Investor Relations

Press Release

Korn Ferry Announces Third Quarter Fiscal 2019 Results of Operations

March 7, 2019

LOS ANGELES, March 7, 2019 /PRNewswire/ --

Highlights

  • Korn Ferry reports fee revenue of $474.5 million in Q3 FY'19, an increase of 6% (10% on a constant currency basis) from Q3 FY'18, driven by organic growth in all segments.
  • Operating income was $62.7 million in Q3 FY'19 with an operating margin of 13.2%.  Adjusted EBITDA was $77.7 million with Adjusted EBITDA margin of 16.4%.
  • Q3 FY'19 diluted earnings per share was $0.80 compared to diluted earnings per share of $0.48 in Q3 FY'18.  Adjusted diluted earnings per share was $0.81 in Q3 FY'19 compared to Adjusted diluted earnings per share of $0.70 in Q3 FY'18.
  • The Company continued with its balanced approach to capital allocation, buying back $14.7 million of stock during the quarter and declaring a quarterly dividend of $0.10 per share on March 6, 2019 payable on April 15, 2019 to stockholders of record on March 26, 2019.  In addition, on March 6, 2019, the Board of Directors approved an increase in our capacity to repurchase shares to a total remaining availability of $250 million.  The shares may be repurchased from time to time in the open market or privately negotiated transactions, subject to market conditions and other factors.

Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced third quarter fee revenue of $474.5 million.  Third quarter diluted earnings per share was $0.80 and Adjusted diluted earnings per share was $0.81.  Adjusted diluted earnings per share for the third quarter excludes $0.8 million related to retention awards from a prior acquisition, or $0.01 per share.

"I am pleased with the results of our recently completed third quarter.  We generated $475 million in fee revenue, up approximately 6% year-over-year, 10% at constant currency, with strong growth across all of our geographies and solutions.  Adjusted EBITDA was $78 million, with an Adjusted EBITDA margin of 16.4 percent – an all-time high.  We also continue to execute our balanced approach to capital deployment, repurchasing $14.7 million of our shares in the quarter, bringing our total recent share repurchases to nearly $100 million.  We have increased our capacity to repurchase shares to a total remaining availability of $250 million.  This move, in conjunction with our regular dividend, further drives our capital allocation strategy," said Gary D. Burnison, CEO, Korn Ferry.

"We are redefining an industry.  We are building a firm that has the scale and offerings that synchronize our clients' strategy with their organization and people to help them drive superior performance," added Burnison.

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


Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

Fee revenue

$

474.5


$

447.6


$

1,435.3


$

1,291.9

Total revenue

$

486.2


$

460.8


$

1,471.3


$

1,331.2

Operating income

$

62.7


$

49.8


$

78.6


$

144.2

Operating margin


13.2%



11.1%



5.5%



11.2%

Net income attributable to Korn Ferry

$

45.0


$

27.2


$

52.4


$

92.6

Basic earnings per share

$

0.81


$

0.49


$

0.94


$

1.65

Diluted earnings per share

$

0.80


$

0.48


$

0.92


$

1.63





EBITDA Results (b):

Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

EBITDA

$

76.9


$

69.7


$

115.5


$

195.6

EBITDA margin


16.2%



15.5%



8.0%



15.2%





Adjusted Results (c):

Third Quarter


Year to Date





FY'19


FY'18


FY'19


FY'18

Adjusted EBITDA (b)

$

77.7


$

71.4


$

228.8


$

202.4

Adjusted EBITDA margin (b)


16.4%



15.9%



15.9%



15.7%

Adjusted net income attributable to Korn Ferry

$

45.8


$

39.9


$

138.2


$

108.9

Adjusted basic earnings per share

$

0.82


$

0.71


$

2.47


$

1.94

Adjusted diluted earnings per share

$

0.81


$

0.70


$

2.43


$

1.92

___________

(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):


Third 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")

$


$

11.3


$


$

11.3

Tradename write-offs

$


$


$

106.6


$

Integration/acquisition costs

$

0.8


$

1.7


$

6.7


$

6.7

Restructuring charges, net

$


$


$


$

0.1

Fee revenue was $474.5 million in Q3 FY'19, an increase of 6% (10% increase on a constant currency basis) compared to Q3 FY'18.  The increase in fee revenue was due to organic growth in all segments.

Operating income was $62.7 million in Q3 FY'19 compared to $49.8 million in the year-ago quarter.  Operating margin was 13.2% in Q3 FY'19 compared to 11.1% in the year-ago quarter.  The increase in operating income was primarily due to the increase in fee revenue, partially offset by an increase in compensation and benefits expense driven by an increase in average headcount and performance related bonus expense.

Adjusted EBITDA margin was 16.4%, compared to 15.9% in the year-ago quarter.  The increase in Adjusted EBITDA margin was impacted by the same factors as operating income offset by lower gains in other income, net due to market movements associated with marketable securities.

Results by Segment

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


Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

Fee revenue

$

193.4


$

180.4


$

584.0


$

518.4

Total revenue

$

198.0


$

185.5


$

598.0


$

531.9

Operating income

$

44.7


$

34.4


$

137.0


$

102.6

Operating margin


23.1%



19.1%



23.5%



19.8%













Ending number of consultants


552



536



552



536

Average number of consultants


554



537



546



527

Engagements billed


3,849



3,671



8,201



7,709

New engagements (b)


1,608



1,564



5,073



4,735




























EBITDA Results (c):

Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

EBITDA

$

48.2


$

37.3


$

144.1


$

110.3

EBITDA margin


24.9%



20.7%



24.7%



21.3%













Adjusted Results (d):

Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

Adjusted EBITDA (c)

$

48.2


$

37.3


$

144.1


$

110.6

Adjusted EBITDA margin (c)


24.9%



20.7%



24.7%



21.3%


___________

(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):





Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

Restructuring charges, net

$


$


$


$

0.3

Fee revenue was $193.4 million in Q3 FY'19, an increase of $13.0 million or 7% (10% on a constant currency basis) compared to Q3 FY'18.  The increase in fee revenue was attributable to higher fee revenue in the North American, Asia Pacific and Latin American regions.

Operating income was $44.7 million in Q3 FY'19 compared to $34.4 million in Q3 FY'18.  Operating margin was 23.1% in Q3 FY'19 compared to 19.1% in the year-ago quarter.  The increase in operating income was due to higher fee revenue in Q3 FY'19 compared to Q3 FY'18, partially offset by an increase in general and administrative expenses driven by higher premise and office expense and adversely impacted by foreign exchange losses in Q3 FY'19 compared to gains in the year-ago quarter.

Adjusted EBITDA was $48.2 million in Q3 FY'19 with an Adjusted EBITDA margin of 24.9% compared to $37.3 million and 20.7%, respectively, in the year-ago quarter.

Selected Advisory Data
(dollars in millions) (a)


Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

Fee revenue

$

201.5


$

198.1


$

614.0


$

577.5

Total revenue

$

205.7


$

202.0


$

627.2


$

589.1

Operating income (loss)

$

29.3


$

27.1


$

(24.4)


$

72.5

Operating margin


14.5%



13.7%



(4.0%)



12.5%













Ending number of consultants (b)


569



590



569



590

Staff utilization (c)


62%



64%



65%



65%













EBITDA Results (d):

Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

EBITDA

$

37.4


$

35.7


$

(1.1)


$

98.2

EBITDA margin


18.5%



18.0%



(0.2%)



17.0%













Adjusted Results (e):

Third Quarter


Year to Date





FY'19


FY'18


FY'19


FY'18

Adjusted EBITDA (d)

$

38.1


$

37.3


$

112.1


$

104.4

Adjusted EBITDA margin (d)


18.9%



18.8%



18.3%



18.1%

 ___________

(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):





Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

Tradename write-offs

$


$


$

106.6


$

Integration/acquisition costs

$

0.8


$

1.6


$

6.6


$

6.5

Restructuring recoveries, net

$


$


$


$

(0.2)

Fee revenue was $201.5 million in Q3 FY'19 compared to $198.1 million in Q3 FY'18, an increase of $3.4 million or 2% (6% on a constant currency basis) compared to Q3 FY'18.  The increase in fee revenue was primarily driven by an increase in Consulting Solutions fee revenue across each of our Advisory businesses.

Operating income was $29.3 million in Q3 FY'19 with an operating margin of 14.5% compared to operating income of $27.1 million and an operating margin of 13.7% in the year-ago quarter.  The increase in operating income was primarily due to higher fee revenue compared to the year-ago quarter, partially offset by an increase in compensation and benefits expense driven by the use of outside contractors and higher commission expense.

Adjusted EBITDA was $38.1 million in Q3 FY'19 with an Adjusted EBITDA margin of 18.9% compared to $37.3 million and 18.8%, respectively, in the year-ago quarter.  The increase in Adjusted EBITDA margin was impacted by the same factors as operating income offset by decrease in integration/acquisition costs in Q3 FY'19 compared to the year-ago quarter.

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


Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

Fee revenue

$

79.6


$

69.1


$

237.4


$

196.0

Total revenue

$

82.5


$

73.3


$

246.1


$

210.2

Operating income

$

12.2


$

10.1


$

36.3


$

27.7

Operating margin


15.3%



14.6%



15.3%



14.1%













Engagements billed (b)


1,296



1,284



2,809



2,677

New engagements (c)


652



730



2,154



2,173













EBITDA and Adjusted Results (d):

Third Quarter


Year to Date


FY'19


FY'18


FY'19


FY'18

EBITDA and Adjusted EBITDA

$

13.1


$

10.8


$

38.8


$

30.1

EBITDA and Adjusted EBITDA margin


16.4%



15.6%



16.3%



15.3%

___________

(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 $79.6 million in Q3 FY'19, an increase of $10.5 million or 15% (19% 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 $6.7 million and $3.8 million, respectively, in Q3 FY'19 compared to Q3 FY'18.

Operating income was $12.2 million in Q3 FY'19, an increase of $2.1 million compared to Q3 FY'18 operating income of $10.1 million.  Operating margin was 15.3% in the current quarter compared to 14.6% in the year-ago quarter. 

EBITDA was $13.1 million during Q3 FY'19, an increase of $2.3 million compared to Q3 FY'18.  EBITDA margin was 16.4% in Q3 FY'19 and 15.6% in Q3 FY'18.

Outlook

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

  • Q4 FY'19 fee revenue is expected to be in the range of $485 million and $505 million; and
  • Q4 FY'19 diluted earnings per share is likely to range between $0.85 to $0.93.

Earnings Conference Call Webcast

The earnings conference call will be held today at 4:30 PM (EST) 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.  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


Nine Months Ended



January 31,


January 31,



2019


2018


2019


2018



(unaudited)

Fee revenue


$

474,504


$

447,581


$

1,435,277


$

1,291,853

Reimbursed out-of-pocket engagement expenses



11,668



13,189



36,050



39,302

           Total revenue



486,172



460,770



1,471,327



1,331,155














Compensation and benefits



321,835



309,527



979,575



882,102

General and administrative expenses



61,179



58,516



287,641



175,380

Reimbursed expenses



11,668



13,189



36,050



39,302

Cost of services



17,066



17,467



55,020



53,163

Depreciation and amortization



11,741



12,225



34,490



36,881

Restructuring charges, net



-



-



-



78

           Total operating expenses



423,489



410,924



1,392,776



1,186,906














Operating income



62,683



49,846



78,551



144,249

 Other income, net



2,401



7,510



2,292



14,311

 Interest expense, net



(4,282)



(3,710)



(12,722)



(11,014)

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



60,802



53,646



68,121



147,546

Equity in earnings of unconsolidated subsidiaries



62



97



191



187

Income tax provision



15,420



26,316



14,143



54,145

 Net income



45,444



27,427



54,169



93,588

           Net income attributable to noncontrolling interest



(480)



(180)



(1,782)



(969)

Net income attributable to Korn Ferry


$

44,964


$

27,247


$

52,387


$

92,619














Earnings per common share attributable to Korn Ferry:













      Basic


$

0.81


$

0.49


$

0.94


$

1.65

      Diluted


$

0.80


$

0.48


$

0.92


$

1.63














Weighted-average common shares outstanding:













      Basic



55,233



55,252



55,358



55,479

      Diluted



55,753



55,997



56,181



56,236














 Cash dividends declared per share:


$

0.10


$

0.10


$

0.30


$

0.30

 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)




Three Months Ended January 31,


Nine Months Ended January 31,



2019




2018


% Change


2019




2018


% Change






















Fee revenue:




















Executive Search:





















North America

$

114,215




$

102,716


11.2%


$

342,175




$

296,093


15.6%


EMEA


45,940





46,782


(1.8%)



137,522





128,249


7.2%


Asia Pacific


25,687





24,493


4.9%



79,918





71,983


11.0%


Latin America


7,554





6,425


17.6%



24,339





22,048


10.4%

Total Executive Search


193,396





180,416


7.2%



583,954





518,373


12.7%

Advisory


201,502





198,056


1.7%



613,966





577,462


6.3%

RPO and Professional Search


79,606





69,109


15.2%



237,357





196,018


21.1%


Total fee revenue


474,504





447,581


6.0%



1,435,277





1,291,853


11.1%

Reimbursed out-of-pocket engagement expenses


11,668





13,189


(11.5%)



36,050





39,302


(8.3%)


Total revenue

$

486,172




$

460,770


5.5%


$

1,471,327




$

1,331,155


10.5%





















Operating income (loss):




Margin





Margin





Margin





Margin

Executive Search:





















North America

$

30,596


26.8%


$

21,408


20.8%


$

92,438


27.0%


$

66,517


22.5%


EMEA


7,525


16.4%



7,329


15.7%



21,813


15.9%



20,349


15.9%


Asia Pacific


5,929


23.1%



5,289


21.6%



19,337


24.2%



12,811


17.8%


Latin America


653


8.6%



408


6.4%



3,460


14.2%



2,961


13.4%

Total Executive Search


44,703


23.1%



34,434


19.1%



137,048


23.5%



102,638


19.8%

Advisory


29,279


14.5%



27,057


13.7%



(24,374)


(4.0%)



72,459


12.5%

RPO and Professional Search


12,176


15.3%



10,064


14.6%



36,337


15.3%



27,727


14.1%

Corporate


(23,475)





(21,709)





(70,460)





(58,575)




 Total operating income

$

62,683


13.2%


$

49,846


11.1%


$

78,551


5.5%


$

144,249


11.2%


 

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)






January 31,


April 30,


2019


2018


(unaudited)




ASSETS






Cash and cash equivalents

$

489,509


$

520,848

Marketable securities


6,414



14,293

Receivables due from clients, net of allowance for doubtful accounts of $22,046 and $17,845 at January 31, 2019 and April 30, 2018, respectively


421,812



384,996

Income taxes and other receivables


29,502



29,089

Unearned compensation


41,739



37,333

Prepaid expenses and other assets


28,106



27,700

Total current assets


1,017,082



1,014,259







Marketable securities, non-current


126,950



122,792

Property and equipment, net


130,266



119,901

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


124,607



120,087

Deferred income taxes


40,530



25,520

Goodwill


580,021



584,222

Intangible assets, net


86,308



203,216

Unearned compensation, non-current


88,986



78,295

Investments and other assets


22,803



19,622

Total assets

$

2,217,553


$

2,287,914







LIABILITIES AND STOCKHOLDERS' EQUITY






Accounts payable

$

31,151


$

35,196

Income taxes payable


24,287



23,034

Compensation and benefits payable


266,925



304,980

Current portion of long-term debt


-



24,911

Other accrued liabilities


163,997



170,339

Total current liabilities


486,360



558,460







Deferred compensation and other retirement plans


240,856



227,729

Long-term debt


222,662



211,311

Deferred tax liabilities


1,434



9,105

Other liabilities


59,201



61,694

Total liabilities


1,010,513



1,068,299







Stockholders' equity






Common stock: $0.01 par value, 150,000 shares authorized, 72,440 and 71,631 shares issued at January 31, 2019 and April 30, 2018, respectively, and 56,420 and 56,517 shares outstanding at January 31, 2019 and April 30, 2018, respectively


651,683



683,942

Retained earnings


616,282



572,800

Accumulated other comprehensive loss, net


(63,271)



(40,135)

Total Korn Ferry stockholders' equity


1,204,694



1,216,607

Noncontrolling interest


2,346



3,008

Total stockholders' equity


1,207,040



1,219,615

Total liabilities and stockholders' equity

$

2,217,553


$

2,287,914

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)








Three Months Ended


Nine Months Ended



January 31,


January 31,



2019


2018


2019


2018



(unaudited)

 Operating income


$

62,683


$

49,846


$

78,551


$

144,249

 Depreciation and amortization



11,741



12,225



34,490



36,881

 Other income, net



2,401



7,510



2,292



14,311

 Equity in earnings of unconsolidated subsidiaries, net



62



97



191



187

           EBITDA



76,887



69,678



115,524



195,628

 Restructuring charges, net (1)



-



-



-



78

 Integration/acquisition costs (2)



804



1,673



6,746



6,654

 Tradename write-offs (3)



-



-



106,555



-

           Adjusted EBITDA


$

77,691


$

71,351


$

228,825


$

202,360














 Operating margin



13.2%



11.1%



5.5%



11.2%

 Depreciation and amortization



2.5%



2.7%



2.4%



2.9%

 Other income, net



0.5%



1.7%



0.1%



1.1%

 Equity in earnings of unconsolidated subsidiaries, net



-



-



-



-

            EBITDA margin



16.2%



15.5%



8.0%



15.2%

 Restructuring charges, net (1)



-



-



-



-

 Integration/acquisition costs (2)



0.2%



0.4%



0.5%



0.5%

 Tradename write-offs (3)



-



-



7.4%



-

           Adjusted EBITDA margin



16.4%



15.9%



15.9%



15.7%














 Net income attributable to Korn Ferry


$

44,964


$

27,247


$

52,387


$

92,619

 Restructuring charges, net (1)



-



-



-



78

 Integration/acquisition costs (2)



804



1,673



6,746



6,654

 Tradename write-offs (3)



-



-



106,555



-

 Tax effect on the above items (4)



31



(368)



(27,496)



(1,773)

 Tax effect on impact of new tax law (5)



-



11,345



-



11,345

          Adjusted net income attributable to Korn Ferry


$

45,799


$

39,897


$

138,192


$

108,923














 Basic earnings per common share


$

0.81


$

0.49


$

0.94


$

1.65

 Restructuring charges, net (1)



-



-



-



-

 Integration/acquisition costs (2)



0.01



0.03



0.12



0.12

 Tradename write-offs (3)



-



-



1.92



-

 Tax effect on the above items (4)



-



(0.01)



(0.51)



(0.03)

 Tax effect on impact of new tax law (5)



-



0.20



-



0.20

           Adjusted basic earnings per share


$

0.82


$

0.71


$

2.47


$

1.94














 Diluted earnings per common share


$

0.80


$

0.48


$

0.92


$

1.63

 Restructuring charges, net (1)



-



-



-



-

 Integration/acquisition costs (2)



0.01



0.03



0.12



0.12

 Tradename write-offs (3)



-



-



1.89



-

 Tax effect on the above items (4)



-



(0.01)



(0.50)



(0.03)

 Tax effect on impact of new tax law (5)



-



0.20



-



0.20

           Adjusted diluted earnings per share


$

0.81


$

0.70


$

2.43


$

1.92


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 January 31, 2019


Executive Search














North
America


EMEA


Asia
Pacific


Latin
America


Subtotal


Advisory


RPO and
Professional
Search


Corporate


Consolidated




























Fee revenue

$

114,215


$

45,940


$

25,687


$

7,554


$

193,396


$

201,502


$

79,606


$

-


$

474,504

Total revenue

$

117,725


$

46,639


$

26,046


$

7,573


$

197,983


$

205,677


$

82,512


$

-


$

486,172




























Net income attributable to Korn Ferry

























$

44,964

Net income attributable to noncontrolling interest


























480

Other income, net


























(2,401)

Interest expense, net


























4,282

Equity in earnings of unconsolidated subsidiaries, net


























(62)

Income tax provision


























15,420

Operating income (loss)

$

30,596


$

7,525


$

5,929


$

653


$

44,703


$

29,279


$

12,176


$

(23,475)



62,683

Depreciation and amortization


970



402



338



97



1,807



7,307



803



1,824



11,741

Other income (loss), net


1,564



26



(134)



133



1,589



786



77



(51)



2,401

Equity in earnings of unconsolidated subsidiaries, net


62



-



-



-



62



-



-



-



62

EBITDA


33,192



7,953



6,133



883



48,161



37,372



13,056



(21,702)



76,887

EBITDA margin


29.1%



17.3%



23.9%



11.7%



24.9%



18.5%



16.4%






16.2%




























Integration/acquisition costs


-



-



-



-



-



777



-



27



804

Adjusted EBITDA

$

33,192


$

7,953


$

6,133


$

883


$

48,161


$

38,149


$

13,056


$

(21,675)


$

77,691

Adjusted EBITDA margin


29.1%



17.3%



23.9%



11.7%



24.9%



18.9%



16.4%






16.4%





























Three Months Ended January 31, 2018


Executive Search














North
America


EMEA


Asia
Pacific


Latin
America


Subtotal


Advisory


RPO and Professional Search


Corporate


Consolidated




























Fee revenue

$

102,716


$

46,782


$

24,493


$

6,425


$

180,416


$

198,056


$

69,109


$

-


$

447,581

Total revenue

$

106,332


$

47,763


$

24,942


$

6,456


$

185,493


$

201,961


$

73,316


$

-


$

460,770




























Net income attributable to Korn Ferry

























$

27,247

Net income attributable to noncontrolling interest


























180

Other income, net


























(7,510)

Interest expense, net


























3,710

Equity in earnings of unconsolidated subsidiaries, net


























(97)

Income tax provision


























26,316

Operating income (loss)

$

21,408


$

7,329


$

5,289


$

408


$

34,434


$

27,057


$

10,064


$

(21,709)



49,846

Depreciation and amortization


990



458



361



113



1,922



7,882



733



1,688



12,225

Other income, net


585



37



185



40



847



768



2



5,893



7,510

Equity in earnings of unconsolidated subsidiaries, net


97



-



-



-



97



-



-



-



97

EBITDA


23,080



7,824



5,835



561



37,300



35,707



10,799



(14,128)



69,678

EBITDA margin


22.5%



16.7%



23.8%



8.7%



20.7%



18.0%



15.6%






15.5%