash used in financing activities was primarily due to increase in repurchases of the Company’s common stock of $21.9 million, $4.2 million more in cash used to repurchase shares of common stock to satisfy tax withholding requirements upon the vesting of restricted stock and increase in dividends paid to shareholders of $1.8 million in the three months ended July 31, 2022 compared to the year-ago quarter. Cash Surrender Value of Company-Owned Life Insurance Policies, Net of Loans We purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plans as a means of funding benefits under such plans. As of July 31, 2022 and April 30, 2022, we held contracts with gross cash surrender value (“CSV”) of $ 264.5 million and $ 263.2 million, respectively. Total outstanding borrowings against the CSV of COLI contracts was $ 79.8 million as of July 31, 2022 and April 30, 2022. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and are secured by the CSV of COLI contracts. At July 31, 2022 and April 30, 2022, the net cash surrender value of these policies was $ 184.7 million and $183.3 million, respectively. Other than the factors discussed in this section, we are not aware of any other trends, demands or commitments that would materially affect liquidity or those that relate to our resources as of July 31, 2022 . Off-Balance Sheet Arrangements We have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated, special purpose entities. We had no material changes in contractual obligations as of July 31, 2022 , as compared to those disclosed in our table of contractual obligations included in our Annual Report. 36 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 the Form 10-K. There have been no material changes in our critical accounting policies since the end of fiscal 2022.