Investor Relations

Press Release

Korn Ferry International Announces Third Quarter Fiscal 2015 Results of Operations

March 9, 2015

Highlights
- Korn Ferry reports fee revenue of $249.5 million in the third quarter of 2015, an increase of 3.0% (6.8% on a constant currency basis), from Q3 FY'14, with increases realized across all segments on a constant currency basis:
Futurestep 21.4 %
Leadership and Talent Consulting 5.8 %
Executive Recruitment 3.5 %
- Adjusted EBITDA margin increased 120 basis points to 15.7% in Q3 FY'15 compared to 14.5% in Q3 FY'14.
- Q3 FY'15 and Q3 FY'14 diluted earnings per share was $0.46 and $0.43, respectively.
- On March 1, 2015, the Company completed its previously announced acquisition of Portland-based Pivot Leadership, a global provider of innovative, customized and scalable executive development programs.
- The Company declared its first ever quarterly dividend of $0.10 per share on March 4, 2015, payable on April 9, 2015 to stockholders of record on March 25, 2015.
  

LOS ANGELES, March 9, 2015 /PRNewswire/ -- Korn/Ferry International (NYSE: KFY), the preeminent authority on leadership and talent, today announced third quarter fee revenue of $249.5 million and diluted earnings per share of $0.46.

"I am pleased with the results of our fiscal third quarter, which includes top line growth of 7 percent year over year at constant currency," said Gary D. Burnison, CEO, Korn Ferry International. "As our recent acquisition of Pivot Leadership indicates, our firm is committed to creating the preeminent authority on leadership and talent, which includes deploying our capital to acquire the right intellectual property, top talent and solutions that help our clients propel their business." 

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


Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

Fee revenue

$         249.5


$        242.2


$       756.4


$        708.6

Total revenue

$         258.9


$        251.0


$       783.9


$        734.8

Operating income

$           32.9


$          27.3


$         85.9


$          67.1

Operating margin

13.2%


11.3%


11.4%


9.5%

Net income

$          23.0


$          21.3


$        62.9


$          51.5

Basic earnings per share

$          0.46


$          0.44


$        1.27


$          1.07

Diluted earnings per share

$          0.46


$          0.43


$        1.25


$          1.05

 

EBITDA Results (a):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA

$          39.1


$          35.2


$       111.1


$          95.2

EBITDA margin

15.7%


14.5%


14.7%


13.4%





Adjusted Results (b):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA (a)

$          39.1


$          35.2


$       121.0


$        103.8

EBITDA margin (a)

15.7%


14.5%


16.0%


14.6%

Net income

$          23.0


$          21.3


$        69.9


$          57.3

Basic earnings per share

$          0.46


$          0.44


$        1.41


$          1.19

Diluted earnings per share

$          0.46


$          0.43


$        1.39


$          1.17

____________

(a) 

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



Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

Integration and acquisition costs

$                   0.4


$                 —


$              0.4


$                 0.4

Restructuring charges (recoveries), net

$                  (0.4)


$                 —


$              9.5


$                 3.7

Separation costs

$                     —


$                 —


$                —


$                 4.5

Fee revenue was $249.5 million in Q3 FY'15, an increase of $7.3 million, or 3.0% ($16.4 million, or 6.8% on a constant currency basis), compared to Q3 FY'14, primarily due to increases of $5.8 million and $2.1 million in fee revenue in Futurestep and Leadership & Talent Consulting, respectively, partially offset by a decrease of $0.6 million in Executive Recruitment.  The overall fee revenue increase was driven by fee revenue growth in certain of our major markets – industrial and life science/healthcare, partially offset by declines in technology and education/non-profit.

Compensation and benefit expenses were $164.7 million in Q3 FY'15, an increase of $2.5 million, or 1.5%, compared to the year-ago quarter.  The increase was driven 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 were also higher due to an increase in the average headcount in Executive Recruitment and Futurestep in Q3 FY'15 compared to Q3 FY'14, reflecting our continued growth-related investments back into our business.  These increases were partially offset by a decline in the fair value of vested amounts owed under certain deferred compensation plans.

General and administrative expenses were $36.8 million in Q3 FY'15, a decline of $0.4 million, or 1.1%, from Q3 FY'14, mainly due to a decrease in marketing and business development costs and premise and office expenses of $1.0 million and $1.0 million, respectively.  These declines were partially offset by an increase in professional fees, primarily to drive our strategic initiatives and acquisition related costs.

Adjusted EBITDA was $39.1 million in Q3 FY'15, an increase of $3.9 million, or 11.1%, compared to Q3 FY'14.  Adjusted EBITDA margin was 15.7% and 14.5% in Q3 FY'15 and Q3 FY'14, respectively.  The increase in Adjusted EBITDA was primarily driven by $7.3 million in higher fee revenue and a $0.8 million decline in general and administrative expenses (excluding acquisition costs of $0.4 million), partially offset by an increase in compensation expense of $2.5 million and a decline in other income of $2.6 million.  The decrease in other income was due in large part to the decline in the market value of mutual funds held in trust for settlement of our obligations under certain deferred compensation plans.

Operating income was $32.9 million in Q3 FY'15 and $27.3 million in Q3 FY'14 resulting in an operating margin of 13.2% in Q3 FY'15 compared to 11.3% in the year-ago quarter.  Operating income was impacted by all of the above items with the exception of other income, which is not included in operating income.

Balance Sheet and Liquidity

Cash and marketable securities were $453.3 million at January 31, 2015, compared to $468.3 million at April 30, 2014.  Cash and marketable securities include $133.7 million held in trust for deferred compensation plans at January 31, 2015, compared to $116.2 million at April 30, 2014.  As of January 31, 2015 and April 30, 2014, we held $160.7 million and $193.3 million, respectively, of cash and cash equivalents in foreign locations.  Cash and marketable securities decreased by $15.0 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 declared its first ever quarterly dividend of $0.10 per share on March 4, 2015, payable on April 9, 2015 to stockholders of record on March 25, 2015.

Results by Segment Selected Executive Recruitment Data (dollars in millions)


Third Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Fee revenue

$        143.4


$      144.0


$      440.8


$        420.7


Total revenue

$        149.0


$      149.7


$      457.6


$        437.5


Operating income

$          33.6


$        31.6


$        87.7


$          88.0


Operating margin

23.4%


22.0%


19.9%


20.9%











Ending number of consultants

444


429


444


429


Average number of consultants

442


421


438


414


Engagements billed

3,019


2,975


6,671


6,384


New engagements (a)

1,318


1,233


3,948


3,749


 

EBITDA Results (b):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA                                    

$          35.2


$        33.6


$        93.6


$          94.8

EBITDA margin

24.5%


23.3%


21.2%


22.5%





Adjusted Results (c):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA (b)

$          35.1


$        33.6


$        99.0


$          96.1

EBITDA margin (b)

24.4%


23.3%


22.4%


22.8%

____________

(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):



Third Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges (recoveries), net

$                  (0.1)


$                 —


$              5.4


$                  1.3


Executive Recruitment

Fee revenue was $143.4 million in Q3 FY'15, a decrease of $0.6 million, or 0.4% (an increase of $5.1 million, or 3.5% on a constant currency basis), compared to Q3 FY'14.  The overall decrease in fee revenue was primarily attributable to a 1.9% decrease in the weighted-average fees billed per engagement, partially offset by an increase of 1.5% in the number of engagements billed in Q3 FY'15 compared to Q3 FY'14.  On a regional basis, fee revenue decreased in EMEA by $2.3 million, or 5.9% (an increase of $1.0 million, or 2.6 % on a constant currency basis), partially offset by increases in North America of $0.8 million, or 1.0% ($1.4 million, or 1.8% on a constant currency basis), Asia Pacific of $0.7 million, or 3.5% ($1.6 million, or 7.9% on a constant currency basis), and South America of $0.2 million, or 2.7% ($1.1 million, or 14.7% on a constant currency basis).   

Adjusted EBITDA was $35.1 million and $33.6 million during Q3 FY'15 and Q3 FY'14, respectively.  The increase in Adjusted EBITDA was driven by a decrease in compensation and benefits expense of $2.0 million, partially offset by a decline in fee revenue of $0.6 million.  The decrease in compensation and benefit expense was primarily due to a decrease in performance related bonus expense of $2.4 million, as a result of lower fee revenues, and a decline in the fair value of vested amounts owed under certain deferred compensation plans.

Operating income was $33.6 million in Q3 FY'15, an increase of $2.0 million, or 6.3%, compared to Q3 FY'14, resulting in an operating margin of 23.4% in the current quarter compared to 22.0% in the year-ago quarter.  Operating income was impacted by all of the above items.

Selected Leadership & Talent Consulting Data (dollars in millions)


Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

Fee revenue

$          64.4


$        62.3


$      194.3


$        188.4

Total revenue

$          66.0


$        64.3


$      199.9


$        194.6

Operating income

$            8.6


$          5.7


$        19.8


$          17.0

Operating margin

13.3%


9.1%


10.2%


9.0%









Ending number of consultants (a)

140


125


140


125

Staff utilization (b)

65%


61%


70%


66%





EBITDA Results (c):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA

$          11.7


$          8.9


$        29.5


$          26.4

EBITDA margin

18.3%


14.5%


15.2%


14.1%





Adjusted Results (d):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA (c)

$          11.7


$          8.9


$        32.3


$          27.6

EBITDA margin (c)

18.3%


14.5%


16.6%


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):




Third Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges

$                     —


$                 —


$              2.8


$                  1.2


Leadership & Talent Consulting

Fee revenue was $64.4 million in Q3 FY'15, an increase of $2.1 million, or 3.4% ($3.6 million, or 5.8% on a constant currency basis), from the year-ago quarter.  This increase is primarily attributed to an increase in product revenue of $1.7 million in Q3 FY'15 compared to Q3 FY'14 with the remaining increase being generated by consulting fee revenue.           

Adjusted EBITDA was $11.7 million during Q3 FY'15, an increase of $2.8 million, or 31.5%, compared to Q3 FY'14.  Adjusted EBITDA margin was 18.3% in Q3 FY'15 compared to 14.5% in Q3 FY'14 due to an increase in fee revenue of $2.1 million and a decrease in cost of services of $1.2 million, partially offset by an increase in compensation and benefit expense of $0.9 million.  The decrease in cost of services primarily relates to an increased focus on the utilization of internal resources versus contractors.  In addition, the increase in Adjusted EBITDA margin was due to the change in revenue mix with a greater proportion of fee revenue for Q3 FY'15 being derived from product revenue, which yields higher margins than consulting fee revenue.  The increase in compensation and benefit expenses was due to an increase in performance related bonus expense of $2.5 million resulting from higher fee revenue and profitability, and the continued adoption of the Company's integrated go-to market strategy across all three of our lines of businesses, offset by a decrease in salaries and related payroll taxes of $1.4 million due to a 3% decrease in average headcount for Q3 FY'15 compared to Q3 FY'14.

Operating income was $8.6 million in Q3 FY'15, an increase of $2.9 million compared to the year-ago quarter, resulting in an operating margin of 13.3% in the current quarter compared to 9.1% in the year-ago quarter.  The increase in operating income was due to the factors impacting Adjusted EBITDA as discussed above.

Selected Futurestep Data (dollars in millions)


Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

Fee revenue

$           41.7


$        35.9


$      121.3


$           99.5

Total revenue

$           43.9


$        37.0


$      126.4


$         102.7

Operating income

$             5.8


$          3.9


$        14.4


$             9.0

Operating margin

13.8%


10.9%


11.8%


9.1%









Engagements billed

1,171


1,242


2,710


2,592

New engagements (a)

443


584


1,633


1,829









EBITDA Results (b):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA

$              6.3


$ 4.4


$       15.8


$ 10.9

EBITDA margin

14.9%


12.2%


13.0%


10.9%









Adjusted Results (c):

Third Quarter


Year to Date


FY'15


FY'14


FY'15


FY'14

EBITDA (b)

$             6.0


$          4.4


$        16.9


$             12.1

EBITDA margin (b)

14.3%


12.2%


13.9%


12.1%









____________

(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):




Third Quarter


Year to Date



FY'15


FY'14


FY'15


FY'14


Restructuring charges (recoveries), net

$                  (0.3)


$                 —


$              1.1


$                  1.2


Futurestep

Fee revenue was $41.7 million in Q3 FY'15, an increase of $5.8 million, or 16.2% ($7.7 million, or 21.4% on a constant currency basis), compared to the year-ago quarter.  The increase in fee revenue was driven by a 23.5% increase in the weighted average fees billed per engagement offset by a 5.7% decrease in the number of engagements billed in Q3 FY'15 compared to Q3 FY'14. 

Adjusted EBITDA was $6.0 million during Q3 FY'15, an increase of $1.6 million, or 36.4%, compared to Q3 FY'14, due primarily to the increase in fee revenue of $5.8 million, partially offset by an increase in compensation and benefit expenses of $3.7 million due to an increase in salaries and related payroll taxes and performance related bonus expense, both related to an increase in profitability and an 8% increase in average headcount as well as the continued adoption of our strategy, including referrals between lines of business.

Operating income was $5.8 million in Q3 FY'15, an increase of $1.9 million, compared to Q3 FY'14, resulting in an operating margin of 13.8% in the current quarter compared to 10.9% 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'15 fourth quarter year-over-year and quarter sequential revenue growth.  Foreign currencies weakened throughout the third quarter, negatively impacting our third quarter year-over-year fee revenue growth by approximately $9 million.  Our Q4 FY'15 outlook was prepared using current translation rates, which reflect the continuing strength of the U.S dollar.  As we expect the U.S. dollar to remain strong throughout the fourth quarter, our FY'15 fourth quarter fee revenue outlook reflects the negative impact we experienced in the third quarter as well as further additional downward pressure of approximately $4 - $5 million

The acquisition of Pivot Leadership, which closed on March 1, 2015, is expected to contribute approximately $2 million of fee revenue in Q4 FY'15 with breakeven earnings results.  On a run-rate basis, Pivot Leadership is expected to contribute approximately $23 million of annual fee revenue with an Adjusted EBITDA margin of approximately 14% to 15%.

Assuming worldwide economic conditions and financial markets remain where they are currently and considering the effect of foreign exchange rates as discussed above, fee revenue is expected to be in the range of $255 million to $265 million in Q4 FY'15, 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 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 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 


 Nine Months Ended 



 January 31, 


 January 31, 



2015


2014


2015


2014



 (unaudited) 

Fee revenue 


$ 249,545


$ 242,184


$ 756,435


$ 708,589

Reimbursed out-of-pocket engagement expenses 


9,326


8,753


27,478


26,172

           Total revenue 


258,871


250,937


783,913


734,761










Compensation and benefits 


164,802


162,228


508,564


476,294

General and administrative expenses 


36,767


37,265


104,280


112,931

Reimbursed expenses 


9,326


8,753


27,478


26,172

Cost of services 


8,653


9,056


27,824


29,697

Depreciation and amortization 


6,814


6,333


20,363


18,857

Restructuring charges (recoveries), net 


(418)


-


9,468


3,682

           Total operating expenses 


225,944


223,635


697,977


667,633










Operating income  


32,927


27,302


85,936


67,128

Other (loss) income, net 


(1,478)


1,132


3,061


7,751

Interest income (expense), net 


288


(873)


(1,426)


(2,102)

           Income before provision for income taxes 









               and equity in earnings of unconsolidated subsidiaries 


31,737


27,561


87,571


72,777

Equity in earnings of unconsolidated subsidiaries 


778


470


1,696


1,492

Income tax provision  


9,576


6,727


26,392


22,789

            Net income 


$    22,939


$    21,304


$    62,875


$    51,480










Earnings per common share: 









      Basic 


$        0.46


$        0.44


$        1.27


$        1.07

      Diluted 


$        0.46


$        0.43


$        1.25


$        1.05










Weighted-average common shares outstanding: 









      Basic 


49,135


48,341


48,973


48,041

      Diluted 


49,724


49,181


49,663


48,977

 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

 (unaudited) 

























Three Months Ended January 31,


Nine Months Ended January 31,



2015




2014


% Change


2015




2014


% Change


















Fee Revenue:
















Executive recruitment:

















North America

$      78,026




$     77,208


1%


$   243,055




$   226,538


7%


EMEA 

36,816




39,144


(6%)


113,788




107,742


6%


Asia Pacific

20,924




20,213


4%


61,615




63,063


(2%)


South America

7,713




7,477


3%


22,366




23,346


(4%)

Total executive recruitment

143,479




144,042


(0%)


440,824




420,689


5%

Leadership & Talent Consulting

64,313




62,217


3%


194,269




188,357


3%

Futurestep

41,753




35,925


16%


121,342




99,543


22%


Total fee revenue

249,545




242,184


3%


756,435




708,589


7%

 Reimbursed out-of-pocket engagement expenses 

9,326




8,753


7%


27,478




26,172


5%


Total revenue

$    258,871




$   250,937


3%


$   783,913




$   734,761


7%


















Operating Income:



Margin




Margin




Margin




Margin

Executive recruitment:

















North America

$      22,673


29.1%


$     19,919


25.8%


$     60,788


25.0%


$     51,773


22.9%


EMEA

5,073


13.8%


6,649


17.0%


13,337


11.7%


18,469


17.1%


Asia Pacific

4,096


19.6%


3,922


19.4%


10,042


16.3%


12,894


20.4%


South America

1,741


22.6%


1,132


15.1%


3,513


15.7%


4,893


21.0%

Total executive recruitment

33,583


23.4%


31,622


22.0%


87,680


19.9%


88,029


20.9%

Leadership & Talent Consulting

8,577


13.3%


5,651


9.1%


19,799


10.2%


16,992


9.0%

Futurestep

5,760


13.8%


3,925


10.9%


14,367


11.8%


9,009


9.1%

Corporate

(14,993)




(13,896)




(35,910)




(46,902)




 Total operating income

$      32,927


13.2%


$     27,302


11.3%


$     85,936


11.4%


$     67,128


9.5%

 

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (in thousands, except per share amounts) 













January 31,


April 30,



2015


2014

ASSETS


 (unaudited) 



Cash and cash equivalents


$       304,451


$    333,717

Marketable securities


28,291


9,566

Receivables due from clients, net of allowance for doubtful accounts 





of $10,589 and $9,513 respectively


201,486


175,986

Income taxes and other receivables


7,375


8,244

Deferred income taxes


3,975


4,486

Prepaid expenses and other assets


31,295


29,955

Total current assets


576,873


561,954






Marketable securities, non-current


120,578


124,993

Property and equipment, net


59,806


60,434

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


100,343


94,274

Deferred income taxes


54,501


55,039

Goodwill


242,784


257,582

Intangible assets, net


43,467


49,560

Investments and other assets


34,184


29,830

Total assets


$   1,232,536


$ 1,233,666






LIABILITIES AND STOCKHOLDERS' EQUITY





Accounts payable


$         18,270


$      19,375

Income taxes payable


8,011


13,014

Compensation and benefits payable


169,314


192,035

Other accrued liabilities


65,231


62,509

Total current liabilities


260,826


286,933






Deferred compensation and other retirement plans


164,417


169,235

Other liabilities


19,695


21,962

Total liabilities


444,938


478,130






Stockholders' equity





Common stock: $0.01 par value, 150,000 shares authorized, 62,797 and 





62,282 shares issued and 50,391 and 49,811 shares outstanding, respectively


459,689


449,631

Retained earnings


371,656


308,781

Accumulated other comprehensive loss, net


(43,747)


(2,388)

Stockholders' equity


787,598


756,024

Less:  notes receivable from stockholders


-


(488)

Total stockholders' equity


787,598


755,536

Total liabilities and stockholders' equity


$   1,232,536


$ 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 



January 31, 2015


January 31, 2014



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














Fee revenue 


$   249,545




$   249,545


$   242,184




$   242,184

Reimbursed out-of-pocket engagement expenses 


9,326




9,326


8,753




8,753

           Total revenue 


258,871




258,871


250,937




250,937














Compensation and benefits 


164,802




164,802


162,228




162,228

General and administrative expenses 


36,767


(445)


36,322


37,265




37,265

Reimbursed expenses 


9,326




9,326


8,753




8,753

Cost of services 


8,653




8,653


9,056




9,056

Depreciation and amortization 


6,814




6,814


6,333




6,333

Restructuring recoveries, net 


(418)


418


-


-




-

           Total operating expenses 


225,944


(27)


225,917


223,635


-


223,635














Operating income 


32,927


27


32,954


27,302


-


27,302














Other (loss) income, net 


(1,478)




(1,478)


1,132




1,132

Interest income (expense), net 


288




288


(873)




(873)

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


31,737


27


31,764


27,561


-


27,561

Equity in earnings of unconsolidated subsidiaries 


778




778


470




470

Income tax provision (1) (2) 


9,576


8


9,584


6,727




6,727

            Net income 


$     22,939


$             19


$     22,958


$     21,304


$                  -


$     21,304














Earnings per common share: 













      Basic 


$          0.46




$          0.46


$          0.44




$          0.44

      Diluted 


$          0.46




$          0.46


$          0.43




$          0.43














Weighted-average common shares outstanding: 













      Basic 


49,135




49,135


48,341




48,341

      Diluted 


49,724




49,724


49,181




49,181














Explanation of Non-GAAP Adjustments

(1) The adjustments result in an effective tax rate of 30% for the as adjusted amounts for the three months ended January 31, 2015. 

(2) The three months ended January 31, 2015 includes the tax effect on restructuring charges, net and 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) 





























Nine Months Ended


 Nine Months Ended 



January 31, 2015


January 31, 2014



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














Fee revenue 


$   756,435




$   756,435


$   708,589




$   708,589

Reimbursed out-of-pocket engagement expenses 


27,478




27,478


26,172




26,172

           Total revenue 


783,913




783,913


734,761




734,761














Compensation and benefits 


508,564


-


508,564


476,294


(4,500)


471,794

General and administrative expenses 


104,280


(445)


103,835


112,931


(394)


112,537

Reimbursed expenses 


27,478




27,478


26,172




26,172

Cost of services 


27,824




27,824


29,697




29,697

Depreciation and amortization 


20,363




20,363


18,857




18,857

Restructuring charges, net 


9,468


(9,468)


-


3,682


(3,682)


-

           Total operating expenses 


697,977


(9,913)


688,064


667,633


(8,576)


659,057














Operating income 


85,936


9,913


95,849


67,128


8,576


75,704














Other income, net 


3,061




3,061


7,751




7,751

Interest expense, net 


(1,426)




(1,426)


(2,102)




(2,102)

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


87,571


9,913


97,484


72,777


8,576


81,353

Equity in earnings of unconsolidated subsidiaries 


1,696




1,696


1,492




1,492

Income tax provision (1) (2) 


26,392


2,950


29,342


22,789


2,796


25,585

            Net income  


$     62,875


$           6,963


$     69,838


$     51,480


$           5,780


$     57,260














Earnings per common share: 













      Basic 


$          1.27




$          1.41


$          1.07




$          1.19

      Diluted 


$          1.25




$          1.39


$          1.05




$          1.17














Weighted-average common shares outstanding: 













      Basic 


48,973




48,973


48,041




48,041

      Diluted 


49,663




49,663


48,977




48,977














Explanation of Non-GAAP Adjustments

(1) The adjustments result in an effective tax rate of 30% and 31% for the as adjusted amounts for the nine months ended January 31, 2015 and 2014, respectively. 

(2) The nine months ended January 31, 2015 includes the tax effect on restructuring charges, net and acquisition costs, while the nine months ended January 31, 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 January 31, 2015 



 Executive Recruitment 











 North America 


 EMEA 


 Asia Pacific 


 South America 


 Subtotal 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 




















Fee revenue 


$      78,026


$      36,816


$      20,924


$        7,713


$    143,479


$      64,313


$      41,753


$                 -


$    249,545




















Net income 


















$      22,939

       Other loss, net 


















1,478

       Interest income, net 


















(288)

       Equity in earnings of unconsolidated subsidiaries, net 


















(778)

       Income tax provision 


















9,576

 Operating income (loss) 


$      22,673


$        5,073


$        4,096


$        1,741


$      33,583


$        8,577


$        5,760


$     (14,993)


32,927

Depreciation and amortization 


867


431


216


79


1,593


3,317


469


1,435


6,814

       Other (loss) income, net 


(225)


24


25


41


(135)


(156)


4


(1,191)


(1,478)

       Equity in earnings of unconsolidated subsidiaries, net 


103


-


-


-


103


-


-


675


778

 EBITDA 


23,418


5,528


4,337


1,861


35,144


11,738


6,233


(14,074)


39,041

 EBITDA margin 


30.0%


15.0%


20.7%


24.1%


24.5%


18.3%


14.9%




15.7%




















Restructuring recoveries, net 


-


-


-


(148)


(148)


-


(270)


-


(418)

Acquisition costs 


-


-


-


-


-


-


-


445


445

 Adjusted EBITDA 


$      23,418


$        5,528


$        4,337


$        1,713


$      34,996


$      11,738


$        5,963


$     (13,629)


$      39,068

 Adjusted EBITDA margin 


30.0%


15.0%


20.7%


22.2%


24.4%


18.3%


14.3%




15.7%









































 Three Months Ended January 31, 2014 



 Executive Recruitment 











 North America 


 EMEA 


 Asia Pacific 


 South America 


 Subtotal 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 




















Fee revenue 


$      77,208


$      39,144


$      20,213


$        7,477


$    144,042


$      62,217


$      35,925


$                 -


$    242,184




















Net income 


















$      21,304

       Other income, net 


















(1,132)

       Interest expense, net 


















873

       Equity in earnings of unconsolidated subsidiaries, net 


















(470)

       Income tax provision 


















6,727

 Operating income (loss) 


$      19,919


$        6,649


$        3,922


$        1,132


$      31,622


$        5,651


$        3,925


$     (13,896)


27,302

    Depreciation and amortization 


849


452


267


52


1,620


3,272


437


1,004


6,333

       Other income, net 


81


121


52


-


254


92


28


758


1,132

       Equity in earnings of unconsolidated subsidiaries, net 


36


-


-


-


36


-


-


434


470

 EBITDA 


20,885


7,222


4,241


1,184


33,532


9,015


4,390


(11,700)


35,237

 EBITDA margin 


27.1%


18.4%


21.0%


15.8%


23.3%


14.5%


12.2%




14.5%




















Adjusted EBITDA 


$      20,885


$        7,222


$        4,241


$        1,184


$      33,532


$        9,015


$        4,390


$     (11,700)


$      35,237

Adjusted EBITDA margin 


27.1%


18.4%


21.0%


15.8%


23.3%


14.5%


12.2%




14.5%

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)






 Nine Months Ended January 31, 2015 



 Executive Recruitment 











 North America 


 EMEA 


 Asia Pacific 


 South America 


 Subtotal 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 




















Fee revenue 


$    243,055


$    113,788


$      61,615


$      22,366


$    440,824


$    194,269


$    121,342


$                 -


$    756,435




















Net income 


















$      62,875

       Other income, net 


















(3,061)

       Interest expense, net 


















1,426

       Equity in earnings of unconsolidated subsidiaries, net 


















(1,696)

       Income tax provision 


















26,392

Operating income (loss) 


$      60,788


$      13,337


$      10,042


$        3,513


$      87,680


$      19,799


$      14,367


$     (35,910)


85,936

       Depreciation and amortization 


2,662


1,366


771


249


5,048


9,848


1,374


4,093


20,363

       Other income (loss), net 


98


69


283


87


537


(111)


27


2,608


3,061

       Equity in earnings of unconsolidated subsidiaries, net 


281


-


-


-


281


-


-


1,415


1,696

EBITDA 


63,829


14,772


11,096


3,849


93,546


29,536


15,768


(27,794)


111,056

EBITDA margin 


26.3%


13.0%


18.0%


17.2%


21.2%


15.2%


13.0%




14.7%




















       Restructuring charges, net 


1,151


3,987


17


229


5,384


2,758


1,154


172


9,468

       Acquisition costs 


-


-


-


-


-


-


-


445


445

Adjusted EBITDA 


$      64,980


$      18,759


$      11,113


$        4,078


$      98,930


$      32,294


$      16,922


$     (27,177)


$    120,969

Adjusted EBITDA margin 


26.7%


16.5%


18.0%


18.2%


22.4%


16.6%


13.9%




16.0%









































 Nine Months Ended January 31, 2014 



 Executive Recruitment 











 North America 


 EMEA  


 Asia Pacific 


 South America 


 Subtotal 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 




















Fee revenue 


$    226,538


$    107,742


$      63,063


$      23,346


$    420,689


$    188,357


$      99,543


$                 -


$    708,589




















Net income 


















$      51,480

       Other income, net 


















(7,751)

       Interest expense, net 


















2,102

       Equity in earnings of unconsolidated subsidiaries, net 


















(1,492)

       Income tax provision 


















22,789

Operating income (loss) 


$      51,773


$      18,469


$      12,894


$        4,893


$      88,029


$      16,992


$        9,009


$     (46,902)


67,128

       Depreciation and amortization 


2,732


1,339


1,102


225


5,398


9,330


1,285


2,844


18,857

       Other income, net 


529


403


144


10


1,086


145


576


5,944


7,751

       Equity in earnings of unconsolidated subsidiaries, net 


258


-


-


-


258


-


-


1,234


1,492

EBITDA 


55,292


20,211


14,140


5,128


94,771


26,467


10,870


(36,880)


95,228

EBITDA margin 


24.4%


18.8%


22.4%


22.0%


22.5%


14.1%


10.9%




13.4%




















       Restructuring charges, net 


816


460


60


-


1,336


1,149


1,134


63


3,682

       Separation costs 


-


-


-


-


-


-


-


4,500


4,500

Integration/acquisition costs 


-


-


-


-


-


-


-


394


394

Adjusted EBITDA 


$      56,108


$      20,671


$      14,200


$        5,128


$      96,107


$      27,616


$      12,004


$     (31,923)


$    103,804

Adjusted EBITDA margin 


24.8%


19.2%


22.5%


22.0%


22.8%


14.7%


12.1%




14.6%

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/korn-ferry-international-announces-third-quarter-fiscal-2015-results-of-operations-300047649.html

SOURCE Korn Ferry

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