Segments

3 Months Ended

Jul. 31, 2020

Segment Reporting [Abstract]

Segments

11. Segments

The Company has invested in its digital business over the past year in order to digitize and harmonize the structure of its IP content and data and to build a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement. These investments combined with the recent acquisition of the Acquired Companies resulted in a reassessment in the third quarter of fiscal 2020 of how the Company managed its former Advisory business. Given the Company’s strategy and development of financial and operational metrics for the consulting and digital businesses, the Company’s chief operating decision maker (“CODM”) had begun to make resource allocation decisions and assess performance separately between Consulting and Digital. Therefore, on November 1, 2019, the Company changed the composition of its global segments, and under the new reporting format, the Advisory segment was separated into two segments: Consulting and Digital. 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 factors. Operating results by segment prior to November 1, 2019 have been recast to conform to the new segment reporting.

The Company operates through four global segments:

1. Consulting helps clients synchronize their strategy and their talent by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Rewards and Benefits. This work is supported and underpinned by a comprehensive range of some of the world’s leading lP and data.

2. Digital leverages an artificial intelligence powered platform to identify structure, roles, capabilities and behaviors needed to drive business forward. This end-to-end system gives clients one enterprise-wide talent framework and delivers an achievable blueprint for success along with the guidance and tools to deliver it.

3. Executive Search helps organizations recruit board level, chief executive and other senior executive and general

management talent. Behavioral interviewing and proprietary assessments are used to determine ideal organizational fit, and salary benchmarking builds appropriate frameworks for compensation and retention.

4. RPO and Professional Search combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to clients. Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions.

Executive Search is managed by geographic regional leaders. Worldwide operations for Consulting, Digital, and RPO and Professional Search are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Consulting, Digital, and RPO & Professional Search report directly to the Chief Executive Officer of the Company. The Company also operates a Corporate segment to record global expenses.

The Company evaluates performance and allocates resources based on the CODM’s review of 1) fee revenue and 2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such costs or charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other than temporary impairment). The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies in Note 1—Organization and Summary of Significant Accounting Policies, except the items described above are excluded from earnings before interest, taxes, depreciation and amortization (“EBITDA”) to arrive at Adjusted EBITDA. The CODM is not provided asset information by reportable segment.

Financial highlights by operating segment are as follows:

	Three Months Ended July 31, 2020
							Executive Search
	Consulting			Digital			North America			EMEA			Asia Pacific		Latin America			Subtotal			RPO & Professional Search		Corporate			Consolidated
	(in thousands)
Fee revenue	$	99,318		$	55,973		$	69,315		$	30,081		$	17,252	$	3,495		$	120,143		$	68,663	$	—		$	344,097
Total revenue	$	99,590		$	56,022		$	69,856		$	30,195		$	17,340	$	3,495		$	120,886		$	70,385	$	—		$	346,883
Net loss attributable to Korn Ferry																										$	(30,833	)
Net loss attributable to noncontrolling interest																											(22	)
Other income net																											(11,162	)
Interest expense, net																											6,894
Income tax benefit																											(8,672	)
Operating (loss) income	$	(10,927	)	$	(2,627	)	$	(5,735	)	$	(6,219	)	$	861	$	(1,217	)	$	(12,310	)	$	2,165	$	(20,096	)	$	(43,795	)
Depreciation and amortization		4,009			6,726			730			362			275		202			1,569			940		1,791			15,035
Other income, net		788			418			9,342			19			226		48			9,635			196		125			11,162
EBITDA		(6,130	)		4,517			4,337			(5,838	)		1,362		(967	)		(1,106	)		3,301		(18,180	)		(17,598	)
Integration/acquisition costs		—			556			—			—			—		—			—			—		181			737
Restructuring, charges, net		12,734			2,870			975			7,548			232		405			9,160			2,723		—			27,487
Adjusted EBITDA	$	6,604		$	7,943		$	5,312		$	1,710		$	1,594	$	(562	)	$	8,054		$	6,024	$	(17,999	)	$	10,626

	Three Months Ended July 31, 2019
					Executive Search
	Consulting		Digital		North America		EMEA		Asia Pacific		Latin America		Subtotal		RPO & Professional Search		Corporate			Consolidated
	(in thousands)
Fee revenue	$	137,542	$	57,984	$	111,722	$	46,530	$	27,362	$	7,585	$	193,199	$	95,824	$	—		$	484,549
Total revenue	$	141,336	$	57,984	$	115,446	$	47,312	$	27,668	$	7,587	$	198,013	$	98,865	$	—		$	496,198
Net income attributable to Korn Ferry																				$	42,951
Net income attributable to noncontrolling interest																					699
Other income, net																					(1,826	)
Interest expense, net																					4,057
Income tax provision																					14,453
Operating income (loss)	$	11,783	$	14,008	$	30,322	$	7,311	$	6,993	$	1,010	$	45,636	$	15,041	$	(26,134	)	$	60,334
Depreciation and amortization		4,414		3,639		901		456		346		328		2,031		992		1,701			12,777
Other income (loss), net		525		201		1,140		12		15		57		1,224		74		(198	)		1,826
EBITDA and Adjusted EBITDA	$	16,722	$	17,848	$	32,363	$	7,779	$	7,354	$	1,395	$	48,891	$	16,107	$	(24,631	)	$	74,937