KORN FERRYKFY
KORN FERRY Income Taxes Disclosure
Income Taxes
Income from continuing operations before provision for income taxes was as follows:
| Year Ended April 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Domestic | $ | 157,356 | $ | 70,716 | $ | 136,269 | |||||||||||
| Foreign | 187,556 | 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, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current income taxes: | |||||||||||||||||
| Federal | $ | 33,433 | $ | 31,466 | $ | 39,188 | |||||||||||
| State | 13,916 | 10,071 | 15,879 | ||||||||||||||
| Foreign | 52,891 | 40,853 | 42,019 | ||||||||||||||
| Current provision for income taxes | 100,240 | 82,390 | 97,086 | ||||||||||||||
| Deferred income taxes: | |||||||||||||||||
| Federal | (5,380) | (15,693) | (13,228) | ||||||||||||||
| State | (1,853) | (2,904) | (5,723) | ||||||||||||||
| Foreign | 829 | (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, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State tax, net of federal effect | 2.8 | 2.8 | 2.8 | ||||||||||||||
| Foreign tax rates differential | 4.7 | 4.0 | 4.0 | ||||||||||||||
| Non-deductible officer's compensation | 1.6 | 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 subsidiaries | 1.1 | 1.4 | 1.2 | ||||||||||||||
| R&D tax credit | (0.7) | (1.5) | (0.6) | ||||||||||||||
| Other | (0.5) | (1.2) | (0.8) | ||||||||||||||
| Effective income tax rate | 27.2 | % | 22.5 | % | 28.0 | % | |||||||||||
Components of deferred tax assets and liabilities were as follows:
| April 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Deferred compensation | $ | 145,410 | $ | 136,722 | |||||||
| Operating lease liability | 18,015 | 22,693 | |||||||||
| Loss carryforwards | 25,565 | 28,542 | |||||||||
| Reserves and accruals | 20,833 | 20,398 | |||||||||
| Allowance for doubtful accounts | 6,786 | 7,169 | |||||||||
| Deferred revenue | 6,112 | 7,086 | |||||||||
| Gross deferred tax assets | 222,721 | 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, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Unrecognized tax benefits, beginning of year | $ | 14,023 | $ | 10,566 | $ | 10,682 | |||||||||||
| Additions based on tax positions related to the current year | 2,140 | 1,573 | 1,257 | ||||||||||||||
| Additions based on tax positions related to prior years | 993 | 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.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jun 27, 2025 | Showing above |
| 2024 | Jun 28, 2024 | |
| 2023 | Jun 28, 2023 | |
| 2022 | Jun 28, 2022 | |
| 2021 | Jun 28, 2021 | |
| 2020 | Jul 15, 2020 | |
| 2019 | Jun 28, 2019 | |
| 2018 | Jun 28, 2018 | |
| 2017 | Jun 28, 2017 | |
| 2016 | Jun 28, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.