XML 38 R17.htm IDEA: XBRL DOCUMENT v3.25.2
Income Taxes
 12 Months Ended
Apr. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income from continuing operations before provision for income taxes was as follows:
Year Ended April 30,
202520242023
(in thousands)
Domestic$157,356 $70,716 $136,269 
Foreign187,556 151,926 159,468 
Income before provision for income taxes$344,912 $222,642 $295,737 
The provision for domestic and foreign income taxes was as follows:
Year Ended April 30,
202520242023
(in thousands)
Current income taxes:
Federal$33,433 $31,466 $39,188 
State13,916 10,071 15,879 
Foreign52,891 40,853 42,019 
Current provision for income taxes100,240 82,390 97,086 
Deferred income taxes:   
Federal(5,380)(15,693)(13,228)
State(1,853)(2,904)(5,723)
Foreign829 (13,712)4,548 
Deferred benefit for income taxes(6,404)(32,309)(14,403)
Total provision for income taxes$93,836 $50,081 $82,683 
The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:
Year Ended April 30,
202520242023
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
State tax, net of federal effect2.8 2.8 2.8 
Foreign tax rates differential4.7 4.0 4.0 
Non-deductible officer's compensation1.6 1.9 1.0 
Change in valuation allowance(0.5)(5.8)0.3 
Change in uncertain tax positions(1.3)1.1 0.1 
Foreign-derived intangible income deduction(1.0)(1.2)(1.0)
Repatriation of earnings of foreign subsidiaries1.1 1.4 1.2 
R&D tax credit(0.7)(1.5)(0.6)
Other(0.5)(1.2)(0.8)
Effective income tax rate27.2 %22.5 %28.0 %
Components of deferred tax assets and liabilities were as follows:
April 30,
20252024
(in thousands)
Deferred tax assets:
Deferred compensation$145,410 $136,722 
Operating lease liability18,015 22,693 
Loss carryforwards25,565 28,542 
Reserves and accruals20,833 20,398 
Allowance for doubtful accounts6,786 7,169 
Deferred revenue6,112 7,086 
Gross deferred tax assets222,721 222,610 
Deferred tax liabilities:
Operating lease, right-of-use, assets(14,531)(19,316)
Intangibles and goodwill(24,753)(24,697)
Property and equipment(10,306)(12,567)
Prepaid expenses(15,997)(16,172)
Unrealized gain on marketable securities
(6,502)(6,164)
Other(2,584)(2,158)
Gross deferred tax liabilities(74,673)(81,074)
Valuation allowances(9,469)(12,512)
Net deferred tax asset$138,579 $129,024 
Deferred tax assets are reduced by a valuation allowance if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Management believes uncertainty exists regarding the realizability of certain deferred tax assets and has, therefore, established a valuation allowance offsetting deferred tax assets that are not more-likely-than-not to be realized. Realization of the deferred tax asset is dependent on the Company generating enough taxable income of the appropriate nature in future years. Although realization is not assured, management believes that it is more-likely-than-not that the net deferred tax assets will be realized. In fiscal 2025, the Company’s valuation allowance decreased by $3.0 million primarily due to releases of valuation allowances against deferred tax assets, including net operating loss carryforwards, in certain foreign jurisdictions that were now more-likely-than-not to be realized. In fiscal 2024, the Company’s valuation allowance decreased by $12.7 million primarily due to the release of a $9.7 million valuation allowance as a result of actions taken in connection with the global minimum tax, and other releases of valuation allowances against deferred tax assets, primarily net operating loss carryforwards, in certain foreign jurisdictions that were more-likely-than-not to be realized. In fiscal 2023, the Company's valuation allowance increased by $1.2 million, primarily due to changes in deferred tax asset balances, including net operating loss carryforwards in certain foreign jurisdictions that were not more-likely-than-not to be realized. Deferred tax assets and deferred tax liabilities are presented net on the consolidated balance sheets by tax jurisdiction.
The global minimum tax, which is also known as Pillar Two under the Organization for Economic Cooperation and Development framework on Base Erosion and Profit Shifting and was first applicable to Korn Ferry in fiscal 2025,
did not have a material impact on the Company’s tax provision.
As of April 30, 2025, the Company had U.S. federal net operating loss carryforwards of $0.8 million, which if unutilized, will begin to expire in fiscal 2036. The Company has state net operating loss carryforwards of $23.7 million, which, if unutilized, will begin to expire in fiscal 2031. The Company also has foreign net operating loss carryforwards of $93.9 million, which, if unutilized, will begin to expire in fiscal 2026.
The Company continues to consider approximately $831.0 million of undistributed earnings of foreign subsidiaries to be indefinitely reinvested, and accordingly, have provided no state, local or foreign withholding income taxes on such earnings. While the Company does not anticipate the need to repatriate funds to the U.S. to satisfy domestic liquidity needs, it reviews cash positions regularly and, to the extent that it is determined that all or a portion of foreign earnings are not indefinitely reinvested, the Company will provide additional state, local and foreign withholding income taxes. Under current U.S. federal tax law, the Company does not expect to incur a U.S. federal income tax liability on the undistributed earnings in the event they are repatriated to the United States.
The Company elected to treat taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income as an expense when incurred (the “period cost method”) as opposed to factoring such amounts in the Company’s measurement of its deferred taxes (the “deferred method”).
The Company and its subsidiaries file federal and state income tax returns in the U.S. as well as in foreign jurisdictions. These income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax authorities. Currently, income tax returns of the Company’s subsidiaries are under audit in Germany, Saudi Arabia, India, United Kingdom and United States. The Company’s income tax returns are not otherwise under examination in any material jurisdictions. The statute of limitations varies by jurisdiction in which the Company operates. With few exceptions, however, the Company’s tax returns for years prior to fiscal 2018 are no longer open to examination by tax authorities (including U.S. federal, state and foreign).
Unrecognized tax benefits are the differences between the amount of benefits of tax positions taken, or expected to be taken, on a tax return and the amount of benefits recognized for financial reporting purposes. As of April 30, 2025, the Company had a liability of $10.9 million for unrecognized tax benefits. A reconciliation of the beginning and ending balances of the unrecognized tax benefits is as follows:
Year Ended April 30,
202520242023
(in thousands)
Unrecognized tax benefits, beginning of year$14,023 $10,566 $10,682 
Additions based on tax positions related to the current year2,140 1,573 1,257 
Additions based on tax positions related to prior years993 2,208 28 
Settlement with tax authority(2,159)— (545)
Lapse of applicable statute of limitations(4,141)(324)(856)
Unrecognized tax benefits, end of year$10,856 $14,023 $10,566 
The full amount of unrecognized tax benefits would impact the effective tax rate if recognized. In the next 12 months, it is reasonably possible that the Company’s unrecognized tax benefits could change due to the resolution of certain tax matters either because the tax positions are sustained on audit or the Company agrees to their disallowance. These resolutions could reduce the Company’s liability for unrecognized tax benefits by approximately $3.0 million.
The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The Company had accruals of $2.7 million, $2.1 million and $1.8 million for interest related to unrecognized tax benefits as of April 30, 2025, 2024 and 2023 respectively. The Company had an accrual of $0.4 million and $0.2 million as of April 30, 2025 and 2024, respectively, for penalties related to unrecognized tax benefits. The Company recognized tax expense of $0.8 million and $0.4 million for interest and penalties related to unrecognized tax benefits during fiscal 2025 and 2023, respectively. The Company did not recognize a tax expense for interest and penalties related to unrecognized tax benefits during fiscal 2024.