Investor Relations

Press Release

Korn Ferry International Announces Fourth Quarter and Fiscal 2015 Results of Operations - Surpassing $1 Billion in Annual Fee Revenue for the First Time

June 11, 2015
Highlights
- Korn Ferry reports record annual fee revenue of $1,028.2 million, an increase of $67.9 million or 7.1% ($91.8 million or 9.6% on a constant currency basis) over FY'14.
- Fourth quarter fee revenue was also a record at $271.8 million, an increase of $20.1 million or 8.0% ($35.8 million or 14.2% on a constant currency basis), from Q4 FY'14, with increases realized across all segments on a constant currency basis:
Futurestep 22.0 %
Leadership and Talent Consulting 14.5 %
Executive Recruitment 12.1 %
- Adjusted EBITDA margin increased 130 basis points to 15.0% in Q4 FY'15 compared to 13.7% in Q4 FY'14. Full year adjusted EBITDA margin also increased 130 basis points to 15.7% in FY'15 compared to 14.4% in FY'14.
- Q4 FY'15 and Q4 FY'14 diluted and adjusted diluted earnings per share were $0.51 and $0.43, respectively.
- FY'15 diluted earnings per share was $1.76 compared to $1.48 in FY'14. Adjusted diluted earnings per share was $1.90 in FY'15 excluding $10.4 million of net restructuring and integration/acquisition costs, and $1.60 in FY'14 excluding $8.6 million of net restructuring, integration/acquisition and separation costs.
- The Company declared a quarterly dividend of $0.10 per share on June 10, 2015, payable on July 15, 2015 to stockholders of record on June 25, 2015.
- Effective June 5, 2015, the Company amended its unsecured revolving credit agreement; increasing its borrowing capacity to $150.0 million, with terms and conditions substantially similar to its existing facility.

LOS ANGELES, June 11, 2015 /PRNewswire/ -- Korn/Ferry International (NYSE: KFY), the preeminent authority on leadership and talent, today announced record fourth quarter fee revenue of $271.8 million and record annual fee revenue of $1,028.2 million.  Fourth quarter diluted and adjusted diluted earnings per share were $0.51 compared to $0.43 in the year-ago quarter.  Full year adjusted diluted earnings per share was $1.90, excluding net restructuring and integration/acquisition costs of $10.4 million.  Including such costs, diluted earnings per share was $1.76 for the year ended April 30, 2015.

"Korn Ferry closed out the fiscal year with a strong quarter and record fee revenue of $271.8 million – 14.2% growth year over year and 11.4% growth sequentially, at constant currency, with diluted earnings per share of $0.51.  With all service lines up year over year, our quarterly results propelled our fiscal year fee revenue to a record high of $1.03 billion – a major milestone in our firm's history," said Gary D. Burnison, CEO, Korn Ferry.  "The strategic transformation our firm has undertaken – from a mono line to a multi solutions talent advisory – is taking hold.  Korn Ferry will continue to build on our leadership position in helping companies deliver superior business outcomes through impactful people strategies."

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


Fourth Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

Fee revenue

$        271.8


$        251.7


$    1,028.2


$        960.3

Total revenue

$        282.2


$        260.8


$    1,066.1


$        995.6

Operating income

$          28.1


$          24.5


$       114.0


$          91.6

Operating margin

10.3%


9.7%


11.1%


9.5%

Net income

$          25.5


$          21.2


$         88.4


$          72.7

Basic earnings per share

$          0.51


$          0.44


$         1.78


$          1.51

Diluted earnings per share

$          0.51


$          0.43


$         1.76


$          1.48

 

EBITDA Results (a):

Fourth Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA

$          40.2


$          34.5


$       151.3


$        129.7

EBITDA margin

14.8%


13.7%


14.7%


13.5%





Adjusted Results (b):

Fourth Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA (a)

$          40.7


$          34.5


$       161.7


$        138.3

EBITDA margin (a)

15.0%


13.7%


15.7%


14.4%

Net income

$          25.6


$          21.2


$         95.5


$          78.5

Basic earnings per share

$          0.52


$          0.44


$         1.93


$          1.63

Diluted earnings per share

$          0.51


$          0.43


$         1.90


$          1.60

____________

(a)

EBITDA refers to earnings before interest, taxes, depreciation and amortization.  Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (recoveries), integration/acquisition costs and certain separation costs.  EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliation). 



(b)

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

 


Fourth Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

Integration/acquisition costs

$                      0.5


$                 —


$                0.9


$                 0.4

Restructuring charges, net

$                       —


$                 —


$                9.5


$                 3.7

Separation costs

$                       —


$                 —


$                 —


$                 4.5

 

Fiscal 2015 Fourth Quarter Results

Fee revenue was $271.8 million in Q4 FY'15, an increase of $20.1 million, or 8.0% ($35.8 million, or 14.2% on a constant currency basis), compared to Q4 FY'14, primarily due to increases of $8.4 million, $6.6 million, and $5.1 million in fee revenue in Executive Recruitment, Leadership & Talent Consulting, and Futurestep, respectively.  The overall fee revenue increase was driven by fee revenue growth in certain of our major markets – life science/healthcare, financial services, industrial and consumer, partially offset by a decline in technology.

Compensation and benefit expenses were $183.0 million in Q4 FY'15, an increase of $12.4 million, or 7.3%, compared to the year-ago quarter.  The increase was driven, in part, by higher performance related bonus expense resulting from an increase in fee revenue and profitability as a result of the continued adoption of our strategy, including referrals between lines of business.  Salaries and related payroll taxes and employee insurance were also higher due to an increase in the average headcount in Executive Recruitment and Futurestep in Q4 FY'15 compared to Q4 FY'14, reflecting our continued growth-related investments back into our business. 

General and administrative expenses were $41.6 million in Q4 FY'15, an increase of $2.5 million, or 6.4%, from Q4 FY'14, mainly due to increases in foreign exchange losses and premise and office expenses, which were partially offset by a decline in travel related expenses.

Adjusted EBITDA was $40.7 million in Q4 FY'15, an increase of $6.2 million, or 18.0%, compared to Q4 FY'14.  Adjusted EBITDA margin was 15.0% and 13.7% in Q4 FY'15 and Q4 FY'14, respectively.  The increase in Adjusted EBITDA was primarily driven by the factors discussed above.

On a GAAP basis, operating income was $28.1 million in Q4 FY'15 and $24.5 million in Q4 FY'14 resulting in an operating margin of 10.3% in Q4 FY'15 compared to 9.7% in the year-ago quarter.  Operating income was impacted by the above items.

Fiscal 2015 Results 

Fee revenue was $1,028.2 million in FY'15, an increase of $67.9 million, or 7.1% ($91.8 million or 9.6% on a constant currency basis), compared to FY'14, primarily due to fee revenue increases of $28.5 million, $26.9 million, and $12.5 million in Executive Recruitment, Futurestep and Leadership & Talent Consulting, respectively.  The overall higher fee revenue was driven by fee revenue growth in industrial, life science/healthcare, financial services and consumer sectors, offset by a decline in the education/non-profit sector, while the technology sector was essentially flat.

Adjusted EBITDA was $161.7 million during FY'15, an increase of $23.4 million, or 16.9%, compared to FY'14.  Adjusted EBITDA margin was 15.7% and 14.4% in FY'15 and FY'14, respectively. 

On a GAAP basis, operating income was $114.0 million in FY'15, an increase of $22.4 million, or 24.5%, compared to FY'14, resulting in an operating margin of 11.1% in FY'15 compared to 9.5% in FY'14.

Balance Sheet and Liquidity

Cash and marketable securities were $525.4 million at April 30, 2015, compared to $468.3 million at April 30, 2014.  Net of amounts held in trust for deferred compensation plans and to pay FY'15 bonuses, cash and marketable securities were $235.6 million and $211.1 million at April 30, 2015 and 2014, respectively.  As of April 30, 2015 and 2014, we held $143.4 million and $136.3 million, respectively, of cash and cash equivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay FY'15 bonuses.  Cash and marketable securities increased by $57.1 million from April 30, 2014, primarily due to cash provided by operating activities, partially offset by Q1 FY'15 payments of FY'14 annual bonuses, $15.3 million to acquire Pivot Leadership and $5.1 million in dividend payments made to stockholders during the year.

In accordance with the Company's dividend policy, the Company declared a quarterly dividend of $0.10 per share on June 10, 2015, payable on July 15, 2015 to stockholders of record on June 25, 2015.

Results by Segment

Selected Executive Recruitment Data
(dollars in millions)


Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$        156.6


$      148.2


$      597.4


$        568.9


Total revenue

$        161.7


$      153.7


$      619.3


$        591.2


Operating income

$          31.3


$        28.4


$      119.0


$        116.4


Operating margin

20.0%


19.1%


19.9%


20.5%











Ending number of consultants

452


432


452


432


Average number of consultants

448


431


442


416


Engagements billed

3,175


3,048


8,480


8,144


New engagements (a)

1,382


1,303


5,165


5,052




















EBITDA Results (b):

Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA

$          33.4


$        31.7


$      127.0


$        126.5


EBITDA margin

21.3%


21.4%


21.3%


22.2%







Adjusted Results (c):

Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA (b)

$          33.4


$        31.7


$      132.4


$        127.8


EBITDA margin (b)

21.3%


21.4%


22.2%


22.5%


____________

(a)

Represents new engagements opened in the respective period.



(b)

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 exclude the following (see attached reconciliations):

 


Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges, net

$                     —


$                 —


$              5.4


$                  1.3


 

Executive Recruitment

Fee revenue was $156.6 million in Q4 FY'15, an increase of $8.4 million, or 5.7% (an increase of $18.0 million, or 12.1% on a constant currency basis), compared to Q4 FY'14.  The overall increase in fee revenue was primarily attributable to an increase of 4.2% in the number of engagements billed and a 1.4% increase in the weighted-average fees billed per engagement in Q4 FY'15 compared to Q4 FY'14.  On a regional basis, fee revenue increased in North America by $7.3 million, or 9.1% ($8.0 million, or 10.0% on a constant currency basis), Asia Pacific by $0.8 million, or 3.7% ($2.3 million, or 10.6% on a constant currency basis), and South America by $0.8 million, or 13.3% ($2.2 million, or 36.7% on a constant currency basis), partially offset by a decline in EMEA by $0.5 million, or 1.2% (an increase of $5.5 million, or 13.7% on a constant currency basis).

Adjusted EBITDA was $33.4 million and $31.7 million during Q4 FY'15 and Q4 FY'14, respectively.  The increase in Adjusted EBITDA was driven by higher fee revenues of $8.4 million, partially offset by increases in compensation and benefit expenses and general and administrative expenses of $4.9 million and $1.0 million, respectively.  The increase in compensation and benefit expenses was primarily due to an increase in performance related bonus expense resulting from an increase in fee revenue and average headcount and in the fair value of the vested amounts owed under certain deferred compensation plans in Q4 FY'15 compared to Q4 FY'14.  General and administrative expenses were higher due to an increase in foreign exchange loss and premise and office expense, partially offset by a decline in travel related expenses.

Operating income was $31.3 million in Q4 FY'15, an increase of $2.9 million, or 10.2%, compared to Q4 FY'14, resulting in an operating margin of 20.0% in Q4 FY'15 compared to 19.1% in Q4 FY'14.  Operating income was impacted by all of the above items and a decline in depreciation expense of $1.0 million in Q4 FY'15 compared to the year-ago quarter.

Selected Leadership & Talent Consulting Data
(dollars in millions)


Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$          72.8


$        66.2


$      267.1


$        254.6


Total revenue

$          75.3


$        68.4


$      275.2


$        263.0


Operating income

$            8.4


$          6.8


$        28.2


$          23.8


Operating margin

11.5%


10.3%


10.6%


9.4%











Ending number of consultants (a)

164


127


164


127


Staff utilization (b)

74%


70%


71%


67%











EBITDA Results (c):

Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA

$          12.1


$        10.0


$        41.6


$          36.4


EBITDA margin

16.6%


15.1%


15.6%


14.3%




Adjusted Results (d):

Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA (c)

$          12.1


$         10.0


$        44.4


$          37.6


EBITDA margin (c)

16.6%


15.1%


16.6%


14.8%


____________

(a)

Represents number of employees originating consulting services.



(b)

Calculated by dividing the number of hours of our full-time LTC professional staff, who recorded time to an engagement during the period, by the total available working hours during the same 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'15


FY'14


FY'15


FY'14


Restructuring charges, net

$                     —


$                 —


$              2.8


$                  1.2


 

Leadership & Talent Consulting

Fee revenue was $72.8 million in Q4 FY'15, an increase of $6.6 million, or 10.0% ($9.6 million, or 14.5% on a constant currency basis), from the year-ago quarter.  This increase is primarily attributed to higher consulting fee revenue of $5.4 million in Q4 FY'15 compared to Q4 FY'14 with the remaining increase being generated by product revenue.  The increase in consulting revenue includes $3.7 million of fee revenue from Pivot Leadership which was acquired on March 1, 2015.

Adjusted EBITDA was $12.1 million during Q4 FY'15, an increase of $2.1 million, or 21.0%, compared to Q4 FY'14.  Adjusted EBITDA margin was 16.6% in Q4 FY'15 compared to 15.1% in Q4 FY'14 due to higher fee revenue of $6.6 million, partially offset by increases in compensation and benefit expenses and general and administrative expenses of $2.8 million and $0.7 million, respectively.  The increase in compensation and benefit expenses was due to an increase in performance related bonus expense, higher recruitment costs and an increase in the use of temporary workers to deliver the higher levels of fee revenue.

Operating income was $8.4 million in Q4 FY'15, an increase of $1.6 million compared to Q4 FY'14, resulting in an operating margin of 11.5% in the current quarter compared to 10.3% in the year-ago quarter.  The increase in operating income was due to the factors impacting Adjusted EBITDA as discussed above and an increase in depreciation and amortization expense of $0.4 million in Q4 FY'15 compared to Q4 FY'14.

Selected Futurestep Data
(dollars in millions)


Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$           42.4


$        37.3


$      163.7


$         136.8


Total revenue

$           45.2


$        38.7


$      171.6


$         141.4


Operating income

$             5.5


$          4.3


$        19.9


$           13.3


Operating margin

13.1%


11.7%


12.2%


9.8%











Engagements billed

1,205


1,205


3,309


3,246


New engagements (a)

509


598


2,142


2,427











EBITDA Results (b):

Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA

$             6.1


$          4.8


$        21.9


$           15.7


EBITDA margin

14.4%


13.1%


13.4%


11.5%






Adjusted Results (c):

Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA (b)

$             6.1


$          4.8


$        23.0


$            16.9


EBITDA margin (b)

14.4%


13.1%


14.1%


12.3%


____________

(a)

Represents new engagements opened in the respective period.



(b)

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 exclude the following (see attached reconciliations):

 


Fourth Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges, net

$                     —


$                 —


$              1.1


$                  1.2


 

Futurestep

Fee revenue was $42.4 million in Q4 FY'15, an increase of $5.1 million, or 13.7% ($8.2 million, or 22.0% on a constant currency basis), compared to the year-ago quarter.  The increase in fee revenue was driven by a 13.9% increase in the weighted average fees billed per engagement in Q4 FY'15 compared to Q4 FY'14. 

Adjusted EBITDA was $6.1 million during Q4 FY'15, an increase of $1.3 million, or 27.1%, compared to Q4 FY'14, due primarily to the increase in fee revenue of $5.1 million, partially offset by higher compensation and benefit expenses of $3.4 million and an increase in general and administrative expenses of $0.5 million due primarily to higher foreign currency losses in Q4 FY'15 compared to the year-ago quarter.  The increase in compensation and benefit expenses was driven by higher salaries and related payroll taxes as a result of a 15% increase in average headcount and an increase in outside contractor expense.  The higher average headcount and use of outside contractors are both related to the higher levels of fee revenue driven by the continued adoption of our strategy, including referrals between lines of business.

Operating income was $5.5 million in Q4 FY'15, an increase of $1.2 million, compared to Q4 FY'14, resulting in an operating margin of 13.1% in the current quarter compared to 11.7% in the year-ago quarter.  The increase in operating income was due to the same factors impacting Adjusted EBITDA.

Outlook

The current strong U.S. dollar will negatively impact our FY'16 first quarter year-over-year revenue growth.  Assuming worldwide economic conditions and financial markets remain where they are currently and considering the effect of foreign exchange rates, fee revenue is expected to be in the range of $258 million to $270 million in Q1 FY'16, and diluted earnings per share are likely to be in the range of $0.44 to $0.50.

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 www.kornferry.com, accessible through the Investor Relations section.  We will also post to this section of our website earnings 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 the preeminent authority on leadership and talent.  For decades, clients have trusted us to recruit leaders throughout the world.  Today we are their partner in designing strategies to accelerate business outcomes through talent.  For more information, visit www.kornferry.com.

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, the dependence on attracting and retaining qualified and experienced consultants, our ability to successfully integrate acquired businesses, maintaining our brand name and professional reputation, potential legal liability, 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 the growth, alignment of our cost structure with our growth, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, consolidation of industries we serve, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, impairment of goodwill and other intangible assets, deferred tax assets, seasonality, our ability to successfully rationalize our cost structure and employment liability risk.  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, adjusted to exclude restructuring charges, integration and acquisition costs and certain separation costs, net of income tax effect;
  • adjusted basic and diluted earnings per share, adjusted to exclude restructuring charges, integration and acquisition costs and certain separation costs, net of income tax effect;
  • constant currency 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 charges, integration and acquisition costs and certain separation costs, 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.  The use of these non-GAAP financial measures facilitate comparisons to Korn Ferry's historical performance.  Korn Ferry includes these 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.  In the case of constant currency amounts, management believes the presentation of such information provides meaningful 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, 



2015


2014


2015


2014



 (unaudited) 





 Fee revenue 


$ 271,717


$ 251,712


$ 1,028,152


$ 960,301

 Reimbursed out-of-pocket engagement expenses 


10,436


9,086


37,914


35,258

           Total revenue 


282,153


260,798


1,066,066


995,559










 Compensation and benefits 


182,886


170,595


691,450


646,889

 General and administrative expenses 


41,637


39,109


145,917


152,040

 Reimbursed expenses 


10,436


9,086


37,914


35,258

 Cost of services 


11,868


10,213


39,692


39,910

 Depreciation and amortization 


7,234


7,315


27,597


26,172

 Restructuring charges, net 


-


-


9,468


3,682

           Total operating expenses 


254,061


236,318


952,038


903,951










 Operating income  


28,092


24,480


114,028


91,608

 Other income, net 


4,397


2,018


7,458


9,769

 Interest expense, net 


(358)


(261)


(1,784)


(2,363)

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


32,131


26,237


119,702


99,014

 Equity in earnings of unconsolidated subsidiaries 


485


677


2,181


2,169

 Income tax provision  


7,134


5,703


33,526


28,492

            Net income 


$   25,482


$   21,211


$      88,357


$   72,691










 Earnings per common share: 









      Basic 


$       0.51


$       0.44


$           1.78


$       1.51

      Diluted 


$       0.51


$       0.43


$           1.76


$       1.48










 Weighted-average common shares outstanding: 









      Basic 


49,288


48,523


49,052


48,162

      Diluted 


49,890


49,458


49,766


49,145

 


















KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

 (unaudited) 

























Three Months Ended April 30,


Year Ended April 30,



2015




2014


% Change


2015




2014


% Change


















Fee Revenue:
















Executive recruitment:

















North America

$    87,579




$    80,230


9%


$      330,634




$  306,768


8%


EMEA 

39,677




40,175


(1%)


153,465




147,917


4%


Asia Pacific

22,533




21,753


4%


84,148




84,816


(1%)


South America

6,794




6,028


13%


29,160




29,374


(1%)

Total executive recruitment

156,583




148,186


6%


597,407




568,875


5%

Leadership & Talent Consulting

72,749




66,279


10%


267,018




254,636


5%

Futurestep

42,385




37,247


14%


163,727




136,790


20%


Total fee revenue

271,717




251,712


8%


1,028,152




960,301


7%

 Reimbursed out-of-pocket engagement expenses 

10,436




9,086


15%


37,914




35,258


8%


Total revenue

$  282,153




$  260,798


8%


$  1,066,066




$  995,559


7%


















Operating Income:



Margin




Margin




Margin




Margin

Executive recruitment:

















North America

$    20,030


22.9%


$    18,483


23.0%


$        80,818


24.4%


$    70,256


22.9%


EMEA

5,530


13.9%


4,699


11.7%


18,867


12.3%


23,168


15.7%


Asia Pacific

4,589


20.4%


4,380


20.1%


14,631


17.4%


17,274


20.4%


South America

1,191


17.5%


761


12.6%


4,704


16.1%


5,654


19.2%

Total executive recruitment

31,340


20.0%


28,323


19.1%


119,020


19.9%


116,352


20.5%

Leadership & Talent Consulting

8,376


11.5%


6,855


10.3%


28,175


10.6%


23,847


9.4%

Futurestep

5,573


13.1%


4,343


11.7%


19,940


12.2%


13,352


9.8%

Corporate

(17,197)




(15,041)




(53,107)




(61,943)




 Total operating income

$    28,092


10.3%


$    24,480


9.7%


$      114,028


11.1%


$    91,608


9.5%

 

 






KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (in thousands, except per share amounts) 













April 30,



2015


2014

ASSETS





Cash and cash equivalents


$    380,838


$    333,717

Marketable securities


25,757


9,566

Receivables due from clients, net of allowance for doubtful accounts of $9,958 and $9,513 respectively


188,543


175,986

Income taxes and other receivables


10,966


8,244

Deferred income taxes


3,827


4,486

Prepaid expenses and other assets


31,054


29,955

Total current assets


640,985


561,954






Marketable securities, non-current


118,819


124,993

Property and equipment, net


62,088


60,434

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


102,691


94,274

Deferred income taxes


56,014


55,039

Goodwill


254,440


257,582

Intangible assets, net


47,901


49,560

Investments and other assets


34,863


29,830

Total assets


$ 1,317,801


$ 1,233,666






LIABILITIES AND STOCKHOLDERS' EQUITY





Accounts payable


$      19,238


$      19,375

Income taxes payable


3,813


13,014

Compensation and benefits payable


219,364


192,035

Other accrued liabilities


63,595


62,509

Total current liabilities


306,010


286,933






Deferred compensation and other retirement plans


173,432


169,235

Other liabilities


23,110


21,962

Total liabilities


502,552


478,130






Stockholders' equity





Common stock: $0.01 par value, 150,000 shares authorized, 62,863 and 62,282 shares issued and 50,573 and 49,811 shares outstanding, respectively


463,839


449,631

Retained earnings


392,033


308,781

Accumulated other comprehensive loss, net


(40,623)


(2,388)

Stockholders' equity


815,249


756,024

Less:  notes receivable from stockholders


-


(488)

Total stockholders' equity


815,249


755,536

Total liabilities and stockholders' equity


$ 1,317,801


$ 1,233,666

 

KORN FERRY AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME 

 RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP) 

 (in thousands, except per share amounts) 

 (unaudited) 





























 Three Months Ended 


 Three Months Ended 



April 30, 2015


April 30, 2014



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














 Fee revenue 


$ 271,717




$ 271,717


$ 251,712




$ 251,712

 Reimbursed out-of-pocket engagement expenses 


10,436




10,436


9,086




9,086

           Total revenue 


282,153




282,153


260,798




260,798














 Compensation and benefits 


182,886




182,886


170,595




170,595

 General and administrative expenses 


41,637


(514)


41,123


39,109




39,109

 Reimbursed expenses 


10,436




10,436


9,086




9,086

 Cost of services 


11,868




11,868


10,213




10,213

 Depreciation and amortization 


7,234




7,234


7,315




7,315

           Total operating expenses 


254,061


(514)


253,547


236,318


-


236,318














 Operating income 


28,092


514


28,606


24,480


-


24,480














 Other income, net 


4,397




4,397


2,018




2,018

 Interest expense, net 


(358)




(358)


(261)




(261)














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


32,131


514


32,645


26,237


-


26,237

 Equity in earnings of unconsolidated subsidiaries 


485




485


677




677

 Income tax provision (1) (2) 


7,134


332


7,466


5,703




5,703

            Net income 


$   25,482


$             182


$   25,664


$   21,211


$                 -


$   21,211














 Earnings per common share: 













      Basic 


$       0.51




$       0.52


$       0.44




$       0.44

      Diluted 


$       0.51




$       0.51


$       0.43




$       0.43














 Weighted-average common shares outstanding: 













      Basic 


49,288




49,288


48,523




48,523

      Diluted 


49,890




49,890


49,458




49,458














 Explanation of Non-GAAP Adjustments 







(1)

The adjustments result in an effective tax rate of 23% for the as adjusted amounts for the three months ended April 30, 2015. 



(2)

The three months ended April 30, 2015 includes the tax effect on acquisition costs. 















 

 

KORN FERRY AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME 

 RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP) 

 (in thousands, except per share amounts) 

 (unaudited) 





























Year Ended


 Year Ended 



April 30, 2015


April 30, 2014



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














 Fee revenue 


$ 1,028,152




$ 1,028,152


$ 960,301




$ 960,301

 Reimbursed out-of-pocket engagement expenses 


37,914




37,914


35,258




35,258

           Total revenue 


1,066,066




1,066,066


995,559




995,559














 Compensation and benefits 


691,450


-


691,450


646,889


(4,500)


642,389

 General and administrative expenses 


145,917


(959)


144,958


152,040


(394)


151,646

 Reimbursed expenses 


37,914




37,914


35,258




35,258

 Cost of services 


39,692




39,692


39,910




39,910

 Depreciation and amortization 


27,597




27,597


26,172




26,172

 Restructuring charges, net 


9,468


(9,468)


-


3,682


(3,682)


-

           Total operating expenses 


952,038


(10,427)


941,611


903,951


(8,576)


895,375














 Operating income 


114,028


10,427


124,455


91,608


8,576


100,184














 Other income, net 


7,458




7,458


9,769




9,769

 Interest expense, net 


(1,784)




(1,784)


(2,363)




(2,363)

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


119,702


10,427


130,129


99,014


8,576


107,590

 Equity in earnings of unconsolidated subsidiaries 


2,181




2,181


2,169




2,169

 Income tax provision (1) (2) 


33,526


3,282


36,808


28,492


2,796


31,288

            Net income  


$       88,357


$          7,145


$       95,502


$   72,691


$          5,780


$   78,471














 Earnings per common share: 













      Basic 


$           1.78




$           1.93


$       1.51




$       1.63

      Diluted 


$           1.76




$           1.90


$       1.48




$       1.60














 Weighted-average common shares outstanding: 













      Basic 


49,052




49,052


48,162




48,162

      Diluted 


49,766




49,766


49,145




49,145














 Explanation of Non-GAAP Adjustments 








(1)

The adjustments result in an effective tax rate of 28% and 29% for the as adjusted amounts for the year ended April 30, 2015 and 2014, respectively. 





(2)

The year ended April 30, 2015 includes the tax effect on restructuring charges, net and acquisition costs, while the year ended April 30, 2014 includes the tax effect on restructuring charges, separation costs, and integration/acquisition costs associated with the acquisition of PDI Ninth House. 



 

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, 2015 



 Executive Recruitment 











North America 


 EMEA 


Asia Pacific 


 South America 


 Subtotal 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 




















 Fee revenue 


$ 87,579


$ 39,677


$ 22,533


$ 6,794


$ 156,583


$      72,749


$       42,385


$                 -


$          271,717




















 Net income 


















$            25,482

       Other income, net 


















(4,397)

       Interest expense, net 


















358

       Equity in earnings of unconsolidated subsidiaries, net 


















(485)

       Income tax provision 


















7,134

 Operating income (loss) 


$ 20,030


$   5,530


$   4,589


$ 1,191


$   31,340


$         8,376


$         5,573


$    (17,197)


28,092

       Depreciation and amortization 


853


398


274


101


1,626


3,579


508


1,521


7,234

       Other income, net 


190


14


86


22


312


89


27


3,969


4,397

       Equity in earnings of unconsolidated subsidiaries, net 


145


-


-


-


145


-


-


340


485

 EBITDA 


21,218


5,942


4,949


1,314


33,423


12,044


6,108


(11,367)


40,208

 EBITDA margin 


24.2%


15.0%


22.0%


19.3%


21.3%


16.6%


14.4%




14.8%




















       Acquisition costs 


-


-


-


-


-


-


-


514


514

 Adjusted EBITDA 


$ 21,218


$   5,942


$   4,949


$ 1,314


$   33,423


$      12,044


$         6,108


$    (10,853)


$            40,722

 Adjusted EBITDA margin 


24.2%


15.0%


22.0%


19.3%


21.3%


16.6%


14.4%




15.0%









































 Three Months Ended April 30, 2014 



 Executive Recruitment 











North America 


 EMEA 


Asia Pacific 


 South America 


 Subtotal 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 




















 Fee revenue 


$ 80,230


$ 40,175


$ 21,753


$ 6,028


$ 148,186


$      66,279


$       37,247


$                 -


$          251,712




















 Net income 


















$            21,211

       Other income, net 


















(2,018)

       Interest expense, net 


















261

       Equity in earnings of unconsolidated subsidiaries, net 


















(677)

       Income tax provision 


















5,703

 Operating income (loss) 


$ 18,483


$   4,699


$   4,380


$     761


$   28,323


$         6,855


$         4,343


$    (15,041)


24,480

       Depreciation and amortization 


847


1,388


281


98


2,614


3,161


512


1,028


7,315

       Other income (loss), net 


102


229


59


293


683


(39)


7


1,367


2,018

       Equity in earnings of unconsolidated subsidiaries, net 


125


-


-


-


125


-


-


552


677

 EBITDA 


19,557


6,316


4,720


1,152


31,745


9,977


4,862


(12,094)


34,490

 EBITDA margin 


24.4%


15.7%


21.7%


19.1%


21.4%


15.1%


13.1%




13.7%




















 Adjusted EBITDA 


$ 19,557


$   6,316


$   4,720


$ 1,152


$   31,745


$         9,977


$         4,862


$    (12,094)


$            34,490

 Adjusted EBITDA margin 


24.4%


15.7%


21.7%


19.1%


21.4%


15.1%


13.1%




13.7%

 




















KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)






 Year Ended April 30, 2015 



 Executive Recruitment 











North America 


 EMEA 


Asia Pacific 


 South America 


 Subtotal 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 




















 Fee revenue 


$ 330,634


$ 153,465


$ 84,148


$ 29,160


$ 597,407


$    267,018


$     163,727


$                 -


$       1,028,152




















 Net income 


















$            88,357

       Other income, net 


















(7,458)

       Interest expense, net 


















1,784

       Equity in earnings of unconsolidated subsidiaries, net 


















(2,181)

       Income tax provision 


















33,526

 Operating income (loss) 


$   80,818


$   18,867


$ 14,631


$   4,704


$ 119,020


$      28,175


$       19,940


$    (53,107)


114,028

       Depreciation and amortization 


3,515


1,764


1,045


350


6,674


13,427


1,882


5,614


27,597

       Other income (loss), net 


288


83


369


109


849


(22)


54


6,577


7,458

       Equity in earnings of unconsolidated subsidiaries, net 


426


-


-


-


426


-


-


1,755


2,181

 EBITDA 


85,047


20,714


16,045


5,163


126,969


41,580


21,876


(39,161)


151,264

 EBITDA margin 


25.7%


13.5%


19.1%


17.7%


21.3%


15.6%


13.4%




14.7%




















       Restructuring charges, net 


1,151


3,987


17


229


5,384


2,758


1,154


172


9,468

       Acquisition costs 


-


-


-


-


-


-


-


959


959

 Adjusted EBITDA 


$   86,198


$   24,701


$ 16,062


$   5,392


$ 132,353


$      44,338


$       23,030


$    (38,030)


$          161,691

 Adjusted EBITDA margin 


26.1%