Investor Relations

Press Release

Korn Ferry International Announces Second Quarter Fiscal 2015 Results of Operations

December 9, 2014

Highlights
-- Korn Ferry reports record fee revenue of $255.7 million in the second quarter of 2015, an increase of 7.4% (8.1% on a constant currency basis), from Q2 FY'14, with increases realized across all segments:
Futurestep 26.6 %
Executive Recruitment 6.4 %
Leadership and Talent Consulting 0.5 %
-- Adjusted EBITDA margin was 17.2% in Q2 FY'15 compared to 15.4% in Q2 FY'14.
-- Q2 FY'15 diluted earnings per share was $0.51 compared to adjusted diluted earnings per share of $0.41 in Q2 FY'14, excluding separation costs of $2.0 million. No such costs were incurred in Q2 FY'15.
-- The Company is announcing today that the Board has adopted a dividend policy, reflecting an intention to distribute to our stockholders a regular quarterly cash dividend of $0.10 per share, commencing at the conclusion of the third quarter of FY'15 and has approved an increase in the Company's share repurchase program to an aggregate of $150 million.
  

LOS ANGELES, Dec. 9, 2014 /PRNewswire/ -- Korn/Ferry International (NYSE: KFY), a leading provider of leadership and talent consulting services, today announced record second quarter fee revenue of $255.7 million and diluted earnings per share of $0.51.

"I am very pleased with what Korn Ferry has accomplished.  We generated the strongest top line results in the company's history, up 8% year over year at constant currency, with strong earnings per share," said Gary D. Burnison, CEO, Korn Ferry.  "To be relevant and meaningful, global organizations are demanding a workforce that can innovate, with leaders who are extremely agile and can drive growth across borders.  While challenging, this environment is also creating opportunity for Korn Ferry, as our diversified offerings and approach are helping companies build the right teams, with the right talent, and linking business strategies to talent strategies."          

Financial Results

(dollars in millions, except per share amounts)



Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$         255.7


$        238.0


$       506.9


$        466.4


Total revenue

$         264.7


$        246.2


$       525.0


$        483.8


Operating income

$           34.4


$          23.2


$         53.0


$          39.8


Operating margin

13.5%


9.7%


10.5%


8.5%


Net income

$           25.4


$          18.8


$        39.9


$          30.2


Basic earnings per share

$           0.52


$          0.39


$        0.82


$          0.63


Diluted earnings per share

$           0.51


$          0.38


$        0.80


$          0.62











EBITDA Results (a):

Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA

$          44.0


$          34.7


$        72.0


$          60.0


EBITDA margin

17.2%


14.6%


14.2%


12.9%







Adjusted Results (b):

Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Operating income

$          34.4


$         25.2


$        62.9


$          48.4


Operating margin

13.5%


10.6%


12.4%


10.4%


EBITDA (a)

$          44.0


$         36.7


$        81.9


$          68.6


EBITDA margin (a)

17.2%


15.4%


16.2%


14.7%


Net income

$          25.4


$          20.0


$        46.9


$          36.0


Basic earnings per share

$          0.52


$          0.41


$        0.96


$          0.75


Diluted earnings per share

$          0.51


$          0.41


$        0.94


$          0.74


____________

(a) 

EBITDA refers to earnings before interest, taxes, depreciation and amortization.  Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges, integration/acquisition and 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):




Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Separation costs

$                     —


$                2.0


$                —


$                 4.5


Restructuring charges

$                     —


$                 —


$              9.9


$                 3.7


Integration/acquisition costs

$                     —


$                 —


$                —


$                 0.4


 

Fee revenue was $255.7 million in Q2 FY'15, an increase of $17.7 million, or 7.4% (8.1% on a constant currency basis), compared to Q2 FY'14, driven by an $8.9 million, $8.5 million, and a $0.3 million increase in fee revenue in Executive Recruitment, Futurestep and Leadership & Talent Consulting, respectively.  The overall fee revenue increase was driven by fee revenue growth in all of our major markets – consumer, industrial, life science/healthcare, financial services and technology.

Compensation and benefit expenses were $174.7 million in Q2 FY'15, an increase of $13.4 million, or 8.3%, compared to the year-ago quarter.  The increase was due to an increase in performance related bonus expense resulting from the continued adoption of our strategy, including referrals between lines of business, resulting in an increase in fee revenue and profitability, as well as an increase in salaries and related payroll taxes.  Also contributing to the increase in compensation and benefit expenses was an increase in the use of outside contractors driven by the growth in our recruitment process outsourcing business in Q2 FY'15 compared to Q2 FY'14.  These increases were partially offset by $2.0 million in management separation costs incurred in Q2 FY'14 which were not incurred in Q2 FY'15.  The increase in salaries and related payroll taxes was due to an increase in the average headcount in Executive Recruitment and Futurestep in Q2 FY'15 compared to Q2 FY'14, reflecting our continued growth-related investments back into our business. 

General and administrative expenses were $30.1 million in Q2 FY'15, a decrease of $5.7 million, or 15.9%, from Q2 FY'14, mainly due to a $6.2 million insurance reimbursement received for legal fees incurred in prior periods and a decrease in marketing and business development expenses of $0.7 million.  This decline in general and administrative expenses was partially offset by an increase in professional fees, primarily to drive our strategic initiatives and unfavorable foreign currency rates that resulted in an impact of $1.3 million in the quarter.

Adjusted EBITDA was $44.0 million in Q2 FY'15, an increase of $7.3 million, or 19.9%, compared to Q2 FY'14.  Adjusted EBITDA margin was 17.2% and 15.4% in Q2 FY'15 and Q2 FY'14, respectively.  The increase in Adjusted EBITDA was driven by an increase in fee revenue of $17.7 million, and decreases of $5.7 million and $1.4 million in general and administrative expenses and cost of services, respectively, partially offset by an increase in compensation expense of $15.4 million (excluding certain prior year separation costs) and a decrease in other income of $1.9 million.

On a GAAP basis, operating income was $34.4 million in Q2 FY'15 and $23.2 million in Q2 FY'14 resulting in an operating margin of 13.5% in Q2 FY'15 compared to 9.7% in the year-ago quarter.  Operating income (including certain prior year separation costs) was impacted by all of the above items with the exception of other income, which is not included in GAAP operating income.

Balance Sheet and Liquidity

Cash and marketable securities were $400.1 million at October 31, 2014, compared to $468.3 million at April 30, 2014.  Cash and marketable securities include $135.6 million held in trust for deferred compensation plans at October 31, 2014, compared to $116.2 million at April 30, 2014.  Cash and marketable securities decreased by $68.2 million from April 30, 2014, primarily due to Q1 FY'15 payments of FY'14 annual bonuses, partially offset by cash provided by operating activities.

The Company and its Board endorse a balanced approach to capital allocation.   First, the Company's strategy has been to become the world's premier talent management firm by utilizing capital for investment in the Company's consultants and intellectual property, as well as the strategic acquisition of businesses perceived to be both accretive and in the best interests of the Company – acquisitions that produce a return superior to the Company's cost of capital. Management believes recent acquisitions have not only yielded such returns but have helped to create a stronger, broader, solution-rich firm that is less economically cyclical and more strategically relevant to its clients.

In addition, the Company is announcing today that the Board has adopted a dividend policy, reflecting an intention to distribute to our stockholders a regular quarterly cash dividend of $0.10 per share, commencing at the conclusion of the third quarter of FY'15.  The declaration and payment of dividends under the quarterly dividend program will be at the discretion of the Board and will depend upon many factors, including our earnings, capital requirements, financial conditions, the terms of our indebtedness and other factors our Board of Directors may deem to be relevant.

The Board has also approved an increase in the Company's stock repurchase program to an aggregate of $150 million.  Common stock may be repurchased from time to time in open market or privately negotiated transactions at the Company's discretion subject to market conditions and other factors.

Results by Segment

Selected Executive Recruitment Data

(dollars in millions)



Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$        149.0


$      140.1


$      297.4


$        276.7


Total revenue

$        154.4


$      145.3


$      308.6


$        287.8


Operating income

$          29.9


$        28.1


$        54.1


$          56.4


Operating margin

20.1%


20.1%


18.2%


20.4%











Ending number of consultants

440


412


440


412


Average number of consultants

441


414


436


406


Engagements billed

3,054


2,965


4,937


4,690


New engagements (a)

1,310


1,300


2,620


2,516











EBITDA Results (b):

Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA                                    

$          32.0


$        30.7


$        58.4


$          61.2


EBITDA margin

21.5%


21.9%


19.6%


22.1%







Adjusted Results (c):

Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Operating income

$          29.9


$        28.1


$        59.6


$          57.7


Operating margin

20.1%


20.1%


20.1%


20.9%


EBITDA (b)

$          32.0


$        30.7


$        63.9


$          62.5


EBITDA margin (b)

21.5%


21.9%


21.5%


22.6%


____________

(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):




Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges

$                     —


$                 —


$              5.5


$                  1.3


 

Executive Recruitment

Fee revenue was $149.0 million in Q2 FY'15, an increase of $8.9 million, or 6.4% (7.1% on a constant currency basis), compared to Q2 FY'14.  The overall increase in fee revenue was primarily attributable to a 3.4% increase in the weighted-average fees billed per engagement and a 3.0% increase in the number of executive recruitment engagements billed in Q2 FY'15 compared to Q2 FY'14.  On a regional basis, fee revenue increased in North America by $7.5 million, or 10.0%, and Europe by $2.5 million, or 7.3%, partially offset by decreases in Asia Pacific of $0.6 million, or 2.8%, and Latin America of $0.5 million, or 5.6%.   

Adjusted EBITDA was $32.0 million and $30.7 million during Q2 FY'15 and Q2 FY'14, respectively.  The Adjusted EBITDA increase was driven by an $8.9 million increase in fee revenue offset by an increase in compensation and benefits expense of $6.2 million associated with the investments in headcount to grow our business, as well as increased incentive compensation resulting from the continued adoption of our strategy, including referrals between lines of business.  In addition, general and administrative expenses are up $1.5 million in Q2 FY'15 compared to Q2 FY'14, partially due to unfavorable exchange rates which had an impact of $1.3 million in the current quarter.

On a GAAP basis, operating income was $29.9 million in Q2 FY'15, an increase of $1.8 million, or 6.4%, compared to Q2 FY'14, resulting in an operating margin of 20.1% in both the current quarter and in the year-ago quarter.  All items having a significant impact on operating income have been discussed above in the discussion regarding Adjusted EBITDA.

Selected Leadership & Talent Consulting Data

(dollars in millions)



Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$          66.3


$        66.0


$      129.9


$        126.1


Total revenue

$          68.5


$        68.2


$      133.9


$        130.3


Operating income

$            7.8


$          7.0


$        11.2


$          11.3


Operating margin

11.7%


10.6%


8.6%


9.0%











Ending number of consultants (a)

131


129


131


129


Staff utilization (b)

71%


70%


70%


68%







EBITDA Results (c):

Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA

$          10.9


$        10.3


$        17.8


$          17.5


EBITDA margin

16.4%


15.5%


13.7%


13.8%







Adjusted Results (d):

Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Operating income

$            7.8


$           7.0


$        14.0


$          12.5


Operating margin

11.7%


10.6%


10.8%


9.9%


EBITDA (c)

$          10.9


$         10.3


$        20.6


$          18.7


EBITDA margin (c)

16.4%


15.5%


15.8%


14.7%














____________

(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):




Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges

$                     —


$                 —


$              2.8


$                  1.2


 

Leadership & Talent Consulting

Fee revenue was $66.3 million in Q2 FY'15, an increase of $0.3 million, or 0.5% (0.9% on a constant currency basis), from the year-ago quarter.  This increase is primarily attributed to an increase in product revenue of $0.5 million in Q2 FY'15 compared to Q2 FY'14.      

Adjusted EBITDA was $10.9 million during Q2 FY'15, an increase of $0.6 million, or 5.8%, compared to Q2 FY'14.  Adjusted EBITDA margin was 16.4% in Q2 FY'15 compared to 15.5% in Q2 FY'14 due to a decrease in cost of services of $2.0 million, partially offset by an increase in compensation and benefit expense of $1.4 million.  The decrease in cost of services primarily relates to an increased focus on the utilization of internal resources versus outside contractors.  The increase in compensation and benefit expenses was due to an increase in performance related bonus expense resulting from higher fee revenue, profitability, and the continued adoption of the company's integrated go-to market strategy across all three of our lines of businesses.

On a GAAP basis, operating income was $7.8 million in Q2 FY'15, an increase of $0.8 million compared to the year-ago quarter, resulting in an operating margin of 11.7% in the current quarter compared to 10.6% 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 expense of $0.1 million.

Selected Futurestep Data

(dollars in millions)



Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$           40.4


$        31.9


$        79.6


$           63.6


Total revenue

$           41.8


$        32.7


$        82.5


$           65.7


Operating income

$             5.1


$          2.6


$          8.6


$             5.1


Operating margin

12.8%


8.0%


10.8%


8.0%











Engagements billed

1,277


1,195


1,980


1,952


New engagements (a)

617


620


1,190


1,245




 

EBITDA Results (b):


Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


EBITDA

$             5.6


$          3.0


$          9.5


$             6.5


EBITDA margin

14.0%


9.3%


12.0%


10.2%







 

Adjusted Results (c):

Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Operating income

$             5.1


$          2.6


$        10.0


$              6.3


Operating margin

12.8%


8.0%


12.6%


9.8%


EBITDA (b)

$             5.6


$          3.0


$        10.9


$              7.7


EBITDA margin (b)

14.0%


9.3%


13.8%


12.0%



















____________

(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):




Second Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges

$                     —


$                 —


$              1.4


$                  1.2


 

Futurestep

Fee revenue was $40.4 million in Q2 FY'15, an increase of $8.5 million, or 26.6% (27.3% on a constant currency basis), compared to the year-ago quarter.  The increase in fee revenue was driven by an 18.4% increase in the weighted average fees billed per engagement and a 6.9% increase in the engagements billed in Q2 FY'15 compared to Q2 FY'14.  The increase in the weighted average fees billed per engagement resulted from a 35.7% increase in fee revenue from recruitment process outsourcing and a 33.3% increase in professional recruitment.

Adjusted EBITDA was $5.6 million during Q2 FY'15, an increase of $2.6 million, or 86.7%, compared to Q2 FY'14, due primarily to the increase in fee revenue of $8.5 million and an increase in compensation and benefit expenses of $5.5 million due to an increase in salaries and related payroll taxes and performance related bonus expense, both related to an increase in profitability and headcount as well as the continued adoption of our strategy, including referrals between lines of business.  In addition, the use of outside contractors (cost of services expense) increased $0.7 million driven by the growth in our recruitment process outsourcing business.

On a GAAP basis, operating income was $5.1 million in Q2 FY'15, an increase of $2.5 million, compared to Q2 FY'14, resulting in an operating margin of 12.8% in the current quarter compared to 8.0% in the year-ago quarter.  The increase in operating income was due to the same factors impacting Adjusted EBITDA.

Outlook                                                        

Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, fee revenue is expected to be in the range of $241 million to $251 million in Q3 FY'15 and diluted earnings per share are likely to be in the range of $0.43 to $0.49.

Earnings Conference Call Webcast

The earnings conference call will be held today at 5:00 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 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

At Korn Ferry, we design, build, attract and ignite talent.  Since our inception, clients have trusted us to help recruit world-class leadership.  Today, we are a single source for leadership and talent consulting services to empower businesses and leaders to reach their goals.  Our solutions range from executive recruitment and leadership development programs, to enterprise learning, succession planning and recruitment process outsourcing (RPO).  Visit www.kornferry.com for more information on Korn Ferry, and www.kornferryinstitute.com for thought leadership, intellectual property and research.

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 Commission.  Korn 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 operating income and operating margin, adjusted to exclude restructuring, integration/acquisition and separation costs;
  • adjusted net income, adjusted to exclude restructuring, integration/acquisition and separation costs, net of income tax effect;
  • adjusted basic and diluted earnings per share, adjusted to exclude restructuring, integration/acquisition and 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, integration/acquisition and 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 


 Six Months Ended 



 October 31, 


 October 31, 



2014


2013


2014


2013



 (unaudited) 

Fee revenue 


$ 255,702


$ 237,968


$ 506,890


$ 466,405

Reimbursed out-of-pocket engagement expenses 


9,015


8,269


18,152


17,419

           Total revenue 


264,717


246,237


525,042


483,824










Compensation and benefits 


174,656


161,296


343,762


314,066

General and administrative expenses 


30,145


35,795


67,513


75,666

Reimbursed expenses 


9,015


8,269


18,152


17,419

Cost of services 


9,706


11,132


19,171


20,641

Depreciation and amortization 


6,779


6,580


13,549


12,524

Restructuring charges, net 


-


-


9,886


3,682

           Total operating expenses 


230,301


223,072


472,033


443,998










Operating income  


34,416


23,165


53,009


39,826

Other income, net 


2,362


4,352


4,539


6,619

Interest expense, net 


(920)


(638)


(1,714)


(1,229)

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


35,858


26,879


55,834


45,216

Equity in earnings of unconsolidated subsidiaries 


452


557


918


1,022

Income tax provision  


10,907


8,677


16,816


16,062

            Net income 


$   25,403


$   18,759


$   39,936


$   30,176










Earnings per common share: 









      Basic 


$       0.52


$       0.39


$       0.82


$       0.63

      Diluted 


$       0.51


$       0.38


$       0.80


$       0.62










Weighted-average common shares outstanding: 









      Basic 


49,082


48,118


48,893


47,892

      Diluted 


49,740


48,816


49,720


48,748

 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

 (unaudited) 

























Three Months Ended October 31,


Six Months Ended October 31,



2014




2013


% Change


2014




2013


% Change


















Fee Revenue:
















Executive recruitment:

















North America

$    82,729




$    75,183


10%


$  165,029




$  149,330


11%


EMEA 

36,675




34,221


7%


76,972




68,598


12%


Asia Pacific

21,157




21,722


(3%)


40,691




42,850


(5%)


South America

8,369




8,866


(6%)


14,653




15,869


(8%)

Total executive recruitment

148,930




139,992


6%


297,345




276,647


7%

Leadership & Talent Consulting

66,408




66,078


0%


129,956




126,140


3%

Futurestep

40,364




31,898


27%


79,589




63,618


25%


Total fee revenue

255,702




237,968


7%


506,890




466,405


9%

 Reimbursed out-of-pocket engagement expenses 

9,015




8,269


9%


18,152




17,419


4%


Total revenue

$  264,717




$  246,237


8%


$  525,042




$  483,824


9%


















Reconciliation of Operating Income (GAAP) to Adjusted Operating Income


























Operating Income:



Margin




Margin




Margin




Margin

Executive recruitment:

















North America

$    19,117


23.1%


$    15,530


20.7%


$    38,115


23.1%


$    31,854


21.3%


EMEA

5,621


15.3%


5,860


17.1%


8,264


10.7%


11,820


17.2%


Asia Pacific

3,424


16.2%


4,472


20.6%


5,946


14.6%


8,972


20.9%


South America

1,699


20.3%


2,265


25.5%


1,772


12.1%


3,761


23.7%

Total executive recruitment

29,861


20.1%


28,127


20.1%


54,097


18.2%


56,407


20.4%

Leadership & Talent Consulting

7,762


11.7%


7,006


10.6%


11,222


8.6%


11,341


9.0%

Futurestep

5,150


12.8%


2,539


8.0%


8,607


10.8%


5,084


8.0%

Corporate

(8,357)




(14,507)




(20,917)




(33,006)




 Total operating income

$    34,416


13.5%


$    23,165


9.7%


$    53,009


10.5%


$    39,826


8.5%



































Restructuring, Separation, and Integration/Acquisition Costs, net:









Executive recruitment:

















North America

$             -


0.0%


$             -


0.0%


$      1,151


0.7%


$         816


0.6%


EMEA

-


0.0%


-


0.0%


3,987


5.2%


460


0.7%


Asia Pacific

-


0.0%


-


0.0%


17


0.1%


60


0.2%


South America

-


0.0%


-


-


377


2.6%


-


-

Total executive recruitment

-


0.0%


-


0.0%


5,532


1.9%


1,336


0.5%

Leadership & Talent Consulting

-


0.0%


-


0.0%


2,758


2.2%


1,149


0.9%

Futurestep

-


0.0%


-


0.0%


1,424


1.8%


1,134


1.8%

Corporate

-




2,000




172




4,957




 Total restructuring, separation, and integration/acquisition costs, net

$             -


0.0%


$      2,000


0.9%


$      9,886


1.9%


$      8,576


1.9%



































Adjusted Operating Income:
















 (Excluding Restructuring, Separation, and Integration/Acquisition Costs, net)


























Margin




Margin




Margin




Margin

Executive recruitment:

















North America

$    19,117


23.1%


$    15,530


20.7%


$    39,266


23.8%


$    32,670


21.9%


EMEA

5,621


15.3%


5,860


17.1%


12,251


15.9%


12,280


17.9%


Asia Pacific

3,424


16.2%


4,472


20.6%


5,963


14.7%


9,032


21.1%


South America

1,699


20.3%


2,265


25.5%


2,149


14.7%


3,761


23.7%

Total executive recruitment

29,861


20.1%


28,127


20.1%


59,629


20.1%


57,743


20.9%

Leadership & Talent Consulting

7,762


11.7%


7,006


10.6%


13,980


10.8%


12,490


9.9%

Futurestep

5,150


12.8%


2,539


8.0%


10,031


12.6%


6,218


9.8%

Corporate 

(8,357)




(12,507)




(20,745)




(28,049)




 Total adjusted operating income 

$    34,416


13.5%


$    25,165


10.6%


$    62,895


12.4%


$    48,402


10.4%

 

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (in thousands, except per share amounts) 













October 31,


April 30,



2014


2014

ASSETS


 (unaudited) 



Cash and cash equivalents


$    248,190


$    333,717

Marketable securities


25,973


9,566

Receivables due from clients, net of allowance for doubtful accounts of $10,327 and $9,513, respectively


211,718


175,986

Income taxes and other receivables


14,317


8,244

Deferred income taxes


4,068


4,486

Prepaid expenses and other assets


32,493


29,955

Total current assets


536,759


561,954






Marketable securities, non-current


125,892


124,993

Property and equipment, net


61,475


60,434

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


98,989


94,274

Deferred income taxes


52,813


55,039

Goodwill


251,915


257,582

Intangible assets, net


45,491


49,560

Investments and other assets


34,569


29,830

Total assets


$ 1,207,903


$ 1,233,666






LIABILITIES AND STOCKHOLDERS' EQUITY





Accounts payable


$      19,503


$      19,375

Income taxes payable


8,240


13,014

Compensation and benefits payable


140,691


192,035

Other accrued liabilities


63,554


62,509

Total current liabilities


231,988


286,933






Deferred compensation and other retirement plans


167,653


169,235

Other liabilities


21,624


21,962

Total liabilities


421,265


478,130






Stockholders' equity





Common stock: $0.01 par value, 150,000 shares authorized, 62,826 and 62,282 shares issued and 50,364 and 49,811 shares outstanding, respectively


456,076


449,631

Retained earnings


348,717


308,781

Accumulated other comprehensive loss, net


(17,671)


(2,388)

Stockholders' equity


787,122


756,024

Less:  notes receivable from stockholders


(484)


(488)

Total stockholders' equity


786,638


755,536

Total liabilities and stockholders' equity


$ 1,207,903


$ 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 



October 31, 2014


October 31, 2013



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














 Fee revenue 


$ 255,702




$ 255,702


$ 237,968




$ 237,968

 Reimbursed out-of-pocket engagement expenses 


9,015




9,015


8,269




8,269

           Total revenue 


264,717




264,717


246,237




246,237














 Compensation and benefits 


174,656




174,656


161,296


(2,000)


159,296

 General and administrative expenses 


30,145




30,145


35,795




35,795

 Reimbursed expenses 


9,015




9,015


8,269




8,269

 Cost of services 


9,706




9,706


11,132




11,132

 Depreciation and amortization 


6,779




6,779


6,580




6,580

 Restructuring charges, net 


-


-


-


-


-


-

           Total operating expenses 


230,301


-


230,301


223,072


(2,000)


221,072














 Operating income 


34,416


-


34,416


23,165


2,000


25,165














 Other income, net 


2,362




2,362


4,352




4,352

 Interest expense, net 


(920)




(920)


(638)




(638)

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


35,858


-


35,858


26,879


2,000


28,879

 Equity in earnings of unconsolidated subsidiaries 


452




452


557




557

 Income tax provision (1) (2) 


10,907




10,907


8,677


791


9,468

            Net income 


$   25,403


$                 -


$   25,403


$   18,759


$          1,209


$   19,968














 Earnings per common share: 













      Basic 


$       0.52




$       0.52


$       0.39




$       0.41

      Diluted 


$       0.51




$       0.51


$       0.38




$       0.41














 Weighted-average common shares outstanding: 













      Basic 


49,082




49,082


48,118




48,118

      Diluted 


49,740




49,740


48,816




48,816














Explanation of Non-GAAP Adjustments 

(1) The adjustments result in an effective tax rate of 33% for the as adjusted amounts for the three months ended October 31, 2013. 

(2) The three months ended October 31, 2013 includes the tax effect on separation charges. 

 

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) 





























Six Months Ended


 Six Months Ended 



October 31, 2014


October 31, 2013



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














 Fee revenue 


$ 506,890




$ 506,890


$ 466,405




$ 466,405

 Reimbursed out-of-pocket engagement expenses 


18,152




18,152


17,419




17,419

           Total revenue 


525,042




525,042


483,824




483,824














 Compensation and benefits 


343,762


-


343,762


314,066


(4,500)


309,566

 General and administrative expenses 


67,513


-


67,513


75,666


(394)


75,272

 Reimbursed expenses 


18,152




18,152


17,419




17,419

 Cost of services 


19,171




19,171


20,641




20,641

 Depreciation and amortization 


13,549




13,549


12,524




12,524

 Restructuring charges, net 


9,886


(9,886)


-


3,682


(3,682)


-

           Total operating expenses 


472,033


(9,886)


462,147


443,998


(8,576)


435,422














 Operating income 


53,009


9,886


62,895


39,826


8,576


48,402














 Other income, net 


4,539




4,539


6,619




6,619

 Interest expense, net 


(1,714)




(1,714)


(1,229)




(1,229)

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


55,834


9,886


65,720


45,216


8,576


53,792

 Equity in earnings of unconsolidated subsidiaries 


918




918


1,022




1,022

 Income tax provision (1) (2) 


16,816


2,942


19,758


16,062


2,796


18,858

            Net income  


$   39,936


$          6,944


$   46,880


$   30,176


$          5,780


$   35,956














 Earnings per common share: 













      Basic 


$       0.82




$       0.96


$       0.63




$       0.75

      Diluted 


$       0.80




$       0.94


$       0.62




$       0.74














 Weighted-average common shares outstanding: 













      Basic 


48,893




48,893


47,892




47,892

      Diluted 


49,720




49,720


48,748




48,748














Explanation of Non-GAAP Adjustments 

(1) The adjustments result in an effective tax rate of 30% and 35% for the as adjusted amounts for the six months ended October 31, 2014 and 2013, respectively. 

(2) The six months ended October 31, 2014 includes the tax effect on restructuring charges, while the six months ended October 31, 2013 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 October 31, 2014 



 Executive
Recruitment 


 Leadership
& Talent
Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$    148,930


$      66,408


$       40,364


$                 -


$          255,702












 Net income 










$            25,403

       Other income, net 










(2,362)

       Interest expense, net 










920

       Equity in earnings of unconsolidated subsidiaries 










(452)

       Income tax provision 










10,907

 Operating income (loss) 


$      29,861


$         7,762


$         5,150


$      (8,357)


34,416

       Depreciation and amortization 


1,683


3,279


459


1,358


6,779

       Other income (loss), net 


355


(172)


25


2,154


2,362

       Equity in earnings of unconsolidated subsidiaries 


110


-


-


342


452

 EBITDA 


32,009


10,869


5,634


(4,503)


44,009

 EBITDA margin 


21.5%


16.4%


14.0%




17.2%












 Adjusted EBITDA 


$      32,009


$      10,869


$         5,634


$      (4,503)


$            44,009

 Adjusted EBITDA margin 


21.5%


16.4%


14.0%




17.2%

























 Three Months Ended October 31, 2013 



 Executive
Recruitment 


 Leadership
& Talent
Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$    139,992


$      66,078


$       31,898


$                 -


$          237,968












 Net income 










$            18,759

       Other income, net 










(4,352)

       Interest expense, net 










638

       Equity in earnings of unconsolidated subsidiaries 










(557)

       Income tax provision 










8,677

 Operating income (loss) 


$      28,127


$         7,006


$         2,539


$    (14,507)


23,165

       Depreciation and amortization 


2,000


3,161


440


979


6,580

       Other income (loss), net 


451


45


(17)


3,873


4,352

       Equity in earnings of unconsolidated subsidiaries 


120


-


-


437


557

 EBITDA 


30,698


10,212


2,962


(9,218)


34,654

 EBITDA margin 


21.9%


15.5%


9.3%




14.6%












       Separation costs 


-


-


-


2,000


2,000

 Adjusted EBITDA 


$      30,698


$      10,212


$         2,962


$      (7,218)


$            36,654

 Adjusted EBITDA margin 


21.9%


15.5%


9.3%




15.4%

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)






 Six Months Ended October 31, 2014 



 Executive
Recruitment 


 Leadership
& Talent
Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$    297,345


$    129,956


$       79,589


$                 -


$          506,890












 Net income 










$            39,936

       Other income, net 










(4,539)

       Interest expense, net 










1,714

       Equity in earnings of unconsolidated subsidiaries 










(918)

       Income tax provision 










16,816

 Operating income (loss) 


$      54,097


$      11,222


$         8,607


$    (20,917)


53,009

       Depreciation and amortization 


3,455


6,531


905


2,658


13,549

       Other income, net 


672


45


23


3,799


4,539

       Equity in earnings of unconsolidated subsidiaries 


178


-


-


740


918

 EBITDA 


58,402


17,798


9,535


(13,720)


72,015

 EBITDA margin 


19.6%


13.7%


12.0%




14.2%












       Restructuring charges, net 


5,532


2,758


1,424


172


9,886

 Adjusted EBITDA 


$      63,934


$      20,556


$       10,959


$    (13,548)


$            81,901

 Adjusted EBITDA margin 


21.5%


15.8%


13.8%




16.2%

























 Six Months Ended October 31, 2013 



 Executive
Recruitment 


 Leadership
& Talent
Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$    276,647


$    126,140


$       63,618


$                 -


$          466,405












 Net income 










$            30,176

       Other income, net 










(6,619)

       Interest expense, net 










1,229

       Equity in earnings of unconsolidated subsidiaries 










(1,022)

       Income tax provision 










16,062

 Operating income (loss) 


$      56,407


$      11,341


$         5,084


$    (33,006)


39,826

       Depreciation and amortization 


3,778


6,058


848


1,840


12,524

       Other income, net 


832


53


548


5,186


6,619

       Equity in earnings of unconsolidated subsidiaries 


222


-


-


800


1,022

 EBITDA 


61,239


17,452


6,480


(25,180)


59,991

 EBITDA margin 


22.1%


13.8%


10.2%




12.9%












       Restructuring charges, net 


1,336


1,149


1,134


63


3,682

       Separation costs 


-


-


-


4,500


4,500

       Integration/acquisition costs 


-


-


-


394


394

 Adjusted EBITDA 


$      62,575


$      18,601


$         7,614


$    (20,223)


$            68,567

 Adjusted EBITDA margin 


22.6%


14.7%


12.0%




14.7%

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/korn-ferry-international-announces-second-quarter-fiscal-2015-results-of-operations-300007203.html

SOURCE Korn Ferry

Take a Closer Look