KORN FERRYKFY

KORN FERRY Leases Disclosure

10-KFiled Jun 26, 20263 min read
Leases
The 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 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 11 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 five 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 fiscal 2026, at the request of a landlord, the Company modified an office lease to shorten the lease term and in return the landlord agreed to pay the Company a fixed cash incentive. As a result of the office lease modification, the Company recorded a $13.9 million gain during fiscal 2026 that was included in general and administrative expenses in the accompanying consolidated statements of income. During fiscal 2025 and 2024, the Company reduced its real estate footprint and as a result recorded an impairment charge of the ROU assets of $2.5 million and $1.6 million, respectively, in the consolidated statements of income.
The components of lease expense were as follows:
Year Ended April 30,
202620252024
(in thousands)
Finance lease cost
Amortization of ROU assets$1,805 $1,464 $1,605 
Interest on lease liabilities205 176 212 
2,010 1,640 1,817 
Operating lease cost48,397 47,939 46,956 
Short-term lease cost894 873 876 
Variable lease cost10,987 10,877 13,324 
Gain on modification of office lease(13,907)— — 
Lease impairment cost— 2,452 1,629 
Sublease income(6,215)(4,965)(4,359)
Total lease cost$42,166 $58,816 $60,243 
Supplemental cash flow information related to leases was as follows:
Year Ended April 30,
202620252024
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$44,012 $52,033 $51,879 
Financing cash flows from finance leases$2,071 $1,631 $1,776 
ROU assets obtained in exchange for lease obligations:
Operating leases$62,893 $27,430 $60,279 
Finance leases$3,125 $811 $906 
Supplemental balance sheet information related to leases was as follows:
Year Ended April 30,
20262025
(in thousands)
Finance Leases:
Property and equipment, at cost$9,734 $7,233 
Accumulated depreciation(5,183)(4,210)
Property and equipment, net$4,551 $3,023 
Other accrued liabilities$1,915 $1,369 
Other liabilities2,682 1,770 
Total finance lease liabilities$4,597 $3,139 
Weighted average remaining lease terms:
Operating leases7.9 years7.0 years
Finance leases2.7 years2.6 years
Weighted average discount rate:
Operating leases6.0 %5.9 %
Finance leases5.4 %5.7 %
Maturities of lease liabilities are as follows:
Year Ending April 30,OperatingFinancing
(in thousands)
2027
$38,459 $2,104 
2028
38,102 1,790 
2029
31,764 706 
2030
24,717 268 
2031
21,033 48 
Thereafter92,243 — 
Total lease payments246,318 4,916 
Less: imputed interest53,308 319 
Total$193,010 $4,597 
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Historical Timeline

Fiscal YearFiled
2026Jun 26, 2026Showing above
2025Jun 27, 2025
2024Jun 28, 2024
2023Jun 28, 2023
2022Jun 28, 2022
2021Jun 28, 2021
2020Jul 15, 2020

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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