Item # Page ASSETS Cash and cash equivalents Marketable securities Receivables due from clients, net of allowance for doubtful accounts of $17,990 and $15,455 at January 31, 2018 and April 30, 2017, respectively Income taxes and other receivables Prepaid expenses and other assets Total current assets Marketable securities,non-current Property and equipment, net Cash surrender value of company owned life insurance policies, net of loans Deferred income taxes, net Goodwill Intangible assets, net Investments and other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable Income taxes payable Compensation and benefits payable Term loan Other accrued liabilities Total current liabilities Deferred compensation and other retirement plans Term loan,non-current Deferred tax liabilities Other liabilities Total liabilities Stockholders’ equity: Common stock: $0.01 par value, 150,000 shares authorized, 71,606 and 70,811 shares issued at January 31, 2018 and April 30, 2017, respectively and 56,518 and 56,938 shares outstanding at January 31, 2018 and April 30, 2017, respectively Retained earnings Accumulated other comprehensive loss, net Total Korn/Ferry International stockholders’ equity Noncontrolling interest Total stockholders’ equity Total liabilities and stockholders’ equity Fee revenue Reimbursedout-of-pocket engagement expenses Total revenue Compensation and benefits General and administrative expenses Reimbursed expenses Cost of services Depreciation and amortization Restructuring charges, net Total operating expenses Operating income Other income, net Interest expense, net Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries Equity in earnings of unconsolidated subsidiaries, net Income tax provision Net income Net income attributable to noncontrolling interest Net income attributable to Korn/Ferry International Earnings per common share: Basic Diluted Weighted-average common shares outstanding: Basic Diluted Cash dividends declared per share: Net income Other comprehensive income: Foreign currency translation adjustments Deferred compensation and pension plan adjustments, net of tax Unrealized gain on interest rate swap, net of tax Comprehensive income Less: comprehensive income attributable to noncontrolling interest Comprehensive income attributable to Korn/Ferry International STOCKHOLDERS’ EQUITY Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation expense Provision for doubtful accounts Gain on cash surrender value of life insurance policies Gain on marketable securities Deferred income taxes Change in other assets and liabilities: Deferred compensation Receivables due from clients Income tax and other receivables Prepaid expenses and other assets Investment in unconsolidated subsidiaries Income taxes payable Accounts payable and accrued liabilities Other Net cash provided by operating activities Cash flows from investing activities: Purchase of property and equipment Cash paid for acquisition, net of cash acquired Purchase of marketable securities Proceeds from sales/maturities of marketable securities Premium on company-owned life insurance policies Proceeds from life insurance policies Dividends received from unconsolidated subsidiaries Net cash used in investing activities Cash flows from financing activities: Proceeds from term loan facility Principal payment on term loan facility Payment of contingent consideration from acquisition Repurchases of common stock Payments of tax withholdings on restricted stock Proceeds from issuance of common stock upon exercise of employee stock options and in connection with an employee stock purchase plan Dividends – noncontrolling interest Dividends paid to shareholders Payments on life insurance policy loans Net cash (used in) provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period better candidate fit. contracted invoicing plan and enforceable right to payment. performed. from quoted market prices, and the fair values of marketable securities classified as available-for-sale and foreign currency forward contracts 2022, there were no indicators of impairment with respect to the Company’s goodwill. 2022. consolidated statements of income. - Not Yet Adopted Net income attributable to Korn/Ferry International Less: distributed and undistributed earnings to nonvested restricted stockholders Basic net earnings attributable to common stockholders Add: undistributed earnings to nonvested restricted stockholders Less: reallocation of undistributed earnings to nonvested restricted stockholders Diluted net earnings attributable to common stockholders Weighted-average common shares outstanding: Basic weighted-average number of common shares outstanding Effect of dilutive securities: Restricted stock Stock options ESPP Diluted weighted-average number of common shares outstanding Net earnings per common share: Basic earnings per share Diluted earnings per share Balance as of October 31, 2017 Comprehensive income (loss): Net income Foreign currency translation adjustments Deferred compensation and pension plan adjustments, net of tax Unrealized gain on interest rate swap, net of tax Dividends paid to shareholders Purchase of stock Issuance of stock Stock-based compensation Balance as of January 31, 2018 Balance as of April 30, 2017 Comprehensive income (loss): Net income Foreign currency translation adjustments Deferred compensation and pension plan adjustments, net of tax Unrealized gain on interest rate swap, net of tax Dividends paid to shareholders Dividends paid to noncontrolling interest Purchase of stock Issuance of stock Stock-based compensation Balance as of January 31, 2018 Balance as of October 31, 2016 Comprehensive income (loss): Net income Foreign currency translation adjustments Deferred compensation and pension plan adjustments, net of tax Dividends paid to shareholders Dividends paid to noncontrolling interest Purchase of stock Issuance of stock Stock-based compensation Tax benefit from exercise of stock options and vesting of restricted stock Balance as of January 31, 2017 Balance as of April 30, 2016 Comprehensive income (loss): Net income Foreign currency translation adjustments Deferred compensation and pension plan adjustments, net of tax Dividends paid to shareholders Dividends paid to noncontrolling interest Purchase of stock Issuance of stock Stock-based compensation Tax benefit from exercise of stock options and vesting of restricted stock Balance as of January 31, 2017 Foreign currency translation adjustments Deferred compensation and pension plan adjustments, net of tax Interest rate swap unrealized gain (loss), net of taxes Accumulated other comprehensive loss, net Balance as of October 31, 2017 Unrealized gains arising during the period Reclassification of realized net losses to net income Balance as of January 31, 2018 The following table summarizes the changes in each component of accumulated other comprehensive income (loss), net for the nine months ended January 31, 2018: Balance as of April 30, 2017 Unrealized gains arising during the period Reclassification of realized net losses to net income Balance as of January 31, 2018 Balance as of October 31, 2016 Unrealized losses arising during the period Reclassification of realized net losses to net income Balance as of January 31, 2017 Balance as of April 30, 2016 Unrealized losses arising during the period Reclassification of realized net losses to net income Balance as of January 31, 2017 Restricted stock ESPP Total stock-based compensation expense,pre-tax Tax benefit from stock-based compensation expense Total stock-based compensation expense, net of tax Plan Non-vested, April 30, 2017 Granted Vested Forfeited Non-vested, January 31, 2018 $20.1 million. Level 1: Cash Money market funds Mutual funds (1) Total Level 2: Foreign currency forward contracts Interest rate swap Level 1: Cash Money market funds Mutual funds (1) Total Level 2: Foreign currency forward contracts Interest rate swap Unrealized losses recorded for the period that relate to equity securities still held as of January 31, 2023 were $2.8 million. Unrealized gains recorded for the period that relate to equity securities still held as of January 31, 2022 were $12.0 million. Derivative asset: Interest rate swap contract Derivative liability: Interest rate swap contract Gains recognized in other comprehensive income (net of tax effects of $553 and $609, respectively) Losses reclassified from accumulated other comprehensive income into interest expense, net Not Designated as Hedges Derivative assets: Total gross amount of foreign currency forward contracts Gross derivatives offset on the balance sheet (1) Net amounts presented on the balance sheet Derivative liabilities: Total gross amount of foreign currency forward contracts Gross derivatives offset on the balance sheet (1) Net amounts presented on the balance sheet $89.7 million and Service cost Interest cost Amortization of actuarial loss Expected return on plan assets (1) Net periodic benefit costs sheets. three and nine months ended January 31, eliminated. There were no restructuring charges for the three and nine months ended January 31, 2022. Liability as of October 31, 2017 Reductions for cash payments Exchange rate fluctuations Liability as of January 31, 2018 Changes in the restructuring liability during the nine months ended January 31, 2018 are as follows: Liability as of April 30, 2017 Restructuring charges, net Reductions for cash payments Exchange rate fluctuations Liability as of January 31, 2018 Executive Search North America Asia Pacific Total Executive Search Hay Group Futurestep Liability as of January 31, 2018 Executive Search North America Europe, Middle East and Africa (“EMEA”) Asia Pacific Latin America Total Executive Search Hay Group Futurestep Liability as of April 30, 2017 Fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of unconsolidated Income tax provision Operating income (loss) Depreciation and Other income, net Equity in earnings of unconsolidated EBITDA Integration/acquisition Adjusted EBITDA assets acquired: Fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of unconsolidated Income tax provision Operating income (loss) Depreciation and Other income (loss), net Equity in earnings of unconsolidated EBITDA Restructuring charges, net Integration/acquisition Adjusted EBITDA Fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of unconsolidated Income tax provision Operating income (loss) Depreciation and Other income, net Equity in earnings of unconsolidated EBITDA Restructuring charges (recoveries), net Integration/acquisition Adjusted EBITDA Acquisition-related intangible assets acquired in connection with the acquisition consists of customer relationships and tradenames of $15.3 million, and $1.1 million, respectively, with weighted-average useful lives from the date of purchase of seven years, and two years, respectively. Fee revenue Adjusted fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of Income tax provision Operating income (loss) Depreciation and Other income (loss), net Equity in earnings of EBITDA Restructuring charges, net Integration/acquisition Deferred revenue Adjusted EBITDA Event 2023, respectively. For the three and nine months ended January 31, 2022, Adjusted EBITDA excluded $3.2 million and $4.3 million of integration/acquisition costs, respectively. In addition, Adjusted EBITDA further excluded $7.4 million impairment of right-of-use assets and $1.9 million impairment of fixed assets during the nine months ended January 31, 2022. The standby letters of credit were generally issued as a result of entering into office premise leases. Fee revenue Reimbursedout-of-pocket engagement expenses Total revenue Compensation and benefits General and administrative expenses Reimbursed expenses Cost of services Depreciation and amortization Restructuring charges, net Operating income Net income Net income attributable to Korn/Ferry International operations: Fee revenue Executive Search: North America EMEA Asia Pacific Latin America. Total Executive Search Hay Group Futurestep Total fee revenue Reimbursedout-of-pocket engagement expenses Total revenue Operating Income Executive Search: North America EMEA Asia Pacific Latin America. Total Executive Search Hay Group Futurestep Corporate Total operating income Fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of unconsolidated subsidiaries, net Income tax provision Operating income (loss) Depreciation and amortization Other income, net Equity in earnings of unconsolidated subsidiaries, net EBITDA Integration/acquisition costs Adjusted EBITDA Adjusted EBITDA margin Fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of unconsolidated subsidiaries, net Income tax provision Operating income (loss) Depreciation and amortization Other income (loss), net Equity in earnings of unconsolidated subsidiaries, net EBITDA Restructuring charges, net Integration/acquisition costs Adjusted EBITDA Adjusted EBITDA margin Fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of unconsolidated subsidiaries, net Income tax provision Operating income (loss) Depreciation and amortization Other income, net Equity in earnings of unconsolidated subsidiaries, net EBITDA Restructuring charges (recoveries), net Integration/acquisition costs Adjusted EBITDA Adjusted EBITDA margin Fee revenue Deferred revenue adjustment due to acquisition Adjusted fee revenue Total revenue Net income attributable to Korn/Ferry International Net income attributable to noncontrolling interest Other income, net Interest expense, net Equity in earnings of unconsolidated subsidiaries, net Income tax provision Operating income (loss) Depreciation and amortization Other income (loss), net Equity in earnings of unconsolidated subsidiaries, net �� EBITDA Restructuring charges, net Integration/acquisition costs Deferred revenue adjustment due to acquisition Adjusted EBITDA Adjusted EBITDA margin 2022 revenue was due to wider adoption of RPO services in the market in combination with our differentiated solutions. Digital compensation and benefits 2023 from 5% in the year-ago quarter. the acquisition of the Acquired Companies. 2023 and 2022, respectively. 2023 and 2022, respectively. Interest expense, net decreased due to an increase in interest income earned on cash and cash equivalent balances as a result of higher interest rates in three months ended January 31, 2023 compared to the year-ago quarter. withholding taxes that are not eligible for credit. 2022. 2022 2022. Interest expense, net increased due to an increase in the interest cost associated with our deferred compensation plans in nine months ended January 31, 2023 compared to the year-ago period. withholding taxes that are not eligible for credit. 2022. facility and to pay expenses and fees in connection therewith. As of January 31, 2023, the fair value of the Notes was $377.0 million, which is based on borrowing rates currently required of notes with similar terms, maturity and credit risk. 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 plans, while the commercial paper, corporate notes/bonds and U.S. Treasury and Agency securities are available for general corporate purposes. quarter. resources as of January 31, 2023. consolidated statements of income. Act of 1934 (the “Exchange Act”)) were effective as of January 31, 2023. November 1, 2017—November 30, 2017 December 1, 2017— December 31, 2017 January 1, 2018—January 31, 2018 Total 2023: not greater than 3.50 to 1.00 and the Company is not in default under the indenture governing the Notes. Description Executive Vice President, Chief Financial Officer and Chief Corporate Officer
UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-Q(Mark One)☑☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2018orOR☐o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ___________Commission File Number001-14505KORN/KORN FERRY INTERNATIONAL(Exact Name of Registrant as Specified in its Charter)Delaware 95-2623879 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 1900 Avenue of the Stars, Suite 2600,1500, Los Angeles, California 90067(Address of principal executive offices) (Zip Code)(310) 552-1834(Registrant’s telephone number, including area code)Securities Registered Pursuant to Section 12(b) of the Act:Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, par value $0.01 per share KFY New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☑ No☐oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.Large accelerated filer Accelerated Filer ☑Accelerated filer ☐oNon-accelerated filer ☐o(Do not check if a smaller reporting company)Smaller reporting company ☐oEmerging growth company ☐oIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐oIndicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐ No ☑The number of shares outstanding of our common stock as of March 5, 20186, 2023 was 56,524,92752,409,108, shares.
KORN/
Table of ContentsDescription Description452440414242424344Item 1. Consolidated Financial StatementsKORN/CONSOLIDATED BALANCE SHEETS January 31,
2018 April 30,
2017 (unaudited) (in thousands, except per share data) $ 389,990 $ 410,882 14,807 4,363 397,845 345,314 25,985 31,573 63,409 51,542 892,036 843,674 124,196 115,574 116,767 109,567 118,248 113,067 23,222 20,175 586,561 576,865 206,733 217,319 98,769 66,657 $ 2,166,532 $ 2,062,898 $ 28,359 $ 37,481 17,128 4,526 234,411 248,354 23,192 19,754 163,784 148,464 466,874 458,579 233,595 219,905 217,969 236,222 7,619 7,014 59,581 54,130 985,638 975,850 679,277 692,527 537,353 461,976 (38,671 ) (71,064 ) 1,177,959 1,083,439 2,935 3,609 1,180,894 1,087,048 $ 2,166,532 $ 2,062,898 January 31,
2023April 30,
2022(unaudited) (in thousands, except per share data) ASSETS Cash and cash equivalents $ 771,898 $ 978,070 Marketable securities 48,253 57,244 Receivables due from clients, net of allowance for doubtful accounts of $43,606 and $36,384 at January 31, 2023 and April 30, 2022, respectively 628,693 590,260 Income taxes and other receivables 65,079 31,884 Unearned compensation 59,899 60,749 Prepaid expenses and other assets 39,605 41,763 Total current assets 1,613,427 1,759,970 Marketable securities, non-current 187,646 175,783 Property and equipment, net 154,983 138,172 Operating lease right-of-use assets, net 140,777 167,734 Cash surrender value of company-owned life insurance policies, net of loans 198,634 183,308 Deferred income taxes 93,403 84,712 Goodwill 793,285 725,592 Intangible assets, net 88,895 89,770 Unearned compensation, non-current 110,958 118,238 Investments and other assets 24,180 21,267 Total assets $ 3,406,188 $ 3,464,546 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable $ 42,035 $ 50,932 Income taxes payable 17,005 34,450 Compensation and benefits payable 405,584 547,826 Operating lease liability, current 45,234 48,609 Other accrued liabilities 346,489 302,408 Total current liabilities 856,347 984,225 Deferred compensation and other retirement plans 393,155 357,175 Operating lease liability, non-current 118,438 151,212 Long-term debt 396,011 395,477 Deferred tax liabilities 2,336 2,715 Other liabilities 26,887 24,153 Total liabilities 1,793,174 1,914,957 Stockholders' equity Common stock: $0.01 par value, 150,000 shares authorized, 76,691 and 75,409 shares issued and 52,522 and 53,190 shares outstanding at January 31, 2023 and April 30, 2022, respectively. 434,163 502,008 Retained earnings 1,271,618 1,134,523 Accumulated other comprehensive loss, net (96,802) (92,185) Total Korn Ferry stockholders' equity 1,608,979 1,544,346 Noncontrolling interest 4,035 5,243 Total stockholders' equity 1,613,014 1,549,589 Total liabilities and stockholders' equity $ 3,406,188 $ 3,464,546 The accompanying notes are an integral part of these consolidated financial statements.KORN/1CONSOLIDATED STATEMENTS OF INCOME(unaudited) Three Months Ended
January 31, Nine Months Ended
January 31, 2018 2017 2018 2017 (in thousands, except per share data) $ 447,581 $ 381,918 $ 1,291,853 $ 1,159,456 13,189 12,277 39,302 42,626 460,770 394,195 1,331,155 1,202,082 310,751 262,438 885,748 796,014 58,516 56,818 175,380 166,294 13,189 12,277 39,302 42,626 17,467 16,545 53,163 52,251 12,225 11,774 36,881 34,970 — 3,801 78 28,321 412,148 363,653 1,190,552 1,120,476 48,622 30,542 140,603 81,606 7,689 4,200 14,847 7,580 (2,665 ) (2,402 ) (7,904 ) (8,199 ) 53,646 32,340 147,546 80,987 97 113 187 221 26,316 8,075 54,145 21,706 27,427 24,378 93,588 59,502 (180 ) (481 ) (969 ) (2,245 ) $ 27,247 $ 23,897 $ 92,619 $ 57,257 $ 0.49 $ 0.42 $ 1.65 $ 1.01 $ 0.48 $ 0.42 $ 1.63 $ 1.00 55,252 56,173 55,479 56,325 55,997 56,702 56,236 56,917 $ 0.10 $ 0.10 $ 0.30 $ 0.30 Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 (in thousands, except per share data) Fee revenue $ 680,782 $ 680,741 $ 2,104,534 $ 1,905,579 Reimbursed out-of-pocket engagement expenses 6,063 4,215 21,178 10,873 Total revenue 686,845 684,956 2,125,712 1,916,452 Compensation and benefits 479,382 445,870 1,409,774 1,273,746 General and administrative expenses 72,785 60,811 202,328 175,143 Reimbursed expenses 6,063 4,215 21,178 10,873 Cost of services 57,903 31,666 157,152 77,988 Depreciation and amortization 17,037 16,104 50,359 47,381 Restructuring charges, net 41,162 — 41,162 — Total operating expenses 674,332 558,666 1,881,953 1,585,131 Operating income 12,513 126,290 243,759 331,321 Other income (loss), net 13,097 (7,277) 4,824 2,236 Interest expense, net (5,378) (7,029) (20,088) (18,820) Income before provision for income taxes 20,232 111,984 228,495 314,737 Income tax provision 8,463 26,927 63,575 76,951 Net income 11,769 85,057 164,920 237,786 Net income attributable to noncontrolling interest (522) (956) (2,885) (3,090) Net income attributable to Korn Ferry $ 11,247 $ 84,101 $ 162,035 $ 234,696 Earnings per common share attributable to Korn Ferry: Basic $ 0.21 $ 1.55 $ 3.07 $ 4.33 Diluted $ 0.21 $ 1.54 $ 3.05 $ 4.28 Weighted-average common shares outstanding: Basic 51,278 52,999 51,639 52,958 Diluted 51,431 53,495 51,999 53,538 Cash dividends declared per share: $ 0.15 $ 0.12 $ 0.45 $ 0.36 The accompanying notes are an integral part of these consolidated financial statements.KORN/2CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(unaudited) Three Months Ended
January 31, Nine Months Ended
January 31, 2018 2017 2018 2017 (in thousands) $ 27,427 $ 24,378 $ 93,588 $ 59,502 17,839 (1,583 ) 29,773 (20,016 ) 361 465 1,065 1,392 1,077 — 1,470 — 46,704 23,260 125,896 40,878 (226 ) (219 ) (884 ) (1,809 ) $ 46,478 $ 23,041 $ 125,012 $ 39,069 Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 (in thousands) Net income $ 11,769 $ 85,057 $ 164,920 $ 237,786 Other comprehensive income (loss): Foreign currency translation adjustments 39,915 (15,279) (4,164) (30,818) Deferred compensation and pension plan adjustments, net of tax 60 1,159 165 1,851 Net unrealized gain (loss) on marketable securities, net of tax 321 (115) 10 (132) Comprehensive income 52,065 70,822 160,931 208,687 Less: comprehensive income attributable to noncontrolling interest (955) (909) (3,513) (2,889) Comprehensive income attributable to Korn Ferry $ 51,110 $ 69,913 $ 157,418 $ 205,798 The accompanying notes are an integral part of these consolidated financial statements.KORN/3CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited) Nine Months Ended
January 31, 2018 2017 (in thousands) $ 93,588 $ 59,502 36,881 34,970 15,800 14,101 9,933 8,373 (6,020 ) (3,316 ) (14,022 ) (7,090 ) 5,373 7,812 25,587 (22 ) (62,464 ) (35,503 ) 4,445 (3,249 ) (11,867 ) (8,882 ) (187 ) (221 ) 18,217 (3,450 ) (15,569 ) (45,891 ) (40,103 ) (3,393 ) 59,592 13,741 (31,133 ) (41,616 ) — (2,880 ) (7,462 ) (9,526 ) 2,515 42,533 (1,339 ) (1,337 ) 5,175 — 60 455 (32,184 ) (12,371 ) — 275,000 (15,469 ) (150,313 ) (485 ) (1,070 ) (32,568 ) (16,318 ) (3,657 ) (4,377 ) 6,885 4,981 (1,558 ) (1,229 ) (17,242 ) (17,546 ) (464 ) — (64,558 ) 89,128 16,258 (12,445 ) (20,892 ) 78,053 410,882 273,252 $ 389,990 $ 351,305 Common Stock Retained
EarningsAccumulated
Other
Comprehensive
Loss, NetTotal
Korn Ferry
Stockholders'
EquityNoncontrolling
InterestTotal
Stockholder's
EquityShares Amount (in thousands) Balance as of April 30, 2022 53,190 $ 502,008 $ 1,134,523 $ (92,185) $ 1,544,346 $ 5,243 $ 1,549,589 Net income — — 77,247 — 77,247 1,289 78,536 Other comprehensive loss — — — (16,259) (16,259) (48) (16,307) Dividends paid to shareholders — — (8,703) — (8,703) — (8,703) Purchase of stock (735) (44,276) — — (44,276) — (44,276) Issuance of stock 1,047 4,857 — — 4,857 — 4,857 Stock-based compensation — 7,538 — — 7,538 — 7,538 Balance as of July 31, 2022 53,502 470,127 1,203,067 (108,444) 1,564,750 6,484 1,571,234 Net income — — 73,541 — 73,541 1,074 74,615 Other comprehensive loss — — — (28,221) (28,221) 243 (27,978) Dividends paid to shareholders — — (8,171) — (8,171) — (8,171) Dividends paid to noncontrolling interest — — — — — (3,133) (3,133) Purchase of stock (627) (33,286) — — (33,286) — (33,286) Issuance of stock 34 — — — — — — Stock-based compensation — 9,439 — — 9,439 — 9,439 Balance as of October 31, 2022 52,909 446,280 1,268,437 (136,665) 1,578,052 4,668 1,582,720 Net income — — 11,247 — 11,247 522 11,769 Other comprehensive income — — — 39,863 39,863 433 40,296 Dividends paid to shareholders — — (8,066) — (8,066) — (8,066) Dividends paid to noncontrolling interest — — — — — (1,588) (1,588) Purchase of stock (464) (25,062) — — (25,062) — (25,062) Issuance of stock 77 3,595 — — 3,595 — 3,595 Stock-based compensation — 9,350 — — 9,350 — 9,350 Balance as of January 31, 2023 52,522 $ 434,163 $ 1,271,618 $ (96,802) $ 1,608,979 $ 4,035 $ 1,613,014 The accompanying notes are an integral part of these consolidated financial statements.4KORN FERRY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(unaudited)Common Stock Retained
EarningsAccumulated
Other
Comprehensive
Loss, NetTotal
Korn Ferry
Stockholders'
EquityNoncontrolling
InterestTotal
Stockholder's
EquityShares Amount (in thousands) Balance as of April 30, 2021 54,008 $ 583,260 $ 834,949 $ (51,820) $ 1,366,389 $ 2,386 $ 1,368,775 Net income — — 74,823 — 74,823 1,574 76,397 Other comprehensive loss — — — (8,023) (8,023) 24 (7,999) Dividends paid to shareholders — — (6,866) — (6,866) — (6,866) Purchase of stock (297) (20,091) — — (20,091) — (20,091) Issuance of stock 795 3,992 — — 3,992 — 3,992 Stock-based compensation — 6,962 — — 6,962 — 6,962 Balance as of July 31, 2021 54,506 574,123 902,906 (59,843) 1,417,186 3,984 1,421,170 Net income — — 75,772 — 75,772 560 76,332 Other comprehensive loss — — — (6,687) (6,687) (178) (6,865) Dividends paid to shareholders — — (6,683) — (6,683) — (6,683) Purchase of stock (99) (7,353) — — (7,353) — (7,353) Issuance of stock 59 — — — — — — Stock-based compensation — 7,288 — — 7,288 — 7,288 Balance as of October 31, 2021 54,466 574,058 971,995 (66,530) 1,479,523 4,366 1,483,889 Net income — — 84,101 — 84,101 956 85,057 Other comprehensive loss — — — (14,188) (14,188) (47) (14,235) Dividends paid to shareholders — — (6,665) — (6,665) — (6,665) Dividends paid to noncontrolling interest — — — — — (1,307) (1,307) Purchase of stock (307) (22,331) — — (22,331) — (22,331) Issuance of stock 57 3,696 — — 3,696 — 3,696 Stock-based compensation — 7,141 — — 7,141 — 7,141 Balance as of January 31, 2022 54,216 $ 562,564 $ 1,049,431 $ (80,718) $ 1,531,277 $ 3,968 $ 1,535,245 The accompanying notes are an integral part of these consolidated financial statements.5KORN FERRY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)Nine Months Ended
January 31,2023 2022 (in thousands) Cash flows from operating activities: Net income $ 164,920 $ 237,786 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 50,359 47,381 Stock-based compensation expense 26,910 21,975 Impairment of right-of-use assets 5,471 7,392 Impairment of fixed assets 4,375 1,915 Provision for doubtful accounts 16,725 15,029 Gain on cash surrender value of life insurance policies (7,439) (3,897) Gain on marketable securities (2,960) (2,366) Deferred income taxes (9,082) (2,704) Change in other assets and liabilities: Deferred compensation 42,627 32,192 Receivables due from clients (35,739) (155,849) Income taxes and other receivables (26,439) (5,822) Prepaid expenses and other assets 2,574 (8,662) Unearned compensation 8,130 (32,966) Income taxes payable (17,492) 5,261 Accounts payable and accrued liabilities (128,596) 70,473 Other (1,560) (5,661) Net cash provided by operating activities 92,784 221,477 Cash flows from investing activities: Cash paid for acquisitions, net of cash acquired (99,322) (90,860) Purchase of property and equipment (54,049) (32,659) Purchase of marketable securities (53,530) (69,314) Proceeds from sales/maturities of marketable securities 53,697 66,933 Premium on company-owned life insurance policies (14,998) (14,290) Proceeds from life insurance policies 2,696 3,382 Dividends received from unconsolidated subsidiaries 150 255 Net cash used in investing activities (165,356) (136,553) Cash flows from financing activities: Repurchases of common stock (82,456) (28,949) Payments of tax withholdings on restricted stock (22,136) (18,244) Proceeds from issuance of common stock upon exercise of employee stock options and in connection with an employee stock purchase plan 7,606 6,919 Dividends paid to shareholders (24,940) (20,214) Dividends - noncontrolling interest (4,721) (1,307) Payments on life insurance policy loans (2,244) (178) Principal payments on finance leases (1,228) (860) Net cash used in financing activities (130,119) (62,833) Effect of exchange rate changes on cash and cash equivalents (3,481) (26,364) Net decrease in cash and cash equivalents (206,172) (4,273) Cash and cash equivalents at beginning of period 978,070 850,778 Cash and cash equivalents at end of the period $ 771,898 $ 846,505 The accompanying notes are an integral part of these consolidated financial statements.6KORN/NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 20182023 1. Organization and Summary of Significant Accounting PoliciesNature of BusinessKorn/Korn Ferry, International, a Delaware corporation, (the “Company”), and its subsidiaries are engaged(the “Company”) is a global organizational consulting firm. The Company helps clients synchronize strategy and talent to drive superior performance. The Company works with organizations to design their structures, roles and responsibilities. The Company helps organizations hire the right people to bring their strategy to life and advise them on how to reward, develop and motivate their people.The Company is pursuing a strategy designed to help Korn Ferry focus on clients and collaborate intensively across the organization. This approach is intended to build on the best of the Company’s past and give the Company a clear path to the future with focused initiatives to increase its client and commercial impact. Korn Ferry is transforming how clients address their talent management needs. The Company has evolved from a mono-line to a diversified business, giving its consultants more frequent and expanded opportunities to engage with clients. In the past year, the Company has acquired companies that have added critical mass to its existing professional search and interim operations, as described in Note 10. This provided the Company with the opportunity to reassess how it manages the Recruitment Process Outsourcing (“RPO”) & Professional Search segment. Therefore, beginning in fiscal 2023, the Company 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 began to regularly make separate resource allocation decisions and assess performance separately between Professional Search & Interim and RPO.The Company now has eight reportable segments that 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. This work is supported by a comprehensive range of some of the world’s leading intellectual property (“lP”) and data. The Consulting teams employ an integrated approach across core capabilities and integrated solutions, each one intended to strengthen the work and thinking in the next, to help clients execute their strategy in a digitally enabled world.2.Digital delivers scalable tech-enabled solutions designed to identify the best structures, roles, capabilities and behaviors to drive businesses forward. The digital products give clients direct access to Korn Ferry proprietary data, client data and analytics to deliver clear insights with the training and tools needed to align organizational structure with business of providingstrategy.3.Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent management solutions, including executive searchto deliver lasting impact. The Company’s approach to placing talent is bringing together research-based IP, proprietary assessments and behavioral interviewing with practical experience to determine ideal organizational fit. Salary benchmarking then builds appropriate frameworks for compensation and retention. This business is managed and reported on a retainedgeographic 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 and Executive Search Latin America).4.Professional Search & Interim delivers enterprise talent acquisition solutions for professional level middle and upper management. The Company helps clients source high-quality candidates at speed and scale globally, covering single-hire to multi-hire permanent placements and interim contractors.5.RPO offers scalable recruitment outsourcing solutions leveraging customized technology and talent insights. The Company's scalable solutions, built on science and powered by best-in-class technology and consulting expertise, enable the Company to act as a strategic partner in clients’ quest fornon-executive professionals, superior recruitment process outsourcingoutcomes and leadership & talent consulting services.Basis of Consolidation and PresentationThe accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form10-K for the year ended April 30, 20172022 for the Company and its wholly and majority owned/controlled domestic and international subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The preparation of the consolidated financial statements conform with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and prevailing practice within the industry.Company's different industries. The consolidated financial statements include all adjustments, consisting of normal recurring accruals and any other adjustments that management considers necessary for a fair presentation of the results for these periods. The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year.Investments in affiliated companies, which are 50% or less owned and where the Company exercises significant influence over operations, are accounted for using the equity method.7KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)The Company has control of a MexicoMexican subsidiary and consolidates the operations of this subsidiary. Noncontrolling interest, which represents the Company’sMexican partners’ 51% noncontrolling interest in the MexicoMexican subsidiary, is reflected on the Company’s consolidated financial statements.The Company considers events or transactions that occur after the balance sheet date but before the consolidated financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosures.Use of Estimates and UncertaintiesThe preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates, and changes in estimates are reported in current operations as new information is learned or upon the amounts becoming fixed andor determinable. The most significant areas that require managementmanagement’s judgment are revenue recognition, restructuring, deferred compensation, annual performance relatedperformance-related bonuses, evaluation of the carrying value of receivables, goodwill and other intangible assets, fair value of contingent consideration, share-based payments, leases and the recoverability of deferred income taxes.Revenue RecognitionSubstantially all fee revenue is derived from talent and organizational consulting services and digital sales, stand-alone or as part of a solution, fees for professional services related to executive searchand professional recruitment performed on a retained basis recruitmentand RPO, eitherstand-alone or as part of a solution.Revenue is recognized when control of the goods and services are transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange fornon-executive professionals, recruitment process outsourcing, people those goods and organizational advisoryservices. Revenue contracts with customers are evaluated based on the five-step model outlined in Accounting Standards Codification (“ASC”) 606 (“ASC 606”), Revenue from Contracts with Customers: 1) identify the contract with a customer; 2) identify the performance obligation(s) in the contract; 3) determine the transaction price; 4) allocate the transaction price to the separate performance obligation(s); and 5) recognize revenue when (or as) each performance obligation is satisfied.Consulting fee revenue is primarily recognized as services are rendered, measured by total hours incurred as a percentage of the total estimated hours at completion. It is possible that updated estimates for consulting engagements may vary from initial estimates with such updates being recognized in the period of determination. Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate.Digital fee revenue is generated from IP platforms enabling large-scale, technology-based talent programs for pay, talent development, engagement, and assessment and is consumed directly by an end user or indirectly through a consulting engagement. Revenue is recognized as services are delivered and the Company has a legally enforceable right to payment. Revenue also comes from the sale of product services. the Company’s proprietary IP subscriptions, which are considered symbolic IP due to the dynamic nature of the content. As a result, revenue is recognized over the term of the contract. Functional IP licenses grant customers the right to use IP content via the delivery of a flat file. Because the IP content license has significant stand-alone functionality, revenue is recognized upon delivery and when an enforceable right to payment exists. Revenue for tangible and digital products sold by the Company, such as books and digital files, is recognized when these products are shipped.Fee revenue from executive and professional search activities and recruitment fornon-executive professionals is generallyone-third of the estimated first yearfirst-year cash compensation of the placed executive ornon-executive professional, as applicable,candidate, plus a percentage of the fee to cover indirect engagement-related expenses. In addition to the search retainer, an uptick fee is billed when the actual compensation awarded by the client for a placement is higher than the estimated compensation. In the aggregate, upticks have been a relatively consistent percentage of the original estimated fee; therefore, the Company estimates upticks using the expected value method based on historical data on a portfolio basis. In a standard search engagement, related expenses.there is one performance obligation, which is the promise to undertake a search. The Company generally recognizes such revenue onover the course of a straight-line basis over a three-month period, commencing upon client acceptance,search and when it is legally entitled to payment as this isoutlined in the period over which the recruitment services are performed. Fees earned in excessbilling terms of the initial contract amount are recognized upon completion of the engagement, which reflect the difference between the final actual compensation of the placed executive and the estimate used for purposes of the previous billings. Since the initial contract fees are typically not contingent upon placement of a candidate, our assumptions primarily relate to establishing the period over which such service is performed. These assumptions determine the timing of revenue recognition and profitability for the reported period.contract. Any revenues associated with services that are provided on a contingent basis are recognized once the contingency is resolved.resolved, as this is when control is transferred to the customer. These assumptions determine the timing of revenue recognition for the reported period. In addition to talent acquisition for permanent placement roles, the Professional Search & Interim segment also offers recruitment fornon-executive professionals, Futurestep provides recruitment process outsourcing (“RPO”) services andfor interim roles. Interim roles are short term in duration, generally less than 12 months. Generally, each interim role is a separate performance obligation. The Company recognizes fee revenue is recognized asover the duration that the interim resources’ services are rendered and/or as milestones are achieved. Fee revenue from Hay Group (formerly known as Leadership & Talent Consulting (“Legacy LTC”)provided which was combined with HG (Luxembourg) S.à.r.l (“Legacy Hay”) in December 2015) is recognized as services are rendered for consulting engagements and other time-based services, measured by total hours incurredalso aligns to the total estimated hours at completion. It is possible that updated estimates for the consulting engagement may vary from initial estimates with such updates being recognized in the period of determination.8KORN/KORN FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 20182023 (continued)Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate. Hay Group RPO feerevenue is also derived fromgenerated through two distinct phases: 1) the sale of product services, which includes revenue from licensesimplementation phase and from2) the sale of products. Revenue from licenses ispost-implementation recruitment phase. The fees associated with the implementation phase are recognized using a straight-line method over the term ofperiod that the contract (generally 12 months). Underrelated implementation services are provided. The post-implementation recruitment phase represents end-to-end recruiting services to clients for which there are both fixed term licenses,and variable fees, which are recognized over the Company is obligated to provideperiod that the licensee with access to any updates to the underlying intellectual property thatrelated recruiting services are made by the Company during the term of the license. Once the term of the agreement expires, the client’s right to access or use the intellectual property expires and the Company has no further obligations to the client under the license agreement. Revenue from perpetual licenses is recognized when the license is sold since the Company’s only obligation is to provide the client access to the intellectual property but is not obligated to provide maintenance, support, updates or upgrades. Products sold by the Company mainly consist of books and automated services covering a variety of topics including performance management, team effectiveness, and coaching and development. The Company recognizes revenue for its products when the product has been sold or shipped in the case of books. As of January 31, 2018 and April 30, 2017, the Company included deferred revenue of $110.9 million and $95.8 million, respectively, in other accrued liabilities.ReimbursementsThe Company incurs certainout-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in itsthe consolidated statements of income.Allowance for Doubtful AccountsAn allowance is established for doubtful accounts by taking a charge to general and administrative expenses. The Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivable. Due to the short-term nature of such receivables, the estimate of amount of the allowanceaccounts receivable that may not be collected is primarily based on historical loss experience, assessment ofloss-rate experience. When required, the collectability of specific accounts, as well asCompany adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future collections based upon trendseconomic and market conditions. The Company generally assesses future economic condition for a period of sixty to ninety days, which corresponds with the typecontractual life of work for which services are rendered.its accounts receivables. After the Company exhausts all collection efforts, the amount of the allowance is reduced for balances identifiedwritten off as uncollectible.Cash and Cash EquivalentsThe Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. As of January 31, 20182023 and April 30, 2017,2022, the Company’s investments in cash equivalents consistconsisted of money market funds, and as of April 30, 2022 also consisted of commercial paper with initial maturity of less than 90 days for which market prices are readily available.Marketable SecuritiesThe Company currently has investments in marketable securities and mutual funds that are classified as tradingeither equity securities based upon management’s intent and ability to hold, sell or trade suchavailable-for-sale debt securities. The classification of the investments in these marketable securities and mutual funds is assessed upon purchase and reassessed at each reporting period. These investments are recorded at fair value and are classified as marketable securities in the accompanying consolidated balance sheets.The investments that the Company may sell within the next 12 months are carried as current assets.The Company invests in mutual funds (for which market prices are readily available) that are held in trust to satisfy obligations under the Company’s deferred compensation plans. Such investments are based uponclassified as equity securities and mirror the employees’ investment elections in their deemed accounts in the Executive Capital Accumulation Plan and similar plans in Asia Pacific and Canada (“ECAP”) from apre-determined set of securities and the Company invests in marketable securities to mirror these elections. These investments are recorded at fair value and are classified as marketable securities in the accompanying consolidated balance sheets. The investments that the Company may sell within the next twelve months are carried as current assets.securities. Realized gains (losses) on marketable securities are determined by specific identification. Interest is recognized on an accrual basis; dividends are recorded as earned on theex-dividend date. Interest, dividend income and the changes in fair value in tradingmarketable securities are recorded in the accompanying consolidated statements of income in other income (loss), net.The Company also invests cash in excess of its daily operating requirements and capital needs primarily in marketable fixed income (debt) securities in accordance with the Company’s investment policy, which restricts the type of investments that can be made. The Company’s investment portfolio includes commercial paper, corporate notes/bonds and U.S. Treasury and Agency securities. These marketable fixed income (debt)securities are classified as available-for-sale securities based on management’s decision, at the date such securities are acquired, not to hold these securities to maturity or actively trade them. The Company carries these marketable debt securities at fair value based on the market prices for these marketable debt securities or similar debt securities whose prices are readily available. The changes in fair values, net of applicable taxes, are recorded as unrealized gains or losses as a component of comprehensive income unless the change is due to credit loss. A credit loss is recorded in the statements of income in other income (loss), net; any amount in excess of the credit loss is recorded as unrealized losses as a component of comprehensive income. Generally, the amount of the loss is the difference between the cost or amortized cost and its then current fair value; a credit loss is the difference between the discounted expected future cash flows to be collected from the debt security and the cost or amortized cost of the debt security. During the three and nine months ended January 31, 2023 and 2022, no amount was recognized as a credit loss for the Company’s available for sales debt securities.Fair Value of Financial InstrumentsFair value is the price the Company would receive to sell an asset or transfer a liability (exit price) in an orderly transaction between market participants. For those assets and liabilities recorded or disclosed at fair value, the Company determines9KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)the fair value based upon the quoted market price, if available. If a quoted market price is not available for identical assets, the fair value is based upon the quoted market price of similar assets. The fair values are assigned a level within the fair value hierarchy as defined below:◾Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.◾Level 2:Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.◾Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.•Level 2:Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.As of January 31, 20182023 and April 30, 2017,2022, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included cash, cash equivalents, accounts receivable, marketable securities and foreign currency forward contracts and an interest rate swap.contracts. The carrying amount of cash, cash equivalents and accounts receivable approximates fair value due to the shortshort-term maturity of these instruments. The fair values of marketable securities classified as tradingequity securities are obtainedKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued) or the interest rate swap are obtained from a third party, which are based on quoted prices or market prices for similar assets and financial instruments.Derivative Financial InstrumentsThe Company is exposed to interest rate risk due to the outstanding senior secured credit agreement entered on June 15, 2016. The Company has entered into an interest rate swap agreement to effectively convert its variable debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s long-term debt, thus reducing the impact of interest rate changes on future interest payment cash flows. The Company has determined that the interest rate swap qualifies as a cash flow hedge in accordance with Accounting Standards Codification 815,Derivatives and Hedging. Changes in the fair value of an interest rate swap agreement designated as a cash flow hedge are recorded as a component of accumulated other comprehensive income (loss), net within stockholders’ equity and are amortized to interest expense over the term of the related debt.Foreign Currency Forward Contracts Not Designated as HedgesThe Company has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures.exposures primarily originating from intercompany balances due to cross border work performed in the ordinary course of business. These foreign currency forward contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to Accounting Standards CodificationASC 815,Derivatives and Hedging. Accordingly, the fair value of these contracts is recorded as of the end of the reporting period in the accompanying consolidated balance sheets, while the change in fair value is recorded to the accompanying consolidated statements of income.Business AcquisitionsBusiness acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity, and recognize and measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value of the assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than twelve12 months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed and requires the Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a business combination.LeasesThe Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and current and non-current operating lease liability, in the consolidated balance sheets. Finance leases are included in property and equipment, net, other accrued liabilities and other liabilities in the consolidated balance sheets.ROU assets represent the Company's right to use an underlying asset for the lease term, and the lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the periods in which they are incurred.The Company has lease agreements with lease and non-lease components. For all leases with non-lease components the Company accounts for the lease and non-lease components as a single lease component.10KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)Impairment of Long-Lived AssetsLong-lived assets include property, equipment, ROU assets and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment, management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability, as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. During the three and nine months ended January 31, 2023, the Company reduced its real estate footprint and as a result, the Company took an impairment charge of ROU assets of $5.5 million and an impairment of leasehold improvements and furniture and fixtures of $4.4 million, both recorded in the consolidated statements of income in general and administrative expenses. During the nine months ended January 31, 2022, the Company reduced its real estate footprint and as a result, the Company took an impairment charge of ROU assets of $7.4 million and an impairment of leasehold improvements and furniture and fixtures of $1.9 million, both recorded in the consolidated statements of income in general and administrative expenses.Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwillGoodwill is tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Results of the annual qualitative impairment test compares the fair valueperformed as of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount ofJanuary 31, 2023 and 2022, indicated that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). Results of the annual impairment test performed as of January 31, 2017, indicated that the fair value of each reporting unit exceeded its carrying amount and no reporting units were at risk of failing the impairment test. As a result, no impairment charge was recognized. The Company’s annual impairment test will be performed in the fourth quarterAs of fiscal 2018. There was also no indication of potential impairment as of January 31, 2018 and April 30, 2017 that would have required further testing.Intangible assets primarily consist of customer lists,non-compete agreements, proprietary databases intellectual property and trademarks andIP. Intangible assets are recorded at their estimated fair value at the date of acquisition and are amortized in a pattern in which the asset is consumed, if that pattern can be reliably determined, or using the straight-line method over their estimated useful lives, which range from one to 24 years. For intangible assets subject to amortization, an impairment loss is recognized if the carrying amount of the intangible assets is not recoverable and exceeds fair value. The carrying amount of the intangible assets is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from use of the asset. IntangibleThe Company reviewed its intangible assets with indefinite lives are not amortized, but are reviewed annually forand noted no impairment or more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than its carrying amount. Asas of January 31, 20182023 and April 30, 2017, there were no indicators of impairment with respect to the Company’s intangible assets.KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)Compensation and Benefits ExpenseCompensation and benefits expense in the accompanying consolidated statements of income consist of compensation and benefits paid to consultants (employees who originate business), executive officers and administrative and support personnel. The most significant portions of this expense are salaries and the amounts paid under the annual performance relatedperformance-related bonus plan to employees. The portion of the expense applicable to salaries is comprised of amounts earned by employees during a reporting period. The portion of the expenses applicable to annual performance relatedperformance-related bonuses refers to the Company’s annual employee performance relatedperformance-related bonus with respect to a fiscal year, the amount of which is communicated and paid to each eligible employee following the completion of the fiscal year.Each quarter, management makes its best estimate of its annual performance relatedperformance-related bonuses, which requires management to, among other things, project annual consultant productivity (as measured by engagement fees billed and collected by executive searchExecutive Search and Professional Search consultants and revenue and other performance/profitability metrics for Hay GroupConsulting, Digital, Interim and FuturestepRPO consultants), the level of engagements referred by a consultant in one line of business to a different line of business, and Company performance, including profitability, competitive forces and future economic conditions and their impact on the Company’s results. At the end of each fiscal year, annual performance relatedperformance-related bonuses take into account final individual consultant productivity (including referred work), Company/line of business results, including profitability, the achievement of strategic objectives, the results of individual performance appraisals and the current economic landscape. Accordingly, each quarter the Company reevaluates the assumptions used to estimate annual performance relatedperformance-related bonus liability and adjusts the carrying amount of the liability recorded on the consolidated balance sheet and reports any changes in the estimate in current operations.Because annual performance-based bonuses are communicated and paid only after the Company reports its full fiscal year results, actual performance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus estimate historically have been immaterial and are recorded in current operations in the period in which they are determined. The performance relatedperformance-related bonus expense was $155.2$94.1 million and $136.2$295.8 million during the three and nine months ended January 31, 2018 and 2017,2023, respectively, included in compensation and benefits expense in the consolidated statements of income. During11KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)The performance-related bonus expense was $117.7 million and $332.9 million during the three and nine months ended January 31, 20182022, respectively, included in compensation and 2017,benefits expense in the performance related bonus expense was $56.8 million and $41.1 million, respectively.Other expenses included in compensation and benefits expense are due to changes in deferred compensation and pension plan liabilities, changes in cash surrender value (“CSV”) of company ownedcompany-owned life insurance (“COLI”) contracts, amortization of stockstock-based compensation awards, commissions, payroll taxes and employee insurance benefits. Investments and other assets includeUnearned compensation on the consolidated balance sheets includes long-term retention awards that are generally amortized over four to five-to-five years.Restructuring Charges, NetThe Company accounts for its restructuring charges as a liability when the obligations are incurred and records such charges at fair value. Such charges includedone-time employee termination benefits and the cost to terminate an office lease including remaining lease payments. Changes in the estimates of the restructuring charges are recorded in the period the change is determined.Stock-Based CompensationThe Company has employee compensation plans under which various types of stock-based instruments are granted. These instruments principally include restricted stock units, restricted stock and an Employee Stock Purchase Plan (“ESPP”). The Company recognizes compensation expense related to restricted stock units, restricted stock and the estimated fair value of stock purchases under the ESPP on a straight-line basis over the service period for the entire award.ReclassificationsCertain reclassifications have been made to the amounts in the prior periods in order to conform to the current period’s presentation.Recently AdoptedProposed Accounting StandardsIn March 2016,October 2021, the Financial Accounting Standards Board (the “FASB”(“FASB”) issued guidance onan amendment in accounting for certain aspectscontract assets and contract liabilities from contracts with customers, which clarifies that an acquirer of share-based payments to employees.a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. The new guidance requires excess tax benefits and tax deficiencies to be recordedamendment of this standard becomes effective in the income statement when the awards vest or are settled. Furthermore, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The guidance also allows companies to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifying that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity in the consolidated statements of cash flows and provides an accounting policy election to account for forfeitures as they occur. The provisions of the guidance are effective for fiscal years beginning after December 15, 2016 and were adopted by the Company effective May 1, 2017.2022. The primary impact of the adoption was the recognition of excess tax benefits in our provision for income taxes in the current year compared to recording it previously as a component of equity. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings, where the cumulative effect of these changes are required to be recorded. The Company elected to apply the presentation for cash flows related to excess tax benefits retrospectively for all periods presented which resulted in minimal impact to cash used in operations and cash providedKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)by financing activities for the nine months ended January 31, 2017. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact on any of the periods presented on our consolidated cash flows statements since such cash flows have historically been presented as a financing activity. The Company elected to account for forfeitures as they occur, rather than estimating the expected forfeitures over the vesting period. This election did not have an impact on the Company’s financial statements.Recently Issued Accounting Standards - Not Yet AdoptedIn May 2014, the FASB issued ASU2014-09, which superseded revenue recognition requirements regarding contracts with customers to transfer goods or services or for the transfer of nonfinancial assets. Under this new guidance, entities are required to recognize revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis to be performed on transactions to determine when and how revenue is recognized. In addition, the guidance permits companies to choose between the following two transition methods of adopting ASU2014-09: (1) the full retrospective method, in which case the standard wouldamendment should be applied prospectively to all reporting periods presented and (2)business combinations that occur after the modified retrospective method, with a cumulative-effect adjustment as of the date of adoption.The new guidance is effective for fiscal years and interim periods within those annual years beginning after December 15, 2017.date. The Company will adopt this guidance in its fiscal year beginning May 1, 2018 and expects to apply the modified retrospective method in adopting ASU2014-09.2023. The Company organized a team and developed a project plan to guide the implementation. The project plan includes working sessions to review, evaluate and document the arrangements with customers under our various reporting units to identify potential differences that would result from applying the requirements of the new standard.The Company has completed its initial evaluation ofis currently evaluating the impact of ASU2014-09 on executive search activities and recruitment fornon-executive professionals and recruitment process outsourcing. As to executive search and recruitment fornon-executive professionals we expect the implementation of ASU2014-09 to result in timing differences in the recognition of uptick revenue (uptick revenue occurs when a placement’s actual compensation is higher than the original estimated compensation). Currently the Company recognizes uptick revenue as the amount becomes fixed and determinable. Under ASU2014-09, however, upticks are considered variable consideration and the Company will be required to estimate upticks at contract inception and recognize the revenue over the service period. Based on our initial evaluation the impact of ASU2014-09 on the recruitment process outsourcing revenue stream isthis accounting guidance but does not expected to be material. The Company expects to finalize its evaluation of the impact of ASUNo. 2014-09 by the end of the fiscal year.In February 2016, the FASB issued guidance on accounting for leasesanticipate that generally requires all leases to be recognized on the consolidated balance sheet. The provisions of the guidance are effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. The Company plans to adopt this guidance in fiscal year beginning May 1, 2019. The provisions of the guidance are to be applied using a modified retrospective approach. The Company is still evaluating the effect this guidance will have on the consolidated financial statements. Based on our initial assessment, the Company expects that upon adoption it will report an increase in assets and liabilities on our consolidated balance sheet as a result of recognizingright-of-use assets and lease liabilities related to lease agreements.In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance provides clarification on specific cash flow issues regarding presentation and classification in the statement of cash flows with the objective of reducing the existing diversity in practice. The amendments in this update are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company plans to adopt this guidance in its fiscal year beginning May 1, 2018. The provisions of the guidance are to be applied using a retrospective transition method. The adoption of this guidance is not anticipated to have a material impact on the consolidated financial statements.In January 2017, the FASB issued guidance that clarifies the definition of a business. The new guidance assists a company when evaluating whether transactions should be accounted for as acquisitions (disposals) of assets or businesses. The provisions of the guidance require that if the fair value of the gross assets acquired (or disposed of) is substantially concentrated in a single identifiable asset or a group of similar identifiable assets, then it is not a business. The provisions of the guidance are effective for annual years beginning after December 15, 2017, including interim periods, with early adoption permitted. The Company plans to adopt this guidance in its fiscal year beginning May 1, 2018. The provisions of the guidance are to be applied prospectively. The adoption of this guidance is not anticipated to have a material impact on the consolidated financial statements.In January 2017, the FASB issued guidance simplifying the test for goodwill impairment. The new guidance simplifies the test for goodwill impairment by removing Step 2 from the goodwill impairment test. Companies will now perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments of this standard are effective for goodwill impairment tests in fiscalKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)years beginning after December 15, 2019, with early adoption permitted for goodwill impairment tests performed after January 1, 2017. The Company is evaluating the adoption timeline and the effects that the standard will have on the consolidated financial statements.In March 2017, the FASB issued guidance that changes the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance will change the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income. Additionally, only service costs may be capitalized in assets. The amendments of this standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company will adopt this guidance in its fiscal year beginning May 1, 2018. The adoption of this standard is not anticipated to have a material impact on the consolidated financial statements.In May 2017, the FASB issued guidance clarifying the scope of modification accounting for stock compensation. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. The Company will adopt this guidance in its fiscal year beginning May 1, 2018. The Company is currently evaluating the impact of adopting this guidance.In August 2017, the FASB issued guidance amending and simplifying accounting for hedging activities. The new guidance will refine and expand strategies that qualify for hedge accounting and simplify the application of hedge accounting in certain situations. The amendments of this standard are effective for fiscal years beginning after December 15, 2018. The Company will adopt this guidance in its fiscal year beginning May 1, 2019. The Company is currently evaluating the impact of adopting this guidance.In February 2018, the FASB issued ASU2018-02 which provides companies the option to reclassify stranded tax effects within accumulated other comprehensive income (loss), net to retained earnings resulting from the Tax Cuts and Jobs Act (the “Tax Act”). The new guidance requires companies to disclose whether they decided to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income (loss), net to retained earnings and to disclose a policy for releasing the income tax effects from accumulated other comprehensive income (loss), net. The guidance is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. If companies elect to reclassify the stranded tax effects the guidance allows it to be recorded in the period of adoption or retrospectively to each period in which the effect of the Tax Act is recognized. The Company is currently evaluating the impact of adopting this guidance.2. Basic and Diluted Earnings Per ShareAccounting Standards CodificationASC 260,Earnings Per Share, requires companies to treat unvested share-based payment awards that havenon-forfeitable rights to dividends prior to vesting as a separate class of securities in calculating earnings per share. We haveThe Company has granted and expectexpects to continue to grant to certain employees under ourits restricted stock agreements, grants that containnon-forfeitable rights to dividends. Such grants are considered participating securities. Therefore, we arethe Company is required to apply thetwo-class method in calculating earnings per share. Thetwo-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The dilutive effect of participating securities is calculated using the more dilutive of the treasury method or thetwo-class method.Basic earnings per common share was computed using thetwo-class method by dividing basic net earnings attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share was computed using thetwo-class method by dividing diluted net earnings attributable to common stockholders by the weighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common equivalent shares include allin-the-money outstanding options or other contracts to issue common stock as if they were exercised or converted. Financial instruments that are not in the form of common stock, but when converted into common stock increase earnings per share, are anti-dilutive and are not included in the computation of diluted earnings per share.During the three and nine months ended January 31, 2018,2023, restricted stock awards of 0.61.2 million shares and 1.2 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive. During the three and nine months ended January 31, 2017,2022, restricted stock awards of 0.51.2 million shares and 0.61.2 million shares, respectively, were outstanding respectively, but not included in the computation of diluted earnings per share because they were anti-dilutive.12KORN/KORN FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 20182023 (continued)The following table summarizes basic and diluted earnings per common share attributable to common stockholders: Three Months Ended
January 31, Nine Months Ended
January 31, 2018 2017 2018 2017 (in the thousands, except per share data) $ 27,247 $ 23,897 $ 92,619 $ 57,257 295 227 982 505 26,952 23,670 91,637 56,752 235 172 804 356 232 171 793 353 $ 26,955 $ 23,671 $ 91,648 $ 56,755 55,252 56,173 55,479 56,325 738 505 744 540 3 20 6 24 4 4 7 28 55,997 56,702 56,236 56,917 $ 0.49 $ 0.42 $ 1.65 $ 1.01 $ 0.48 $ 0.42 $ 1.63 $ 1.00 Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 (in thousands, except per share data) Net income attributable to Korn Ferry $ 11,247 $ 84,101 $ 162,035 $ 234,696 Less: distributed and undistributed earnings to nonvested restricted stockholders 249 1,798 3,545 5,363 Basic net earnings attributable to common stockholders 10,998 82,303 158,490 229,333 Add: undistributed earnings to nonvested restricted stockholders 72 1,658 3,017 4,908 Less: reallocation of undistributed earnings to nonvested restricted stockholders 72 1,643 2,997 4,856 Diluted net earnings attributable to common stockholders $ 10,998 $ 82,318 $ 158,510 $ 229,385 Weighted-average common shares outstanding: Basic weighted-average number of common shares outstanding 51,278 52,999 51,639 52,958 Effect of dilutive securities: Restricted stock 150 490 352 573 ESPP 3 6 8 7 Diluted weighted-average number of common shares outstanding 51,431 53,495 51,999 53,538 Net earnings per common share: Basic earnings per share $ 0.21 $ 1.55 $ 3.07 $ 4.33 Diluted earnings per share $ 0.21 $ 1.54 $ 3.05 $ 4.28 3. Stockholders’ EquityThe following table summarizes the changes in stockholders’ equity for the three months ended January 31, 2018: Total Korn/Ferry
International
Stockholders’
Equity Noncontrolling
Interest Total
Stockholders’
Equity (in thousands) $ 1,132,014 $ 2,709 $ 1,134,723 27,247 180 27,427 17,793 46 17,839 361 — 361 1,077 — 1,077 (5,705 ) — (5,705 ) (3,503 ) — (3,503 ) 3,412 — 3,412 5,263 — 5,263 $ 1,177,959 $ 2,935 $ 1,180,894 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)The following table summarizes the changes in stockholders’ equity for the nine months ended January 31, 2018: Total Korn/Ferry
International
Stockholders’
Equity Noncontrolling
Interest Total
Stockholders’
Equity (in thousands) $ 1,083,439 $ 3,609 $ 1,087,048 92,619 969 93,588 29,858 (85 ) 29,773 1,065 — 1,065 1,470 — 1,470 (17,242 ) — (17,242 ) — (1,558 ) (1,558 ) (36,225 ) — (36,225 ) 7,998 — 7,998 14,977 — 14,977 $ 1,177,959 $ 2,935 $ 1,180,894 The following table summarizes the changes in stockholders’ equity for the three months ended January 31, 2017: Total Korn/Ferry
International
Stockholders’
Equity Noncontrolling
Interest Total
Stockholders’
Equity (in thousands) $ 1,050,553 $ 3,591 $ 1,054,144 23,897 481 24,378 (1,321 ) (262 ) (1,583 ) 465 — 465 (5,796 ) — (5,796 ) — (1,229 ) (1,229 ) (9,578 ) — (9,578 ) 2,778 — 2,778 4,406 — 4,406 17 — 17 $ 1,065,421 $ 2,581 $ 1,068,002 The following table summarizes the changes in stockholders’ equity for the nine months ended January 31, 2017: Total Korn/Ferry
International
Stockholders’
Equity Noncontrolling
Interest Total
Stockholders’
Equity (in thousands) $ 1,045,300 $ 2,001 $ 1,047,301 57,257 2,245 59,502 (19,580 ) (436 ) (20,016 ) 1,392 — 1,392 (17,546 ) — (17,546 ) — (1,229 ) (1,229 ) (20,695 ) — (20,695 ) 5,746 — 5,746 13,497 — 13,497 50 — 50 $ 1,065,421 $ 2,581 $ 1,068,002 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)4. Comprehensive IncomeComprehensive income is comprised of net income and all changes to stockholders’ equity, except those changes resulting from investments by stockholders (changes in paid in capital) and distributions to stockholders (dividends) and is reported in the accompanying consolidated statements of comprehensive income. Accumulated other comprehensive income (loss),loss, net of taxes, is recorded as a component of stockholders’ equity.The components of accumulated other comprehensive income (loss),loss, net were as follows: January 31,
2018 April 30,
2017 (in thousands) $ (25,501 ) $ (55,359 ) (14,062 ) (15,127 ) 892 (578 ) $ (38,671 ) $ (71,064 ) January 31,
2023April 30,
2022(in thousands) Foreign currency translation adjustments $ (97,509) $ (92,717) Deferred compensation and pension plan adjustments, net of tax 1,126 961 Marketable securities unrealized loss, net of tax (419) (429) Accumulated other comprehensive loss, net $ (96,802) $ (92,185) 13KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)The following table summarizes the changes in each component of accumulated other comprehensive income (loss),loss, net for the three months ended January 31, 2018: Foreign
Currency
Translation Deferred
Compensation
and Pension
Plan (1) Unrealized
(Losses) Gains
on Interest Rate
Swap (2) Accumulated
Other
Comprehensive
Income (Loss) (in thousands) $ (43,294 ) $ (14,423 ) $ (185 ) $ (57,902 ) 17,793 — 973 18,766 — 361 104 465 $ (25,501 ) $ (14,062 ) $ 892 $ (38,671 ) Foreign
Currency
Translation Deferred
Compensation
and Pension
Plan (1) Unrealized
(Losses) Gains
on Interest Rate
Swap (2) Accumulated
Other
Comprehensive
Income (Loss) (in thousands) $ (55,359 ) $ (15,127 ) $ (578 ) $ (71,064 ) 29,858 — 1,061 30,919 — 1,065 409 1,474 $ (25,501 ) $ (14,062 ) $ 892 $ (38,671 ) Foreign
Currency
TranslationDeferred
Compensation
and Pension
PlanUnrealized Losses on
Marketable Securities (1)Accumulated
Other
Comprehensive
Loss(in thousands) Balance as of October 31, 2022 $ (136,991) $ 1,066 $ (740) $ (136,665) Unrealized gains arising during the period 39,482 — 321 39,803 Reclassification of realized net losses to net income — 60 — 60 Balance as of January 31, 2023 $ (97,509) $ 1,126 $ (419) $ (96,802) The following table summarizes the changes in each component of accumulated other comprehensive loss, net for the nine months ended January 31, 2023:Foreign
Currency
TranslationDeferred
Compensation
and Pension
Plan (2)Unrealized Losses on
Marketable SecuritiesAccumulated
Other
Comprehensive
Loss(in thousands) Balance as of April 30, 2022 $ (92,717) $ 961 $ (429) $ (92,185) Unrealized (losses) gains arising during the period (4,792) — 10 (4,782) Reclassification of realized net losses to net income — 165 — 165 Balance as of January 31, 2023 $ (97,509) $ 1,126 $ (419) $ (96,802) ___________________(1) The tax effect on the unrealized gains was $0.1 million for three months ended January 31, 2023. (2) The tax effect on the reclassifications of realized net losses was $0.2$0.1 million and $0.7for the nine months ended January 31, 2023.14KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)The following table summarizes the changes in each component of accumulated other comprehensive loss, net for the three months ended January 31, 2022:Foreign
Currency
TranslationDeferred
Compensation
and Pension
Plan (1)Unrealized Losses on
Marketable SecuritiesAccumulated
Other
Comprehensive
Loss(in thousands) Balance as of October 31, 2021 $ (49,051) $ (17,443) $ (36) $ (66,530) Unrealized (losses) gains arising during the period (15,232) 824 (115) (14,523) Reclassification of realized net losses to net income — 335 — 335 Balance as of January 31, 2022 $ (64,283) $ (16,284) $ (151) $ (80,718) The following table summarizes the changes in each component of accumulated other comprehensive loss, net for the nine months ended January 31, 2022:Foreign
Currency
TranslationDeferred
Compensation
and Pension
Plan (1)Unrealized Losses on
Marketable SecuritiesAccumulated
Other
Comprehensive
Loss(in thousands) Balance as of April 30, 2021 $ (33,666) $ (18,135) $ (19) $ (51,820) Unrealized (losses) gains arising during the period (30,617) 839 (133) (29,911) Reclassification of realized net losses to net income — 1,012 1 1,013 Balance as of January 31, 2022 $ (64,283) $ (16,284) $ (151) $ (80,718) ___________________(1) The tax effect on unrealized (losses) gains were both $0.3 million for the three and nine months ended January 31, 2018, respectively.(2)The tax effect on unrealized gains was $0.6 million and $0.6 million for the three and nine months ended January 31, 2018, respectively.2022. The tax effect on the reclassificationreclassifications of realized net losses to net income was $0.1 million and $0.3 million for the three and nine months ended January 31, 2018, respectively.2022.KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)The following table summarizes the changes in each component of accumulated other comprehensive income (loss), net for the three months ended January 31, 2017: Foreign
Currency
Translation Deferred
Compensation
and Pension
Plan (1) Accumulated
Other
Comprehensive
Income (Loss) (in thousands) $ (54,598 ) $ (20,645 ) $ (75,243 ) (1,321 ) — (1,321 ) — 465 465 $ (55,919 ) $ (20,180 ) $ (76,099 ) The following table summarizes the changes in each component of accumulated other comprehensive income (loss), net for the nine months ended January 31, 2017: Foreign
Currency
Translation Deferred
Compensation
and Pension
Plan (1) Accumulated
Other
Comprehensive
Income (Loss) (in thousands) $ (36,339 ) $ (21,572 ) $ (57,911 ) (19,580 ) — (19,580 ) — 1,392 1,392 $ (55,919 ) $ (20,180 ) $ (76,099 ) (1)The tax effect on the reclassifications of realized net losses was $0.3 million and $0.9 million for the three and nine months ended January 31, 2017, respectively.5.4. Employee Stock PlansStock-Based CompensationThe following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of income for the periods indicated: Three Months Ended
January 31, Nine Months Ended
January 31, 2018 2017 2018 2017 (in thousands) $ 5,263 $ 4,406 $ 14,977 $ 13,497 254 175 823 604 5,517 4,581 15,800 14,101 (2,750 ) (1,111 ) (5,798 ) (3,778 ) $ 2,767 $ 3,470 $ 10,002 $ 10,323 Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 (in thousands) Restricted stock $ 9,350 $ 7,141 $ 26,327 $ 21,391 ESPP 134 185 583 584 Total stock-based compensation expense $ 9,484 $ 7,326 $ 26,910 $ 21,975 Stock Incentive PlansAt the Company’s 20162022 Annual Meeting of Stockholders, held on October 6, 2016,September 22, 2022, the Company’s stockholders approved an amendment and restatement to the Korn/Korn Ferry International Amended and Restated 20082022 Stock Incentive Plan (the 2016 amendment and restatement being “The Third A&R 2008 Plan”"2022 Plan"), which, among other things, increased the total number of shares underof the planCompany’s common stock available for stock-based awards by 5,500,0001,700,000 shares, increasing the current maximum number ofleaving 2,248,284 shares that may be issued under the plan to 11,200,000 shares,available for issuance, subject to certain changes in the Company’s capital structure and other extraordinary events. The Third A&R 20082022 Plan requires a minimum one-year vesting for all future awards, and provides for the grant of awards to eligible participants, designated as either nonqualified or incentive stock options, restricted stock and restricted stock units, any of which may be performance-based orare market-based, and incentive bonuses, which may be paid in cash or stock or a combination thereof. Under the Third A&R 2008 Plan, the ability to issue full-value awards is limited by requiring full-value stock awards to count 2.3 times as much as stock options.15KORN/KORN FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 20182023 (continued)Restricted StockThe Company grants time-based restricted stock awards to executive officers and other senior employees that generally vestingvest over a four-year period. In addition, certain key management members typically receive time-based restricted stock awards upon commencement of employment and may receive them annually in conjunction with the Company’s performance review. Time-based restricted stock awards are granted at a price equal to fair value, which is determined based on the closing price of the Company’s common stock on the grant date. The Company recognizes compensation expense for time-based restricted stock awards on a straight-line basis over the vesting period.The Company also grants market-based and performance-based restricted stock units to executive officers and other senior employees. The market-based units vest after three years depending upon the Company’s total stockholder return over the three-year performance period relative to other companies in its selected peer group. The fair value of these market-based restricted stock units isare determined by using extensive market data that is based on historical Company and peer group information. The Company recognizes compensation expense for market-based restricted stock units on a straight-line basis over the vesting period.Performance-based restricted stock units vest after three years depending upon the Company meeting certain objectives that are set at the time the restricted stock unit is issued. Performance-based restricted stock units are granted at a price equal to the fair value, which is determined based on the closing price of the Company’s common stock on the grant date. At the end of each reporting period, the Company estimates the number of restricted stock units expected to vest, based on the probability that certain performance objectives will be met, exceeded, or fall below target levels, and the Company takes into account these estimates when calculating the expense for the period.Restricted stock activity during the nine months ended January 31, 20182023 is summarized below: Shares Weighted-
Average Grant
Date Fair Value (in thousands, except per share data) 1,581 $ 29.74 623 $ 37.46 (419 ) $ 26.01 (68 ) $ 33.28 1,717 $ 33.31 Shares Weighted-
Average Grant
Date Fair Value(in thousands, except per share data) Non-vested, April 30, 2022 1,980 $ 40.32 Granted 1,123 $ 49.11 Vested (1,002) $ 37.69 Forfeited/expired (36) $ 55.73 Non-vested, January 31, 2023 2,065 $ 50.08 As of January 31, 2018,2023, there were 0.7 million shares and 0.20.4 million shares outstanding relating to market-based and performance-based restricted stock units respectively, with total unrecognized compensation totaling $9.9 million and $4.3 million, respectively.As of January 31, 2018,2023, there was $35.1$78.8 million of total unrecognized compensation cost related to allnon-vested awards of restricted stock, which is expected to be recognized over a weighted-average period of 2.42.6 years. During the nine months ended January 31, 2023, 370,857 shares of restricted stock totaling, $22.1 million, were repurchased by the Company, at the option of employees, to pay for taxes related to the vesting of restricted stock. During the three and nine months ended January 31, 2018, 4,6532022, 2,509 shares and 105,024267,316 shares of restricted stock totaling $0.2 million and $3.6$18.2 million, respectively, were repurchased by the Company, at the option of employees, to pay for taxes related to the vesting of restricted stock. During the three and nine months ended January 31, 2017, 7,151 shares and 193,668 shares of restricted stock totaling $0.2 million and $4.4 million, respectively, were repurchased by the Company, at the option of employees, to pay for taxes related to vesting of restricted stock.Employee Stock Purchase PlanThe Company has an ESPP that, in accordance with Section 423 of the Internal Revenue Code, allows eligible employees to authorize payroll deductions of up to 15% of their salary to purchase shares of the Company’s common stock atstock. On June 3, 2020, the Company amended the plan so that the purchase price of the shares purchased could not be less than 85% or more than 100% of the fair market price of the common stock on the last day of the enrollment period. This amendment became effective July 1, 2020. At the Company’s 2022 Annual Meeting of Stockholders, held on September 22, 2022, the Company’s stockholders approved the Korn Ferry Amended and Restated Employee Stock Purchase Plan, which, among other things, increased the total number of shares of the Company’s common stock that may be purchased thereunder by 1,500,000 shares. Employees may not purchase more than $25,000 in stock during any calendar year. The maximum number of shares that may be issued under the ESPP is 3.04.5 million shares. During the three months ended January 31, 2023 and 2022, employees purchased 71,016 shares at $45.56 per share and 48,801 shares at $68.16 per share, respectively, under the ESPP. During the nine months ended January 31, 2023 and 2022, employees purchased 154,720 shares at an average price of $49.16 per share and 103,826 shares at an average price of $66.64 per share, respectively. As of January 31, 2023, the ESPP had approximately 1.8 million shares remaining available for future issuance.Common StockDuring the three and nine months ended January 31, 2018, employees purchased 82,464 shares at $35.17 per share and 198,749 shares at $31.77 per share, respectively. During the three and nine months ended January 31, 2017, employees purchased 93,130 shares at $25.01 per share and 207,141 shares at $20.93 per share, respectively. As of January 31, 2018, the ESPP had approximately 1.1 million shares remaining available for future issuance.Common StockDuring the nine months ended January 31, 2018, the Company issued 41,075 shares of common stock, as a result of the exercise of stock options, with cash proceeds from the exercise of $0.6 million. No stock options were exercised during the three months ended January 31, 2018. During the three and nine months ended January 31, 2017, the Company issued 2,510 shares andKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)46,600 shares of common stock, respectively, as a result of the exercise of stock options, with cash proceeds from the exercise of $0.03 million and $0.6 million, respectively.During the three and nine months ended January 31, 2018,2023, the Company repurchased (on the open market) 80,800market or through privately negotiated transactions) 462,500 shares and 974,0791,454,867 shares of the Company’s common stock for $3.3$25.0 million and $32.6$80.5 million, respectively. During the three and nine months ended January 31, 2017,2022, the Company repurchased (on the open market) 383,598market or through privately negotiated transactions) 304,500 shares and 719,098435,581 shares of the Company’sCompany's common stock for $9.4$22.1 million and $16.3$31.5 million, respectively.6.16KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)5. Financial InstrumentsThe following tables show the Company’s financial instruments and balance sheet classification as of January 31, 20182023 and April 30, 2017: January 31, 2018 Fair Value Measurement Balance Sheet Classification Cost Unrealized
Gains Unrealized
Losses Fair Value Cash and
Cash
Equivalents Marketable
Securities,
Current Marketable
Securities,
Non-current Income
Taxes &
Other
Receivables Other
Accrued
Liabilities (in thousands) $ 388,962 $ — $ — $ 388,962 $ 388,962 $ — $ — $ — $ — 1,028 — — 1,028 1,028 — — — — 124,202 15,489 (688 ) 139,003 — 14,807 124,196 — — $ 514,192 $ 15,489 $ (688 ) $ 528,993 $ 389,990 $ 14,807 $ 124,196 $ — $ — $ — $ 814 $ (1,992 ) $ (1,178 ) $ — $ — $ — $ 78 $ (1,256 ) $ — $ 1,390 $ — $ 1,390 $ — $ — $ — $ 1,390 $ — April 30, 2017 Fair Value Measurement Balance Sheet Classification Cost Unrealized
Gains Unrealized
Losses Fair Value Cash and
Cash
Equivalents Marketable
Securities,
Current Marketable
Securities,
Non-current Income
Taxes &
Other
Receivables Other
Accrued
Liabilities (in thousands) $ 409,824 $ — $ — $ 409,824 $ 409,824 $ — $ — $ — $ — 1,058 — — 1,058 1,058 — — — — 113,818 6,697 (578 ) 119,937 — 4,363 115,574 — — $ 524,700 $ 6,697 $ (578 ) $ 530,819 $ 410,882 $ 4,363 $ 115,574 $ — $ — $ — $ 129 $ (846 ) $ (717 ) $ — $ — $ — $ — $ (717 ) $ — $ — $ (947 ) $ (947 ) $ — $ — $ — $ — $ (947 ) January 31, 2023 Fair Value Measurement Balance Sheet Classification Cost Unrealized
GainsUnrealized
LossesFair
ValueCash and
Cash
EquivalentsMarketable
Securities,
CurrentMarketable
Securities,
Non-
currentIncome Taxes & Other Receivables (in thousands) Changes in Fair Value Recorded in Other Comprehensive Loss Level 2: Commercial paper $ 16,294 $ — $ (79) $ 16,215 $ — $ 16,215 $ — $ — Corporate notes/bonds 31,363 1 (489) 30,875 — 23,572 7,303 — Total debt investments $ 47,657 $ 1 $ (568) $ 47,090 $ — $ 39,787 $ 7,303 $ — Changes in Fair Value Recorded in Net Income Level 1: Mutual funds (1) $ 188,809 $ — $ 8,466 $ 180,343 $ — Total equity investments $ 188,809 $ — $ 8,466 $ 180,343 $ — Cash $ 735,392 $ 735,392 $ — $ — $ — Money market funds 36,506 36,506 — — — Level 2: Foreign currency forward contracts 1,303 — — — 1,303 Total $ 1,009,100 $ 771,898 $ 48,253 $ 187,646 $ 1,303 17KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)April 30, 2022 Fair Value Measurement Balance Sheet Classification Cost Unrealized
GainsUnrealized
LossesFair
ValueCash and
Cash
EquivalentsMarketable
Securities,
CurrentMarketable
Securities,
Non-currentOther Accrued Liabilities (in thousands) Changes in Fair Value Recorded in Other Comprehensive Loss Level 2: Commercial paper $ 41,627 $ — $ (126) $ 41,501 $ 15,489 $ 26,012 $ — $ — Corporate notes/bonds 37,736 — (450) 37,286 — 20,242 17,044 — U.S. Treasury and Agency Securities 995 — (8) 987 — 987 — — Total debt investments $ 80,358 $ — $ (584) $ 79,774 $ 15,489 $ 47,241 $ 17,044 $ — Changes in Fair Value Recorded in Net Income Level 1: Mutual funds (1) $ 168,742 $ — $ 10,003 $ 158,739 $ — Total equity investments $ 168,742 $ — $ 10,003 $ 158,739 $ — Cash $ 874,490 $ 874,490 $ — $ — $ — Money market funds 88,091 88,091 — — — Level 2: Foreign currency forward contracts (204) — — — (204) Total $ 1,210,893 $ 978,070 $ 57,244 $ 175,783 $ (204) ___________________(1) These investments are held in trust for settlement of the Company’s vested obligations of $122.3$173.7 million and $99.5$160.8 million as of January 31, 20182023 and April 30, 2017,2022, respectively, under the ECAP (see Note 76 — Deferred Compensation and Retirement Plans)Plans). Unvested obligations under the deferred compensation plans totaled $22.3 million and $24.0 million as of January 31, 2023 and April 30, 2022, respectively. During the three and nine months ended January 31, 2018,2023, the fair value of the investments increased; therefore, the Company recognized incomea gain of $7.2$12.7 million and $14.0$3.0 million, respectively, which was recorded in other income (loss), net. During the three andmonths ended January 31, 2022, the fair value of the investments decreased; therefore, the Company recognized a loss of $7.7 million, which was recorded in other income (loss), net. During the nine months ended January 31, 2017,2022, the fair value of the investments increased; therefore, the Company recognized incomea gain of $3.9$2.4 million, and $7.1 million, respectively, which was recorded in other income (loss), net.Investments in marketable securities classified as tradingavailable-for-sale securities are made based on the Company’s investment policy, which restricts the types of investments that can be made. As of January 31, 2023, marketable securities classified as available-for-sale consisted of commercial paper and corporate notes/bonds, and as of April 30, 2022, marketable securities classified as available-for-sale consisted of commercial paper, corporate notes/bonds and U.S. Treasury and Agency securities, for which market prices for similar assets are readily available. Investments that have an original maturity of 90 days or less and are considered highly liquid investments are classified as cash equivalents. As of January 31, 2023, available-for-sale marketable securities had remaining maturities ranging from one month to 15 months. During the three and nine months ended January 31, 2023, there were $14.3 million and $47.3 million in sales/maturities of available-for-sale marketable securities, respectively. During the three and nine months ended January 31, 2022, there were $18.7 million and $54.7 million in sales/maturities of available-for-sale marketable securities, respectively. Investments in marketable securities that are held in trust for settlement of the Company’s vested obligations under the ECAP are equity securities and are based upon the investment selections the employee electionselects from apre-determined set of securities in the ECAP and the Company invests in marketableequity securities to mirror these elections. As of January 31, 20182023 and April 30, 2017,2022, the Company’s investments in marketableequity securities classified as trading consistconsisted of mutual funds for which market prices are readily available.18KORN/KORN FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 20182023 (continued)Designated Derivatives - Interest Rate Swap AgreementIn March 2017, the Company entered into an interest rate swap contract with a notional amount of $129.8 million, to hedge the variability to changes in cash flows attributable to interest rate risks caused by changes in interest rates related to its variable rate debt. The Company has designated the swap as a cash flow hedge. The notional amount will be amortized so that the amount is always half of the principal balance of the debt outstanding. As of January 31, 2018, the notional amount was $122.0 million. The interest rate swap agreement matures on June 15, 2021 and locks the interest rates on half the debt outstanding at 1.919%, exclusive of the credit spread on the debt.The fair value of the derivative designated as a cash flow hedge instrument is as follows: January 31,
2018 April 30,
2017 (in thousands) $ 1,390 $ — $ — $ 947 During the three and nine months ended January 31, 2018, the Company recognized the following gains and losses on the interest rate swap: Three Months
Ended Nine Months
Ended January 31, 2018 (in thousands) $ 973 $ 1,061 $ 167 $ 667 As the critical terms of the hedging instrument and the hedged forecasted transaction are the same, the Company has concluded that the changes in the fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis.We estimate that the amount included in accumulated other comprehensive income as of January 31, 2018 that will be reclassified into interest expense, net within the following 12 months is less than $0.1 million in income. The cash flows related to the interest rate swap contract are included in net cash provided by operating activities.Non-Designated Derivatives – Foreign Currency Forward ContractsThe fair value of derivatives not designated as hedge instruments are as follows: January 31,
2018 April 30,
2017 (in thousands) $ 814 $ — (736 ) — $ 78 $ — $ 1,992 $ 846 (736 ) (129 ) $ 1,256 $ 717 (1)These amounts represent the impact of netting derivative assets and derivative liabilities when a legally enforceable master netting agreement exists and fair value of adjustments related to our counterparty credit risk.January 31,
2023April 30,
2022(in thousands) Derivative assets: Foreign currency forward contracts $ 1,987 $ 1,639 Derivative liabilities: Foreign currency forward contracts $ 684 $ 1,843 As of January 31, 2018,2023, the total notional amounts of the forward contracts purchased and sold were $19.7$109.0 million and $57.2$35.8 million, respectively. As of April 30, 2017,2022, the total notional amounts of the forward contracts purchased and sold were $19.4KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)$70.0$35.8 million, respectively. The Company recognizes forward contracts as a net asset or net liability on the consolidated balance sheets as such contracts are covered by master netting agreements. During the three and nine months ended January 31, 2018,2023, the Company incurred lossesa gain of $1.9$3.3 million and $4.2$1.2 million, respectively, related to forward contracts which iswas recorded in general and administrative expenses in the accompanying consolidated statements of income. These losses offset foreign currency gains that result from transactions denominated in a currency other than the Company’s functional currency. During the three and nine months ended January 31, 2017,2022, the Company incurred gainsa loss of $1.1$0.3 million and $1.3a gain of $0.2 million, respectively, related to forward contracts. Thesecontracts which was recorded in general and administrative expenses in the accompanying consolidated statements of income. Foreign currency gains and losses related to forward contracts are offset by foreign currency losses and gains that result from transactions denominated in a currency other than the Company’s functional currency. The cash flows related to foreign currency forward contracts are included in net cash used inflows from operating activities.7.6. Deferred Compensation and Retirement PlansThe Company has several deferred compensation and retirement plans for eligible consultants and vice presidents that provide defined benefits to participants based on the deferral of current compensation or contributions made by the Company subject to vesting and retirement or termination provisions. Among these plans is a defined benefit pension plan for certain Hay Group employees in the United States.U.S. The assets of this plan are held separately from the assets of the sponsorssponsor in self-administered funds. The plan is funded consistent with local statutory requirements. All other defined benefit obligations from other plans are unfunded.The components of net periodic benefit costs are as follows: Three Months Ended
January 31, Nine Months Ended
January 31, 2018 2017 2018 2017 (in thousands) $ 3,235 $ 1,793 $ 8,526 $ 3,981 958 1,062 2,876 3,185 577 763 1,731 2,289 (398 ) (389 ) (1,195 ) (1,169 ) $ 4,372 $ 3,229 $ 11,938 $ 8,286 Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 (in thousands) Service cost $ 10,573 $ 9,762 $ 30,200 $ 28,190 Interest cost 2,439 1,038 7,263 3,095 Amortization of actuarial loss 218 537 654 1,622 Expected return on plan assets (1) (289) (387) (867) (1,160) Net periodic service credit amortization (101) (101) (304) (304) Net periodic benefit costs (2) $ 12,840 $ 10,849 $ 36,946 $ 31,443 ___________________(1) The expected long-term rate of return on plan assets is 6.50%was 5.50% and 6.00% for January 31, 20182023 and 2017.2022, respectively.(2) The service cost, interest cost and the other components of net periodic benefit costs are included in compensation and benefits expense, interest expense, net and other income (loss), net, respectively, on the consolidated statements of income. The Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plans as a means of funding benefits undersetting aside funds to cover such plans. The gross CSV of these contracts of $185.0$276.2 million and $180.3$263.2 million as of January 31, 20182023 and April 30, 2017,2022, respectively, iswas offset by outstanding policy loans of $66.8$77.6 million and $67.2$79.8 million in the accompanying consolidated balance sheets as of January 31, 20182023 and April 30, 2017,2022, respectively. The CSV value of the underlying COLI investments increased by $1.8$2.5 million and $6.0$7.4 million during the three and nine months ended January 31, 2018,2023, respectively, and iswas recorded as a decrease in compensation19KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)and benefits expense in the accompanying consolidated statements of income. The CSV value of the underlying COLI investmentsinvestment increased by $0.1$1.7 million and $3.3$3.9 million during the three and nine months ended January 31, 2017,2022, respectively, and iswas recorded as a decrease in compensation and benefits expense in the accompanying consolidated statements of income.The Company’s ECAP is intended to provide certain employees an opportunity to defer their salary and/or bonus on apre-tax basis. In addition, the Company, as part of its compensation philosophy, makes discretionary contributions into the ECAP and such contributions may be granted to key employees annually based on the employee’s performance. Certain key management may also receive Company ECAP contributions upon commencement of employment. The Company amortizes these contributions on a straight-line basis over the service period, generally a four- to five-yearfive year period. Participants have the ability to allocate their deferrals among a number of investment options and may receive their benefits at termination, retirement or “in service”‘in service’ either in a lump sum or in quarterly installments over one to 15-to-15 years. The ECAP amounts that are expected to be paid to employees over the next 12 months are classified as a current liability included in compensation and benefits payable on the accompanying consolidated balance sheet.The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are adjusted with a corresponding charge (or credit) to compensation and benefits costs. During the three and nine months ended January 31, 2018,2023, deferred compensation liability increased; therefore, the Company recognized compensation expense of $12.1 million and $3.5 million, respectively. Offsetting the increases in compensation and benefits expense was an increase in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) of $12.7 million and $3.0 million during the three and nine months ended January 31, 2023, recorded in other income (loss), net on the consolidated statements of income. During the three months ended January 31, 2022, deferred compensation liability decreased; therefore, the Company recognized a reduction in compensation expense of $7.2$7.0 million. Offsetting the decrease in compensation and benefits expense was a decrease in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) of $7.7 million and $14.4 million, respectively.during the three months ended January 31, 2022, recorded in other income (loss), net on the consolidated statements of income. During the nine months ended January 31, 2022, deferred compensation liability increased; therefore, the Company recognized compensation expense of $3.1 million. Offsetting the increase in compensation and benefits expense was an increase in the fair value of marketable securities classified as trading (held in trust to satisfy obligations underof the ECAP)ECAP liabilities) of $7.2$2.4 million during the nine months ended January 31, 2022, recorded in other income (loss), net on the consolidated statements of income. (see Note 5—Financial Instruments).7. Fee RevenueContract BalancesA contract asset (unbilled receivables) is recorded when the Company transfers control of products or services before there is an unconditional right to payment. A contract liability (deferred revenue) is recorded when cash is received in advance of performance of the obligation. Deferred revenue represents the future performance obligations to transfer control of products or services for which we have already received consideration. Deferred revenue is presented in other accrued liabilities on the consolidated balance sheets.The following table outlines the Company’s contract asset and liability balances as of January 31, 2023 and April 30, 2022:January 31, 2023 April 30, 2022 (in thousands) Contract assets-unbilled receivables $ 112,299 $ 100,652 Contract liabilities-deferred revenue $ 268,611 $ 244,149 During the nine months ended January 31, 2023, we recognized revenue of $161.9 million that was included in the contract liabilities balance at the beginning of the period.Performance ObligationsThe Company has elected to apply the practical expedient to exclude the value of unsatisfied performance obligations for contracts with a duration of one year or less, which applies to all executive search, professional search and to most of the fee revenue from the interim business. As of January 31, 2023, the aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year at inception was $1,166.9 million. Of the $1,166.9 million of remaining performance obligations, the Company expects to recognize approximately $202.8 million in the remainder of fiscal 2023, $538.2 million in fiscal 2024, $265.4 million in fiscal 2025 and the remaining $160.5 million in fiscal 2026 and thereafter. However, this amount should not be considered an indication of the Company’s future revenue as contracts with an initial term of one year or less are not included. Further, our contract terms and20KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)conditions allow for clients to increase or decrease the scope of services and such changes do not increase or decrease a performance obligation until the Company has an enforceable right to payment.Disaggregation of RevenueThe Company disaggregates its revenue by line of business and further by region for Executive Search. This information is presented in Note 10—Segments.The following table provides further disaggregation of fee revenue by industry:Three Months Ended January 31, 2023 2022 Dollars % Dollars % (dollars in thousands) Industrial $ 199,341 29.3 % $ 181,016 26.6 % Life Sciences/Healthcare 125,064 18.4 126,840 18.6 Financial Services 117,880 17.3 121,459 17.8 Technology 112,218 16.5 124,903 18.4 Consumer Goods 88,631 13.0 97,210 14.3 Education/Non–Profit/General 37,648 5.5 29,313 4.3 Fee Revenue $ 680,782 100.0 % $ 680,741 100.0 % Nine Months Ended January 31, 2023 2022 Dollars % Dollars % (dollars in thousands) Industrial $ 601,698 28.6 % $ 500,078 26.2 % Life Sciences/Healthcare 391,863 18.6 370,009 19.4 Financial Services 367,878 17.5 341,099 17.9 Technology 359,475 17.1 323,504 17.0 Consumer Goods 283,859 13.5 271,233 14.2 Education/Non–Profit/General 99,761 4.7 99,656 5.3 Fee Revenue $ 2,104,534 100.0 % $ 1,905,579 100.0 % 8. Credit LossesThe Company is exposed to credit losses primarily through the services it provides. The Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is primarily based on historical loss-rate experience. When required, the Company adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions. The Company generally assesses future economic conditions for a period of sixty to ninety days, which corresponds with the contractual life of its accounts receivables. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.21KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)The activity in the allowance for credit losses on the Company's trade receivables is as follows:(in thousands) Balance at April 30, 2022 $ 36,384 Provision for credit losses 16,725 Write-offs (10,116) Recoveries of amounts previously written off 598 Foreign currency translation 15 Balance at January 31, 2023 $ 43,606 The fair value and unrealized losses on available for sale debt securities, aggregated by investment category and the length of time the security has been in an unrealized loss position, are as follows:Less Than 12 Months 12 Months or longer Balance Sheet Classification Fair Value Unrealized Losses Fair Value Unrealized Losses Cash and Cash
EquivalentMarketable Securities,
CurrentMarketable
Securities, Non-
Current(in thousands) Balance at January 31, 2023 Commercial paper $ 13,567 $ 78 $ 2,648 $ 1 $ — $ 16,215 $ — Corporate notes/bonds $ 13,454 $ 211 $ 14,160 $ 278 $ — $ 20,311 $ 7,303 Balance at April 30, 2022 Commercial paper $ 37,002 $ 125 $ 4,499 $ 1 $ 15,489 $ 26,012 $ — Corporate notes/bonds $ 32,186 $ 446 $ 3,800 $ 4 $ — $ 18,942 $ 17,044 U.S. Treasury and Agency Securities $ 987 $ 8 $ — $ — $ — $ 987 $ — The unrealized losses on 11 and 27 investments in commercial paper securities, 19 and 23 investments in corporate notes/bonds, and no investment and 1 investment in U.S. Treasury and Agency securities on January 31, 2023 and April 30, 2022, respectively, were caused by fluctuations in market interest rates. The Company only purchases high grade bonds that have a maturity from the date of purchase of no more than two years. The Company monitors the credit worthiness of its investments on a quarterly basis. The Company does not intend to sell the investments and does not believe it will be required to sell the investments before the investments mature and therefore recover the amortized cost basis.9. Income TaxesThe provision for income tax was an expense of $8.5 million and $14.0$63.6 million duringin the three and nine months ended January 31, 2018,2023, with an effective tax rate of 41.8% and 27.8%, respectively, recordedcompared to an expense of $26.9 million and $77.0 million in other income, net on the consolidated statements of income. During the three and nine months ended January 31, 2017, deferred compensation liability increased; therefore,2022, with an effective tax rate of 24.0% and 24.4%, respectively. In addition to the Company recognized an increaseimpact of U.S. state income taxes and the jurisdictional mix of earnings, which generally create variability in compensation expense of $4.1 million and $6.7 million, respectively. Offsettingour effective tax rate over time, the increase in compensation and benefits expense was an increase ineffective tax rate for the fair value of marketable securities classified as trading (held in trust to satisfy obligations under the ECAP) of $3.9 million and $7.1 million during theKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)2017, respectively,2023 were affected by a tax expense recorded for withholding taxes that are not eligible for credit. The effective tax rate for the three months ended January 31, 2023 was also elevated due to common permanent tax adjustments being applied to lower earnings resulting from restructuring charges recorded in the quarter.10. SegmentsIn the past year, the Company has allocated capital to build out its Professional Search and Interim operations through the acquisition of Lucas Group, Patina and Infinity Consulting Solutions ("ICS"). These acquisitions provided the Company with the opportunity to reassess how it manages its RPO & Professional Search segment. Given the Company’s strategy and development of separate financial and operational metrics for the Professional Search & Interim and RPO operations, the Company’s chief operating decision maker began to regularly make separate resource allocation decisions between Professional Search & Interim and RPO. Therefore, on May 1, 2022, the Company changed the composition of its global segments and under the new reporting format, the RPO & Professional Search segment has been separated into two segments; Professional Search & Interim and RPO.Revenues are directly attributed to a segment and expenses not directly associated with a specific segment are allocated based on the most relevant measures applicable, including revenues, headcount and other income,factors. Due to this change, the Company completed a quantitative assessment for potential goodwill22KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)impairment both prior and subsequent to the aforementioned change and determined there was no goodwill impairment. The presentation of operating results prior to May 1, 2022 has been revised to conform to the new segment reporting.The Company now has eight reportable segments: Consulting, Digital, Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific, Executive Search Latin America, Professional Search & Interim and RPO.The Company’s 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. This work is supported by a comprehensive range of some of the world’s leading lP and data. The Consulting teams employ an integrated approach across our core capabilities and integrated solutions, each one intended to strengthen the work and thinking in the next, to help clients execute their strategy in a digitally enabled world.2.Digital delivers scalable tech-enabled solutions designed to identify the best structures, roles, capabilities and behaviors to drive businesses forward. The digital products give clients direct access to Korn Ferry 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. The Company’s approach to placing talent is bringing together research-based IP, proprietary assessments and behavioral interviewing with 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 geographic basis and represents four of the Company’s reportable segments (Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific and Executive Search Latin America).4.Professional Search & Interim delivers enterprise talent acquisition solutions for professional level middle and upper management. The Company helps clients source high-quality candidates at speed and scale globally, covering single-hire to multi-hire permanent placements and interim contractors.5.RPO offers scalable recruitment outsourcing solutions leveraging customized technology and talent insights. The Company's scalable solutions, built on science and powered by best-in-class technology and consulting expertise, enables the Company to act as a strategic partner in clients’ quest for superior recruitment outcomes and better candidate fit.Executive Search is managed by geographic regional leaders. Worldwide operations for Consulting, Digital, Professional Search & Interim and RPO are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Consulting, Digital, Professional Search & Interim and RPO report directly to the Chief Executive Officer of the Company. The Company also operates Corporate to record global expenses.The Company evaluates performance and allocates resources based on the Company’s chief operating decision maker (“CODM”) review of 1) fee revenue and 2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such costs or charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other impairment charges). The CODM is not provided asset information by reportable segment.23KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)Financial highlights are as follows:Three Months Ended January 31, Nine Months Ended January 31, 2023 2022 2023 2022 Consolidated (in thousands) Fee revenue $ 680,782 $ 680,741 $ 2,104,534 $ 1,905,579 Total revenue $ 686,845 $ 684,956 $ 2,125,712 $ 1,916,452 Net income attributable to Korn Ferry $ 11,247 $ 84,101 $ 162,035 $ 234,696 Net income attributable to noncontrolling interest 522 956 2,885 3,090 Other (income) loss, net (13,097) 7,277 (4,824) (2,236) Interest expense, net 5,378 7,029 20,088 18,820 Income tax provision 8,463 26,927 63,575 76,951 Operating income 12,513 126,290 243,759 331,321 Depreciation and amortization 17,037 16,104 50,359 47,381 Other income (loss), net 13,097 (7,277) 4,824 2,236 Integration/acquisition costs 2,456 3,214 9,472 4,298 Impairment of fixed assets 4,375 — 4,375 1,915 Impairment of right-of-use assets 5,471 — 5,471 7,392 Restructuring charges, net 41,162 — 41,162 — Adjusted EBITDA(1) $ 96,111 $ 138,331 $ 359,422 $ 394,543 ___________________(1) Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further excludes integration/acquisition costs, impairment of fixed assets, impairment of right-of-use assets, and restructuring charges, net. Financial highlights by reportable segments are as follows:Three Months Ended January 31, 2023 2022 Fee revenue Total revenue Adjusted EBITDA Fee revenue Total revenue Adjusted EBITDA (in thousands) Consulting $ 162,155 $ 164,414 $ 23,305 $ 162,889 $ 163,824 $ 28,556 Digital 85,071 85,087 22,153 90,194 90,501 28,142 Executive Search: North America 132,810 134,255 30,446 152,597 153,454 45,702 EMEA 48,960 49,195 7,981 47,509 47,666 8,080 Asia Pacific 22,621 22,694 5,538 31,425 31,448 9,451 Latin America 7,654 7,658 2,462 7,468 7,470 2,484 Professional Search & Interim 117,980 118,616 21,969 90,015 90,198 31,344 RPO 103,531 104,926 9,849 98,644 100,395 12,765 Corporate — — (27,592) — — (28,193) Consolidated $ 680,782 $ 686,845 $ 96,111 $ 680,741 $ 684,956 $ 138,331 24KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)Nine Months Ended January 31, 2023 2022 Fee revenue Total revenue Adjusted EBITDA Fee revenue Total revenue Adjusted EBITDA (in thousands) Consulting $ 501,731 $ 508,994 $ 83,944 $ 476,260 $ 478,563 $ 85,458 Digital 263,161 263,479 73,855 259,504 259,894 82,330 Executive Search: North America 426,839 431,286 112,164 449,472 451,836 137,939 EMEA 140,661 141,443 24,577 132,690 133,080 23,328 Asia Pacific 72,410 72,669 18,723 88,385 88,447 25,972 Latin America 23,283 23,289 7,686 20,815 20,821 6,204 Professional Search & Interim 351,670 354,430 83,587 196,411 196,832 72,608 RPO 324,779 330,122 43,562 282,042 286,979 41,726 Corporate — — (88,676) — — (81,022) Consolidated $ 2,104,534 $ 2,125,712 $ 359,422 $ 1,905,579 $ 1,916,452 $ 394,543 11. Long-Term Debt4.625% Senior Unsecured Notes due 2027On December 16, 2019, the Company completed a private placement of 4.625% Senior Unsecured Notes due 2027 (the “Notes”) with a $400 million principal amount pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes were issued with a $4.5 million discount and will mature December 15, 2027, with interest payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. The Notes represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. The Company may redeem the Notes prior to maturity, subject to certain limitations and premiums defined in the indenture governing the Notes. Prior to December 15, 2022, the Company was permitted to redeem the Notes at a redemption price equal to 100% of the principal plus the Applicable Premium (as defined in the indenture governing the Notes), and accrued and unpaid interest. Also, prior to December 15, 2022, the Company was permitted to use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the Notes, including any permitted additional notes, at a redemption price equal to 104.625% of the principal amount and accrued and unpaid interest. Since December 15, 2022, the Company may redeem the Notes at the applicable redemption prices set forth in the table below, plus accrued and unpaid interest, if redeemed during the 12-month period beginning on December 15 of each of the years indicated:Year Percentage 2022 102.313% 2023 101.156% 2024 and thereafter 100.000% The Notes allow the Company to pay $25 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. The Notes are guaranteed by each of the Company's existing and future wholly owned domestic subsidiaries to the extent such subsidiaries guarantee the Company's credit facilities. 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), the Company shall make an offer to purchase all of the Notes at 101% of their principal amount, and accrued and unpaid interest. The Company used the proceeds from the offering of the Notes to repay $276.9 million outstanding under the Company’s prior revolving credit facility and to pay expenses and fees in connection therewith. The remainder of the proceeds were used for general corporate requirements. The effective interest rate on the Notes was 4.86% as of January 31, 2023. As of January 31, 2023 and April 30, 2022, the fair value of the Notes was $377.0 million and $379.5 million, respectively, based on borrowing rates then required of notes with similar terms, maturity and credit risk. The fair value of the Notes was classified as a Level 2 measurement in the fair value hierarchy.25KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)Long-term debt, at amortized cost, consisted of the following:In thousands January 31,
2023April 30,
2022Senior Unsecured Notes $ 400,000 $ 400,000 Less: Unamortized discount and issuance costs (3,989) (4,523) Long-term borrowings, net of unamortized discount and debt issuance costs $ 396,011 $ 395,477 Credit FacilitiesOn June 24, 2022, the Company entered into an amendment (the “Amendment”) to its December 16, 2019 Credit Agreement (the “Credit Agreement”; as amended by the Amendment, the “Amended Credit Agreement”) with a syndicate of banks 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 forward-looking SOFR term rate (���Term SOFR”) as described below, and (iv) replace the existing financial covenants with the financial covenant described below. The Amended Credit Agreement provides for five-year senior secured credit facilities in an aggregate amount of $1,150.0 million comprised of a $650.0 million revolving credit facility (the “Revolver”) and a $500.0 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 up to $250.0 million plus an unlimited amount subject to a consolidated secured net leverage ratio of 3.25 to 1.00.Extensions of credit under the Delayed Draw Facility are available to the Company in up to two advances through June 24, 2023. Any amounts undrawn under the Delayed Draw Facility as of June 24, 2023 will no longer be available to the Company. The Amended Credit Agreement contains certain customary affirmative and negative covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments. In addition, the Amended Credit Agreement contains a covenant that requires the Company to maintain a maximum consolidated secured leverage ratio of 3.50 to 1.00 (which may be temporarily increased to 4.00 following certain material acquisitions under certain circumstances) (the “Financial Covenant”).The principal balance of the Delayed Draw Facility, if any, is subject to annual term loan amortization of 2.5% for the fiscal quarters ending September 30, 2022 through June 30, 2024, and 5.0% for the fiscal quarter ending September 30, 2024 through June 30, 2027, with the remaining principal due at maturity. The principal balance of the Revolver, if any, is due at maturity. The Credit Facilities mature on June 24, 2027 and any unpaid principal balance is payable on this date. The Credit Facilities may also be prepaid and terminated early by the Company at any time without premium or penalty (subject to customary breakage fees).Amounts outstanding under the Amended Credit Agreement will bear interest at a rate equal to, at the Company’s election, either Term SOFR plus a SOFR adjustment of 0.10%, plus an interest rate margin between 1.125% per annum and 2.00% per annum, depending on the Company’s consolidated net leverage ratio, or base rate plus an interest rate margin between 0.125% per annum and 1.00% per annum depending on the Company’s consolidated net leverage ratio. In addition, the Company will be required to pay to the lenders a ticking fee of 0.20% per annum on the actual daily unused portion of the Delayed Draw Facility, and a quarterly commitment fee ranging from 0.175% to 0.300% per annum on the actual daily unused amount of the Revolver, based upon the Company’s consolidated net leverage ratio at such time, and fees relating to the issuance of letters of credit.As of January 31, 2023 and April 30, 2022, there was no outstanding liability under the Credit Facilities and the credit facilities under the Credit Agreement prior to the Amendment (the “Prior Credit Facility”), respectively. The unamortized debt issuance costs associated with the Amended Credit Agreement was $4.4 million as of January 31, 2023 and $2.4 million under the Credit Agreement as of April 30, 2022. The debt issuance costs were included in other current assets and other non-current assets on the consolidated balance sheets. As of January 31, 2023, the Company was in compliance with its debt covenants.The Company has a total of $1,145.3 million available under the Credit Facilities and had a total $645.3 million available under the Prior Credit Facility after $4.7 million of standby letters of credit were issued as of both January 31, 2023 and April 30, 2022. The Company had a total of $11.6 million and $10.0 million of standby letters with other financial institutions as of January 31, 2023 and April 30, 2022, respectively. The standby letters of credit were generally issued as a result of entering into office premise leases.26KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)12. LeasesThe Company’s lease portfolio is comprised of operating leases for office space and equipment and finance leases for equipment. Equipment leases are comprised of vehicles and office equipment. The majority of the Company’s leases include both lease and non-lease components. Non-lease components primarily include maintenance, insurance, taxes and other utilities. The Company combines fixed payments for non-lease components with its lease payments and accounts for them as a single lease component, which increases its ROU assets and lease liabilities. Some of the leases include one or more options to renew or terminate the lease at the Company’s discretion. Generally, the renewal and termination options are not included in the ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company has elected not to recognize a ROU asset or lease liability for leases with an initial term of 12 months or less.As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the future minimum lease payments. The Company applies the portfolio approach when determining the incremental borrowing rate since it has a centrally managed treasury function. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments in a similar economic environment.Operating leases contain both office and equipment leases and have remaining terms that range from less than one year to 9 years, some of which also include options to extend or terminate the lease. Finance leases are comprised of equipment leases and have remaining terms that range from less than one year to six years. Finance lease assets are included in property and equipment, net while finance lease liabilities are included in other accrued liabilities and other liabilities.During both the three and nine months ended January 31, 2023, the Company reduced its real estate footprint and as a result recorded an impairment charge of the ROU assets of $5.5 million recorded in the consolidated statements of income (see Note 6 —Financial Instruments).8.income. During nine months ended January 31, 2022, the Company reduced its real estate footprint and as a result recorded an impairment charge of the ROU assets of $7.4 million recorded in the consolidated statements of income.The components of lease expense were as follows:Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 (in thousands) Finance lease cost Amortization of ROU assets $ 366 $ 248 $ 1,104 $ 785 Interest on lease liabilities 47 19 141 64 413 267 1,245 849 Operating lease cost 12,339 13,013 36,957 40,288 Short-term lease cost 183 279 616 761 Variable lease cost 3,300 2,820 7,538 7,919 Lease impairment cost 5,471 — 5,471 7,392 Sublease income (1,019) (283) (2,264) (742) Total lease cost $ 20,687 $ 16,096 $ 49,563 $ 56,467 27KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)Supplemental cash flow information related to leases was as follows:Nine Months Ended
January 31,2023 2022 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 49,870 $ 48,246 Financing cash flows from finance leases $ 1,228 $ 860 ROU assets obtained in exchange for lease obligations: Operating leases $ 8,967 $ 22,662 Finance leases $ 2,673 $ 916 Supplemental balance sheet information related to leases was as follows:January 31, 2023 April 30, 2022 (in thousands) Finance Leases: Property and equipment, at cost $ 7,105 $ 5,770 Accumulated depreciation (2,896) (3,085) Property and equipment, net $ 4,209 $ 2,685 Other accrued liabilities $ 1,302 $ 1,049 Other liabilities 2,958 1,657 Total finance lease liabilities $ 4,260 $ 2,706 Weighted average remaining lease terms: Operating leases 4.5 years 5.1 years Finance leases 3.9 years 3.3 years Weighted average discount rate: Operating leases 4.5 % 4.3 % Finance leases 4.5 % 3.2 % 28KORN FERRY AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2023 (continued)Maturities of lease liabilities were as follows:Year Ending April 30, Operating Financing (in thousands) 2023 (excluding the nine months ended January 31, 2023) $ 12,944 $ 390 2024 49,150 1,385 2025 40,665 1,144 2026 36,751 796 2027 18,780 538 Thereafter 22,323 396 Total lease payments 180,613 4,649 Less: imputed interest 16,941 389 Total $ 163,672 $ 4,260 13. Restructuring Charges, NetDuring fiscal 2016,In light of the Company’s evolution to an organization that is selling larger integrated solutions in a world where there are shifts in global trade lanes and persistent inflationary pressures, on January 11, 2023, the Company implementedinitiated a restructuring plan (the “Plan”) intended to realign its workforce with its business needs and objectives, namely, to invest in orderareas of potential growth and implement reductions where there is excess capacity. Due to rationalize its cost structure by eliminating redundant positions and consolidating office space due to the acquisition of Legacy Hay on December 1, 2015. The Company continued the implementation of the fiscal 2016Plan, the Company recorded restructuring plancharges of $41.2 million in fiscal 2018 in orderthe three and nine months ended January 31, 2023 across all lines of business related to integrate the Hay Group entitiesseverance for positions that were acquired in fiscal 2016 by consolidating premises.Changes in the restructuring liability during the three months ended January 31, 2018 are2023 were as follows: Severance Facilities Total (in thousands) $ 1,541 $ 4,716 $ 6,257 (231 ) (1,063 ) (1,294 ) 123 55 178 $ 1,433 $ 3,708 $ 5,141 Severance Facilities Total (in thousands) $ 5,341 $ 8,354 $ 13,695 — 78 78 (4,178 ) (5,328 ) (9,506 ) 270 604 874 $ 1,433 $ 3,708 $ 5,141 Restructuring Liability (in thousands) As of October 31, 2022 $ 463 Restructuring charges, net 41,162 Reductions for cash payments (7,634) Reductions for non-cash payments (10,827) Exchange rate fluctuations 133 As of January 31, 2023 $ 23,297 Changes in the restructuring liability during the nine months ended January 31, 2023 were as follows:Restructuring Liability (in thousands) As of April 30, 2022 $ 1,502 Restructuring charges, net 41,162 Reductions for cash payments (8,067) Reductions for non-cash payments (10,827) Exchange rate fluctuations (473) As of January 31, 2023 $ 23,297 As of January 31, 20182023 and April 30, 2017,2022, the restructuring liability is included in the current portion of other accrued liabilities on the consolidated balance sheets, except for $1.6$0.6 million and $4.6$0.5 million, respectively, of facilities costs which primarily relate to commitments under operating leases, net of sublease income, which are included in other long-term liabilities.The restructuring liability by segment is summarized below: January 31, 2018 Severance Facilities Total (in thousands) $ — $ 262 $ 262 — 5 5 — 267 267 1,433 3,340 4,773 — 101 101 $ 1,433 $ 3,708 $ 5,141 April 30, 2017 Severance Facilities Total (in thousands) $ 134 $ 250 $ 384 393 — 393 — 6 6 — 87 87 527 343 870 4,814 7,879 12,693 — 132 132 $ 5,341 $ 8,354 $ 13,695 29KORN/KORN FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 20182023 (continued)9. Business SegmentsThe14. AcquisitionOn August 1, 2022, the Company currently operates in three global businesses: Executive Search, Hay Groupcompleted its acquisition of ICS for $99.3 million, net of cash acquired.ICS contributes interim professional placement offerings and Futurestep. The Executive Search segment focuses on recruiting Boardexpertise that are highly relevant for the new world of Director andC-level positions, in addition to research-based interviewing and onboardingwork where more workplaces are hybrid or virtual. ICS is a highly regarded provider of senior-level IT interim professional solutions for clients predominantlywith additional expertise in the consumer,areas of compliance and legal, accounting and finance, and human resources. The acquisition of ICS echoes the commitment to scale the Company's solutions and further increases the Company's focus at the intersection of talent and strategy - wherever and however the needs of organizations evolve. ICS is part of our rapidly growing interim practice, which is included in the Professional Search & Interim segment. Actual results of operations of ICS are included in the Company's consolidated financial services, industrial, life sciences/healthcare and technology industries. Hay Group assists clients with ongoing assessment, compensation and development of their senior executives and management teams, and addresses four fundamental needs: Talent Strategy, Succession Management, Leadership Development and Rewards, Motivation and Engagement, all underpinned by a comprehensive array of world-leading intellectual property, products and tools. Futurestep is a global industry leader in high-impact talent acquisition solutions. Its portfolio of services includes global and regional RPO, project recruitment, individual professional search and consulting. The Executive Search business segment is managed by geographic regional leaders and Hay Group and Futurestep worldwide operations are managed by their Chief Executive Officers. The Executive Search geographic regional leaders andstatements from August 1, 2022, the Chief Executive Officers of Hay Group and Futurestep report directly to the Chief Executive Officereffective date of the Company. acquisition.The Company also operatesfollowing table provides a Corporate segment to record global expensessummary of the Company.The Company evaluates performance and allocates resources based on the Company’s 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, net integration/acquisition costs, certain separation costs and certainnon-cash charges (goodwill, intangible asset and other than temporary impairment). The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA. For the nine months ended January 31, 2017, Adjusted EBITDA includes deferred revenue adjustment related to the Legacy Hay acquisition, reflecting revenue that the Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value andwrite-off deferred revenue where no future services are required to be performed to earn that revenue.Financial highlights by business segment are as follows: Three Months Ended January 31, 2018 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 102,716 $ 46,782 $ 24,493 $ 6,425 $ 180,416 $ 198,056 $ 69,109 $ — $ 447,581 $ 106,332 $ 47,763 $ 24,942 $ 6,456 $ 185,493 $ 201,961 $ 73,316 $ — $ 460,770 $ 27,247 180 (7,689 ) 2,665
subsidiaries, net (97 ) 26,316 $ 21,313 $ 7,329 $ 5,289 $ 408 $ 34,339 $ 27,079 $ 10,056 $ (22,852 ) 48,622
amortization 990 458 361 113 1,922 7,882 733 1,688 12,225 585 37 185 40 847 370 2 6,470 7,689
subsidiaries, net 97 — — — 97 — — — 97 22,985 7,824 5,835 561 37,205 35,331 10,791 (14,694 ) 68,633
costs — — — — — 1,593 — 80 1,673 $ 22,985 $ 7,824 $ 5,835 $ 561 $ 37,205 $ 36,924 $ 10,791 $ (14,614 ) $ 70,306 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)Current assets (1) $ 19,932 Long-term assets 1,496 Intangible assets (2) 16,400 Current liabilities 6,248 Long-term liabilities 566 Net assets acquired 31,014 Purchase price 99,322 Goodwill (3) $ 68,308 Three Months Ended January 31, 2017 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 84,827 $ 39,147 $ 21,012 $ 7,835 $ 152,821 $ 175,662 $ 53,435 $ — $ 381,918 $ 87,975 $ 39,965 $ 21,336 $ 7,856 $ 157,132 $ 178,962 $ 58,101 $ — $ 394,195 $ 23,897 481 (4,200 ) 2,402
subsidiaries, net (113 ) 8,075 $ 17,718 $ 8,175 $ 2,086 $ 1,352 $ 29,331 $ 15,988 $ 6,549 $ (21,326 ) 30,542
amortization 996 226 268 (21 ) 1,469 8,061 789 1,455 11,774 316 19 60 61 456 122 (2 ) 3,624 4,200
subsidiaries, net 113 — — — 113 — — — 113 19,143 8,420 2,414 1,392 31,369 24,171 7,336 (16,247 ) 46,629 — — 893 309 1,202 2,519 80 — 3,801
costs — — — — — 3,364 — 1,466 4,830 $ 19,143 $ �� 8,420 $ 3,307 $ 1,701 $ 32,571 $ 30,054 $ 7,416 $ (14,781 ) $ 55,260 Nine Months Ended January 31, 2018 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 296,093 $ 128,249 $ 71,983 $ 22,048 $ 518,373 $ 577,462 $ 196,018 $ — $ 1,291,853 $ 305,866 $ 130,894 $ 73,009 $ 22,114 $ 531,883 $ 589,093 $ 210,179 $ — $ 1,331,155 $ 92,619 969 (14,847 ) 7,904
subsidiaries, net (187 ) 54,145 $ 66,253 $ 20,349 $ 12,811 $ 2,961 $ 102,374 $ 72,532 $ 27,702 $ (62,005 ) 140,603
amortization 2,923 1,345 1,052 331 5,651 24,110 2,313 4,807 36,881 1,157 136 384 99 1,776 459 10 12,602 14,847
subsidiaries, net 187 — — — 187 — — — 187 70,520 21,830 14,247 3,391 109,988 97,101 30,025 (44,596 ) 192,518 — — 313 — 313 (241 ) 6 — 78
costs — — — — — 6,455 — 199 6,654 $ 70,520 $ 21,830 $ 14,560 $ 3,391 $ 110,301 $ 103,315 $ 30,031 $ (44,397 ) $ 199,250 ________________Included in current assets is acquired receivables in the amount of $19.4 million. (2) KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS(3) Tax deductible goodwill from the acquisition was $66.0 million as of January 31, 2018 (continued)2023. Nine Months Ended January 31, 2017 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 259,361 $ 109,296 $ 60,108 $ 26,645 $ 455,410 $ 539,086 $ 164,960 $ — $ 1,159,456 Deferred revenue
adjustment due to
acquisition — — — — — 3,535 — — 3,535 $ 259,361 $ 109,296 $ 60,108 $ 26,645 $ 455,410 $ 542,621 $ 164,960 — $ 1,162,991 $ 269,302 $ 111,721 $ 61,445 $ 26,766 $ 469,234 $ 552,822 $ 180,026 $ — $ 1,202,082 $ 57,257 2,245 (7,580 ) 8,199
unconsolidated
subsidiaries, net (221 ) 21,706 $ 60,458 $ 21,049 $ 6,216 $ 5,966 $ 93,689 $ 31,188 $ 21,849 $ (65,120 ) 81,606
amortization 2,816 666 757 267 4,506 24,102 2,081 4,281 34,970 512 (37 ) 171 158 804 346 (4 ) 6,434 7,580
unconsolidated
subsidiaries, net 221 — — — 221 — — — 221 64,007 21,678 7,144 6,391 99,220 55,636 23,926 (54,405 ) 124,377 1,706 128 1,515 669 4,018 24,007 80 216 28,321
costs — — — — — 11,993 — 6,684 18,677
adjustment due to
acquisition — — — — — 3,535 — — 3,535 $ 65,713 $ 21,806 $ 8,659 $ 7,060 $ 103,238 $ 95,171 $ 24,006 $ (47,505 ) $ 174,910 10. Long-Term DebtOn June 15, 2016, the Company entered into a senior secured $400 million Credit Agreement (the “Credit Agreement”) with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent. The Credit Agreement provides for, among other things: (a) a senior secured term loan facility in an aggregate principal amount of $275 million (the “Term Facility”), (b) a senior secured revolving credit facility (the “Revolver” and together with the Term Facility, the “Credit Facilities”) in an aggregate principal amount of $125 million, (c) annual term loan amortization of 7.5%, 7.5%, 10.0%, 10.0% and 10.0%, with the remaining principal due at maturity, (d) certain customary affirmative and negative covenants, including a maximum consolidated total leverage ratio (as defined below) and a minimum interest coverage ratio and (e) an expanded definition of permittedadd-backs to Adjusted EBITDA in recognition of the accelerated integration actions. The Company’s credit agreement permits payment of dividends to stockholders and share repurchases so long as the pro forma leverage ratio is no greater than 2.50 to 1.00, and the pro forma domestic liquidity is at least $50.0 million. The Company drew down $275 million on the term loan and used $140 million of the proceeds topay-off the term loan thatpurchase price was outstanding as of April 30, 2016.At the Company’s option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Facilities may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.25% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon the Company’s total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated leverage ratio”) at such time. In addition, the Company will be required to paypreliminary allocated to the lenders a quarterly fee ranging from 0.20% to 0.35% per annumassets and liabilities assumed based on their estimated fair values at the average daily unused amountdate of the Term Facility, based upon the Company’s consolidated leverage ratio at such time and fees relating to the issuance of letters of credit. During the three and nine months ended January 31, 2018, the average rate on the Term Facility was 2.65% and 2.49%, respectively. During the three and nine months ended January 31, 2017, the average rate on the Term Facility was 2.06% and 2.29%, respectively.KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTSJanuary 31, 2018 (continued)Both the Revolver and the Term Facility mature on June 15, 2021 and may be prepaid and terminated early by the Company at any time without premium or penalty (subject to customary LIBOR breakage fees). The Term Facility is payable in quarterly installments with principal payments totalling $15.5 million made during the nine months ended January 31, 2018.acquisition. As of January 31, 2018, $244.1 million was outstanding under the Term Facility compared2023, these allocations remain preliminary with regard to $259.5 millionany income tax. The measurement period for purchase price allocation ends as of April 30, 2017. The current and long-term portion of unamortized debt issuance costs associated with the long-term debt, was $2.9 million and $3.5 millionsoon as of January 31, 2018 and April 30, 2017, respectively. The fair value of the Company’s Term Facility is based on borrowing rates currently required of loans with similar terms, maturity and credit risk. The carrying amount of the Term Facility approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the Term Facility is classified as a Level 2 liability in the fair value hierarchy. As of January 31, 2018, the Company was in compliance with its debt covenants.As of January 31, 2018 and April 30, 2017, the Company had no borrowings under the Revolver. The Company had $2.9 million and $3.0 million of standby letters of credits issued under its long-term debt arrangements as of January 31, 2018 and April 30, 2017, respectively. The Company had a total of $7.3 million and $8.1 million of standby letters of credits with other financial institutions as of January 31, 2018 and April 30, 2017, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases.11. Income TaxesThe current fiscal year effective tax rate was significantly impacted by the December 22, 2017 enactment of the Tax Act into law in the United States. The most significant impacts of the Tax Actfinal information on the Company include (1) a reduction in the U.S. corporate federal statutory income tax rate from 35.0%facts and circumstances become available, not to 21.0% effective January 1, 2018, and (2) aone-time tax on accumulated foreign earnings (the “Transition Tax”), which is applicable at a rate of 15.5% on cash and other specified assets and 8% on other residual earnings. Because our fiscalyear-end is April 30, 2018, the Company’s fiscal 2018 statutory federal tax rate is 30.4%.As a result of the enactment of the Tax Act, the Company recorded a provisional tax charge of $16.3 million for the Transition Tax and a provisional tax benefit of $5.8 million from the remeasurement of our U.S. federal deferred tax assets and liabilities at the rate at which we expect these deferred tax balances to be realized (30.4% in fiscal 2018 and 21.0% thereafter). The amounts recorded as a result of the enactment of the Tax Act, specifically the impact of the Transition Tax and the remeasurement of deferred tax balances, are provisional estimates. Additional information and analysis are required to finalize the impact that the Tax Act will have on our financial results, including the final determination of foreign cash and other specified assets at the end of fiscal 2018, refinement of the computation of foreign subsidiaries earnings and the final determination of deferred tax balances subject to remeasurement. Additionally, anticipated future guidance from the Internal Revenue Service, state tax agencies, the Financial Accounting Standards Board and the Securities and Exchange Commission could result in changes to these provisional amounts. The Company will continue to appropriately refine these amounts within the measurement period allowed by Staff Accounting Bulletin (“SAB”) No.118, which will be completed no later than December 22, 2018.12.exceed 12 months.15. Subsequent EventsQuarterly Dividend DeclarationOn March 5, 2018,7, 2023, the Board of Directors of the Company declared a cash dividend of $0.10$0.15 per share with a payment date of April 13, 201814, 2023 to holders of the Company’s common stock of record at the close of business on March 26, 2018.28, 2023. 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,condition, 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.30Item 2.Management’s Discussion and Analysis of Financial Condition and Results of OperationsForward-lookingForward-Looking StatementsThis Quarterly Report onForm 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, including the timing and anticipated impacts of our restructuring plans and business strategy, are also are forward-looking statements. All of theseThese 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. Other risk factors that can also cause actual performance and future actions to differ materially from the forward-looking statements include global and local political and or economic developments in or affecting countries where we have operations, such as inflation, global slowdowns, or recessions, competition, geopolitical tensions, shifts in global trade patterns, 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, globalconsolidation of or within the industries we serve, changes and local political or economic developments in or affecting countries where we have operations, 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, including as a result of recent workforce, real estate, and other restructuring initiatives, restrictions imposed byoff-limits agreements, competition, 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, tax accounting effects of the Tax Act, alignment of our cost structure, risks related to the integration of recently acquired businesses, the utilization and billing rates of our consultants, seasonality, the expansion of social media platforms, the ability to effect acquisitions and integrate acquired businesses, including Infinity Consulting Solutions ("ICS") and Salo LLC ("Salo"), 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 ofincluded in the Company’s Annual Report on Form10-K for the fiscal year ended April 30, 2017 (“Form2022 (the “Form 10-K”) and Item 1A of this Quarterly Report on Form10-Q.. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Quarterly Report on Form10-Q are made only as of the date of this Quarterly Report on Form10-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 financialcondition and results of operations should be read together with our consolidatedfinancial statements and related notes included in this Quarterly Report onForm 10-Q. We also make available on the Investor Relations portion of our website at www.kornferry.com earnings slides and other important information, which we encourage you to review.Executive SummaryKorn/Korn Ferry International (referred to herein as the “Company,” “Korn Ferry,”“Company” or in the first personfirst-person notations “we,” “our,”“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.31Our services includeeight 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.2.Digital delivers scalable tech-enabled solutions designed to identify the best structures, roles, capabilities and behaviors to drive businesses 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 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 advisoryEurope, 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 products through Hay Group (formerly known as Leadership & Talent Consulting (“Legacy LTC”) which was combined with HG (Luxembourg) S.à.r.l (“Legacy Hay”) in December 2015)upper management. We help clients source high-quality candidates at speed and recruitment fornon-executive professionalsscale globally, covering single-hire to multi-hire permanent placements and recruitment process outsourcinginterim contractors.5.Recruitment Process Outsourcing (“RPO”) through Futurestep. The Company also operatesoffers 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 Corporate segmentstrategic partner in clients’ quest for superior recruitment outcomes and better candidate fit.Professional Search & Interim and RPO were formerly referred to, record global expensesand reported together, as Korn Ferry RPO & Professional Search (“RPO & Professional Search”). We have recently 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. Company’s chief operating decision maker, who began 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 71%76% of the executive searches we performed in fiscal 20172022 were for board level, chief executive and other senior executive and general management positions. Our 3,589 executivemore than 4,300 search engagement clients in fiscal 20172022 included many of the world’s largest and most prestigious public and private companies, including approximately 57% of the Fortune 500, middle market and emerging growth companies, as well as government and nonprofit organizations. companies.•We have built strong client loyalty, with 82%nearly 90% of the assignments performed (without giving effect to Legacy Hay assignments) during fiscal 20172022 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years.•Approximately 61%70% of our revenues were generated from clients that utilizehave utilized multiple lines of our business.Superior performance comes from having•In fiscal 2022, we acquired the right conditions for success in two key areas – the organization and its people. Organizational conditions encourage people to put forth their best effort and invest their energy towards achieving the organization’s purpose. We can help operationalize a client’s complete strategy or address any combination of five broad categories:Organizational StrategyWe map talent strategy to business strategy by designing operating models and organizational structures that align to them, helping organizations put their plans into action. We make sure they have the right people, in the right roles, engaged and enabled to do the right things.Assessment and SuccessionWe provide actionable, research-backed insights that allow organizations to understand the true capabilities of their people so they can make decisions that ensure the right leaders are ready — when and where they are needed — in the future.Talent AcquisitionFrom executive search to recruitment process outsourcing, we integrate scientific research with our practical experience and industry-specific expertise to recruit professionals of all levels and functions for client organizations.Leadership DevelopmentWe activate purpose, vision and strategy through leaders at all levels and organizations. We combine expertise, science and proven techniques with forward thinking and creativity to build leadership experiences that help entry- to senior-level leaders grow and deliver superior results.Rewards and BenefitsWe help organizations align reward with strategy. We help them pay their people fairly for doing the right things — with rewards they value — at a cost the organization can afford.The Company currently operates in three global business segments: Executive Search, HayLucas Group and Futurestep. See Note 9 —Business Segments,Patina Solutions Group ("Patina"). 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 HighlightsOn August 1, 2022, we completed the acquisition of ICS for $99.3 million, net of cash acquired. ICS contributes interim professional placement offerings and expertise that are highly relevant for the new world of work where more workplaces are hybrid or virtual. ICS is a highly regarded provider of senior-level IT interim professional solutions with additional expertise in the Notesareas of compliance and legal, accounting and finance, and human resources. The acquisition of ICS echoes the commitment to Consolidated Unaudited Financial Statements for discussionscale the Company's solutions and further increases the Company's focus at the intersection of talent and32strategy - wherever and however the needs of organizations evolve. ICS is part of our rapidly growing interim practice, which is included in the Professional Search & Interim segment.In light of the Company’s evolution to an organization that is selling larger integrated solutions in a world where there are shifts in global trade lanes and persistent inflationary pressures, on January 11, 2023, the Company initiated a plan (the “Plan”) intended to realign its workforce with its business segments. needs and objectives, namely, to invest in areas of potential growth and implement reductions where there is excess capacity. The Plan is expected to reduce the Company’s annualized cost base by approximately $45.0 million to $55.0 million (after taking into account new hires in connection with the rebalancing of the Company’s workforce). The Plan consists of severance and related employee benefits payments and lease termination costs. During the three and nine months ended January 31, 2023 the Company recorded $41.2 million in restructuring charges, net, and $5.5 million and $4.4 million in impairment of right-of-use asset and fixed assets, respectively, as a result of implementing the Plan.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, (recoveries), net, integration/acquisition costs, and certain separation costs and certainnon-cash charges (goodwill, intangible asset and other than temporary impairment)impairments charges). For the nine months ended January 31, 2017, Adjusted EBITDA includes a deferred revenue adjustment related to the Legacy Hay acquisition, reflecting revenue that Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value andwrite-off deferred revenue where no future services are required to be performed to earn that revenue. During the three and nine months ended January 31, 20182023, Adjusted EBITDA excluded $41.2 million of restructuring charges, net, $5.5 million impairment of right-of-use assets, and $4.4 million impairment of fixes assets. In addition, Adjusted EBITDA further excluded $2.5 million and $9.5 million of integration/acquisition costs during the three and nine months ended January 31, 2017, management no longer has adjusted fee revenue.Consolidated and the subtotals of Executive Search Adjusted EBITDA and Adjusted EBITDA margin arenon-GAAP financial measures. Theymeasures and have limitations as analytical tools,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 tonon-GAAP performance measures that may be presented by other companies.Management believes the presentation of thesenon-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 thesenon-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance and the identification of operating trends that may otherwise be distorted by certain charges and other items that may not be indicative of Korn Ferry’s ongoing operating results.the factors discussed above. Korn Ferry includes thesenon-GAAP financial measures because management believes it is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies in the accompanying consolidated financial statements, except that the above noted items are excluded from EBITDA to arrive at Adjusted EBITDA. Management further believes that 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.Similarly, adjusted fee revenue, which includes revenue that Hay Group would have realized over the ensuing year after the acquisition if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value andwrite-off deferred revenue where no future services are required to be performed to earn that revenue, is anon-GAAP financial measure. Adjusted fee revenue is not a measure that substitutes an individually tailored revenue recognition or measurement method for those of GAAP; rather, it is an adjustment for a short period of time that will provide better comparability in the current and future periods. Management believes the presentation of adjusted fee revenue assists management in its evaluation of ongoing operations and provides useful information to investors because it allows investors to make more meaningfulperiod-to-period comparisons of the Company’s operating results, to better identify operating trends that may otherwise be distorted by write-offs required under business combination accounting and to perform related trend analysis and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making.Fee revenue was $447.6$680.8 million during the three months ended January 31, 2018,2023, an increase of $65.7$0.1 million, or 17%, compared to $381.9$680.7 million in the three months ended January 31, 2017, with increases2022. Fee revenue decreased in Executive Search and Digital primarily due to a decline in demand for our products and services driven by the global economic slowdown. This decline in fee revenue was fully offset by increases in all business segments. DuringRPO and Professional Search & Interim fee revenue compared to the year-ago quarter. The acquisitions of Patina and ICS (the "Acquired Companies") were a significant factor in the year-over-year increase in Professional Search & Interim fee revenue. Exchange rates unfavorably impacted fee revenue by $23.2 million, or 3%, in the three months ended January 31, 2018, we recorded operating income of $48.6 million with ExecutiveSearch, Hay Group and Futurestep segments contributing $34.3 million, $27.1 million and $10.1 million, respectively, offset by Corporate expenses of $22.9 million.2023 compared to the year-ago quarter. Net income attributable to Korn Ferry increased $3.3 million duringin the three months ended January 31, 20182023 was $11.2 million, decreased by $72.9 million as compared to $27.2$84.1 million from $23.9in the year-ago quarter. The decrease in net income attributable to Korn Ferry was primarily due to restructuring charges, net and impairment charges of the ROU assets and fixed assets incurred in the three months ended January 31, 2023 and increases in cost of service expense and compensation and benefits expense. These increases were partially offset by an increase in other income and a decrease in income tax provision. Adjusted EBITDA in the three months ended January 31, 2023 was $96.1 million, fordecreased by $42.2 million as compared to $138.3 million in theyear-ago quarter. During the three months ended January 31, 2018,2023, the Executive Search, Consulting, Digital, Professional Search & Interim, and RPO lines of business contributed $46.4 million, $23.3 million, $22.2 million, $22.0 million, and $9.8 million, respectively, to Adjusted EBITDA, which was $70.3 million with Executive Search, Hay Group and Futurestep segments contributing $37.2 million, $36.9 million and $10.8 million, respectively,partially offset by Corporate expenses net of other income of $14.6$27.6 million. Adjusted EBITDA was $70.3 million, an increase of $15.0 million during the three months ended January 31, 2018, from Adjusted EBITDA of $55.3 million in theyear-ago quarter.33Our cash, cash equivalents and marketable securities decreased $1.8by $203.3 million to $529.0$1,007.8 million at January 31, 2018,2023, compared to $530.8$1,211.1 million at April 30, 2017.2022. This decrease iswas mainly due to annual bonuses earned in fiscal 20172023 and paid during the first quarter of fiscal 2018,sign-on and2023, retention payments, the acquisition of ICS, the semi-annual interest payment on the 4.625% Senior Unsecured Notes due 2027 (the “Notes”), capital expenditures, stock repurchases in the open market, payments for the purchase of property and equipment, dividends paid to stockholders during fiscal 2018 and principal payments on our term loan, partially offset by cash provided by operating activities.the nine months ended January 31, 2023. As of January 31, 2018,2023, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $124.2$187.0 million and a fair value of $139.0$188.8 million. Our vested obligations for which these assets were held in trust totaled $122.3$173.7 million as of January 31, 20182023 and our unvested obligations totaled $29.7$22.3 million.Our working capital increased from April 30, 2017 to January 31, 2018decreased by $40.1$18.7 million to $425.2$757.1 million as of January 31, 2018.2023, 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 the debt obligations incurred in connection with the Legacy Hay acquisition, the retention pool obligations pursuant to the Legacy Hay acquisition and dividend payments under our dividend policy in the next twelve12 months. We had no outstanding borrowingsa total of $1,145.3 million available under our revolvingthe Credit Facilities (defined in Liquidity and Capital Resources) and a total of $645.3 million available under the previous credit facility at January 31, 2018 and April 30, 2017. As of January 31, 2018 and April 30, 2017, there was $2.9facilities after $4.7 million and $3.0 million, respectively, of standby letters of credit issued under our long-term debt arrangements.as of both January 31, 2023 and April 30, 2022, respectively. We had a total of $7.3$11.6 million and $8.1$10.0 million of standby letters of creditscredit with other financial institutions as of January 31, 20182023 and April 30, 2017,2022, respectively.Results of OperationsThe following table summarizes the results of our operations as a percentage of fee revenue:(Numbers may not total exactly due to rounding) Three Months Ended
January 31, Nine months Ended
January 31, 2018 2017 2018 2017 100.0 % 100.0 % 100.0 % 100.0 % 2.9 3.2 3.0 3.7 102.9 103.2 103.0 103.7 69.4 68.7 68.6 68.7 13.1 14.9 13.6 14.3 2.9 3.2 3.0 3.7 3.9 4.3 4.1 4.5 2.7 3.1 2.9 3.0 — 1.0 — 2.4 10.9 8.0 10.9 7.0 6.1 % 6.4 % 7.2 % 5.1 % 6.1 % 6.3 % 7.2 % 4.9 % Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 Fee revenue 100.0 % 100.0 % 100.0 % 100.0 % Reimbursed out-of-pocket engagement expenses 0.9 0.6 1.0 0.6 Total revenue 100.9 100.6 101.0 100.6 Compensation and benefits 70.4 65.5 67.0 66.8 General and administrative expenses 10.7 8.9 9.6 9.2 Reimbursed expenses 0.9 0.6 1.0 0.6 Cost of services 8.5 4.7 7.5 4.1 Depreciation and amortization 2.5 2.4 2.4 2.5 Restructuring charges, net 6.0 — 2.0 — Operating income 1.8 18.6 11.6 17.4 Net income 1.7 % 12.5 % 7.8 % 12.5 % Net income attributable to Korn Ferry 1.7 % 12.4 % 7.7 % 12.3 % The operating results prior to May 1, 2022 have been revised to conform to the new segment reporting.34The following tables summarize the results of our operations by business segment:(Numbers may not total exactly due to rounding) Three Months Ended January 31, Nine months Ended January 31, 2018 2017 2018 2017 Dollars % Dollars % Dollars % Dollars % (in thousands) $ 102,716 22.9 % $ 84,827 22.2 % $ 296,093 22.9 % $ 259,361 22.4 % 46,782 10.5 39,147 10.3 128,249 9.9 109,296 9.4 24,493 5.5 21,012 5.5 71,983 5.6 60,108 5.2 6,425 1.4 7,835 2.0 22,048 1.7 26,645 2.3 180,416 40.3 152,821 40.0 518,373 40.1 455,410 39.3 198,056 44.3 175,662 46.0 577,462 44.7 539,086 46.5 69,109 15.4 53,435 14.0 196,018 15.2 164,960 14.2 447,581 100.0 % 381,918 100.0 % 1,291,853 100.0 % 1,159,456 100.0 % 13,189 12,277 39,302 42,626 $ 460,770 $ 394,195 $ 1,331,155 $ 1,202,082 Three Months Ended January 31, Nine months Ended January 31, 2018 2017 2018 2017 Dollars Margin
(1) Dollars Margin
(1) Dollars Margin
(1) Dollars Margin
(1) (in thousands) $ 21,313 20.7 % $ 17,718 20.9 % $ 66,253 22.4 % $ 60,458 23.3 % 7,329 15.7 8,175 20.9 20,349 15.9 21,049 19.3 5,289 21.6 2,086 9.9 12,811 17.8 6,216 10.3 408 6.4 1,352 17.3 2,961 13.4 5,966 22.4 34,339 19.0 29,331 19.2 102,374 19.7 93,689 20.6 27,079 13.7 15,988 9.1 72,532 12.6 31,188 5.8 10,056 14.6 6,549 12.3 27,702 14.1 21,849 13.2 (22,852 ) — (21,326 ) — (62,005 ) — (65,120 ) — $ 48,622 10.9 % $ 30,542 8.0 % $ 140,603 10.9 % $ 81,606 7.0 % (1)Margin calculated as a percentage of fee revenue by business segment. Three Months Ended January 31, 2018 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 102,716 $ 46,782 $ 24,493 $ 6,425 $ 180,416 $ 198,056 $ 69,109 $ — $ 447,581 $ 106,332 $ 47,763 $ 24,942 $ 6,456 $ 185,493 $ 201,961 $ 73,316 $ — $ 460,770 $ 27,247 180 (7,689 ) 2,665 (97 ) 26,316 $ 21,313 $ 7,329 $ 5,289 $ 408 $ 34,339 $ 27,079 $ 10,056 $ (22,852 ) 48,622 990 458 361 113 1,922 7,882 733 1,688 12,225 585 37 185 40 847 370 2 6,470 7,689 97 — — — 97 — — — 97 22,985 7,824 5,835 561 37,205 35,331 10,791 (14,694 ) 68,633 — — — — — 1,593 — 80 1,673 $ 22,985 $ 7,824 $ 5,835 $ 561 $ 37,205 $ 36,924 $ 10,791 $ (14,614 ) $ 70,306 22.4 % 16.7 % 23.8 % 8.7 % 20.6 % 18.6 % 15.6 % 15.7 % Three Months Ended January 31, 2017 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 84,827 $ 39,147 $ 21,012 $ 7,835 $ 152,821 $ 175,662 $ 53,435 $ — $ 381,918 $ 87,975 $ 39,965 $ 21,336 $ 7,856 $ 157,132 $ 178,962 $ 58,101 $ — $ 394,195 $ 23,897 481 (4,200 ) 2,402 (113 ) 8,075 $ 17,718 $ 8,175 $ 2,086 $ 1,352 $ 29,331 $ 15,988 $ 6,549 $ (21,326 ) 30,542 996 226 268 (21 ) 1,469 8,061 789 1,455 11,774 316 19 60 61 456 122 (2 ) 3,624 4,200 113 — — — 113 — — — 113 19,143 8,420 2,414 1,392 31,369 24,171 7,336 (16,247 ) 46,629 — — 893 309 1,202 2,519 80 — 3,801 — — — — — 3,364 — 1,466 4,830 $ 19,143 $ 8,420 $ 3,307 $ 1,701 $ 32,571 $ 30,054 $ 7,416 $ (14,781 ) $ 55,260 22.6 % 21.5 % 15.7 % 21.7 % 21.3 % 17.1 % 13.9 % 14.5 % Nine months Ended January 31, 2018 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 296,093 $ 128,249 $ 71,983 $ 22,048 $ 518,373 $ 577,462 $ 196,018 $ — $ 1,291,853 $ 305,866 $ 130,894 $ 73,009 $ 22,114 $ 531,883 $ 589,093 $ 210,179 $ — $ 1,331,155 $ 92,619 969 (14,847 ) 7,904 (187 ) 54,145 $ 66,253 $ 20,349 $ 12,811 $ 2,961 $ 102,374 $ 72,532 $ 27,702 $ (62,005 ) 140,603 2,923 1,345 1,052 331 5,651 24,110 2,313 4,807 36,881 1,157 136 384 99 1,776 459 10 12,602 14,847 187 — — — 187 — — — 187 70,520 21,830 14,247 3,391 109,988 97,101 30,025 (44,596 ) 192,518 — — 313 — 313 (241 ) 6 — 78 — — — — — 6,455 — 199 6,654 $ 70,520 $ 21,830 $ 14,560 $ 3,391 $ 110,301 $ 103,315 $ 30,031 $ (44,397 ) $ 199,250 23.8 % 17.0 % 20.2 % 15.4 % 21.3 % 17.9 % 15.3 % 15.4 % Nine months Ended January 31, 2017 Executive Search North
America EMEA Asia Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated (in thousands) $ 259,361 $ 109,296 $ 60,108 $ 26,645 $ 455,410 $ 539,086 $ 164,960 $ — $ 1,159,456 — — — — — 3,535 — — 3,535 $ 259,361 $ 109,296 $ 60,108 $ 26,645 $ 455,410 $ 542,621 $ 164,960 $ — $ 1,162,991 $ 269,302 $ 111,721 $ 61,445 $ 26,766 $ 469,234 $ 552,822 $ 180,026 $ — $ 1,202,082 $ 57,257 2,245 (7,580 ) 8,199 (221 ) 21,706 $ 60,458 $ 21,049 $ 6,216 $ 5,966 $ 93,689 $ 31,188 $ 21,849 $ (65,120 ) 81,606 2,816 666 757 267 4,506 24,102 2,081 4,281 34,970 512 (37 ) 171 158 804 346 (4 ) 6,434 7,580 221 — — — 221 — — — 221 64,007 21,678 7,144 6,391 99,220 55,636 23,926 (54,405 ) 124,377 1,706 128 1,515 669 4,018 24,007 80 216 28,321 — — — — — 11,993 — 6,684 18,677 — — — — — 3,535 — — 3,535 $ 65,713 $ 21,806 $ 8,659 $ 7,060 $ 103,238 $ 95,171 $ 24,006 $ (47,505 ) $ 174,910 25.3 % 20.0 % 14.4 % 26.5 % 22.7 % 17.5 % 14.6 % 15.0 % Three Months Ended
January 31,Nine Months Ended
January 31,2023 2022 2023 2022 Dollars % Dollars % Dollars % Dollars % (dollars in thousands) Fee revenue Consulting $ 162,155 23.8 % $ 162,889 23.9 % $ 501,731 23.9 % $ 476,260 25.0 % Digital 85,071 12.5 90,194 13.3 263,161 12.5 259,504 13.6 Executive Search: North America 132,810 19.5 152,597 22.4 426,839 20.3 449,472 23.6 EMEA 48,960 7.2 47,509 7.0 140,661 6.7 132,690 7.0 Asia Pacific 22,621 3.3 31,425 4.6 72,410 3.4 88,385 4.6 Latin America 7,654 1.1 7,468 1.1 23,283 1.1 20,815 1.1 Total Executive Search 212,045 31.1 238,999 35.1 663,193 31.5 691,362 36.3 Professional Search & Interim 117,980 17.4 90,015 13.2 351,670 16.7 196,411 10.3 RPO 103,531 15.2 98,644 14.5 324,779 15.4 282,042 14.8 Total fee revenue 680,782 100.0 % 680,741 100.0 % 2,104,534 100.0 % 1,905,579 100.0 % Reimbursed out-of-pocket engagement expense 6,063 4,215 21,178 10,873 Total revenue $ 686,845 $ 684,956 $ 2,125,712 $ 1,916,452 35In 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
January 31,Nine Months Ended
January 31,2023 2022 2023 2021 Consolidated (in thousands) Fee revenue $ 680,782 $ 680,741 $ 2,104,534 $ 1,905,579 Total revenue $ 686,845 $ 684,956 $ 2,125,712 $ 1,916,452 Net income attributable to Korn Ferry $ 11,247 $ 84,101 $ 162,035 $ 234,696 Net income attributable to noncontrolling interest 522 956 2,885 3,090 Other (income) loss, net (13,097) 7,277 (4,824) (2,236) Interest expense, net 5,378 7,029 20,088 18,820 Income tax provision 8,463 26,927 63,575 76,951 Operating income 12,513 126,290 243,759 331,321 Depreciation and amortization 17,037 16,104 50,359 47,381 Other income (loss), net 13,097 (7,277) 4,824 2,236 Integration/acquisition costs 2,456 3,214 9,472 4,298 Impairment of fixed assets 4,375 — 4,375 1,915 Impairment of right-of-use assets 5,471 — 5,471 7,392 Restructuring charges, net 41,162 — 41,162 — Adjusted EBITDA $ 96,111 $ 138,331 $ 359,422 $ 394,543 Adjusted EBITDA margin 14.1 % 20.3 % 17.1 % 20.7 % Three Months Ended January 31, 2023 2022 Fee revenue Total revenue Adjusted EBITDA Adjusted EBITDA margin Fee revenue Total revenue Adjusted EBITDA Adjusted EBITDA margin (dollars in thousands) Consulting $ 162,155 $ 164,414 $ 23,305 14.4 % $ 162,889 $ 163,824 $ 28,556 17.5 % Digital 85,071 85,087 22,153 26.0 % 90,194 90,501 28,142 31.2 % Executive Search: North America 132,810 134,255 30,446 22.9 % 152,597 153,454 45,702 29.9 % EMEA 48,960 49,195 7,981 16.3 % 47,509 47,666 8,080 17.0 % Asia Pacific 22,621 22,694 5,538 24.5 % 31,425 31,448 9,451 30.1 % Latin America 7,654 7,658 2,462 32.2 % 7,468 7,470 2,484 33.3 % Total Executive Search 212,045 213,802 46,427 21.9 % 238,999 240,038 65,717 27.5 % Professional Search & Interim 117,980 118,616 21,969 18.6 % 90,015 90,198 31,344 34.8 % RPO 103,531 104,926 9,849 9.5 % 98,644 100,395 12,765 12.9 % Corporate — — (27,592) — — (28,193) Consolidated $ 680,782 $ 686,845 $ 96,111 14.1 % $ 680,741 $ 684,956 $ 138,331 20.3 % 36Nine Months Ended January 31, 2023 2022 Fee revenue Total revenue Adjusted EBITDA Adjusted EBITDA margin Fee revenue Total revenue Adjusted EBITDA Adjusted EBITDA margin (dollars in thousands) Consulting $ 501,731 $ 508,994 $ 83,944 16.7 % $ 476,260 $ 478,563 $ 85,458 17.9 % Digital 263,161 263,479 73,855 28.1 % 259,504 259,894 82,330 31.7 % Executive Search: North America 426,839 431,286 112,164 26.3 % 449,472 451,836 137,939 30.7 % EMEA 140,661 141,443 24,577 17.5 % 132,690 133,080 23,328 17.6 % Asia Pacific 72,410 72,669 18,723 25.9 % 88,385 88,447 25,972 29.4 % Latin America 23,283 23,289 7,686 33.0 % 20,815 20,821 6,204 29.8 % Total Executive Search 663,193 668,687 163,150 24.6 % 691,362 694,184 193,443 28.0 % Professional Search & Interim 351,670 354,430 83,587 23.8 % 196,411 196,832 72,608 37.0 % RPO 324,779 330,122 43,562 13.4 % 282,042 286,979 41,726 14.8 % Corporate — — (88,676) — — (81,022) Consolidated $ 2,104,534 $ 2,125,712 $ 359,422 17.1 % $ 1,905,579 $ 1,916,452 $ 394,543 20.7 % Three Months Ended January 31, 20182023 Compared to Three Months Ended January 31, 2017Fee RevenueFee Revenue.Fee revenue increased by $65.7 million, or 17%, to $447.6was $680.8 million in the three months ended January 31, 20182023, essentially flat compared to $381.9$680.7 million in theyear-ago quarter. Exchange rates favorablyunfavorably impacted fee revenue by $15.8$23.2 million, or 3%, in the three months ended January 31, 2023 compared to the year-ago quarter. Fee revenue decreased in Executive Search, Professional Search permanent placements and Digital, mainly due to a decline in demand for our products and services driven by the global economic slowdown. This decrease was fully offset by increases in RPO and Interim fee revenue. The Acquired Companies were the primary reason for the increase in Interim fee revenue compared to the year-ago quarter.Consulting. Consulting reported fee revenue of $162.2 million, a decrease of $0.7 million, in the three months ended January 31, 2023 compared to $162.9 million in the year-ago quarter. Consulting saw declines in Leadership Development Strategy and Competency Modeling, partially offset by growth in Performance Management, Leadership Development Programs, Organizational Effectiveness, ESG, and Reward Implementation. Exchange rates unfavorably impacted fee revenue by $6.8 million, or 4%, in the three months ended January 31, 20182023 compared to theyear-ago quarter. The higher fee revenue was attributable to organic growth in all lines of business.Executive Search.Executive SearchDigital. Digital reported fee revenue of $180.4$85.1 million, an increasea decrease of $27.6$5.1 million, or 18%6%, in the three months ended January 31, 20182023 compared to $152.8$90.2 million in theyear-ago quarter. As detailed below, Executive SearchSubscription-based revenue remained steady with demand for sales effectiveness tools growing; however, there was a decline in service delivery supporting content and usage of assessment tools, especially in the tech industry as a result of their recent scaling back of employees. Exchange rates unfavorably impacted fee revenue was higher in North America, EMEA and Asia Pacific regions, partially offset by lower fee revenue in the Latin America region$4.5 million, or 5%, in the three months ended January 31, 2018 as2023 compared to theyear-ago quarter. The higherExecutive Search North America. Executive Search North America reported fee revenue of $132.8 million, a decrease of $19.8 million, or 13%, in Executive Searchthe three months ended January 31, 2023 compared to $152.6 million in the year-ago quarter. North America’s fee revenue was mainlylower due to a 10% increasedecrease in the number of engagements billed, and 4% increasecombined with a 3% decrease in the weighted-average feesfee billed per engagement (calculated using local currency) during the three months ended January 31, 20182023 compared to theyear-ago quarter. Exchange rates favorably impactedExecutive Search EMEA. Executive Search EMEA reported fee revenue by $5.6of $49.0 million, an increase of $1.5 million, or 4%3%, in the three months ended January 31, 2018,2023 compared to $47.5 million in theyear-ago quarter.North America reported Exchange rates unfavorably impacted fee revenue of $102.7 million, an increase of $17.9by $3.8 million, or 21%8%, in the three months ended January 31, 20182023 compared to $84.8 millionthe year-ago quarter. The increase in theyear-ago quarter. North America’s fee revenue was higher due to a 16%an 8% increase in the number of engagements billed andcoupled with a 4%3% increase in the weighted-average feesfee billed per engagement (calculated using local currency) during the three months ended January 31, 20182023 compared to theyear-ago quarter. The overall increasePerformance in fee revenue was driven by the increase in fee revenue from consumer, life sciences/healthcare, technology, industrial,Denmark, Belgium, Netherlands, Switzerland andeducation/non-profit sectors. Exchange rates favorably impacted fee revenue by $0.5 million, or 1% in the three months ended January 31, 2018 compared to theyear-ago quarter.EMEA reported fee revenue of $46.8 million, an increase of $7.7 million, or 20%, in the three months ended January 31, 2018 compared to $39.1 million in theyear-ago quarter. Exchange rates favorably impacted fee revenue by $3.9 million, or 10%, in the three months ended January 31, 2018, compared to theyear-ago quarter. The rest of the change in fee revenue was due to a 15% increase in the number of engagements billed, offset by a 5% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the three months ended January 31, 2018 compared to theyear-ago quarter. The performance in France, United Kingdom, Germany, and Denmark Ireland were the primary contributors to the increase in fee revenue in the three months ended January 31, 20182023 compared to theyear-ago quarter, partially offset by a decrease in fee revenue in France and Italy.37Executive Search Asia Pacific. Executive Search Asia Pacific reported fee revenue of $22.6 million, a decrease of $8.8 million, or 28%, in the three months ended January 31, 2023 compared to $31.4 million in the year-ago quarter. In termsExchange rates unfavorably impacted fee revenue by $2.2 million, or 7%, in the three months ended January 31, 2023 compared to the year-ago quarter.The decrease in fee revenue was due to a 17% decrease in the number of business sectors, industrialengagements billed, and consumer had7% decrease in the largest increaseweighted-average fee billed per engagement (calculated using local currency) during the three months ended January 31, 2023 compared to the year-ago quarter. The performance in China, Hong Kong, Japan and Singapore were the primary contributors to the decrease in fee revenue in the three months ended January 31, 20182023 compared to theyear-ago quarter.Asia PacificExecutive Search Latin America. Executive Search Latin America reported fee revenue of $24.5$7.7 million, an increase of $3.5$0.2 million, or 17%3%, in the three months ended January 31, 20182023 compared to $21.0$7.5 million in theyear-ago quarter. Exchange rates favorably impacted fee revenue by $0.2 million, or 3%, in the three months ended January 31, 2023 compared to the year-ago quarter. The effect of exchange rates onslight increase in fee revenue was $1.1due to a 3% increase in the weighted-average fees billed per engagement (calculated using local currency), partially offset by a 2% decrease in the number of engagements billed during the three months ended January 31, 2023 compared to the year-ago quarter.The increase in fee revenue was due to higher fee revenue in Argentina and Brazil in the three months ended January 31, 2023 compared to the year-ago quarter, partially offset by a decrease in fee revenue in Colombia, Ecuador, and Chile.Professional Search & Interim. Professional Search & Interim reported fee revenue of $118.0 million, an increase of $28.0 million, or 31%, in the three months ended January 31, 2023 compared to $90.0 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.6 million, or 2%, in the three months ended January 31, 2023 compared to the year-ago quarter. The increase in fee revenue was due to an increase in interim fee revenue of $38.0 million primarily due to the Acquired Companies. This increase was partially offset by a decrease in permanent placement fee revenue of $10.0 million.RPO. RPO reported fee revenue of $103.5 million, an increase of $4.9 million, or 5%, in the three months ended January 31, 20182023 compared to theyear-ago quarter. The increase in fee revenue was due to a 11% increase$98.6 million in the number of engagements billed in the three months ended January 31, 2018 compared to theyear-ago quarter. The performance in China, Australia, and Singapore were the primary contributors to the increase in fee revenue in the three months ended January 31, 2018 compared to theyear-ago quarter. Life sciences/ healthcare, financial services, and technology were the main sectors contributing to the increase in fee revenue in the three months ended January 31, 2018, as compared to theyear-ago quarter.Latin America reported fee revenue of $6.4 million, a decrease of $1.4 million, or 18%, in the three months ended January 31, 2018 compared to $7.8 million in theyear-ago quarter. The effect of exchange rates on fee revenue was minimal. The decrease in fee revenue in the region is due to lower fee revenue in Mexico in the three months ended January 31, 2018, compared to theyear-ago quarter, partially offset by higher fee revenue in Argentina. Industrial and financial services were the main sectors contributing to the decline in fee revenue.Hay Group.Hay Group reported fee revenue of $198.1 million, an increase of $22.4 million, or 13%, in the three months ended January 31, 2018 compared to $175.7 million in theyear-ago quarter. Exchange rates favorablyunfavorably impacted fee revenue by $7.8 million, or 4%, compared to theyear-ago quarter. Fee revenue from consulting services was higher by $15.6 million in the three months ended January 31, 2018 compared to theyear-ago quarter, with the remaining increase of $6.8 million generated by our products business.Futurestep.Futurestep reported fee revenue of $69.1 million, an increase of $15.7 million, or 29%, in the three months ended January 31, 2018 compared to $53.4 million in theyear-ago quarter. Exchange rates favorably impacted fee revenue by $2.4$3.8 million, or 4%, in the three months ended January 31, 2018. Higher fee revenues in RPO and professional search of $9.9 million and $6.0 million, respectively, drove2023 compared to the year-ago quarter. The increase in fee revenue.Compensation and BenefitsCompensation and benefits expense increased $48.4by $33.5 million, or 18%8%, to $310.8$479.4 million in the three months ended January 31, 20182023 from $262.4$445.9 million in theyear-ago quarter. Exchange rates unfavorablyfavorably impacted compensation and benefits by $12.4 million, or 3%, in the three months ended January 31, 2023 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 $36.2 million and employee insurance of $3.2 million due to an increase in average headcount of 19% in the three months ended January 31, 2023 compared to the year-ago quarter and wage inflation. Also contributing to higher compensation and benefit expense was an increase in deferred compensation expenses of $21.4 million as a result of an increase in the fair value of participants' accounts compared to the year-ago quarter. The increase in compensation and benefits expense was partially offset by $9.9lower performance-related bonus expense of $23.6 million and a decrease in the amortization of long-term incentive awards of $3.9 million in the three months ended January 31, 2023 compared to the year-ago quarter. Compensation and benefits expense, as a percentage of fee revenue, increased to 70% in the three months ended January 31, 2023 from 65% in the year-ago quarter.Consulting compensation and benefits expense increased by $4.3 million, or 4%, to $118.1 million in the three months ended January 31, 2023 from $113.8 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $3.8 million, or 3%, in the three months ended January 31, 2023 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 $6.0 million, employee insurance of $0.5 million and amortization of long-term incentive awards of $0.6 milliondue to an increase in average headcount of 7% in the three months ended January 31, 2023 compared to the year-ago quarter and wage inflation. Additionally, an increase in deferred compensation expense of $1.9 million due to an increase in the fair value of participants' account also contributed to the increase in compensation and benefits expense. The increase was partially offset by a decrease in performance-related bonus expense of $5.4 million. Consulting compensation and benefits expense, as a percentage of fee revenue, increased to 73% in the three months ended January 31, 2023 from 70% in the year-ago quarter.Digital compensation and benefits expense was $46.5 million in the three months ended January 31, 2023 compared to $46.4 million in the year-ago quarter, essentially flat. Exchange rates favorably impacted compensation and benefits by $1.7 million, or 4%, in the three months ended January 31, 20182023 compared to theyear-ago quarter. The increase inwas primarily dueexpense, as a percentage of fee revenue, increased to a 9% increase in average headcount, which contributed $25.6 million in higher salaries and related payroll taxes, $3.4 million increase in amortization of long-term incentive awards, $1.8 million in vacation expense and $1.4 million in employee insurance costs. The rest of the change was due to an increase in performance related bonus expense of $15.7 million due to higher fee revenues and an increase in the amounts owed under certain deferred compensation and retirement plans of $4.8 million that was driven by increases in the fair value of participants’ accounts55% in the three months ended January 31, 2018 compared to2023 from 51% in theyear-ago quarter. The increases in compensation and benefits were partially offset by a decline in integration costs of $2.6 million.38Executive Search North America compensation and benefits expense increased by $21.7$12.8 million, or 21%14%, to $123.7$103.6 million in the three months ended January 31, 20182023 compared to $102.0$90.8 million in theyear-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.3 million, in the three months ended January 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to increases in deferred compensation expense of $15.8 million as a result of an increase in the fair value of the participants' accounts, coupled with an increase in salaries and related payroll taxes of $3.0 million driven by an increase in average headcount of 7% in the three months ended January 31, 2023 compared to the year-ago quarter and wage inflation. This increase was partially offset by a decrease in performance-related bonus of $4.2 million due to the lower segment fee revenue in the three months ended January 31, 2023 compared to the year-ago quarter, and a decline in the amortization of long-term incentive awards of $1.8 million. Executive Search North America compensation and benefits expense, as a percentage of fee revenue, increased to 78% in the three months ended January 31, 2023 from 60% in the year-ago quarter.Executive Search EMEA compensation and benefits expense increased by $1.7 million, or 5%, to $36.9 million in the three months ended January 31, 2023 compared to $35.2 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $1.9 million, or 5%, in the three months ended January 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to an increase in salaries and related payroll taxes of $1.3 million due to an increase in average headcount of 14% in the three months ended January 31, 2023 compared to the year-ago quarter and wage inflation. Executive Search EMEA compensation and benefits expense, as a percentage of fee revenue, increased to 75% in the three months ended January 31, 2023 from 74% in the year-ago quarter.Executive Search Asia Pacific compensation and benefits expense decreased by $4.2 million, or 22%, to $14.6 million in the three months ended January 31, 2023 compared to $18.8 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $1.2 million, or 6%, in the three months ended January 31, 2023 compared to the year-ago quarter. The decrease in compensation and benefits expense was primarily due to a decrease in performance-related bonus expense of $4.7 million in the three months ended January 31, 2023 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, increased to 65% in the three months ended January 31, 2023 from 60% in the year-ago quarter.Executive Search Latin America compensation and benefits expense increased by $0.9 million, or 21%, to $5.1 million in the three months ended January 31, 2023 compared to $4.2 million in the year-ago quarter. Exchange rates unfavorably impacted compensation and benefits by $0.1 million, or 2% in the three months ended January 31, 2023 compared to the year-ago quarter. The increase in compensation and benefits expense was primarily due to an increase of $0.4 million in performance-related bonus expense in the three months ended January 31, 2023 compared to the year-ago quarter. Executive Search Latin America compensation and benefits expense, as a percentage of fee revenue, increased to 67% in the three months ended January 31, 2023 from 57% in the year-ago quarter.Professional Search & Interim compensation and benefits expense increased by $9.7 million, or 22%, to $53.4 million in the three months ended January 31, 2023 from $43.7 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $0.6 million, or 1%, in the three months ended January 31, 2023 compared to the year-ago quarter. The increase was primarily due to increases in salaries and related payroll taxes of $11.6 million, employee insurance of $1.0 million and integration/acquisition costs of $0.4 million due to the acquisitions of the Acquired Companies, which resulted in an increase in average headcount of 118% in the three months ended January 31, 2023 compared to the year-ago quarter. Also contributing to higher compensation and benefit expense was an increase in deferred compensation expenses of $0.8 million as a result of an increase in the fair value of participants' accounts compared to the year-ago quarter. The increase in compensation and benefits expense was partially offset by decreases in performance-related bonus expense of $2.3 million and commission expense of $1.7 million. Professional Search & Interim compensation and benefits expense, as a percentage of fee revenue, decreased to 45% in the three months ended January 31, 2023 from 49% in the year-ago quarter.RPO compensation and benefits expense increased by $6.4 million, or 8%, to $84.5 million in the three months ended January 31, 2023 from $78.1 million in the year-ago quarter. Exchange rates favorably impacted compensation and benefits by $3.1 million, or 4%, in the three months ended January 31, 2023 compared to the year-ago quarter. The increase was primarily due to higher salaries and related payroll taxes of $6.7$7.9 million due toand employee insurance expense of $1.3 million as a 6%result of an increase in average headcount reflecting our continued growth-related investment back intoof 14% in the business.three months ended January 31, 2023 compared to the year-ago quarter. This was partially offset by a decrease in performance-related bonus expense of $2.8 million. RPO compensation and benefits expense, as a percentage of fee revenue, increased to 82% in the three months ended January 31, 2023 from 79% in the year-ago quarter.Corporate compensation and benefits expense increased by $2.0 million, or 14%, to $16.7 million in the three months ended January 31, 2023 from $14.7 million in the year-ago quarter. The increase in compensation and benefits expense was due to an increase of $1.4 million in salaries and related payroll taxes driven by an increase in average headcount of 20% in the three months ended January 31, 2023 compared to the year-ago quarter and wage inflation. Also contributing to the increase in compensation and benefits expense was a $7.2 million increase in performance related bonus expense compared to theyear-ago quarter, an increase of $3.5$1.5 million in expenses associated with our deferred compensation and retirement plans (including the increasesexpenses due to39an increase in the fair value of participants’ accounts), and $2.4 million increase in amortization of long-term incentive awards. The increase in performance related bonus expense was due to the increase in fee revenue. Executive Search compensation and benefits expense, as a percentage of fee revenue, was 69% and 67%participants' accounts in the three months ended January 31, 2018 and 2017, respectively.Hay Group2023 compared to the year-ago quarter. The increase in compensation and benefits expense was partially offset by an increase in the cash surrender value (“CSV”) of company-owned life insurance (“COLI”) of $0.8 million as a result of recording more death benefits in the three months ended January 31, 2023 compared to the year-ago quarter.General and Administrative ExpensesGeneral and administrative expenses increased $13.9by $12.0 million, or 12%20%, to $125.5$72.8 million in the three months ended January 31, 20182023 from $111.6$60.8 million in theyear-ago quarter. The increase was primarily due to higher average consultant headcount of 6% compared to theyear-ago quarter which contributed $10.5Exchange rates favorably impacted general and administrative expenses by $2.5 million, in higher salaries and related payroll taxes and an increase in performance-related bonus expense of $2.6 million due to higher fee revenues, offset by $1.8 million in lower integration costs. Hay Group compensation and benefits expense, as a percentage of fee revenue, was 63% and 64%or 4%, in the three months ended January 31, 2018 and 2017, respectively.Futurestep compensation and benefits expense increased $12.3 million, or 34%, to $49.0 million in the three months ended January 31, 2018 from $36.7 million in theyear-ago quarter. The increase was due to higher salaries and related payroll taxes of $7.4 million due to a 31% increase in the average headcount in the three months ended January 31, 20182023 compared to theyear-ago quarter. The higher average headcount was primarily driven by the need to service an increase in fee revenue in the RPO business. Also contributing to the increase in compensation and benefits was a higher performance related bonus expense of $4.6 million. Futurestep compensation and benefits expense, as a percentage of fee revenue, was 71% and 69% in the three months ended January 31, 2018 and 2017, respectively.Corporate compensation and benefits expense increased by $0.4 million, or 3%, to $12.5 million in the three months ended January 31, 2018 from $12.1 million in theyear-ago quarter.General and Administrative ExpensesGeneral and administrative expenses increased $1.7 million, or 3%, to $58.5 million in the three months ended January 31, 2018 compared to $56.8 million in theyear-ago quarter. Exchange rates unfavorably impacted general and administrative expenses by $1.8 million, or 3%, during the three months ended January 31, 2018 compared to theyear-ago quarter. The increase in general and administrative expenses was primarily due to increasesimpairment of $2.1right-of-use assets of $5.5 million and $0.9impairment of fixed assets of $4.4 million in legal and other professional fees and business development expense, respectively, offset by a declineassociated with the reduction of $0.6 millionthe Company's real estate footprint in integration costs and a decrease in foreign exchange loss of $0.5 million during the three months ended January 31, 20182023. Further contributing to the increase in general and administrative expenses was an increase in marketing and business development expense of $3.0 million. These increases were partially offset by a decrease in integration/acquisition costs of $1.2 million compared to theyear-ago quarter. General and administrative expenses, as a percentage of fee revenue, was 13%increased to 11% in the three months ended January 31, 20182023 compared to 15%9% in the three months ended January 31, 2017.Executive Searchyear-ago quarter.Consulting general and administrative expenses increased $1.3by $7.3 million, or 7%61%, to $19.3$19.2 million in the three months ended January 31, 2018 from $18.02023 compared to $11.9 million in theyear-ago quarter. The increase in general and administrative expenses was primarily due to increasesimpairment of right-of-use assets of $3.1 million and impairment of fixed assets of $2.8 million as a result of the reduction of the Company's real estate footprint. In addition, an increase of $0.4 million in marketing and $0.9 millionbusiness development expenses contributed to the overall increase in legal and other professional fees and other general and administrative expenses respectively, duringin the three months ended January 31, 20182023 compared to theyear-ago quarter. Executive SearchConsulting general and administrative expenses, as a percentage of fee revenue, was 11% in the three months ended January 31, 2018 comparedincreased to 12% in the three months ended January 31, 2017.Hay Group2023 from 7% in the year-ago quarter.Digital general and administrative expenses decreased $0.8increased by $5.1 million, or 3%67%, to $24.0$12.7 million in the three months ended January 31, 20182023 from $24.8$7.6 million in theyear-ago quarter. The decreaseincrease in general and administrative expenses was primarily due to generating a foreign exchange gainimpairment of $0.1right-of-use assets of $1.7 million and impairment of fixed assets of $1.5 million associated with the reduction of the Company's real estate footprint, coupled with higher computer software licenses and marketing and business development expenses of $0.9 million and $0.5 million, respectively, in the three months ended January 31, 20182023 compared to a foreign exchange loss of $1.0 million in theyear-ago quarter. This was offset by an increase in legal and other professional fees of $0.4 million. Hay GroupDigital general and administrative expenses, as a percentage of fee revenue, was 12%increased to 15% in the three months ended January 31, 2018 compared to 14%2023 from 8% in the three months ended January 31, 2017.Futurestepyear-ago quarter.Executive Search North America general and administrative expenses was $6.5decreased by $0.6 million, or 8%, to $7.4 million in the three months ended January 31, 20182023 compared to $6.2$8.0 million in theyear-ago quarter. FuturestepThe decrease in general and administrative expenses was primarily due to a foreign exchange gain of $0.5 million in the three months ended January 31, 2023 compared to a foreign exchange loss of $0.1 million the year-ago quarter. Executive Search North America general and administrative expenses, as a percentage of fee revenue, was 9%increased to 6% in the three months ended January 31, 2018 compared to 12%2023 from 5% in theyear-ago quarter.CorporateExecutive Search EMEA general and administrative expenses increased $0.9decreased by $0.2 million, or 12%5%, to $8.7$4.0 million in the three months ended January 31, 20182023 from $4.2 million in the year-ago quarter. Executive Search EMEA general and administrative expenses, as a percentage of fee revenue, decreased to 8% in the three months ended January 31, 2023 from 9% in the year-ago quarter.Executive Search Asia Pacific general and administrative expenses decreased by $0.3 million, or 10%, to $2.6 million in the three months ended January 31, 2023 compared to $7.8$2.9 million in theyear-ago quarter. Executive Search Asia Pacific general and administrative expenses, as a percentage of fee revenue, increased to 11% in the three months ended January 31, 2023 from 9% in the year-ago quarter.Executive Search Latin America general and administrative expenses decreased by $0.6 million, or 75%, to $0.2 million in the three months ended January 31, 2023 compared to $0.8 million in the year-ago quarter. The decrease in general and administrative expenses was primarily due to an increase in foreign exchange gain of $0.6 million in the three months ended January 31, 2023 compared to the year-ago quarter. Executive Search Latin America general and administrative expenses, as a percentage of fee revenue, decreased to 2% in the three months ended January 31, 2023 from 11% in the year-ago quarter.Professional Search & Interim general and administrative expenses increased by $1.6 million, or 27%, to $7.6 million in the three months ended January 31, 2023 compared to $6.0 million in the year-ago quarter. The increase in general and administrative expense was primarily due to higher bad debt expense of $1.2 million in the three months ended January 31, 2023 compared the year-ago quarter and an impairment of right-of-use assets of $0.6 million associated with the reduction of the Company's real estate footprint in the three months ended January 31, 2023. Professional Search & Interim general40and administrative expenses, as a percentage of fee revenue, decreased to 6% in the three months ended January 31, 2023 from 7% in the year-ago quarter.RPO general and administrative expenses increased by $1.7 million, or 37%, to $6.3 million in the three months ended January 31, 2023 compared to $4.6 million in the year-ago quarter. The increase in general and administrative expenses was due to an increase of $1.2 million in legal and other professional fees, offset by a decline of $0.6 million in integration costs and a decrease of $0.8 million in premise and office expense. The rest of the change was primarily due to generating foreign exchange loss of $0.8 million during the three months ended January 31, 2018 compared to achange in foreign exchange gain of $0.2 million in theyear-ago quarter.Cost of Services ExpenseCost of services expense consists primarily ofnon-billable contractor and product costs related to the delivery of various services and products, primarily in Futurestep and Hay Group. Cost of services expense increased $1.0 million, or 6%, to $17.5$1.2 million in the three months ended January 31, 20182023 compared to $16.5a foreign exchange loss of $0.1 million in theyear-ago quarter. Also contributing to the increase in general and administrative expense was higher computer software license costs of $0.5 million in the three months ended January 31, 2023 compared to the year-ago quarter. RPO general and administrative expenses, as a percentage of fee revenue, increased to 6% in the three months ended January 31, 2023 from 5% in the year-ago quarter.Corporate general and administrative expenses decreased by $2.0 million, or 14%, to $12.7 million in the three months ended January 31, 2023 compared to $14.7 million in the year-ago quarter. The decrease was primarily due to decreases in integration/acquisition costs of $1.0 million and an increase in foreign exchange gain of $0.8 million in the three months ended January 31, 2023 compared to the year-ago quarter.Cost of Services ExpenseCost of services expense consists 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 $26.2 million, or 83%, to $57.9 million in the three months ended January 31, 2023 compared to $31.7 million in the year-ago quarter. Professional Search & Interim account for $27.2 million of the increase due the acquisition of the Acquired Companies, which includes a significant amount of interim business as part of the services they perform and which services have a higher cost of service expense as compared to the Company's other services. The increase was partially offset by the decrease in cost of services from Digital and Executive Search North America due to a decrease in fee revenue in these segments. Cost of services expense, as a percentage of fee revenue, was 4%increased to 9% in both the three months ended January 31, 2018 and 2017.Depreciation and Amortization ExpensesDepreciation and amortization expenses were $12.2$17.0 million, an increase of $0.4increased by $0.9 million, or 3%6%, in the three months ended January 31, 20182023 compared to $11.8$16.1 million in theyear-ago quarter. The increase relateswas primarily due to technology investments made in the current and prior year in software and computer equipment, in additionamortization of intangible assets due to increases in leasehold improvements and furniture and fixtures.Restructuring Charges, NetDuring the third quarter of fiscal 2023, we implemented a restructuring plan to realign our workforce with business needs and objectives. As a result, we recorded restructuring charges, net of $41.2 million during the three months ended January 31, 2018,2023. There were no restructuring charges, were incurred.Duringnet during the three months ended January 31, 2017, we continued the implementation of the fiscal 2016 restructuring plan2022.Net Income Attributable to integrate Legacy Hay entities that were acquired in fiscal 2016 and recorded $3.8Korn FerryNet income attributable to Korn Ferry decreased by $72.9 million, of restructuring charges, net relatingor 87%, to the consolidation of premises.Operating IncomeOperating income was $48.6$11.2 million in the three months ended January 31, 20182023, as compared to $30.5$84.1 million in theyear-ago quarter. This increaseThe decrease in operatingnet income resulted from higher fee revenue of $65.7attributable to Korn Ferry was primarily due to $41.2 million and a decrease in restructuring charges, net, $5.5 million in impairment of $3.8right-of-use assets and $4.4 million offset by increasesin impairment of $48.4fixed assets during the three months ended January 31, 2023. Also contributing to the decrease in net income was an increase of $26.2 million in cost of services expense associated with the acquisitions of the Acquired Companies and an increase in compensation and benefits expense $1.7 million in general and administrative expenses and $1.0 million in cost of services expense.Executive Search operating income increased $5.0 million, or 17%, to $34.3$33.5 million in the three months ended January 31, 2018 as2023 compared to $29.3 million in theyear-ago quarter. The decrease was partially offset by an increase in Executive Search operatingother income wasof $20.4 million driven by higher fee revenuethe increase in the value of $27.6 millionour marketable securities (that are held in trust to satisfy obligations under our deferred compensation plan) due to market movements and a decrease in restructuring charges, netincome tax provision of $1.2 million, offset by increases in compensation and benefits expense, general and administrative expenses, and depreciation and amortization expenses of $21.7 million, $1.3 million, and $0.5 million, respectively. Executive Search operating$18.4 million. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 19%2% and 12% in both the three months ended January 31, 20182023 and 2017.Hay Group operating income was $27.1 million, an increase of $11.12022, respectively.Adjusted EBITDAAdjusted EBITDA decreased by $42.2 million, or 69%31%, to $96.1 million in the three months ended January 31, 20182023 as compared to operating income of $16.0$138.3 million in theyear-ago quarter. The increasedecrease in Adjusted EBITDA was primarily driven by an increase in cost of services expense associated with the Acquired Companies, higher compensation and benefit expense (excluding integration/acquisition costs) due to an increase in headcount and wage inflation, and an increase in general and administrative expenses (excluding impairment charges and integration/acquisition costs). Additionally, adjusted EBITDA decreased due to the mix in the fee revenue of $22.4 milliongrowth where increases in fee revenue were generated from products and services that are less profitable whereas the more profitable products and services saw a decreasedecline in restructuring charges, net of $2.5 million, offset by an increase of $13.9 million in compensation and benefits expense. Hay Group operating income,fee revenue. Adjusted EBITDA, as a percentage of fee revenue, was 14% in the three months ended January 31, 20182023 compared to 9%20% in theyear-ago quarter.Futurestep operating income41Consulting Adjusted EBITDA was $10.1 million, an increase of $3.6$23.3 million in the three months ended January 31, 20182023, a decrease of $5.3 million, or 19%, as compared to $6.5$28.6 million in theyear-ago quarter. The increaseThis decrease in operating incomeAdjusted EBITDA was driven by higher fee revenue of $15.7 million, offset by an increaseincreases in compensation and benefits expense of $12.3 million. Futurestep operating income,and general and administrative expenses (excluding impairment charges).Consulting Adjusted EBITDA, as a percentage of fee revenue, was 15%14% and 18% in the three months ended January 31, 2018 compared to 12% in theyear-ago quarter.Net Income Attributable to Korn FerryNet income attributable to Korn Ferry increased by $3.3 million to $27.22023 and 2022, respectively.Digital Adjusted EBITDA was $22.2 million in the three months ended January 31, 20182023, a decrease of $5.9 million, or 21%, as compared to $23.9$28.1 million in theyear-ago quarter. The increaseThis decrease in Adjusted EBITDA was due to higher totalmainly driven by the lower segment fee revenue of $66.6 million and an increase in other income, net of $3.5 million offset by higher operatinggeneral and administrative expenses of $48.4 million and an increase in(excluding impairment charges) during the income tax provision of $18.2 millionthree months ended January 31, 2023 compared to theyear-ago quarter. Net income attributable to Korn Ferry,Digital Adjusted EBITDA, as a percentage of fee revenue, was 6%26% and 31% in both the three months ended January 31, 20182023 and 2017,2022, respectively.Adjusted EBITDAExecutive Search North America Adjusted EBITDA increaseddecreased by $15.0$15.3 million, or 33%, to $70.3$30.4 million in the three months ended January 31, 2018 as2023 compared to $55.3$45.7 million in theyear-ago quarter. This increaseThe decrease was mainly driven by higherlower fee revenue of $65.7 millionin the segment combined with increases in compensation and benefits expense. This decrease was partially offset by an increase of $3.5 million in other income, net due to the change in fair value of our marketable securities offset by increases(that are held in trust to satisfy obligations under our deferred compensation plans) due to market movements that generated other income for the three months ended January 31, 2023 compared to other loss in the year-ago quarter and decreases in cost of $51.0 million in compensationservice expense and benefits expense (excluding integration costs), $2.3 million in general and administrative expenses(excluding integration cost)expenses. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, was 23% and $1.030% in three months ended January 31, 2023 and 2022, respectively.Executive Search EMEA Adjusted EBITDA was $8.0 million in cost of services expense.the three months ended January 31, 2023 compared to $8.1 million in the year-ago quarter, essentially flat. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 16% and 17% in the three months ended January 31, 2018 compared to 14% in theyear-ago quarter.Executive Search Asia Pacific Adjusted EBITDA increased $4.6decreased by $4.0 million, or 14%42%, to $37.2$5.5 million in the three months ended January 31, 2018 as2023 compared to $32.6$9.5 million in the three months ended January 31, 2017.year-ago quarter. The increasedecrease in Adjusted EBITDA was driven by higherlower fee revenue of $27.6 million duringin the three months ended January 31, 2018 compared to theyear-ago quarter,segment, partially offset by increases of $21.7 milliona decrease in compensation and benefits expense and $1.3 million in general and administrative expenses. expense.Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, was 21%24% and 30% in three months ended January 31, 2023 and 2022, respectively.Executive Search Latin America Adjusted EBITDA was $2.5 million in both the three months ended January 31, 20182023 and 2017.Hay Group2022. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, was 32% and 33% in three months ended January 31, 2023 and 2022, respectively.Professional Search & Interim Adjusted EBITDA was $36.9$22.0 million in the three months ended January 31, 2018, an increase2023, a decrease of $6.8$9.3 million, or 23%30%, as compared to $30.1$31.3 million in theyear-ago quarter. The increasedecrease in Adjusted EBITDA was mainly driven by higher fee revenueincreases in cost of $22.4 million, offset by increases of $15.7 million inservices expense, compensation and benefits expense (excluding integrationintegration/acquisition costs) during, and general and administrative expenses (excluding impairment charges and integration/acquisition costs). This decrease was partially offset by higher fee revenue in the three months ended January 31, 2018 compared tosegment as a result of theyear-ago quarter. Hay Group acquisitions of the Acquired Companies. Professional Search & Interim Adjusted EBITDA, as a percentage of fee revenue, was 19% and 35% in the three months ended January 31, 2018 as compared to 17% in theyear-ago quarter.Futurestep2023 and 2022, respectively.RPO Adjusted EBITDA was $10.8$9.8 million in the three months ended January 31, 2018, an increase2023, a decrease of $3.4$3.0 million, or 23%, as compared to $7.4$12.8 million in theyear-ago quarter. The increasedecrease in Adjusted EBITDA was mainly driven by higher fee revenue of $15.7 million, offset by increases of $12.3 million in compensation and benefits expense during the three months ended January 31, 2018 compared to theyear-ago quarter. Futurestepand general and administrative expenses (excluding impairment charges), partially offset by an increase in fee revenue. RPO Adjusted EBITDA, as a percentage of fee revenue, was 16%10% and 13% in the three months ended January 31, 2018 compared to 14% in theyear-ago quarter.Other Income (Loss), NetOther income, net was $7.7$13.1 million in the three months ended January 31, 2018 as2023 compared to $4.2other loss, net of $7.3 million in theyear-ago quarter. The increasedifference was primarily due to gains from the changeincrease in the fair value of our marketable securities where there was a larger gainthat are held in trust to for the settlement of the Company's obligation under the ECAP during the three months ended January 31, 20182023 compared to losses from the decrease in the fair value of our marketable securities in the year-ago quarter.Interest Expense, NetInterest expense, net primarily relates to our term loan facility andthe Notes issued in December 2019, borrowings under our COLI policies and interest cost related to our deferred compensation plans, which isare partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $2.7$5.4 million in the three months ended January 31, 2018 as2023 compared to $2.4$7.0 million in theyear-ago quarter.42Income Tax ProvisionThe provision for income tax was $26.3$8.5 million in the three months ended January 31, 2018 compared to $8.1 million in theyear-ago quarter. This reflects a 49% and 25%2023, with an effective tax rate forof 41.8%, compared to $26.9 million in the three months ended January 31, 20182022, with an effective rate of 24.0%. In addition to the impact of U.S. state income taxes and 2017, respectively. The current fiscal yearthe jurisdictional mix of earnings, which generally create variability in our effective tax rate over time, the effective tax rate in the three months ended January 31, 2023 was significantly impactedelevated due to common permanent tax adjustments being applied to lower earnings resulting from restructuring charges recorded in the quarter, and by the December 22, 2017 enactment of the Tax Cuts and Jobs Act (the “Tax Act”) as a result of which, Korn Ferrytax expense recorded a provisional tax charge of $16.3 million for aone-time tax on accumulated foreign earnings (the “Transition Tax”) and a provisional tax benefit of $5.8 million from the remeasurement of our U.S. federal deferred tax assets and liabilities. Korn Ferry will continue to appropriately refine these amounts within the measurement period allowed by SAB No.118, which will be completed no later than December 22, 2018.Net Income Attributable to Noncontrolling InterestNet 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 January 31, 20182023 was $0.2$0.5 million, as compared to $0.5$1.0 million forin the three months ended January 31, 2017.Nine Months Ended January 31, 20182023 Compared to Nine Months Ended January 31, 2017Fee RevenueFee Revenue.Fee revenue went upincreased by $132.4$198.9 million, or 11%10%, to $1,291.9$2,104.5 million in the nine months ended January 31, 20182023 compared to $1,159.5$1,905.6 million in theyear-ago period. Exchange rates favorablyunfavorably impacted fee revenue by $17.7$82.0 million, or 2%, in the three months ended January 31, 2018 compared to theyear-ago period. The higher fee revenue was attributable to organic growth in all lines of business.Executive Search.Executive Search reported fee revenue of $518.4 million, an increase of $63.0 million, or 14%4%, in the nine months ended January 31, 20182023 compared to $455.4 millionthe year-ago period. Fee revenue increased in theyear-ago period. As detailed below,all lines of business except Executive Search which saw a decline in fee revenue was highercompared to the year-ago period. The acquisitions of the Acquired Companies and Lucas Group were a significant factor in North America, EMEA and Asia Pacific, partially offset by lowerthe increase in fee revenue incompared to the Latin America regionyear-ago period.Consulting. Consulting reported fee revenue of $501.7 million, an increase of $25.4 million, or 5%, in the nine months ended January 31, 2018 as2023 compared to $476.3 million in theyear-ago period. The higherincrease in fee revenue was mainly driven by an increase in demand from large workforce transformation initiatives delivered through our Organization Strategy, and Leadership Development and Total Rewards solutions. We specifically saw growth in immersion and Senior Executive Leadership Development programs, Job Evaluations, People Strategy, Change Management, and Workforce Compensation demand as clients aligned their structures to new market opportunities and addressed compensation and retention issues. Exchange rates unfavorably impacted fee revenue by $24.0 million, or 5%, in the nine months ended January 31, 2023 compared to the year-ago period.Digital. Digital reported fee revenue of $263.2 million, an increase of $3.7 million, or 1%, in the nine months ended January 31, 2023 compared to $259.5 million in the year-ago period. The increase in fee revenue was driven by increasing demand for Development offerings as companies invest in sales effectiveness tools and training content to build their commercial teams' capabilities to maximize revenue growth, as well as in analytics on Total Rewards trends used to aid in retention earlier in the year, and staffing decisions more recently. These increases helped offset the decline in assessment tools and service delivery in support of development content. Exchange rates unfavorably impacted fee revenue by $16.1 million, or 6%, in the nine months ended January 31, 2023 compared to the year-ago period.Executive Search North America. Executive Search North America reported fee revenue of $426.8 million, a decrease of $22.7 million, or 5%, in the nine months ended January 31, 2023 compared to $449.5 million in the year-ago period. North America’s fee revenue was mainlylower due to an 8% increasea 13% decrease in the number of engagements billed, and a 4%partially offset by an 9% increase in the weighted-average feesfee billed per engagement (calculated using local currency) during the nine months ended January 31, 20182023 compared to theyear-ago period. Exchange rates favorably impactedExecutive Search EMEA. Executive Search EMEA reported fee revenue by $6.4of $140.7 million, an increase of $8.0 million, or 1%6%, in the nine months ended January 31, 2018,2023 compared to $132.7 million in theyear-ago period.North America reported Exchange rates unfavorably impacted fee revenue of $296.1 million, an increase of $36.7by $13.7 million, or 14%10%, in the nine months ended January 31, 20182023 compared to $259.4 million in theyear-ago period. North America’s fee revenue was higher due to a 10% increase in the number of engagements billed and a 4% increase in the weighted-average fees billed per engagement (calculated using local currency) during the nine months ended January 31, 2018 compared to theyear-ago period. All of the business sectors contributed to the growth in fee revenue in the nine months ended January 31, 2018 as compared to theyear-ago period, with industrial and technology contributing the most. The effect of exchange rates on fee revenue was minimal in the nine months ended January 31, 2018, compared to theyear-ago period.EMEA reported fee revenue of $128.2 million, an increase of $18.9 million, or 17%, in the nine months ended January 31, 2018 compared to $109.3 million in theyear-ago period. The favorable effect of exchange rates on fee revenue was $4.2 million, or 4%, in the three months ended January 31, 2018, compared to theyear-ago period. The increase in fee revenue was due to a 16%12% increase in the weighted-average fee billed per engagement (calculated using local currency) and a 5% increase in the number of engagements billed offset by a 2% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the nine months ended January 31, 20182023 compared to theyear-ago period. The performancePerformance in theGermany, United Arab Emirates, Netherlands, Switzerland, United Kingdom France, Germany, and ItalyBelgium were the primary contributors to the increase in fee revenue in the nine months ended January 31, 20182023 compared to theyear-ago period, partially offset by a decrease in fee revenue in Russia and Italy.Executive Search Asia Pacific. Executive Search Asia Pacific reported fee revenue of $72.4 million, a decrease of $16.0 million, or 18%, in the nine months ended January 31, 2023 compared to $88.4 million in the year-ago period. All ofExchange rates unfavorably impacted fee revenue by $6.1 million, or 7%, in the business sectors contributednine months ended January 31, 2023 compared to the growthyear-ago period.The decrease in fee revenue was due to a 12% decrease in the number of engagements billed during the nine months ended January 31, 2023 compared to the year-ago period. The performance in China, Singapore, Japan, and43Korea were the primary contributors to the decrease in fee revenue in the nine months ended January 31, 2018 as2023 compared to theyear-ago period, with industrial contributing the most.Asia Pacificpartially offset by an increase in fee revenue in Malaysia.Executive Search Latin America. Executive Search Latin America reported fee revenue of $72.0$23.3 million, an increase of $11.9$2.5 million, or 20%12%, in the nine months ended January 31, 20182023 compared to $60.1$20.8 million in theyear-ago period. The favorable effect of exchangeExchange rates onunfavorably impacted fee revenue was $1.2by $0.2 million, or 2%1%, in the nine months ended January 31, 2023 compared to theyear-ago period. The increase in fee revenue was due to a 9% increase in the number of engagements billed and an 8%10% increase in the weighted-average fees billed per engagement (calculated using local currency) and a 3% increase in the number of engagements billed during the nine months ended January 31, 20182023 compared to theyear-ago period.The performance in China, Australia, Singapore, JapanMexico and IndiaBrazil were the primary contributors to the increase in fee revenue in the nine months ended January 31, 20182023 compared to theyear-ago period, partially offset by a declinedecrease in fee revenue in Hong Kong. Financial services, technology, industrial and life sciences/healthcare were the main sectors contributing to the increase in fee revenue in the nine months ended January 31, 2018, as compared to theyear-ago period.Latin AmericaColombia.Professional Search & Interim. Professional Search & Interim reported fee revenue of $22.0$351.7 million, a decreasean increase of $4.6$155.3 million, or 17%79%, in the nine months ended January 31, 20182023 compared to $26.6$196.4 million in theyear-ago period. The effect of exchangeExchange rates onunfavorably impacted fee revenue was minimal. The decrease in fee revenue is due to lower fee revenue in Mexico and Brazil in the nine months ended January 31, 2018, compared to theyear-ago period, partially offset by higher fee revenue in Argentina, Ecuador and Chile. Consumer goods and financial services were the main sectors contributing to the decline in fee revenue in the nine months ended January 31, 2018, compared to theyear-ago period.Hay Group.Hay Group reported fee revenue of $577.5 million, an increase of $38.4$6.2 million, or 7%3%, in the nine months ended January 31, 20182023 compared to $539.1the year-ago period. The increase in fee revenue was due to an increase in interim fee revenue and permanent placement fee revenue of $118.1 million and $37.1 million, respectively, primarily due to the acquisitions of the Acquired Companies and Lucas Group.RPO. RPO reported fee revenue of $324.8 million, an increase of $42.8 million, or 15%, in the nine months ended January 31, 2023 compared to $282.0 million in theyear-ago period. Exchange rates favorablyunfavorably impacted fee revenue by $8.5$14.2 million, or 2%,5% in the nine months ended January 31, 2023 compared to theyear-ago period. FeeThe increase in fee revenue from consultingwas due to wider adoption of RPO services was higherin the market in combination with our differentiated solutions.Compensation and BenefitsCompensation and benefits expense increased by $25.9$136.1 million, or 11%, to $1,409.8 million in the nine months ended January 31, 2018 compared to2023 from $1,273.7 million in theyear-ago period, with the remaining increase of $12.5 million generated period. Exchange rates favorably impacted compensation and benefits by our products business.Futurestep.Futurestep reported fee revenue of $196.0 million, an increase of $31.0$48.0 million, or 19%4%, in the nine months ended January 31, 20182023 compared to $165.0 millionthe year-ago period. theyear-ago period. Exchange rates favorably impacted fee revenue by $2.8 million, or 2%, comparedcompensation and benefits expense was primarily due to theyear-ago period. Higher fee revenuesincreases in RPOsalaries and professional searchrelated payroll taxes of $22.3$131.4 million and $10.2 million, respectively, droveemployee insurance of $14.2 million. These increases were due to the increase in fee revenue.Compensationrevenue overall, as well as an increase in average headcount of 23% in the nine months ended January 31, 2023 compared to the year-ago period and BenefitsCompensationwage inflation. Also contributing to the higher compensation and benefitsbenefit expense increased $89.7was an increase in commission expense of $23.3 million or 11%,due to $885.7higher fee revenue, and higher integration/acquisition costs of $3.9 million in the nine months ended January 31, 2018 from $796.02023 compared to the year-ago period. The increase was partially offset by a decrease in performance-related bonuses of $37.1 million in the nine months ended January 31, 2023 compared to the year-ago period. Compensation and benefits expense, as a percentage of fee revenue, were 67% for both the nine months ended January 31, 2023 and 2022.Consulting compensation and benefits expense increased by $20.3 million, or 6%, to $350.8 million in the nine months ended January 31, 2023 from $330.5 million in the year-ago period. Exchange rates favorably impacted compensation and benefits by $14.6 million, or 4%, in the nine months ended January 31, 2023 compared to the year-ago period. The increase in compensation and benefits expense was primarily due to increases in salaries and related payroll taxes of $20.0 million and employee insurance of $2.1 million. These increases were due to segment’s revenue growth coupled with an increase in average headcount of 10% in the nine months ended January 31, 2023 compared to the year-ago period and wage inflation. Also contributing to an increase in compensation and benefits expense are increases in deferred compensation expense, restricted stock expense and amortization of long term incentive awards of $2.1 million, $1.4 million and $0.9 million, respectively, during the nine months ended January 31, 2023 compared to the year-ago period. This increase was partially offset by the $6.1 million decrease in performance-related bonus expense. Consulting compensation and benefits expense, as a percentage of fee revenue, increased to 70% in the nine months ended January 31, 2023 from 69% in the year-ago period.Digital compensation and benefits expense increased by $5.4 million, or 4%, to $139.0 million in the nine months ended January 31, 2023 from $133.6 million in the year-ago period. Exchange rates favorably impacted compensation and benefits by $6.7 million, or 5%, in the nine months ended January 31, 2023 compared to the year-ago period. The increase in compensation and benefits expense was due to increases in salaries and related payroll taxes of $11.4 million, primarily due to the increase in average headcount of 10% during the nine months ended January 31, 2023 compared to the year-ago period and wage inflation. This increase was partially offset by a decrease in performance-related bonus of $6.7 million. Digital compensation and benefits expense, as a percentage of fee revenue, increased to 53% in the nine months ended January 31, 2023 from 51% in the year-ago period.Executive Search North America compensation and benefits expense increased by $2.3 million, or 1%, to $288.5 million in the nine months ended January 31, 2023 compared to $286.2 million in the year-ago period. Exchange rates favorably impacted compensation and benefits by $0.7 million, in the nine months ended January 31, 2023 compared to the year-ago period. The increase in compensation and benefits expense was primarily due to an increase in salaries and related payroll44taxes of $11.4 million driven by the increase in average headcount of 11% in the nine months ended January 31, 2023 compared the year-ago period and wage inflation. This increase was partially offset by a decrease in performance-related bonus expense of $8.0 million in the nine months ended January 31, 2023 compared to the year-ago period. Executive Search North America compensation and benefits expense, as a percentage of fee revenue, increased to 68% in the nine months ended January 31, 2023 from 64% in the year-ago period.Executive Search EMEA compensation and benefits expense increased by $8.4 million, or 9%, to $104.9 million in the nine months ended January 31, 2023 compared to $96.5 million in the year-ago period. Exchange rates favorably impacted compensation and benefits by $8.7 million, or 9%, in the nine months ended January 31, 2023 compared to the year-ago period. The increase in compensation and benefits expense was primarily due to increases in performance-related bonus expense of $4.8 million, salaries and related payroll taxes of $1.9 million and amortization of long-term incentive awards of $1.0 million. These increases were due to the segment’s revenue growth combined with an increase in average headcount of 13% in the nine months ended January 31, 2023 compared to the year-ago period. Executive Search EMEA compensation and benefits expense, as a percentage of fee revenue, increased to 75% in the nine months ended January 31, 2023 from 73% in the year-ago period.Executive Search Asia Pacific compensation and benefits expense decreased by $8.0 million, or 15%, to $46.3 million in the nine months ended January 31, 2023 compared to $54.3 million in the year-ago period. Exchange rates favorably impacted compensation and benefits by $3.5 million, or 6%, in the nine months ended January 31, 2023 compared to the year-ago period. The decrease in compensation and benefits expense was primarily due to a decrease in performance-related bonus expense of $7.6 million in the nine months ended January 31, 2023 compared to the year-ago period due to lower segment fee revenue. Executive Search Asia Pacific compensation and benefits expense, as a percentage of fee revenue, increased to 64% in the nine months ended January 31, 2023 from 61% in the year-ago period.Executive Search Latin America compensation and benefits expense increased by $1.3 million, or 10%, to $14.6 million in the nine months ended January 31, 2023 compared to $13.3 million in the year-ago period. Exchange rates unfavorably impacted compensation and benefits expenses by $11.4$0.1 million, or 1% in the nine months ended January 31, 2023 compared to the year-ago period. The increase in compensation and benefits expense was primarily due to an increase in salaries and related payroll taxes as a result of the segment's fee revenue growth with an increase in average head count of 9% in the nine months ended January 31, 2023 compared to the year-ago period. Executive Search Latin America compensation and benefits expense, as a percentage of fee revenue, decreased to 63% in the nine months ended January 31, 2023 from 64% in the year-ago period.Professional Search & Interim compensation and benefits expense increased by $64.7 million, or 66%, to $162.6 million in the nine months ended January 31, 2023 from $97.9 million in the year-ago period. Exchange rates favorably impacted compensation and benefits by $2.5 million, or 3%, in the nine months ended January 31, 20182023 compared to theyear-ago period. The increase in compensation and benefits was primarily due to an 8% increase in the average headcount, primarily focused on fee earners, which contributed $58.3 million in higher salaries and related payroll taxes and $13.6 million more in expenses associated with our deferred compensation and retirement plans (includes the increases in the fair value of participants’ accounts) in the nine months ended January 31, 2018 compared to theyear-ago period. The rest of the change was due to $19.0 million increase in performance-related bonus expense and $7.9 million increase in amortization of long term incentive awards, offset by an $8.4 million decrease in integration costs compared to theyear-ago period.Executive Search compensation and benefits expense increased by $48.4 million, or 16%, to $348.9 million in the nine months ended January 31, 2018 compared to $300.5 million in theyear-ago period. The increase was primarily due to higher salaries and related payroll taxes of $18.8$40.8 million, commission expense of $21.4 million, employee insurance of $4.2 million and integration/acquisition costs of $3.9 million due to the acquisitions of the Acquired Companies and Lucas Group, which resulted in a 6% increase in average headcount reflecting our continued growth-related investment back into the business. Also contributing to the increase in compensation and benefits expense was an increase of $10.5 million in expenses associated with our deferred compensation and retirement plans (includes the increases in the fair value of participants’ accounts), $9.1 million increase in performance related bonus expense compared to theyear-ago period and a $6.1 million increase in amortization of long-term incentive awards. The increase in performance related bonus expense was due to a 14% increase in fee revenue in the nine months ended January 31, 2018 compared to the year-ago period. Executive Search compensation and benefits expense, as a percentage of fee revenue, was 67% in the nine months ended January 31, 2018 compared to 66% in theyear-ago period.Hay Group compensation and benefits expense increased $19.5 million, or 6%, to $365.7 million in the nine months ended January 31, 2018 from $346.2 million in theyear-ago period. The change was primarily due to increases in salaries and payroll taxes of $18.6 million and $3.1 million increase in expenses associated with our deferred compensation and retirement plans (includes the increases in the fair value of participants’ accounts). Also contributing to the increase in compensation and benefits expense was an increase of $2.3 million in performance related bonus expense and employer insurance cost of $1.7 million, offset by a decrease in integration costs of $5.5 million compared toyear-ago period. Hay Group compensation and benefits expense, as a percentage of fee revenue, was 63% in the nine months ended January 31, 2018 compared to 64% in theyear-ago period.Futurestep compensation and benefits expense increased $23.6 million, or 21%, to $138.4 million in the nine months ended January 31, 2018 from $114.8 million in theyear-ago period. The increase was due to higher salaries and related payroll taxes of $18.4 million due to a 29%90% increase in the average headcount in the nine months ended January 31, 20182023 compared to theyear-ago period. The higher average headcount was primarily driven by the need to service an increase in fee revenue in the RPO business. Also contributing to the increase in compensation and benefits expense was partially offset by a decrease in performance-related bonus expense of $7.0 million. Professional Search & Interim compensation and benefits expense, as a percentage of fee revenue, decreased to 46% in the nine months ended January 31, 2023 from 50% in the year-ago period.RPO compensation and benefits expense increased by $39.1 million, or 18%, to $255.7 million in the nine months ended January 31, 2023 from $216.6 million in the year-ago period. Exchange rates favorably impacted compensation and benefits by $11.3 million, or 5%, in the nine months ended January 31, 2023 compared to the year-ago period. The increase was primarily due to higher salaries and related payroll taxes of $42.2 million, and an increase in employee insurance expenses of $6.5$5.4 million performance relatedas a result of the segment’s fee revenue growth combined with an increase in average headcount of 29% in the nine months ended January 31, 2023 compared to the year-ago period. The increase was partially offset by a $6.9 million decrease in performance-related bonus expense in the nine months ended January 31, 2023 compared to the year-ago period. RPO compensation and benefits expense, as a percentage of fee revenue, increased to 79% in the nine months ended January 31, 2023 from 77% in the year-ago period.Corporate compensation and benefits expense increased by $2.3 million, or 5%, to $47.2 million in the nine months ended January 31, 2023 from $44.9 million in the year-ago period. The increase was primarily due to higher salaries and related payroll taxes of $4.1 million due to a 19%20% increase in the average headcount in the nine months ended January 31, 2023 compared to the year-ago period, and to a lesser extent to an increase in stocked-based compensation expense of $1.4 million and the use of outside contractors of $1.3 million. These were partially offset by an increase in the CSV of COLI of $3.5 million as a result of increased death benefits, and a decrease in the amortization of long-term incentive awards of $1.0 million in the nine months ended January 31, 2023 compared to an increase in the year-ago period.45General and Administrative ExpensesGeneral and administrative expenses increased by $27.2 million, or 16%, to $202.3 million in the nine months ended January 31, 2023 from $175.1 million in the year-ago period. Exchange rates favorably impacted general and administrative expenses by $10.6 million, or 6%, in the nine months ended January 31, 2023 compared to the year-ago period. The increase in general and administrative expenses was primarily due to higher marketing and business development expenses of $11.8 million and an increase in higher computer software licenses expense of $7.2 million, which contributed to the increase in fee revenue in the nine months ended January 31, 20182023 compared to theyear-ago period. Futurestep compensation period, as well as an increase in legal and benefits expense,other professional fees of $5.6 million. Also contributing to the increase in general and administrative expenses was an increase in impairment of fixed assets of $2.5 million as a percentageresult of fee revenue, was 71%the reduction in the nine months ended January 31, 2018 comparedCompany's real estate footprint and an increase of integration/acquisition expenses of $1.2 million due to 70%the acquisitions of the Acquired Companies and Lucas Group. The increase in theyear-ago period.Corporate compensationgeneral and benefits expense decreasedadministrative expenses was partially offset by $1.8 million, or 5%, to $32.7a decrease in impairment of right-of-use assets of $1.9 million in the nine months ended January 31, 2018 from $34.5 million in theyear-ago period. This change was mainly due to a decrease of $2.9 million in integration costs in the nine months ended January 31, 20182023 compared to theyear-ago period, offset by an increase of $1.1 million in performance related bonus expense.General and Administrative ExpensesGeneral and administrative expenses increased $9.1 million, or 5%, to $175.4 million in the nine months ended January 31, 2018 compared to $166.3 million in theyear-ago period. Exchange rates unfavorably impacted general and administrative expenses by $1.7 million during the nine months ended January 31, 2018 compared to theyear-ago period. The increase in general and administrative expenses was due to increases of $3.7 million, $1.9 million, $1.7 million, and $1.6 million in legal and other professional fees, premise and office expense, business development expense, and bad debt expenses, respectively, offset by a decline of $3.6 million in integration costs during the nine months ended January 31, 2018 compared to theyear-ago period. The rest of the change was primarily due to generating foreign exchange loss of $2.8 million during the nine months ended January 31, 2018 compared to a foreign exchange gain of $0.6 million in the nine months ended January 31, 2017. General and administrative expenses, as a percentage of fee revenue, was 14%increased to 10% in both the nine months ended January 31, 2018 and 2017.Executive Search2023 from 9% in the year-ago period.Consulting general and administrative expenses increased $7.3by $6.5 million, or 15%17%, to $57.6$45.0 million in the nine months ended January 31, 2018 from $50.32023 compared to $38.5 million in theyear-ago period. GeneralThe increase in general and administrative expenses increasedwas primarily due to generating foreign exchange lossesincreases in impairment charges of $0.3$3.1 million during the nine months ended January 31, 2018 compared toas a foreign exchange gain of $1.6 million during theyear-ago period and an increase in bad debt expense of $1.2 million. The restresult of the change was due to an increase of $1.0 millionreduction in legalthe Company's real estate footprint, and other professional fees, $0.8 million more in marketing and business development expenses of $1.7 million related to supportfee revenue growth. Also contributing to the higher fee revenues generatedincrease in general and administrative expenses was an increase in foreign exchange loss of $1.1 million in the nine months ended January 31, 20182023, compared to theyear-ago period and $0.5 million increase in premise and office expense. Executive Search period. Consulting general and administrative expenses, as a percentage of fee revenue, was 11%increased to 9% in both the nine months ended January 31, 2018 and 2017.Hay Group2023 from 8% in the year-ago period.Digital general and administrative expenses increased $0.9by $8.4 million, or 37%, to $73.3$31.3 million in the nine months ended January 31, 2018 compared to $72.42023 from $22.9 million in theyear-ago period. GeneralThe increase in general and administrative expenses increasedwas primarily due to higher computer software licenses expense of $2.6 million and an increase of $1.0 million in marketing and business development expenses of $2.3 million. Also contributing to supporthigher general and administrative expenses was an increase in impairment charges of $1.7 million associated with the higher fee revenues generatedreduction of the Company's real estate footprint and an increase in foreign exchange loss of $1.0 million in the nine months ended January 31, 20182023, compared to theyear-ago period. Hay GroupDigital general and administrative expenses, as a percentage of fee revenue, was 13%increased to 12% in both the nine months ended January 31, 2018 and 2017.Futurestep2023 from 9% in the year-ago period.Executive Search North America general and administrative expenses increased $2.6by $1.8 million, or 15%8%, to $20.0$24.4 million in the nine months ended January 31, 2018 from $17.42023 compared to $22.6 million in theyear-ago period. The increase in general and administrative expenses was primarily due primarily to increases in premisehigher marketing and office expense and bad debt expensebusiness development expenses of $1.0$1.6 million each in the nine months ended January 31, 20182023, compared to theyear-ago period. FuturestepExecutive Search North America general and administrative expenses, as a percentage of fee revenue, was 10%increased to 6% in the nine months ended January 31, 2018 compared to 11%2023 from 5% in theyear-ago period.CorporateExecutive Search EMEA general and administrative expenses decreased $1.6by $2.9 million, or 6%21%, to $24.5$10.9 million in the nine months ended January 31, 2018 compared to $26.12023 from $13.8 million in theyear-ago period. The decrease in general and administrative expenses was primarily due to a decrease in premise and office expense of $3.6$2.7 million due to impairment charges recorded in integration costs associated withfiscal 2022 as a result of the Legacy Hay acquisition, offset by an increase in legal and other professional feesreduction of $2.1 million during the nine months ended January 31, 2018 compared to the nine months ended January 31, 2017.CostCompany's real estate footprint, as well as a foreign exchange gain of Services ExpenseCost of services expense consists primarily ofnon-billable contractor and product costs related to the delivery of various services and products, primarily in Futurestep and Hay Group. Cost of services expense was $53.2$0.5 million in the nine months ended January 31, 20182023 compared to $52.3a foreign exchange loss of $0.6 million the year-ago period. This decrease in general and administrative expenses was partially offset by an increase in marketing and business development expenses of $0.7 million. Executive Search EMEA general and administrative expenses, as a percentage of fee revenue, decreased to 8% in the nine months ended January 31, 2023 from 10% in the year-ago period.Executive Search Asia Pacific general and administrative expenses decreased by $0.8 million, or 10%, to $7.4 million in the nine months ended January 31, 2017.2023 compared to $8.2 million in the year-ago period. The decrease in general and administrative expenses was primarily due to decreases in premise and office expense of $0.6 million and bad debt expense of $0.5 million. Executive Search Asia Pacific general and administrative expenses, as a percentage of fee revenue, increased to 10% in the nine months ended January 31, 2023 from 9% in the year-ago period.Executive Search Latin America general and administrative expenses increased by $0.7 million, or 175%, to $1.1 million in the nine months ended January 31, 2023 compared to $0.4 million in the year-ago period. The increase in general and administrative expenses was primarily due to a gain recorded in the nine months ended January 31, 2022 due to the termination of a lease agreement in Mexico, thereby increasing premise and office expense by $1.7 million, partially offset by an increase in foreign currency gains of $0.9 million in the nine months ended January 31, 2023 compared to the year-ago period. Executive Search Latin America general and administrative expenses, as a percentage of fee revenue, increased to 5% in the nine months ended January 31, 2023 from 2% in the year-ago period.46Professional Search & Interim general and administrative expenses increased by $6.6 million, or 46%, to $21.0 million in the nine months ended January 31, 2023 compared to $14.4 million in the year-ago period. The increase in general and administrative expense was primarily due to higher bad debt expense of $3.3 million and increases in marketing and business development expenses and integration/acquisition costs of $1.4 million and $1.3 million, respectively. Professional Search & Interim general and administrative expenses, as a percentage of fee revenue, decreased to 6% in the nine months ended January 31, 2023 from 7% in the year-ago period.RPO general and administrative expenses increased by $1.4 million, or 9%, to $16.5 million in the nine months ended January 31, 2023 compared to $15.1 million in the year-ago period. The increase in general and administrative expenses was primarily due to a foreign exchange loss of $1.1 million in the nine months ended January 31, 2023 compared to a foreign exchange gain of $0.3 million the year-ago period and an increase in marketing and business development expense of $0.9 million, partially offset by a decrease in bad debt expense of $1.1 million. RPO general and administrative expenses, as a percentage of fee revenue, were 5% for both the nine months ended January 31, 2023 and 2022.Corporate general and administrative expenses increased by $5.7 million, or 15%, to $44.9 million in the nine months ended January 31, 2023 compared to $39.2 million in the year-ago period. The increase was primarily due to higher legal and other professional fees of $3.7 million, marketing expenses of $3.1 million, and premise and office costs of $2.0 million. This increase was partially offset by an increase in foreign exchange gain of $1.9 million in the nine months ended January 31, 2023 compared to the year-ago period.Cost of Services ExpenseCost of services expense consists 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 $79.2 million, or 102%, to $157.2 million in the nine months ended January 31, 2023 compared to $78.0 million in the year-ago period. Professional Search & Interim account for $76.9 million of the increase due the acquisitions of the Acquired Companies and Lucas Group which includes a significant amount of interim business as part of the services they perform which has higher cost of service expense as compared to other services Korn Ferry provides. The rest of the increase was from the Consulting segment due to an increase in fee revenue in the segment. Cost of services expense, as a percentage of fee revenue, wasincreased to 7% in the nine months ended January 31, 2023 from 4% in the nine months ended January 31, 2018 as compared to 5% in theyear-ago period.Depreciation and Amortization ExpensesDepreciation and amortization expenses were $36.9$50.4 million, an increase of $3.0 million, or 6% in the nine months ended January 31, 2023 compared to $47.4 million in the year-ago period. The increase was primarily due to the amortization of intangible assets due to the acquisition of the Acquired Companies and Lucas Group.Restructuring Charges, NetDuring the third quarter of fiscal 2023, we implemented a restructuring plan to realign our workforce with our business needs and objectives. As a result, we recorded restructuring charges, net of $41.2 million during the nine months ended January 31, 2023. There were no restructuring charges, net during the nine months ended January 31, 2022.Net Income Attributable to Korn FerryNet income attributable to Korn Ferry decreased by $72.7 million, to $162.0 million in the nine months ended January 31, 2023, as compared to $234.7 million in the year-ago period. The decrease in net income attributable to Korn Ferry was primarily driven by increases in compensation and benefits expense, cost of services, general and administrative expenses, and restructuring charges, net in the nine months ended January 31, 2023 compared to the year ago period. The decrease was partially offset by an increase in fee revenue and a decrease in income tax provision. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 8% and 12% in nine months ended January 31, 2023 and 2022, respectively.Adjusted EBITDAAdjusted EBITDA decreased by $35.1 million, or 9%, to $359.4 million in the nine months ended January 31, 2023 as compared to $394.5 million in the year-ago period. The decrease in Adjusted EBITDA was driven by increases in cost of services expense, compensation and benefits expense (excluding integration/acquisition costs) and general and administrative expenses (excluding impairment charges and integration/acquisition costs), partially offset by an increase in fee revenue in the nine months ended January 31, 2023 compared to the year-ago period. Adjusted EBITDA, as a percentage of fee revenue, was 17% in the nine months ended January 31, 2023 compared to 21% in the year-ago period.Consulting Adjusted EBITDA was $83.9 million in the nine months ended January 31, 2023, a decrease of $1.6 million, or 2%, as compared to $85.5 million in the year-ago period. This decrease in Adjusted EBITDA was driven by increases in compensation and benefits expense, cost of services expense and general and administrative expense (excluding impairment charges), partially offset by an increase in fee revenue in the nine months ended January 31, 2023 compared to47the year-ago period.Consulting Adjusted EBITDA, as a percentage of fee revenue, was 17% and 18% in nine months ended January 31, 2023 and 2022, respectively.Digital Adjusted EBITDA was $73.9 million in the nine months ended January 31, 2023, a decrease of $8.4 million, or 10%, as compared to $82.3 million in the year-ago period. This decrease in Adjusted EBITDA was mainly driven by increases in compensation and benefits expense, and general and administrative expenses (excluding impairment charges), partially offset by an increase in fee revenue in the segment, during the nine months ended January 31, 2023 compared to the year-ago period.Digital Adjusted EBITDA, as a percentage of fee revenue, was 28% in the nine months ended January 31, 2023 as compared to 32% in the nine months ended January 31, 2022.Executive Search North America Adjusted EBITDA decreased by $25.7 million, or 19%, to $112.2 million in the nine months ended January 31, 2023 compared to $137.9 million in the year-ago period. The decrease was primarily driven by a decrease in the segment's fee revenue coupled with increases in compensation and benefits expense and general and administrative expenses in the nine months ended January 31, 2023 compared to the year-ago period. Executive Search North America Adjusted EBITDA, as a percentage of fee revenue, was 26% in the nine months ended January 31, 2023 as compared to 31% in the nine months ended January 31, 2022.Executive Search EMEA Adjusted EBITDA increased by $1.3 million, or 6%, to $24.6 million in the nine months ended January 31, 2023 compared to $23.3 million in the year-ago period. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment and a decrease in general and administrative expenses (excluding impairment charges), partially offset by an increase in compensation and benefits expense. Executive Search EMEA Adjusted EBITDA, as a percentage of fee revenue, was 17% in the nine months ended January 31, 2023 as compared to 18% in the nine months ended January 31, 2022Executive Search Asia Pacific Adjusted EBITDA decreased by $7.3 million, or 28%, to $18.7 million in the nine months ended January 31, 2023 compared to $26.0 million in the year-ago period. The decrease in Adjusted EBITDA was driven by lower fee revenue in the segment, partially offset by a decrease in compensation and benefits expense and general and administrative expenses.Executive Search Asia Pacific Adjusted EBITDA, as a percentage of fee revenue, was 26% in the nine months ended January 31, 2023 as compared to 29% in the nine months ended January 31, 2022.Executive Search Latin America Adjusted EBITDA increased by $1.5 million, or 24%, to $7.7 million in the nine months ended January 31, 2023 compared to $6.2 million in the year-ago period. The increase in Adjusted EBITDA was driven by higher fee revenue in the segment, partially offset by increases in compensation and benefits and general and administrative expenses. Executive Search Latin America Adjusted EBITDA, as a percentage of fee revenue, was 33% in the nine months ended January 31, 2023 as compared to 30% in the nine months ended January 31, 2022.Professional Search & Interim Adjusted EBITDA was $83.6 million in the nine months ended January 31, 2023, an increase of $11.0 million, or 15%, as compared to $72.6 million in the year-ago period. The increase in Adjusted EBITDA was mainly driven by higher fee revenue in the segment as a result of the acquisition of the Acquired Companies and Lucas Group, partially offset by increases in cost of services expense, compensation and benefits expense (excluding integration/acquisition costs) and general and administrative expenses (excluding impairment charges and integration/acquisition costs). Professional Search & Interim Adjusted EBITDA, as a percentage of fee revenue, was 24% in the nine months ended January 31, 2023 compared to 37% in the year-ago period.RPO Adjusted EBITDA was $43.6 million in the nine months ended January 31, 2023, an increase of $1.9 million, or 5%, in the nine months ended January 31, 2018as compared to $35.0$41.7 million in theyear-ago period. The increase relates primarily to technology investments made in the current and prior year in software and computer equipment, in addition to increases in leasehold improvements and furniture and fixtures.Restructuring Charges, NetDuring the nine months ended January 31, 2018, we continued the implementation of the fiscal 2016 restructuring plan to integrate Legacy Hay entities that were acquired in fiscal 2016 and recorded $0.1 million of restructuring charges relating to the consolidation of premises.During the nine months ended January 31, 2017, we continued the implementation of the fiscal 2016 restructuring plan in order to integrate the Hay Group entities that were acquired in fiscal 2016Adjusted EBITDA was mainly driven by eliminating redundant positions and operational, general and administrative expenses and consolidating of office space. As a result, we recorded $28.3 million of restructuring charges with $11.5 million of severance costs and $16.8 million relating to the consolidation of office space during the nine months ended January 31, 2017.Operating IncomeOperating income was $140.6 million in the nine months ended January 31, 2018 as compared to $81.6 million in theyear-ago period. This increase in operating income resulted from higher fee revenue of $132.4 million and a decrease in restructuring charges, net of $28.2 million,the segment, partially offset by increases of $89.7 millionan increase in compensation and benefits expense $9.1 million inand general and administrative expenses $1.9 million in depreciation and amortization expenses and $0.9 million in cost of services expense.Executive Search operating income increased $8.7 million, or 9%, to $102.4 million in the nine months ended January 31, 2018 as compared to $93.7 million in theyear-ago period. The increase in Executive Search operating income was driven by increases in higher fee revenue of $63.0 million and a decrease in restructuring charges, net of $3.7 million, offset by increases in compensation and benefits expense, general and administrative expenses, cost of services expense and depreciation and amortization expenses of $48.4 million, $7.3 million, $1.2 million and 1.1 million, respectively. Executive Search operating income, as a percentage of fee revenue, was 20% in the nine months ended January 31, 2018 as compared to 21% in theyear-ago period.Hay Group operating income was $72.5 million, an increase of $41.3 million, or 132%, in the nine months ended January 31, 2018 as compared to operating income of $31.2 million in theyear-ago period. The increase was primarily driven by an increase in fee revenue of $38.4 million and restructuring recoveries, net of $0.2 million during the nine months ended January 31, 2018 compared to restructuring charges, net of $24.0 million during theyear-ago period, offset by an increase of $19.5 million in compensation and benefits expense, $0.9 million in general and administrative expenses and an increase in cost of services expense of $0.9 million in the nine months ended January 31, 2018 compared to theyear-ago period. Hay Group operating income,(excluding impairment charges). RPO Adjusted EBITDA, as a percentage of fee revenue, was 13% in the nine months ended January 31, 20182023 compared to 6%15% in theyear-ago period.Futurestep operatingOther Income, NetOther income, net was $27.7 million, an increase of $5.9$4.8 million in the nine months ended January 31, 2018 as2023 compared to $21.8 million in theyear-ago period. The increase in operating income was driven by higher fee revenue of $31.0 million, offset by an increase in compensation and benefits expense of $23.6 million and general and administrative expenses of $2.6 million. Futurestep operating income, as a percentage of fee revenue, was 14% in the nine months ended January 31, 2018 compared to 13% in theyear-ago period.Net Income Attributable to Korn FerryNet income attributable to Korn Ferry increased by $35.3 million to $92.6$2.2 million in the nine months ended January 31, 2018 compared to $57.3 million in theyear-ago period. The increasedifference was primarily due to higher total revenue of $129.1 million, an increase in other income, net of $7.2 million and a decrease in net income attributable to noncontrolling interestthe loss on disposal of $1.2 million, offset by higher operating expensesfixed assets, lower amortization of $70.1 millionactuarial loss from our deferred compensation plans and an increase in income tax provision of $32.4 million due to the enactment of the Tax Act compared to theyear-ago period. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 7% for the nine months ended January 31, 2018 as compared to 5% in theyear-ago period.Adjusted EBITDAAdjusted EBITDA increased by $24.4 million to $199.3 million in the nine months ended January 31, 2018 as compared to $174.9 million in theyear-ago period. This increase was driven by higher adjusted fee revenue of $128.9 million and an increase of $7.2 million in other income, net primarily due to the change ingains from the fair value of our marketable securities offset by increases of $98.1 million in compensation and benefits expense (excluding integration costs), $12.7 million in general and administrative expenses (excluding integration costs) and $0.9 million in cost of services expense compared to theyear-ago period. Adjusted EBITDA, as a percentage of adjusted fee revenue, was 15% in both the nine months ended January 31, 2018 and 2017.Executive Search Adjusted EBITDA increased $7.1 million, or 7%, to $110.3 million in the nine months ended January 31, 2018 as compared to $103.2 million in the nine months ended January 31, 2017. The increase was driven by higher fee revenue of $63.0 million, offset by increases of $48.4 million in compensation and benefits expense and $7.3 million in general and administrative expenses during the nine months ended January 31, 20182023 compared to theyear-ago period. Executive Search Adjusted EBITDA, as a percentage of fee revenue, was 21% in the nine months ended January 31, 2018 as compared to 23% in theyear-ago period.Hay Group Adjusted EBITDA was $103.3 million, an increase of $8.1 million, or 9%, in the nine months ended January 31, 2018 as compared to $95.2 million in theyear-ago period. The increase was driven by higher adjusted fee revenue of $34.9 million, offset by increases of $25.0 million in compensation and benefits expense (excluding integration costs), $0.9 million in general and administrative expenses and an increase in cost of services expense of $0.9 million during the nine months ended January 31, 2018 compared to theyear-ago period. Hay Group Adjusted EBITDA, as a percentage of adjusted fee revenue, was 18% in both the nine months ended January 31, 2018 and 2017.Futurestep Adjusted EBITDA was $30.0 million in the nine months ended January 31, 2018, an increase of $6.0 million, as compared to $24.0 million in theyear-ago period. The increase was driven by higher fee revenue of $31.0 million, offset by increases of $23.6 million in compensation and benefits expense and $2.6 million in general and administrative expenses during the nine months ended January 31, 2018 compared to theyear-ago period. Futurestep Adjusted EBITDA, as a percentage of fee revenue, was 15% in both the nine months ended January 31, 2018 and 2017.Other Income, NetOther income, net was $14.8 million in the nine months ended January 31, 2018 as compared to $7.6 million in theyear-ago period. The increase was primarily due to the change in the fair value of our marketable securities, where there was a larger gain during the nine months ended January 31, 2018 compared to theyear-ago period.Interest Expense, NetInterest expense, net primarily relates to our term loan facility andthe Notes issued in December 2019, borrowings under our COLI policies and interest cost related to our deferred compensation plans, which isare partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was $7.9$20.1 million in the nine months ended January 31, 2018 as2023 compared to $8.2$18.8 million in theyear-ago period.48Income Tax ProvisionThe provision for income tax was $54.1$63.6 million in the nine months ended January 31, 2018 compared to $21.7 million in theyear-ago period. This reflects a 37% and 27%2023, with an effective tax rate forof 27.8%, compared to $77.0 million in the nine months ended January 31, 20182022, with an effective rate of 24.4%. In addition to the impact of U.S. state income taxes and 2017, respectively. The current fiscal yearthe jurisdictional mix of earnings, which generally create variability in our effective tax rate over time, the effective tax rate in the nine months ended January 31, 2023 was significantly impactedaffected by the December 22, 2017 enactment of the Tax Act as a result of which, Korn Ferrytax expense recorded a provisional tax charge of $16.3 million for the Transition Tax and a provisional tax benefit of $5.8 million from the remeasurement of our U.S. federal deferred tax assets and liabilities. Korn Ferry will continue to appropriately refine these amounts within the measurement period allowed by SAB No.118, which will be completed no later than December 22, 2018.Net Income Attributable to Noncontrolling InterestNet 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 nine months ended January 31, 20182023 was $1.0$2.9 million, as compared to $2.2$3.1 million forin the nine months ended January 31, 2017.Liquidity and Capital ResourcesThe 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 intellectual propertyIP 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’sCompany'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 and in the “Risk Factors” section of the Annual Report on Form10-K for the fiscal year ending April 30, 2017. 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 February 1, 2023, we completed the acquisition of Salo, a Minneapolis-based interim firm, for approximately $155 million, net of cash acquired. Salo will be part of our Interim business, which is a part of our Professional Search & Interim Segment.On August 1, 2022, we completed the acquisition of ICS for approximately $99.3 million, net of cash acquired. ICS is part of our 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 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 agreement.On June 15, 2016,24, 2022, we entered into a senior secured $400 millionan Amendment to the Credit Agreement (as amended by the Amendment, the “Amended Credit Agreement”) with a syndicatethe lenders party thereto and Bank of banks and Wells Fargo Bank,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 enhanceda 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 flexibilitycovenants 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 in recognitiona $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 the accelerated pacerevolving commitments by an aggregate amount of the Legacy Hay integration.up to $250 million plus an unlimited amount subject to a consolidated secured net leverage ratio of 3.25 to 1.00. See Note 10 11 —Long-Term Debtfor a further description of the credit facility. We drew down $275Amended Credit Agreement. The Company has a total of $1,145.3 million onavailable under the term loanCredit Facilities and used $140 million of the proceeds topay-off the term loan that was outstanding as of April 30, 2016. We had $2.9 million and $3.0 million standby letters of credit issued under our long-term debt arrangements as of January 31, 2018 and April 30, 2017, respectively. We had a total of $7.3$645.3 million and $8.1available under the previous credit facilitiesafter $4.7 million of standby letters of creditscredit have been issued as of both January 31, 2023 and April 30, 2022. The Company had a total of $11.6 million and $10.0 million of standby letters with other financial institutions as of January 31, 20182023 and April 30, 2017, respectively.2022, respectively. The standby letters of creditscredit were generally issued as a result of entering into office premise leases.As part of the Legacy Hay acquisition, the Company has committed to a $40 million retention pool (of which $23.5 million has been paid) for certain employees of Legacy Hay subject to certain circumstances. The remaining balance will be payable within 45 days after November 30, 2018.49On 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 December 8, 2014, theJune 21, 2022, our Board of Directors also approved an increase into the Company’s stockshare repurchase program of approximately $300 million, which at the time brought our available capacity to an aggregate of $150.0 million. Common stock may be repurchased from time to timerepurchase shares in the open market or privately negotiated transactions at the Company’s discretion subject to market conditions and other factors. During the third quarter of fiscal 2017, we resumed repurchasing shares through this program. We$318 million. The Company repurchased approximately $32.6$80.5 million and $31.5 million of the Company’s common stock during the nine months ended January 31, 2018.2023 and 2022, respectively. As of January 31, 2018, $88.62023, $248.6 million remained available for common stock repurchases under our stockshare repurchase program. Any decision to continue to execute our currently outstanding issuershare repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors.Our senior secured credit agreement requires that our pro forma leverage ratio, defined as the ratioprimarily source of consolidated funded indebtedness to consolidated adjusted EBITDA, is no greater than 2.50 to 1.00, and our pro forma domestic liquidity is at least $50.0 million as a condition to consummating permitted acquisitions, paying dividends tothe fee revenue generated from our stockholders and share repurchases ofoperations, supplemented by our common stock. which we service. We believe, based on current economic conditions, that our cash on hand and funds from operations and the Amended Credit Agreement we entered into on June 15, 2016 will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt incurred in connection with the Legacy Hay acquisition, the retention pool obligations in connection with the Legacy Hay acquisition, sharesrepayments, share repurchases and dividend payments under our dividend policy during the next twelve12 months. However, if the national or global economy, credit market conditions and/or labor markets werecontinue to deteriorate in the future, including as a result of ongoing macroeconomic uncertainty due to inflation and a potential recession, such changes have and could put further 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 our existing credit facilityadditional borrowings under the Amended Credit Agreement to meet our capital needs and/or discontinue our share repurchases and dividend policy.Cash and cash equivalents and marketable securities were $529.0$1,007.8 million and $530.8$1,211.1 million as of January 31, 20182023 and April 30, 2017,2022, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and marketable securities were $242.1$531.4 million and $245.1$605.4 million at January 31, 20182023 and April 30, 2017,2022, respectively. As of January 31, 20182023 and April 30, 2017,2022, we held $210.4$358.6 million and $165.8$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 fiscal 2018 and 2017 annualaccrued 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 the nine months ended January 31, 2018.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.As of January 31, 20182023 and April 30, 2017,2022, marketable securities of $139.0$235.9 million and $233.0 million, respectively, included equity securities of $188.8 million (net of gross unrealized gains of $15.5$10.8 million and gross unrealized losses of $0.7$9.0 million) and $119.9$168.7 million (net of gross unrealized gains of $6.7$10.7 million and gross unrealized losses of $0.6$6.1 million), respectively, were held in trust for settlement of our obligations under certain deferred compensation plans, of which $124.2$180.3 million and $115.6$158.7 million, respectively, are classified asnon-current. These marketable securities were held to satisfy vested obligations totaling $122.3$173.7 million and $99.5$160.8 million as of January 31, 20182023 and April 30, 2017,2022, respectively. Unvested obligations under the deferred compensation plans totaled $29.7$22.3 million and $37.6$24.0 million as of January 31, 20182023 and April 30, 2017,2022, respectively.The net increasedecrease in our working capital of $40.1$18.7 million as of January 31, 20182023 compared to April 30, 20172022 is primarily attributable to a decrease in cash and cash equivalents and an increase in accounts receivable andother accrued liabilities, partially offset by a decrease in compensation and benefits payable offset by decreasescombined with an increase in account receivables. The decrease in cash and cash equivalents.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 and the acquisition of ICS in second quarter of fiscal 2023. The increase in accounts receivable was due to an increase in days of sales outstanding, which went from 6158 days to 6971 days (which is consistent with historical experience) from April 30, 20172022 to January 31, 2018.2023. The decreaseincrease in compensation and benefits payable and cash and cash equivalentsother accrued50liabilities was primarily due to the payment of annualbonuses earnedan increase in fiscal 2017 and paid during the first quarter of fiscal 2018, with cash and cash equivalents also decreasingaccrued restructuring due tosign-on restructuring charges, net recorded in the three months ended January 31, 2023 and retention payments made during the quarter.an increase in deferred revenue. Cash provided by operating activities was $59.6$92.8 million in the 2018, an increase2023, a decrease of $45.9$128.7 million, compared to $13.7the cash provided by operating activities of $221.5 million in theyear-ago period.nine months ended January 31, 2022.Cash used in investing activities was $32.2$165.4 million in the nine months ended January 31, 2018, an increase of $19.8 million,2023 compared to $12.4$136.6 million in theyear-ago period. CashAn increase in cash used in investing activities was higherprimarily due to aincreases in cash paid for property and equipment of $21.4 million and cash paid for acquisitions, net of cash acquired of $8.5 million, partially offset by the decrease in proceeds from sales/maturitiesthe purchase of marketable securities offset by less cash used fornet of sales/maturities of $2.5 million during the purchases of property and equipment and proceeds received from life insurance policies in the nine months ended January 31, 20182023 compared to theyear-ago period.Cash used in financing activities was $64.6$130.1 million in the nine months ended January 31, 20182023 compared to cash provided by financing activities of $89.1$62.8 million in theyear-ago period.nine months ended January 31, 2022. The change from cash provided by financing activities toincrease in cash used in financing activities was primarily due to a decrease of $135.0 millionincreases in proceeds from our term loan facility net ofpay-offrepurchases of the term loan that was outstanding asCompany’s common stock, dividends paid to shareholders, cash used to repurchase shares of April 30, 2016, $5.2common stock to satisfy tax withholding requirements upon the vesting of restricted stock, dividends to noncontrolling interest and payments on life insurance policy loans of $53.5 million, more in term loan payments$4.7 million, $3.9 million, $3.4 million and an increase of shares repurchased under the stock repurchase program of $16.3$2.1 million, respectively, in the nine months ended January 31, 20182023 compared to none in theyear-ago period.Cash Surrender Value of Company OwnedCompany-Owned Life Insurance Policies, Net of LoansThe CompanyWe purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plans as a means of funding benefits under such plans. As of January 31, 20182023 and April 30, 2017,2022, we held contracts with gross CSVcash surrender value of $185.0$276.2 million and $180.3$263.2 million, respectively. Total outstanding borrowings against the CSV of COLI contracts were $66.8was $77.6 million and $67.2$79.8 million as of January 31, 20182023 and April 30, 2017,2022, respectively. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and are secured by the CSV of COLI contracts. At January 31, 20182023 and April 30, 2017,2022, the net cash surrender value of these policies was $118.2$198.6 million and $113.1$183.3 million, respectively.Long-Term DebtOn June 15, 2016,Other than the factors discussed in this section, we entered into a senior secured $400 million Credit Agreement (the “Credit Agreement”) with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent. The Credit Agreement provides for, among other things: (a) a senior secured term loan facility in an aggregate principal amount of $275 million (the “ Term Facility”), (b) a senior secured revolving credit facility (the “Revolver” and together with the Term Facility, the “Credit Facilities”) in an aggregate principal amount of $125 million, (c) annual term loan amortization of 7.5%, 7.5%, 10.0%, 10.0% and 10.0%, with the remaining principal due at maturity, (d) certain customary affirmative and negative covenants, including a maximum consolidated total leverage ratio (as defined below) and a minimum interest coverage ratio and (e) an expanded definition of permittedadd-backs to Adjusted EBITDA in recognition of the accelerated integration actions. Our credit agreement permits payment of dividends to stockholders and share repurchases so long as the pro forma leverage ratio is no greater than 2.50 to 1.00, and the pro forma domestic liquidity is at least $50.0 million. We drew down $275 million on the term loan and used $140 million of the proceeds topay-off the term loan that was outstanding as of April 30, 2016.At our option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Facilities may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.25% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon our total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated leverage ratio”) at such time. In addition, we will be required to pay to the lenders a quarterly fee ranging from 0.20% to 0.35% per annum on the average daily unused amount of the Term Facility, based upon our consolidated leverage ratio at such time and fees relating to the issuance of letters of credit. During the three and nine months ended January 31, 2018, the average rate on the Term Facility was 2.65% and 2.49%, respectively. During the three and nine months ended January 31, 2017, the average rate was 2.06% and 2.29%, respectively.Both the Revolver and the Term Facility mature on June 15, 2021 and may be prepaid and terminated early by us at any time without premium or penalty (subject to customary LIBOR breakage fees). The Term Facility is payable in quarterly installments with principal payments totalling $15.5 million made during the nine months ended January 31, 2018. As of January 31, 2018, $244.1 million was outstanding under the Term Facility compared to $259.5 million as of April 30, 2017. The current and long-term portion of unamortized debt issuance costs associated with the long-term debt, was $2.9 million and $3.5 million as of January 31, 2018 and April 30, 2017, respectively. The fair value of our Term Facility is based on borrowing rates currently required of loans with similar terms, maturity and credit risk. The carrying amount of the Term Facility approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the Term Facility is classified as a Level 2 liability in the fair value hierarchy. As of January 31, 2018, we were in compliance with our debt covenants.As of January 31, 2018 and April 30, 2017, we had no borrowings under the Revolver. We had $2.9 million of standby letters of credits issued under our long-term debt arrangements as of January 31, 2018 compared to $3.0 million as of April 30, 2017. We had a total of $7.3 million and $8.1 million of standby letters of credits with other financial institutions as of January 31,2018 and April 30, 2017, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases.We are not aware of any other trends, demands or commitments that would materially affect liquidity or those that relate to our resources.Off-Balance Sheet ArrangementsWe have nooff-balance sheet arrangements and have not entered into any transactions involving unconsolidated, special purpose entities. We had no material changes in contractual obligations as of January 31, 2018,2023, as compared to those disclosed in our table of contractual obligations included in our Annual Report.Critical Accounting PoliciesPreparation of this Quarterly Report onForm 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 andor 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 relatedperformance-related bonuses, deferred compensation, carrying values of receivables, goodwill, intangible assets, fair value of contingent considerationleases 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 ourthe Form10-K filed with the Securities Exchange Commission. 10-K. There have been no material changes in our critical accounting policies since the end of fiscal 2017.Item 3.Quantitative and Qualitative Disclosures About Market RiskAs a result of our global operating activities, we are exposed to certain market risks, including foreign currency exchange fluctuations and fluctuations in interest rates. We manage our exposure to these risks in the normal course of our business as described below.Foreign Currency RiskSubstantially all our foreign subsidiaries’ operations are measured in their local currencies. Assets and liabilities are translated into U.S. dollars at the rates of exchange in effect at the end of each reporting period and revenue and expenses are translated at averagedaily rates of exchange during the reporting period. Resulting translation adjustments are reported as a component of accumulated other comprehensive loss, net on our consolidated balance sheets.51Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to foreign currency gains or losses that impact our results of operations. Historically, we have not realized significant foreign currency gains or losses on such transactions. Foreign currency losses, on an after tax basis, included in net income were $1.8 million inDuring the nine months ended January 31, 2018 as compared to2023 and 2022, we recorded foreign currency gains, on an after tax basis, includedlosses of $1.1 million and $1.1 million, respectively, in net income were $0.4 milliongeneral and administrative expenses in the nine months ended January 31, 2017.Our exposure to foreign currency exchange rates is primarily driven by fluctuations involving the following currencies –— U.S. Dollar, Pound Sterling, Canadian Dollar, Singapore Dollar, Euro, Pound Sterling, Swiss Franc, Korean Won, Brazilian Real, Singapore Dollar and Mexican Peso. Based on balances exposed to fluctuation in exchange rates between these currencies as of January 31, 2018,2023, a 10% increase or decrease equally in the value of these currencies could result in a foreign exchange gain or loss of $10.0$11.6 million. We have a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. These foreign currency forward contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to Accounting Standards Codification 815,Derivatives and Hedging.Interest Rate RiskOur exposure to interest rate risk is limited to our Term Facility andCredit Facilities, borrowings against the CSV of COLI contracts.contracts and to a lesser extent our fixed income debt securities. As of January 31, 2018,2023, there was $244.1 millionwere no amounts outstanding under the Term Facility.Credit Facilities. At our option, loans issued under the Amended Credit FacilitiesAgreement bear interest at either LIBORTerm SOFR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Amended Credit FacilitiesAgreement may fluctuate between LIBORTerm SOFR plus 1.25%a SOFR adjustment of 0.10%, plus 1.125% per annum to LIBOR plus 2.00% per annum, in the case of LIBORTerm SOFR borrowings (or between the alternate base rate plus 0.25%0.125% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon our total funded debt to adjusted EBITDA ratio (as set forth in the Amended Credit Agreement, the “consolidated net leverage ratio”) at such time. In addition, we are required to pay the lenders a quarterly commitment fee ranging from 0.20%0.175% to 0.35%0.300% per annum on the average daily unused amount of the Term Facility,Revolver, based upon our consolidated net leverage ratio at such time, a ticking fee of 0.20% per annum on the actual daily unused portion of the Delayed Draw Facility during the availability period of the Delayed Draw Facility, and fees relating to the issuance of letters of credit. A 100 basis point increase in LIBOR rates would have increased our interest expense by approximately $0.6We had $77.6 million and $1.9 million for the three and nine months ended January 31, 2018, respectively. During the three and nine months ended January 31, 2018, theaverage interest rate on the term loan was 2.65% and 2.49%, respectively. We had no borrowings under the Revolver as of January 31, 2018.To mitigate the interest rate risk on our Term Facility, we entered into an interest rate swap contract with an initial notional amount of $129.8 million to hedge the variability to changes in cash flows attributable to interest rate risks caused by changes in interest rates related to our variable rate debt. We have designated the swap as a cash flow hedge. The notional amount is amortized so that the amount is always 50% of the principal balance of the debt outstanding. As of January 31, 2018, the notional amount was $122.0 million. The interest rate swap agreement matures on June 15, 2021 and locks the interest rates on 50% of our outstanding debt at 1.919%, exclusive of the credit spread on the debt. We had $66.8 million and $67.2$79.8 million of borrowings against the CSV of COLI contracts as of January 31, 20182023 and April 30, 2017, respectively,2022, bearing interest primarily at variable rates. The risk of fluctuations in these variable rates is minimized by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate, which has the effect of increasing the CSV on our COLI contracts.Item 4.Controls and Proceduresa)Evaluation of Disclosure Controls and Procedures.a)Evaluation of Disclosure Controls and Procedures.As of the end of the period covered by this Quarterly Report on Form 10-Q, management, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures and internal controls over financial reporting. Based on their evaluation of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) conducted as of the end of the period covered by this Quarterly Report on Form10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) under the Exchange Act) are effective.b)Changes in Internal Control over Financial Reporting.b)Changes in Internal Control over Financial Reporting.There were no changes in our internal control over financial reporting during the three months ended January 31, 20182023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.52Item 1.Legal ProceedingsFrom time to time, the Company has been and iswe are involved in litigation incidentalboth as a plaintiff and a defendant, relating to its business. The Company is currentlyclaims arising out of our operations. As of the date of this report, we are not a party toengaged in any litigation, which, if resolved adversely against the Company, would,legal proceedings that are expected, individually or in the opinion of management, after consultation with legal counsel,aggregate, to have a material adverse effect on the Company’sour business, financial positioncondition or results of operations.Item 1A.Risk FactorsIn our Form10-K, for the year ended April 30, 2017, we described the material factors, events, and uncertainties that make an investment in our securities risky. Those risk factors facingshould be considered carefully, together with all other information in that Form 10-K and our business. Additionalsubsequent filings with the SEC. It does not address all of the risks that we face, and additional risks not presently known to us or that we currently deem immaterial may also arise and impair our business operations. Except as set forth below, asAs of the date of this report, there have been no material changes to the risk factors described in our Form10-K.The effects of the Tax Cuts and Jobs Act on our business and our company have not yet been fully analyzed and the final impacts could be materially different from our current estimates.On December 22, 2017, the Tax Cuts and Jobs Act (“the “Tax Act”) was enacted into law, making significant changes to the taxation of U.S. business entities. The most significant impacts of the Tax Act on the Company include (1) a reduction in the U.S. corporate federal statutory income tax rate from 35.0% to 21.0% effective January 1, 2018, and (2) aone-time tax on accumulated foreign earnings (the “Transition Tax”), which is applicable at a rate of 15.5% on cash and other specified assets and 8% on other residual earnings. We have recorded in our consolidated financial statements provisional amounts based on our current estimates of the effects of the Tax Act in accordance with our current understanding of the Tax Act and currently available guidance. For additional information regarding the Tax Act and the provisional tax amounts recorded in our consolidated financial statements, refer to Note 11 — Income Taxesto the financial statements of this Quarterly Report. The final amounts may be significantly affected by regulations and interpretive guidance expected to be issued by the tax authorities, clarifications of the accounting treatment of various items, our additional analysis, and our refinement of our estimates of the effects of the Tax Act and, therefore, such final amounts could be materially different than our current provisional amounts, which could materially affect our tax obligations and effective tax rate.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity SecuritiesIssuer Purchases of Equity SecuritiesThe following table summarizes common stock repurchased by us during the quarter ended January 31, 2018: Shares
Purchased (1) Average
Price Paid
Per Share Shares Purchased
as Part of Publicly
Announced
Programs (2) Approximate Dollar
Value of Shares
That May Yet be
Purchased Under
the Programs (2) — $ — — $91.9 million 64,919 $ 41.10 60,800 $89.4 million 20,534 $ 40.66 20,000 $88.6 million 85,453 $ 41.00 80,800 (1)Represents withholding of a portion of restricted shares to cover taxes on vested restricted shares and shares purchased as part of our publicly announced programs.(2)On December 8, 2014, the Board of Directors approved an increase in the Company’s stock repurchase program to an aggregate of $150.0 million. The shares can be repurchased in open market transactions or privately negotiated transactions at the Company’s discretion. We repurchased approximately $3.3 million of the Company’s common stock under the program during the third quarter of fiscal 2018.Total Number of Shares
Purchased (1)Average
Price Paid
Per ShareTotal Number of Shares Purchased
as Part of Publicly-
Announced
ProgramsApproximate Dollar
Value of Shares
That May Yet be
Purchased Under
the Programs (2)November 1, 2022— November 30, 2022 210,000 $ 55.67 210,000 $261.9 million December 1, 2022— December 31, 2022 153,358 $ 52.38 152,500 $254.0 million January 1, 2023— January 31, 2023 100,566 $ 53.08 100,000 $248.6 million Total 463,924 $ 54.02 462,500 _________________________(1)Represents withholding of 1,424 shares to cover taxes on vested restricted shares, in addition to shares purchased as part of a publicly announced program.(2)On June 21, 2022, our Board of Directors approved an increase to the share repurchase program of $300 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. We repurchased approximately $25.0 million of the Company’s common stock under the program during the third quarter of fiscal 2023.Our senior secured credit agreement, dated June 15, 2016,Amended Credit Agreement permits us to pay dividends to our stockholders and make share repurchases so long as there is no default under our pro formaAmended Credit Agreement, the consolidated net leverage ratio, defined as the ratio of consolidated funded indebtedness to consolidatedwhich uses adjusted EBITDA, is no greater than 2.505.00 to 1.00 and ourwe are in pro forma domestic liquiditycompliance with our financial covenant. Furthermore, our Notes allow the Company to pay $25 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 at least $50.0 million.53Item 6.ExhibitsExhibit
Number3.1* 31.13.2*10.1+ 31.1 31.2 32.1 101.INS Inline XBRL Instance Document.Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2023, has been formatted in Inline XBRL and included as Exhibit 101. _________________________* Incorporated herein by reference.+ Management contract, compensatory plan or arrangement.54SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.Korn/Ferry InternationalBy:Korn Ferry Date: March 10, 2023 By: /s/ Robert P. Rozek Robert P. Rozek
(Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)Date: March 9, 20184455