Basic and Diluted Earnings Per Share

9 Months Ended

Jan. 31, 2022

2. Basic and Diluted Earnings Per Share

ASC 260, Earnings Per Share, requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends prior to vesting as a separate class of securities in calculating earnings per share. The Company has granted and expects to continue to grant to certain employees under its restricted stock agreements grants that contain non-forfeitable rights to dividends. Such grants are considered participating securities. Therefore, the Company is required to apply the two-class method in calculating earnings per share. The two-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 the two-class method.

Basic earnings per common share was computed using the two-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 the two-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 all in-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, 2022, restricted stock awards of 1.2 million and 1.2 million were outstanding, respectively, 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, 2021, restricted stock awards of 1.5 million and 1.3 million were outstanding, respectively, but not included in the computation of diluted earnings per share because they were anti-dilutive.

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,
	2022		2021		2022		2021
	(in thousands, except per share data)
Net income attributable to Korn Ferry	$	84,101	$	51,319	$	234,696	$	48,264
Less: distributed and undistributed earnings to nonvested restricted stockholders		1,798		1,377		5,363		1,149
Basic net earnings attributable to common stockholders		82,303		49,942		229,333		47,115
Add: undistributed earnings to nonvested restricted stockholders		1,658		1,232		4,908		714
Less: reallocation of undistributed earnings to nonvested restricted stockholders		1,643		1,222		4,856		709
Diluted net earnings attributable to common stockholders	$	82,318	$	49,952	$	229,385	$	47,120

Weighted-average common shares outstanding:
Basic weighted-average number of common shares outstanding		52,999		52,596		52,958		53,030
Effect of dilutive securities:
Restricted stock		490		414		573		352
ESPP		6		3		7		14
Diluted weighted-average number of common shares outstanding		53,495		53,013		53,538		53,396

Net earnings per common share:
Basic earnings per share	$	1.55	$	0.95	$	4.33	$	0.89
Diluted earnings per share	$	1.54	$	0.94	$	4.28	$	0.88