Investor Relations

Press Release

Korn Ferry Announces Fourth Quarter and Fiscal 2019 Results of Operations

June 20, 2019

LOS ANGELES, June 20, 2019 /PRNewswire/ --

Highlights

  • Korn Ferry reports annual fee revenue of $1,926.0 million, an increase of 9% year-over-year (12% increase on a constant currency basis), with growth coming from all three lines of business.
  • Net income attributable to Korn Ferry was $102.7 million in FY'19 with an operating margin of 7.3% and Adjusted EBITDA margin of 16.1%.
  • Fee revenue was $490.8 million in Q4 FY'19, an increase of 3% (8% increase on a constant currency basis) from Q4 FY'18.
  • Net income attributable to Korn Ferry was $50.3 million and operating income was $62.3 million in Q4 FY'19 with an operating margin of 12.7%. Q4 FY'19 Adjusted EBITDA was $82.2 million with an Adjusted EBITDA margin of 16.7%.
  • Q4 FY'19 diluted earnings per share was $0.89 compared to diluted earnings per share of $0.73 in Q4 FY'18. Adjusted diluted earnings per share was $0.88 in Q4 FY'19 compared to Adjusted diluted earnings per share of $0.80 in Q4 FY'18.
  • The Company continued with its balanced approach to capital allocation, buying back $37.4 million of stock during the year and declaring a quarterly dividend of $0.10 per share on June 20, 2019 payable on July 31, 2019 to stockholders of record on July 2, 2019.

Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced fourth quarter and annual fee revenue of $490.8 million and $1,926.0 million, respectively.  In addition, fourth quarter diluted earnings per share was $0.89 and Adjusted diluted earnings per share was $0.88.

"I am pleased to report fee revenue of $491 million and strong profitability, with diluted earnings per share and Adjusted diluted earnings per share of $0.89 and $0.88 during our recently completed fourth quarter.  Net income attributable to Korn Ferry was $50.3 million and operating margin was 12.7%.  Adjusted EBITDA was $82.2 million and EBITDA margin was 16.7% -- both all-time highs.  We achieved the highest fiscal year fee revenue in our firm's history – up 9% on a US GAAP basis year-over-year and 12% at constant currency," said Gary D. Burnison, CEO of Korn Ferry.

"We have made tremendous progress in the recently completed fiscal year.  Korn Ferry is now the organizational consultancy that helps companies look at talent and strategy together.  We help companies make sure they have the right people, in the right places and for the right rewards.  We bring their strategies to life by redesigning their organizational structure, helping them hire, motivate and hold on to the best people, with the right skills and mindset for the future.  In the fiscal year ahead, we will continue to bridge our clients' talent and organizational strategies, unlocking their potential and driving superior performance." 

Selected Financial Results
(dollars in millions, except per share amounts) (a)



Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Fee revenue


$

490.8


$

475.4


$

1,926.0


$

1,767.2

Total revenue


$

502.5


$

488.4


$

1,973.9


$

1,819.5

Operating income


$

62.3


$

64.2


$

140.8


$

208.4

Operating margin



12.7%



13.5%



7.3%



11.8%

Net income attributable to Korn Ferry


$

50.3


$

41.2


$

102.7


$

133.8

Basic earnings per share


$

0.90


$

0.74


$

1.84


$

2.39

Diluted earnings per share


$

0.89


$

0.73


$

1.81


$

2.35


EBITDA Results (b):


Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

EBITDA


$

82.2


$

72.8


$

197.7


$

268.5

EBITDA margin



16.7%



15.3%



10.3%



15.2%














Adjusted Results (c):


Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Adjusted EBITDA (b)


$

82.2


$

75.6


$

311.0


$

278.0

Adjusted EBITDA margin (b)



16.7%



15.9%



16.1%



15.7%

Adjusted net income attributable to Korn Ferry


$

49.7


$

45.6


$

187.9


$

154.6

Adjusted basic earnings per share


$

0.89


$

0.82


$

3.36


$

2.76

Adjusted diluted earnings per share


$

0.88


$

0.80


$

3.31


$

2.72








(a)

Numbers may not total due to rounding.

(b) 

EBITDA refers to earnings before interest, taxes, depreciation and amortization.  Adjusted EBITDA further adjusts EBITDA to exclude tradename write-offs, integration/acquisition costs and restructuring charges, net.  EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(c) 

Adjusted results are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations):









Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Income tax impact due to the enactment of the Tax Cuts and Jobs Act of 2017 (the "Tax Act")


$


$

2.2


$


$

13.6

Tradename write-offs


$


$


$

106.6


$

Integration/acquisition costs


$


$

2.8


$

6.7


$

9.4

Restructuring charges, net


$


$


$


$

0.1

Fiscal 2019 Fourth Quarter Results

The Company reported fee revenue in Q4 FY'19 of $490.8 million, an increase of 3% (8% increase on a constant currency basis) compared to Q4 FY'18.  The increase in fee revenue was mainly due to organic growth in RPO and Professional Search of 20%.

Net income attributable to Korn Ferry was $50.3 million in Q4 FY'19 as compared to $41.2 million in Q4 FY'18.  The increase in net income attributable to Korn Ferry resulted from an increase in fee revenue partially offset by an increase in compensation and benefits primarily due to an increase in average headcount and an increase in general and administrative expenses.

Operating income was $62.3 million in Q4 FY'19 with an operating margin of 12.7% as compared to $64.2 million and 13.5%, respectively, in the year-ago quarter.  The decrease in operating income resulted from an increase in compensation and benefits and general and administrative expenses, partially offset by higher fee revenue. The increase in compensation and benefits was primarily driven by an increase in amounts owed under certain deferred compensation and retirement plans due to increases in the fair value of participants' accounts in Q4 FY'19 compared to decreases in the year-ago quarter and to a lesser extent an increase in average headcount.

Adjusted EBITDA was $82.2 million in Q4 FY'19 with an Adjusted EBITDA margin of 16.7%, as compared to $75.6 million and 15.9%, respectively, in Q4 FY'18.  The increase in Adjusted EBITDA was impacted by higher fee revenue, partially offset by increases in compensation and benefits expense and general and administrative expenses.

Fiscal 2019 Results

The Company reported record fee revenue in FY'19 of $1,926.0 million, an increase of $158.8 million or 9% (12% increase on a constant currency basis) compared to FY'18.  The organic growth was driven by all three lines of business:

RPO and Professional Search


21%

Executive Search


9%

Advisory


5%

Net income attributable to Korn Ferry was $102.7 million in FY'19 as compared to $133.8 million in FY'18.  The decrease in net income attributable to Korn Ferry was primarily due to the tradename write-off and an increase in compensation and benefits expense, partially offset by an increase in fee revenue and a lower income tax provision.

Operating income was $140.8 million in FY'19 with an operating margin of 7.3% compared to $208.4 million and 11.8% in FY'18.  The decrease in operating income was primarily due to the $106.6 million tradename write-off and an increase of $112.1 million in compensation and benefits expense, partially offset by an increase of $158.8 million in fee revenue.

Adjusted EBITDA was $311.0 million in FY'19 with Adjusted EBITDA margin of 16.1%, compared to $278.0 million and 15.7%, respectively, in the year-ago period.

Results by Segment

Selected Executive Search Data
(dollars in millions) (a)







Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Fee revenue


$

190.9


$

190.7


$

774.8


$

709.0

Total revenue


$

195.3


$

195.4


$

793.4


$

727.3

Operating income


$

42.0


$

47.0


$

179.1


$

149.6

Operating margin



22.0%



24.6%



23.1%



21.1%














Ending number of consultants



565



541



565



541

Average number of consultants



558



539



553



529

Engagements billed



3,943



3,792



10,318



9,706

New engagements (b)



1,717



1,590



6,790



6,325






EBITDA Results (c):


Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

EBITDA


$

49.7


$

48.7


$

193.8


$

159.0

EBITDA margin



26.0%



25.5%



25.0%



22.4%






Adjusted Results (d):


Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Adjusted EBITDA (c)


$

49.7


$

48.7


$

193.8


$

159.3

Adjusted EBITDA margin (c)



26.0%



25.5%



25.0%



22.5%

___________



(a)

Numbers may not total due to rounding.

(b)

Represents new engagements opened in the respective period.

(c)

EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(d)

Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):








Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Restructuring charges, net


$


$


$


$

0.3

Fee revenue was $190.9 million in Q4 FY'19, an increase of $0.2 million (3% increase on a constant currency basis) compared to Q4 FY'18. 

Operating income was $42.0 million in Q4 FY'19 compared to $47.0 million in Q4 FY'18.  Operating margin was 22.0% in Q4 FY'19 compared to 24.6% in the year-ago quarter.  The decrease in operating income was due to an increase in compensation and benefits expense primarily from amounts owed under certain deferred compensation and retirement plans driven by increases in the fair value of participants' accounts in Q4 FY'9 compared to decreases in the year-ago quarter, partially offset by a decline in performance related bonus expense.

Adjusted EBITDA was $49.7 million in Q4 FY'19 with an Adjusted EBITDA margin of 26.0% compared to $48.7 million and 25.5%, respectively, in the year-ago quarter.

Selected Advisory Data
(dollars in millions) (a)







Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Fee revenue


$

207.1


$

207.6


$

821.0


$

785.0

Total revenue


$

211.4


$

211.9


$

838.6


$

801.0

Operating income


$

30.0


$

28.1


$

5.6


$

100.5

Operating margin



14.5%



13.5%



0.7%



12.8%














Ending number of consultants (b)



579



577



579



577

Staff utilization (c)



68%



70%



66%



66%














EBITDA Results (d):


Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

EBITDA


$

38.9


$

36.3


$

37.9


$

134.6

EBITDA margin



18.8%



17.5%



4.6%



17.1%














Adjusted Results (e):


Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Adjusted EBITDA (d)


$

38.9


$

39.0


$

151.0


$

143.5

Adjusted EBITDA margin (d)



18.8%



18.8%



18.4%



18.3%

___________



(a)

Numbers may not total due to rounding.

(b)

Represents number of employees originating consulting services. 

(c)

Calculated by dividing the number of hours our full-time Advisory professional staff record to engagements during the period, by the total available working hours during the same period.

(d)

EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(e)

Adjusted results are non-GAAP financial measures that adjust for the following (see attached reconciliations):








Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Tradename write-offs


$


$


$

106.6


$

Integration/acquisition costs


$


$

2.7


$

6.6


$

9.2

Restructuring recoveries, net


$


$


$


$

(0.2)

Fee revenue was essentially flat at $207.1 million in Q4 FY'19 compared to $207.6 million in Q4 FY'18 (5% increase on a constant currency basis). 

Operating income was $30.0 million in Q4 FY'19 with an operating margin of 14.5% compared to operating income of $28.1 million and an operating margin of 13.5% in the year-ago quarter.  The increase in operating income was primarily due to a decrease in compensation and benefits expense driven by lower performance related bonus expense in Q4 FY'19 compared to the year-ago quarter.

Adjusted EBITDA was $38.9 million in Q4 FY'19 with an Adjusted EBITDA margin of 18.8% compared to $39.0 million and 18.8%, respectively, in the year-ago quarter.

Selected RPO and Professional Search Data
(dollars in millions) (a)



Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

Fee revenue


$

92.8


$

77.1


$

330.1


$

273.2

Total revenue


$

95.8


$

81.1


$

341.9


$

291.2

Operating income


$

14.5


$

11.7


$

50.9


$

39.4

Operating margin



15.7%



15.1%



15.4%



14.4%














Engagements billed (b)



1,409



1,313



3,595



3,423

New engagements (c)



781



748



2,935



2,824














EBITDA and Adjusted Results (d):


Fourth Quarter


Year to Date



FY'19


FY'18


FY'19


FY'18

EBITDA and Adjusted EBITDA


$

15.6


$

12.6


$

54.4


$

42.6

EBITDA and Adjusted EBITDA margin



16.9%



16.3%



16.5%



15.6%

___________



(a)

Numbers may not total due to rounding.

(b)

Represents professional search engagements billed.

(c)

Represents new professional search engagements opened in the respective period.

(d)

EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

Fee revenue was $92.8 million in Q4 FY'19, an increase of $15.7 million or 20% (25% increase on a constant currency basis), compared to the year-ago quarter.  The higher fee revenue was driven by an increase in fee revenue in recruitment process outsourcing and professional search of $11.0 million and $4.7 million, respectively, in Q4 FY'19 compared to Q4 FY'18.

Operating income was $14.5 million in Q4 FY'19, an increase of $2.8 million compared to Q4 FY'18 operating income of $11.7 million.  The increase in operating income resulted from higher fee revenue offset by increases in compensation and benefits expense driven by a 29% increase in average headcount and higher performance related bonus expense. Operating margin was 15.7% in the current quarter compared to 15.1% in the year-ago quarter. 

EBITDA was $15.6 million during Q4 FY'19, an increase of $3.0 million compared to Q4 FY'18.  EBITDA margin was 16.9% in Q4 FY'19 and 16.3% in Q4 FY'18.

Outlook

Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis:

  • Q1 FY'20 fee revenue is expected to be in the range of $466 million and $486 million; and
  • Q1 FY'20 diluted earnings per share is likely to range between $0.73 to $0.81.

Earnings Conference Call Webcast

The earnings conference call will be held today at 4:30 PM (EDT) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak.  The conference call will be webcast and available online at ir.kornferry.com.  We will also post to this section of our website slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.

About Korn Ferry

Korn Ferry is a global organizational consulting firm.  We help clients synchronize strategy and talent to drive superior performance.  We work with organizations to design their structures, roles, and responsibilities.  We help them hire the right people to bring their strategy to life.  And we advise them on how to reward, develop, and motivate their people.  Visit kornferry.com for more information.

Forward-Looking Statements

Statements in this press release and our conference call that relate to future results and events ("forward-looking statements") are based on Korn Ferry's current expectations.  These statements, which include words such as "believes", "expects" or "likely", include references to our outlook.  Readers are cautioned not to place undue reliance on such statements.  Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn Ferry.  The potential risks and uncertainties include those relating to competition, changes in demand for our services as a result of automation, the dependence on attracting and retaining qualified and experienced consultants, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, the portability of client relationships, global and local political or economic developments in or affecting countries where we have operations, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, tax accounting effects of the Tax Act, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, seasonality, risks related to the integration of recently acquired businesses, employment liability risk, the impact of rebranding on the Company's products and services; the expected timing of the Company's rebranding and entity rationalization plan, and the costs of the Company's rebranding and entity rationalization plan.  For a detailed description of risks and uncertainties that could cause differences, please refer to Korn Ferry's periodic filings with the Securities and Exchange CommissionKorn Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").  In particular, it includes:

  • Adjusted net income attributable to Korn Ferry, adjusted to exclude the tax impact associated with the Tax Act, restructuring (recoveries) charges, net, integration/acquisition costs and tradename write-offs, net of income tax effect;
  • Adjusted basic and diluted earnings per share, adjusted to exclude the tax impact associated with the Tax Act, restructuring (recoveries) charges, net, integration/acquisition costs and tradename write-offs, net of income tax effect; and in the case of the outlook section, also adjusted for tax rate impact;
  • Constant currency (calculated using a quarterly average) amounts that represent the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior year period;
  • EBITDA, or earnings before interest, taxes, depreciation and amortization and EBITDA margin; and
  • Adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring (recoveries) charges, net, integration/acquisition costs and tradename write-offs, and Adjusted EBITDA margin.

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn Ferry's performance by excluding certain charges and other items that may not be indicative of Korn Ferry's ongoing operating results.  These non-GAAP financial measures are performance measures and are not indicative of the liquidity of Korn Ferry.  These charges and other items represent 1) the tax impact associated with the Tax Act, 2) costs we incurred to acquire and integrate a portion of our Advisory business, 3) charges we incurred or recoveries we received to restructure the combined company due to the acquisition of a portion of our Advisory business, and 4) tradename write-offs associated with the rebranding plan initiated by Korn Ferry.  The use of non-GAAP financial measures facilitates comparisons to Korn Ferry's historical performance.  Korn Ferry includes non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry's ongoing operations and financial and operational decision-making.  Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company's operating results.  Management further believes that EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company.  In the case of constant currency amounts, management believes the presentation of such information provides useful supplemental information regarding Korn Ferry's performance as excluding the impact of exchange rate changes on Korn Ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the Company's operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry's ongoing operations and financial and operational decision-making. 

[Tables attached]

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)




Three Months Ended


Year Ended



April 30,


April 30,



2019


2018


2019


2018



(unaudited)







 Fee revenue


$

490,756


$

475,364


$

1,926,033


$

1,767,217

 Reimbursed out-of-pocket engagement expenses



11,779



13,000



47,829



52,302

           Total revenue



502,535



488,364



1,973,862



1,819,519














 Compensation and benefits



331,665



316,955



1,311,240



1,199,057

 General and administrative expenses



64,350



62,010



351,991



237,390

 Reimbursed expenses



11,779



13,000



47,829



52,302

 Cost of services



20,467



20,495



75,487



73,658

 Depreciation and amortization



11,999



11,707



46,489



48,588

 Restructuring charges, net



-



-



-



78

           Total operating expenses



440,260



424,167



1,833,036



1,611,073














 Operating income



62,275



64,197



140,826



208,446

 Other income (loss), net



7,802



(3,192)



10,094



11,119

 Interest expense, net



(4,169)



(2,818)



(16,891)



(13,832)

         Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries



65,908



58,187



134,029



205,733

 Equity in earnings of unconsolidated subsidiaries, net



120



110



311



297

 Income tax provision



15,401



15,988



29,544



70,133

 Net income



50,627



42,309



104,796



135,897

           Net income attributable to noncontrolling interest



(363)



(1,149)



(2,145)



(2,118)

 Net income attributable to Korn Ferry


$

50,264


$

41,160


$

102,651


$

133,779














 Earnings per common share attributable to Korn Ferry:













      Basic


$

0.90


$

0.74


$

1.84


$

2.39

      Diluted


$

0.89


$

0.73


$

1.81


$

2.35














 Weighted-average common shares outstanding:













      Basic



55,173



55,266



55,311



55,426

      Diluted



55,666



56,147



56,096



56,254














 Cash dividends declared per share:


$

0.10


$

0.10


$

0.40


$

0.40

 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)




Three Months Ended April 30,


Year Ended April 30,



2019




2018


% Change


2019




2018


% Change






















Fee revenue:




















Executive Search:





















North America

$

113,651




$

112,005


1.5%


$

455,826




$

408,098


11.7%


EMEA


45,307





45,476


(0.4%)



182,829





173,725


5.2%


Asia Pacific


24,373





24,612


(1.0%)



104,291





96,595


8.0%


Latin America


7,557





8,576


(11.9%)



31,896





30,624


4.2%

Total Executive Search


190,888





190,669


0.1%



774,842





709,042


9.3%

Advisory


207,082





207,551


(0.2%)



821,048





785,013


4.6%

RPO and Professional Search


92,786





77,144


20.3%



330,143





273,162


20.9%


Total fee revenue


490,756





475,364


3.2%



1,926,033





1,767,217


9.0%

Reimbursed out-of-pocket engagement expenses


11,779





13,000


(9.4%)



47,829





52,302


(8.6%)


Total revenue

$

502,535




$

488,364


2.9%


$

1,973,862




$

1,819,519


8.5%


Operating income (loss):




Margin





Margin





Margin





Margin

Executive Search:





















North America

$

28,316


24.9%


$

33,880


30.2%


$

120,754


26.5%


$

100,397


24.6%


EMEA


8,161


18.0%



6,419


14.1%



29,974


16.4%



26,768


15.4%


Asia Pacific


5,027


20.6%



5,614


22.8%



24,364


23.4%



18,425


19.1%


Latin America


538


7.1%



1,061


12.4%



3,998


12.5%



4,022


13.1%

Total Executive Search


42,042


22.0%



46,974


24.6%



179,090


23.1%



149,612


21.1%

Advisory


29,991


14.5%



28,076


13.5%



5,617


0.7%



100,535


12.8%

RPO and Professional Search


14,547


15.7%



11,669


15.1%



50,884


15.4%



39,396


14.4%

Corporate


(24,305)





(22,522)





(94,765)





(81,097)




 Total operating income

$

62,275


12.7%


$

64,197


13.5%


$

140,826


7.3%


$

208,446


11.8%

 

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)




April 30,


April 30,



2019


2018








ASSETS







Cash and cash equivalents


$

626,360


$

520,848

Marketable securities



8,288



14,293

Receivables due from clients, net of allowance for doubtful accounts of $21,582 and $17,845 at April 30, 2019 and 2018, respectively



404,857



384,996

Income taxes and other receivables



26,767



29,089

Unearned compensation



42,003



37,333

Prepaid expenses and other assets



28,535



27,700

Total current assets



1,136,810



1,014,259








Marketable securities, non-current



132,463



122,792

Property and equipment, net



131,505



119,901

Cash surrender value of company owned life insurance policies, net of loans



126,000



120,087

Deferred income taxes



43,220



25,520

Goodwill



578,298



584,222

Intangible assets, net



82,948



203,216

Unearned compensation, non-current



80,924



78,295

Investments and other assets



22,684



19,622

Total assets


$

2,334,852


$

2,287,914








LIABILITIES AND STOCKHOLDERS' EQUITY







Accounts payable


$

39,156


$

35,196

Income taxes payable



21,145



23,034

Compensation and benefits payable



328,610



304,980

Current portion of long-term debt



-



24,911

Other accrued liabilities



162,047



170,339

Total current liabilities



550,958



558,460








Deferred compensation and other retirement plans



257,635



227,729

Long-term debt



222,878



211,311

Deferred tax liabilities



1,103



9,105

Other liabilities



58,891



61,694

Total liabilities



1,091,465



1,068,299








Stockholders' equity







Common stock: $0.01 par value, 150,000 shares authorized, 72,442 and 71,631 shares issued and 56,431 and 56,517 shares outstanding at April 30, 2019 and 2018, respectively



656,463



683,942

Retained earnings



660,845



572,800

Accumulated other comprehensive loss, net



(76,652)



(40,135)

Total Korn Ferry stockholders' equity



1,240,656



1,216,607

Noncontrolling interest



2,731



3,008

Total stockholders' equity



1,243,387



1,219,615

Total liabilities and stockholders' equity


$

2,334,852


$

2,287,914

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)





Three Months Ended


Year Ended




April 30,


April 30,




2019


2018


2019


2018




(unaudited)








 Net income attributable to Korn Ferry


$

50,264


$

41,160


$

102,651


$

133,779


 Net income attributable to non-controlling interest



363



1,149



2,145



2,118


 Net income



50,627



42,309



104,796



135,897


 Income tax provision



15,401



15,988



29,544



70,133


 Equity in earnings of unconsolidated subsidiaries, net



(120)



(110)



(311)



(297)


 Income before provision for income taxes and equity of unconsolidated subsidiaries



65,908



58,187



134,029



205,733


 Other (income) loss, net



(7,802)



3,192



(10,094)



(11,119)


 Interest Expense



4,169



2,818



16,891



13,832


 Operating income



62,275



64,197



140,826



208,446


 Depreciation and amortization



11,999



11,707



46,489



48,588


 Other income (loss), net



7,802



(3,192)



10,094



11,119


 Equity in earnings of unconsolidated subsidiaries, net



120



110



311



297


           EBITDA



82,196



72,822



197,720



268,450


 Restructuring charges, net (1)



-



-



-



78


 Integration/acquisition costs (2)



-



2,776



6,746



9,430


 Tradename write-offs (3)



-



-



106,555



-


           Adjusted EBITDA


$

82,196


$

75,598


$

311,021


$

277,958
















 Operating margin



12.7%



13.5%



7.3%



11.8%


 Depreciation and amortization



2.4%



2.5%



2.4%



2.8%


 Other income (loss), net



1.6%



(0.7%)



0.6%



0.6%


 Equity in earnings of unconsolidated subsidiaries, net



-



-



-



-


            EBITDA margin



16.7%



15.3%



10.3%



15.2%


 Restructuring charges, net (1)



-



-



-



-


 Integration/acquisition costs (2)



-



0.6%



0.4%



0.5%


 Tradename write-offs (3)



-



-



5.4%



-


           Adjusted EBITDA margin



16.7%



15.9%



16.1%



15.7%
















 Net income attributable to Korn Ferry


$

50,264


$

41,160


$

102,651


$

133,779


 Restructuring charges, net (1)



-



-



-



78


 Integration/acquisition costs (2)



-



2,776



6,746



9,430


 Tradename write-offs (3)



-



-



106,555



-


 Tax effect on the adjusted items (4)



(598)



(541)



(28,094)



(2,314)


 Tax effect on impact of new tax law (5)



-



2,237



-



13,582


           Adjusted net income attributable to Korn Ferry


$

49,666


$

45,632


$

187,858


$

154,555
















 Basic earnings per common share


$

0.90


$

0.74


$

1.84


$

2.39


 Restructuring charges, net (1)



-



-



-



-


 Integration/acquisition costs (2)



-



0.05



0.12



0.17


 Tradename write-offs (3)



-



-



1.93



-


 Tax effect on the adjusted items (4)



(0.01)



(0.01)



(0.53)



(0.04)


 Tax effect on impact of new tax law (5)



-



0.04



-



0.24


           Adjusted basic earnings per share


$

0.89


$

0.82


$

3.36


$

2.76
















 Diluted earnings per common share


$

0.89


$

0.73


$

1.81


$

2.35


 Restructuring charges, net (1)



-



-



-



-


 Integration/acquisition costs (2)



-



0.05



0.12



0.17


 Tradename write-offs (3)



-



-



1.88



-


 Tax effect on the adjusted items (4)



(0.01)



(0.01)



(0.50)



(0.04)


 Tax effect on impact of new tax law (5)



-



0.03



-



0.24


           Adjusted diluted earnings per share


$

0.88


$

0.80


$

3.31


$

2.72
















Explanation of Non-GAAP Adjustments

(1)

Restructuring plan implemented in order to rationalize our cost structure by eliminating redundant positions and consolidating office space due to a previous acquisition that took place on December 1, 2015.

(2)

Costs associated with completing a previous acquisition, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.

(3)

The Company is implementing a plan to go to market under a single, master brand architecture to simplify the Company's organizational structure by eliminating and/or consolidating certain legal entities and implementing a rebranding of the Company to offer the Company's current products and services using the "Korn Ferry" name, branding and trademarks. As a result of this the Company was required under U.S. generally accepted accounting principles to record a one-time, non-cash tradename write-offs.

(4)

Tax effect on restructuring charges, net, integration/acquisition costs and tradename write-offs.

(5)

The tax impact due to provisional tax charge recorded as a result of the Tax Act.

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)




Three Months Ended April 30, 2019



Executive Search















North
America


EMEA


Asia
Pacific


Latin
America


Subtotal


Advisory


RPO and
Professional
Search


Corporate


Consolidated





























Fee revenue


$

113,651


$

45,307


$

24,373


$

7,557


$

190,888


$

207,082


$

92,786


$

-


$

490,756

Total revenue


$

116,939


$

46,107


$

24,726


$

7,572


$

195,344


$

211,377


$

95,814


$

-


$

502,535





























Net income attributable to Korn Ferry


























$

50,264

Net income attributable to noncontrolling interest



























363

Other income, net



























(7,802)

Interest expense, net



























4,169

Equity in earnings of unconsolidated subsidiaries, net



























(120)

Income tax provision



























15,401

Operating income (loss)


$

28,316


$

8,161


$

5,027


$

538


$

42,042


$

29,991


$

14,547


$

(24,305)



62,275

Depreciation and amortization



973



387



345



105



1,810



7,355



930



1,904



11,999

Other income, net



5,433



44



163



59



5,699



1,577



165



361



7,802

Equity in earnings of unconsolidated subsidiaries, net



120



-



-



-



120



-



-



-



120

EBITDA and Adjusted EBITDA


$

34,842


$

8,592


$

5,535


$

702


$

49,671


$

38,923


$

15,642


$

(22,040)


$

82,196

EBITDA and Adjusted EBITDA margin



30.7%



19.0%



22.7%



9.3%



26.0%



18.8%



16.9%






16.7%































Three Months Ended April 30, 2018



Executive Search















North
America


EMEA


Asia
Pacific


Latin
America


Subtotal


Advisory


RPO and
Professional
Search


Corporate


Consolidated





























Fee revenue


$

112,005


$

45,476


$

24,612


$

8,576


$

190,669


$

207,551


$

77,144


$

-


$

475,364

Total revenue


$

115,394


$

46,340


$

25,053


$

8,603


$

195,390


$

211,912