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%

 

16.1%

 

19.1%

 

18.5%

 

22.2%

 

16.6%

 

14.1%

     

15.7%

                                     
                                     
   

 Year Ended April 30, 2014