Korn Ferry International Announces Third Quarter Fiscal 2016 Results of Operations
"Despite the threat of economic contagion at the beginning of this calendar year, I am pleased to report 14% year over year growth in fee revenue at constant currency in our third fiscal quarter – excluding the legacy
"We have successfully completed the initial synergy phase of our combination with
"After a short 90 days with
Hay Group Integration
The acquisition of
In the fourth quarter of FY'16, we estimate that legacy
The integration of
____________
(1)
Q4 FY'16 Legacy Hay Group |
||||
Low |
High |
|||
Legacy Hay Group Adjusted EBITDA margin |
12.0% |
13.0% |
||
Legacy Hay Group deferred revenue adjustment |
(5.2) |
(4.9) |
||
Integration/acquisition costs |
(7.2) |
(5.1) |
||
Restructuring costs |
(1.7) |
(0.8) |
||
Retention bonuses |
(3.6) |
(3.3) |
||
Hay Group EBITDA margin |
(5.7)% |
(1.1)% |
Selected Financial Results |
||||||||
(dollars in millions, except per share amounts) |
||||||||
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Fee revenue |
$ 344.2 |
$ 249.5 |
$ 892.2 |
$ 756.4 |
||||
Total revenue |
$ 358.9 |
$ 258.9 |
$ 929.6 |
$ 783.9 |
||||
Operating (loss) income |
$ (14.1) |
$ 32.9 |
$ 47.8 |
$ 85.9 |
||||
Operating margin |
(4.1)% |
13.2% |
5.4% |
11.4% |
||||
Net (loss) income |
$ (16.0) |
$ 23.0 |
$ 25.1 |
$ 62.9 |
||||
Basic (loss) earnings per share |
$ (0.30) |
$ 0.46 |
$ 0.49 |
$ 1.27 |
||||
Diluted (loss) earnings per share |
$ (0.30) |
$ 0.46 |
$ 0.48 |
$ 1.25 |
||||
EBITDA Results (a): |
Third Quarter |
Year to Date |
||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
EBITDA |
$ (10.6) |
$ 39.1 |
$ 64.4 |
$ 111.1 |
||||
EBITDA margin |
(3.1)% |
15.7% |
7.2% |
14.7% |
||||
Adjusted Results (b): |
Third Quarter |
Year to Date |
||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Fee revenue |
$ 350.1 |
$ 249.5 |
$ 898.1 |
$ 756.4 |
||||
EBITDA (a) |
$ 47.7 |
$ 39.1 |
$ 135.4 |
$ 121.0 |
||||
EBITDA margin (a) |
13.6% |
15.7% |
15.1% |
16.0% |
||||
Net income |
$ 28.8 |
$ 23.0 |
$ 78.1 |
$ 69.9 |
||||
Basic earnings per share |
$ 0.53 |
$ 0.46 |
$ 1.51 |
$ 1.41 |
||||
Diluted earnings per share |
$ 0.52 |
$ 0.46 |
$ 1.50 |
$ 1.39 |
____________ |
|
(a) |
EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (recoveries), net, integration/acquisition costs, and includes the deferred revenue adjustment related to the Hay Group acquisition and separation costs. EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
(b) |
Adjusted results are non-GAAP financial measures that adjust for the following (see attached reconciliations): |
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Deferred revenue adjustment related to the Hay Group acquisition |
$ 5.9 |
$ — |
$ 5.9 |
$ — |
||||
Restructuring charges (recoveries), net |
$ 30.6 |
$ (0.4) |
$ 30.6 |
$ 9.5 |
||||
Integration/acquisition costs |
$ 21.1 |
$ 0.4 |
$ 33.8 |
$ 0.4 |
||||
Separation costs |
$ 0.7 |
$ — |
$ 0.7 |
$ — |
Adjusted fee revenue was
Compensation and benefit expenses were
General and administrative expenses were
In addition to the previously discussed restructuring charges, during the quarter, the Company spent
Adjusted EBITDA was
On a GAAP basis, operating loss was
Balance Sheet and Liquidity
Cash and marketable securities were
The Company declared a quarterly dividend of
Results by Segment |
||||||||
Selected Executive Recruitment Data |
||||||||
(dollars in millions) |
||||||||
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Fee revenue |
$ 154.6 |
$ 143.4 |
$ 463.2 |
$ 440.8 |
||||
Total revenue |
$ 159.6 |
$ 149.0 |
$ 479.1 |
$ 457.6 |
||||
Operating income |
$ 34.6 |
$ 33.6 |
$ 108.7 |
$ 87.7 |
||||
Operating margin |
22.4% |
23.4% |
23.5% |
19.9% |
||||
Ending number of consultants |
492 |
444 |
492 |
444 |
||||
Average number of consultants |
493 |
442 |
472 |
438 |
||||
Engagements billed |
2,975 |
3,050 |
6,440 |
6,458 |
||||
New engagements (a) |
1,302 |
1,260 |
4,054 |
3,783 |
||||
EBITDA Results (b): |
Third Quarter |
Year to Date |
||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
EBITDA |
$ 35.7 |
$ 35.2 |
$ 113.2 |
$ 93.6 |
||||
EBITDA margin |
23.0% |
24.5% |
24.4% |
21.2% |
||||
Adjusted Results (c): |
Third Quarter |
Year to Date |
||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
EBITDA (b) |
$ 43.0 |
$ 35.1 |
$ 120.5 |
$ 99.0 |
||||
EBITDA margin (b) |
27.7% |
24.4% |
26.0% |
22.4% |
____________ |
|
(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'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Restructuring charges (recoveries), net |
$ 7.3 |
$ (0.1) |
$ 7.3 |
$ 5.4 |
Executive Recruitment
Fee revenue was
Adjusted EBITDA was
Operating income was
Selected Hay Group Data |
||||||||
(dollars in millions) |
||||||||
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Fee revenue |
$ 140.6 |
$ 64.4 |
$ 283.4 |
$ 194.3 |
||||
Total revenue |
$ 146.1 |
$ 66.0 |
$ 293.5 |
$ 199.9 |
||||
Operating (loss) income |
$ (21.6) |
$ 8.6 |
$ (6.3) |
$ 19.8 |
||||
Operating margin |
(15.3)% |
13.3% |
(2.2)% |
10.2% |
||||
Ending number of consultants (a) |
183 |
140 |
183 |
140 |
||||
Staff utilization (b) |
62% |
65% |
65% |
70% |
||||
EBITDA Results (c): |
Third Quarter |
Year to Date |
||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
EBITDA |
$ (14.7) |
$ 11.7 |
$ 7.0 |
$ 29.5 |
||||
EBITDA margin |
(10.5)% |
18.3% |
2.5% |
15.2% |
||||
Adjusted Results (d): |
Third Quarter |
Year to Date |
||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Fee revenue |
$ 146.5 |
$ 64.4 |
$ 289.3 |
$ 194.3 |
||||
EBITDA (c) |
$ 22.8 |
$ 11.7 |
$ 48.2 |
$ 32.3 |
||||
EBITDA margin (c) |
15.6% |
18.3% |
16.7% |
16.6% |
____________ |
|
(a) |
Represents number of employees originating consulting services in legacy Leadership & Talent Consulting. We are in process of mapping legacy Hay Group personnel to our existing job categories and will include them in future periods upon completion of the mapping. |
(b) |
Calculated by dividing the number of hours our full-time Hay Group professional staff record to engagements 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 adjust for the following (see attached reconciliations): |
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Deferred revenue adjustment related to the Hay Group acquisition |
$ 5.9 |
$ — |
$ 5.9 |
$ — |
||||
Restructuring charges, net |
$ 23.2 |
$ — |
$ 23.2 |
$ 2.8 |
||||
Integration/acquisition costs |
$ 8.4 |
$ — |
$ 12.1 |
$ — |
Fee revenue was
Adjusted EBITDA was
Operating loss was
Selected Futurestep Data |
|||||||||
(dollars in millions) |
|||||||||
Third Quarter |
Year to Date |
||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
||||||
Fee revenue |
$ 49.0 |
$ 41.7 |
$ 145.6 |
$ 121.3 |
|||||
Total revenue |
$ 53.2 |
$ 43.9 |
$ 157.0 |
$ 126.4 |
|||||
Operating income |
$ 6.6 |
$ 5.8 |
$ 19.7 |
$ 14.4 |
|||||
Operating margin |
13.5% |
13.8% |
13.5% |
11.8% |
|||||
Engagements billed (a) |
824 |
743 |
1,718 |
1,532 |
|||||
New engagements (b) |
435 |
373 |
1,366 |
1,150 |
|||||
EBITDA Results (c): |
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
||||||
EBITDA |
$ 7.3 |
$ 6.3 |
$ 21.6 |
$ 15.8 |
|||||
EBITDA margin |
14.9% |
14.9% |
14.8% |
13.0% |
|||||
Adjusted Results (d): |
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
||||||
EBITDA (c) |
$ 7.3 |
$ 6.0 |
$ 21.6 |
$ 16.9 |
|||||
EBITDA margin (c) |
14.9% |
14.3% |
14.8% |
13.9% |
____________ |
|
(a) |
Represents search engagements billed. |
(b) |
Represents new search engagements opened in the respective period. |
(c) |
EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
(d) |
Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
Third Quarter |
Year to Date |
|||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||
Restructuring charges (recoveries), net |
$ — |
$ (0.3) |
$ — |
$ 1.1 |
Futurestep
Fee revenue was
Adjusted EBITDA was
Operating income was
Outlook
Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated adjusted basis:
- Q4 FY'16 fee revenue is expected to be in the range of
$385 million and$405 million ; and - Q4 FY'16 diluted earnings per share is likely to range from
$0.50 to $0.58 .
On a consolidated basis, measured by U.S. GAAP:
- Q4 FY'16 fee revenue is expected to be in the range of
$379 million and$399 million ; and - Q4 FY'16 diluted earnings per share is likely to range between
$0.11 to $0.26 .
Q4 FY'16 |
Q4 FY'16 |
||||||||
Low |
High |
Low |
High |
||||||
(in millions) |
|||||||||
Korn Ferry consolidated adjusted fee revenue |
$ 385 |
$ 405 |
Adjusted consolidated diluted earnings per share |
$ 0.50 |
$ 0.58 |
||||
Legacy Hay Group deferred revenue adjustment |
(6) |
(6) |
Legacy Hay Group deferred revenue adjustment |
(0.07) |
(0.07) |
||||
Korn Ferry consolidated US GAAP fee revenue |
$ 379 |
$ 399 |
Integration/acquisition costs |
(0.10) |
(0.07) |
||||
Restructuring charges |
(0.02) |
(0.01) |
|||||||
Retention bonuses |
(0.05) |
(0.05) |
|||||||
Venezuela exchange rate |
(0.14) |
(0.11) |
|||||||
Tax rate impact |
(0.01) |
(0.01) |
|||||||
Consolidated US GAAP diluted earnings per share |
$ 0.11 |
$ 0.26 |
(1) |
Korn Ferry consolidated adjusted fee revenue is a non-GAAP financial measure that excludes the deferred revenue adjustment relating to Hay Group. |
(2) |
Adjusted consolidated diluted earnings per share is a non-GAAP financial measure that excludes the items listed below in the table above. |
Additionally, in connection with the recently announced devaluation of the Venezuelan currency, the Company expects to take a non-cash charge of
Earnings Conference Call Webcast
The earnings conference call will be held today at
About
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
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/acquisition costs, separation costs and includes the deferred revenue adjustment related to the
Hay Group acquisition, net of income tax effect; - adjusted basic and diluted earnings per share, adjusted to exclude restructuring charges, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to the
Hay Group acquisition, net of income tax effect; and in the case of the outlook section, also adjusted for Venezuelan exchange rate and tax rate impact; - 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;
- Adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring charges, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to the
Hay Group acquisition, and Adjusted EBITDA margin; - Legacy Hay Group EBITDA, which is EBITDA (as described above) for legacy
Hay Group , and legacy Hay Group Adjusted EBITDA, which is Adjusted EBITDA (as described above) for legacyHay Group , further adjusted to include the deferred revenue adjustment relating to theHay Group acquisition; - Consolidated adjusted fee revenue, which includes the deferred revenue adjustment relating to the
Hay Group acquisition; and Legacy Hay Group adjusted fee revenue, which includes the deferred revenue adjustment relating to theHay Group acquisition;
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
[Tables attached]
KORN FERRY AND SUBSIDIARIES |
||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||
(in thousands, except per share amounts) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
January 31, |
January 31, |
|||||||
2016 |
2015 |
2016 |
2015 |
|||||
(unaudited) |
||||||||
Fee revenue |
$ 344,158 |
$ 249,545 |
$ 892,152 |
$ 756,435 |
||||
Reimbursed out-of-pocket engagement expenses |
14,721 |
9,326 |
37,401 |
27,478 |
||||
Total revenue |
358,879 |
258,871 |
929,553 |
783,913 |
||||
Compensation and benefits |
242,429 |
164,802 |
610,493 |
508,564 |
||||
General and administrative expenses |
57,395 |
36,767 |
139,449 |
104,280 |
||||
Reimbursed expenses |
14,721 |
9,326 |
37,401 |
27,478 |
||||
Cost of services |
17,494 |
8,653 |
38,850 |
27,824 |
||||
Depreciation and amortization |
10,330 |
6,814 |
24,933 |
20,363 |
||||
Restructuring charges (recoveries), net |
30,577 |
(418) |
30,577 |
9,468 |
||||
Total operating expenses |
372,946 |
225,944 |
881,703 |
697,977 |
||||
Operating (loss) income |
(14,067) |
32,927 |
47,850 |
85,936 |
||||
Other (loss) income, net |
(7,092) |
(1,478) |
(9,812) |
3,061 |
||||
Interest (expense) income, net |
(372) |
288 |
(1,215) |
(1,426) |
||||
(Loss) income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries |
||||||||
(21,531) |
31,737 |
36,823 |
87,571 |
|||||
Equity in earnings of unconsolidated subsidiaries |
181 |
778 |
1,446 |
1,696 |
||||
Income tax (benefit) provision |
(5,355) |
9,576 |
13,211 |
26,392 |
||||
Net (loss) income |
$ (15,995) |
$ 22,939 |
$ 25,058 |
$ 62,875 |
||||
(Loss) earnings per common share: |
||||||||
Basic |
$ (0.30) |
$ 0.46 |
$ 0.49 |
$ 1.27 |
||||
Diluted |
$ (0.30) |
$ 0.46 |
$ 0.48 |
$ 1.25 |
||||
Weighted-average common shares outstanding: |
||||||||
Basic |
54,003 |
49,135 |
51,159 |
48,973 |
||||
Diluted |
54,003 |
49,724 |
51,683 |
49,663 |
||||
Cash dividends declared per share: |
$ 0.10 |
$ - |
$ 0.30 |
$ - |
KORN FERRY AND SUBSIDIARIES |
||||||||||||||||
FINANCIAL SUMMARY BY SEGMENT |
||||||||||||||||
(in thousands) |
||||||||||||||||
(unaudited) |
||||||||||||||||
Three Months Ended January 31, |
Nine Months Ended January 31, |
|||||||||||||||
2016 |
2015 |
% Change |
2016 |
2015 |
% Change |
|||||||||||
Fee Revenue: |
||||||||||||||||
Executive recruitment: |
||||||||||||||||
North America |
$ 93,520 |
$ 78,026 |
20% |
$ 276,667 |
$ 243,055 |
14% |
||||||||||
EMEA |
35,498 |
36,816 |
(4%) |
108,158 |
113,788 |
(5%) |
||||||||||
Asia Pacific |
19,094 |
20,924 |
(9%) |
59,307 |
61,615 |
(4%) |
||||||||||
South America |
6,541 |
7,713 |
(15%) |
19,083 |
22,366 |
(15%) |
||||||||||
Total executive recruitment |
154,653 |
143,479 |
8% |
463,215 |
440,824 |
5% |
||||||||||
Hay Group |
140,508 |
64,313 |
118% |
283,350 |
194,269 |
46% |
||||||||||
Futurestep |
48,997 |
41,753 |
17% |
145,587 |
121,342 |
20% |
||||||||||
Total fee revenue |
344,158 |
249,545 |
38% |
892,152 |
756,435 |
18% |
||||||||||
Reimbursed out-of-pocket engagement expenses |
14,721 |
9,326 |
58% |
37,401 |
27,478 |
36% |
||||||||||
Total revenue |
$ 358,879 |
$ 258,871 |
39% |
$ 929,553 |
$ 783,913 |
19% |
||||||||||
Operating (Loss) Income: |
Margin |
Margin |
Margin |
Margin |
||||||||||||
Executive recruitment: |
||||||||||||||||
North America |
$ 28,957 |
31.0% |
$ 22,673 |
29.1% |
$ 80,524 |
29.1% |
$ 60,788 |
25.0% |
||||||||
EMEA |
1,707 |
4.8% |
5,073 |
13.8% |
14,912 |
13.8% |
13,337 |
11.7% |
||||||||
Asia Pacific |
2,775 |
14.5% |
4,096 |
19.6% |
9,668 |
16.3% |
10,042 |
16.3% |
||||||||
South America |
1,166 |
17.8% |
1,741 |
22.6% |
3,644 |
19.1% |
3,513 |
15.7% |
||||||||
Total executive recruitment |
34,605 |
22.4% |
33,583 |
23.4% |
108,748 |
23.5% |
87,680 |
19.9% |
||||||||
Hay Group |
(21,559) |
(15.3%) |
8,577 |
13.3% |
(6,286) |
(2.2%) |
19,799 |
10.2% |
||||||||
Futurestep |
6,630 |
13.5% |
5,760 |
13.8% |
19,715 |
13.5% |
14,367 |
11.8% |
||||||||
Corporate |
(33,743) |
(14,993) |
(74,327) |
(35,910) |
||||||||||||
Total operating (loss) income |
$ (14,067) |
(4.1%) |
$ 32,927 |
13.2% |
$ 47,850 |
5.4% |
$ 85,936 |
11.4% |
KORN FERRY AND SUBSIDIARIES |
||||
CONSOLIDATED BALANCE SHEETS |
||||
(in thousands, except per share amounts) |
||||
January 31, |
April 30, |
|||
2016 |
2015 |
|||
ASSETS |
(unaudited) |
|||
Cash and cash equivalents |
$ 207,342 |
$ 380,838 |
||
Marketable securities |
9,118 |
25,757 |
||
Receivables due from clients, net of allowance for doubtful accounts |
||||
of $11,775 and $9,958 respectively |
330,687 |
188,543 |
||
Income taxes and other receivables |
32,549 |
10,966 |
||
Prepaid expenses and other assets |
43,157 |
31,054 |
||
Total current assets |
622,853 |
637,158 |
||
Marketable securities, non-current |
126,820 |
118,819 |
||
Property and equipment, net |
90,150 |
62,088 |
||
Cash surrender value of company owned life insurance policies, net of loans |
104,837 |
102,691 |
||
Deferred income taxes |
61,448 |
59,841 |
||
Goodwill |
575,112 |
254,440 |
||
Intangible assets, net |
238,889 |
47,901 |
||
Investments and other assets |
53,191 |
34,863 |
||
Total assets |
$ 1,873,300 |
$ 1,317,801 |
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||
Accounts payable |
$ 25,656 |
$ 19,238 |
||
Income taxes payable |
2,612 |
3,813 |
||
Compensation and benefits payable |
213,599 |
219,364 |
||
Term loan |
31,034 |
- |
||
Other accrued liabilities |
155,100 |
63,595 |
||
Total current liabilities |
428,001 |
306,010 |
||
Deferred compensation and other retirement plans |
203,378 |
173,432 |
||
Term loan, non-current |
116,466 |
- |
||
Deferred tax liability |
57,985 |
- |
||
Other liabilities |
36,756 |
23,110 |
||
Total liabilities |
842,586 |
502,552 |
||
Stockholders' equity |
||||
Common stock: $0.01 par value, 150,000 shares authorized, 69,951 and 62,863 shares issued and 57,270 and 50,573 shares outstanding, respectively |
||||
697,397 |
463,839 |
|||
Retained earnings |
401,032 |
392,033 |
||
Accumulated other comprehensive loss, net |
(67,715) |
(40,623) |
||
Total stockholders' equity |
1,030,714 |
815,249 |
||
Total liabilities and stockholders' equity |
$ 1,873,300 |
$ 1,317,801 |
KORN FERRY AND SUBSIDIARIES |
||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||
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, 2016 |
January 31, 2015 |
|||||||||||
As Reported |
Adjustments |
As Adjusted |
As Reported |
Adjustments |
As Adjusted |
|||||||
Fee revenue |
$ 344,158 |
$ 5,871 |
$ 350,029 |
$ 249,545 |
$ 249,545 |
|||||||
Reimbursed out-of-pocket engagement expenses |
14,721 |
14,721 |
9,326 |
9,326 |
||||||||
Total revenue |
358,879 |
5,871 |
364,750 |
258,871 |
- |
258,871 |
||||||
Compensation and benefits |
242,429 |
(12,716) |
229,713 |
164,802 |
164,802 |
|||||||
General and administrative expenses |
57,395 |
(9,175) |
48,220 |
36,767 |
(445) |
36,322 |
||||||
Reimbursed expenses |
14,721 |
14,721 |
9,326 |
9,326 |
||||||||
Cost of services |
17,494 |
17,494 |
8,653 |
8,653 |
||||||||
Depreciation and amortization |
10,330 |
10,330 |
6,814 |
6,814 |
||||||||
Restructuring charges (recoveries), net |
30,577 |
(30,577) |
- |
(418) |
418 |
- |
||||||
Total operating expenses |
372,946 |
(52,468) |
320,478 |
225,944 |
(27) |
225,917 |
||||||
Operating (loss) income |
(14,067) |
58,339 |
44,272 |
32,927 |
27 |
32,954 |
||||||
Other loss, net |
(7,092) |
(7,092) |
(1,478) |
(1,478) |
||||||||
Interest (expense) income, net |
(372) |
(372) |
288 |
288 |
||||||||
(Loss) income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries |
||||||||||||
(21,531) |
58,339 |
36,808 |
31,737 |
27 |
31,764 |
|||||||
Equity in earnings of unconsolidated subsidiaries |
181 |
181 |
778 |
778 |
||||||||
Income tax (benefit) provision (1) (2) |
(5,355) |
13,590 |
8,235 |
9,576 |
8 |
9,584 |
||||||
Net (loss) income |
$ (15,995) |
$ 44,749 |
$ 28,754 |
$ 22,939 |
$ 19 |
$ 22,958 |
||||||
(Loss) earnings per common share: |
||||||||||||
Basic |
$ (0.30) |
$ 0.53 |
$ 0.46 |
$ 0.46 |
||||||||
Diluted |
$ (0.30) |
$ 0.52 |
$ 0.46 |
$ 0.46 |
||||||||
Weighted-average common shares outstanding: |
||||||||||||
Basic |
54,003 |
54,003 |
49,135 |
49,135 |
||||||||
Diluted |
54,003 |
54,433 |
49,724 |
49,724 |
Explanation of Non-GAAP Adjustments |
|||||||||||||
(1) |
The adjustments result in an effective tax rate of 22% and 30% for the as adjusted amounts for the three months ended January 31, 2016 and 2015, respectively. |
||||||||||||
(2) |
The three months ended January 31, 2016 includes the tax effect on restructuring charges, net, integration/acquisition costs and deferred revenue adjustment associated with the acquisition of Hay Group and separation costs, while 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, 2016 |
January 31, 2015 |
|||||||||||
As Reported |
Adjustments |
As Adjusted |
As Reported |
Adjustments |
As Adjusted |
|||||||
Fee revenue |
$ 892,152 |
$ 5,871 |
$ 898,023 |
$ 756,435 |
$ - |
$ 756,435 |
||||||
Reimbursed out-of-pocket engagement expenses |
37,401 |
37,401 |
27,478 |
27,478 |
||||||||
Total revenue |
929,553 |
5,871 |
935,424 |
783,913 |
- |
783,913 |
||||||
Compensation and benefits |
610,493 |
(16,355) |
594,138 |
508,564 |
508,564 |
|||||||
General and administrative expenses |
139,449 |
(18,204) |
121,245 |
104,280 |
(445) |
103,835 |
||||||
Reimbursed expenses |
37,401 |
37,401 |
27,478 |
27,478 |
||||||||
Cost of services |
38,850 |
38,850 |
27,824 |
27,824 |
||||||||
Depreciation and amortization |
24,933 |
24,933 |
20,363 |
20,363 |
||||||||
Restructuring charges, net |
30,577 |
(30,577) |
- |
9,468 |
(9,468) |
- |
||||||
Total operating expenses |
881,703 |
(65,136) |
816,567 |
697,977 |
(9,913) |
688,064 |
||||||
Operating income |
47,850 |
71,007 |
118,857 |
85,936 |
9,913 |
95,849 |
||||||
Other (loss) income, net |
(9,812) |
(9,812) |
3,061 |
3,061 |
||||||||
Interest expense, net |
(1,215) |
(1,215) |
(1,426) |
(1,426) |
||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
||||||||||||
36,823 |
71,007 |
107,830 |
87,571 |
9,913 |
97,484 |
|||||||
Equity in earnings of unconsolidated subsidiaries |
1,446 |
1,446 |
1,696 |
1,696 |
||||||||
Income tax provision (1) (2) |
13,211 |
17,973 |
31,184 |
26,392 |
2,950 |
29,342 |
||||||
Net income |
$ 25,058 |
$ 53,034 |
$ 78,092 |
$ 62,875 |
$ 6,963 |
$ 69,838 |
||||||
Earnings per common share: |
||||||||||||
Basic |
$ 0.49 |
$ 1.51 |
$ 1.27 |
$ 1.41 |
||||||||
Diluted |
$ 0.48 |
$ 1.50 |
$ 1.25 |
$ 1.39 |
||||||||
Weighted-average common shares outstanding: |
||||||||||||
Basic |
51,159 |
51,159 |
48,973 |
48,973 |
||||||||
Diluted |
51,683 |
51,683 |
49,663 |
49,663 |
Explanation of Non-GAAP Adjustments |
|||||||||||||
(1) |
The adjustments result in an effective tax rate of 29% and 30% for the as adjusted amounts for the nine months ended January 31, 2016 and 2015, respectively. |
||||||||||||
(2) |
The nine months ended January 31, 2016 includes the tax effect on restructuring charges, net, integration/acquisition costs and deferred revenue adjustment associated with the acquisition of Hay Group and separation costs, while the nine months ended January 31, 2015 includes the tax effect on restructuring charges, net and acquisition costs associated with the acquisition of PDI Ninth House. |
||||||||||||
KORN FERRY AND SUBSIDIARIES |
||||||||||||||||||
RECONCILIATION OF NET (LOSS) INCOME AND OPERATING (LOSS) INCOME (GAAP) TO |
||||||||||||||||||
EBITDA AND ADJUSTED EBITDA (NON-GAAP) |
||||||||||||||||||
(in thousands) |
||||||||||||||||||
(unaudited) |
||||||||||||||||||
Three Months Ended January 31, 2016 |
||||||||||||||||||
Executive Recruitment |
||||||||||||||||||
North America |
EMEA |
Asia Pacific |
South America |
Subtotal |
Hay Group |
Futurestep |
Corporate |
Consolidated |
||||||||||
Fee revenue |
$ 93,520 |
$ 35,498 |
$ 19,094 |
$ 6,541 |
$ 154,653 |
$ 140,508 |
$ 48,997 |
$ - |
$ 344,158 |
|||||||||
Net loss |
$ (15,995) |
|||||||||||||||||
Other loss, net |
7,092 |
|||||||||||||||||
Interest expense, net |
372 |
|||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
(181) |
|||||||||||||||||
Income tax benefit |
(5,355) |
|||||||||||||||||
Operating income (loss) |
$ 28,957 |
$ 1,707 |
$ 2,775 |
$ 1,166 |
$ 34,605 |
$ (21,559) |
$ 6,630 |
$ (33,743) |
(14,067) |
|||||||||
Depreciation and amortization |
812 |
213 |
235 |
73 |
1,333 |
6,722 |
609 |
1,666 |
10,330 |
|||||||||
Other (loss) income, net |
(330) |
77 |
(114) |
9 |
(358) |
143 |
79 |
(6,956) |
(7,092) |
|||||||||
Equity in earnings of unconsolidated subsidiaries, net |
26 |
- |
- |
- |
26 |
- |
- |
155 |
181 |
|||||||||
EBITDA |
29,465 |
1,997 |
2,896 |
1,248 |
35,606 |
(14,694) |
7,318 |
(38,878) |
(10,648) |
|||||||||
EBITDA margin |
31.5% |
5.6% |
15.2% |
19.1% |
23.0% |
(10.5%) |
14.9% |
(3.1%) |
||||||||||
Restructuring charges, net |
484 |
5,866 |
577 |
328 |
7,255 |
23,241 |
- |
81 |
30,577 |
|||||||||
Integration/acquisition costs |
- |
- |
- |
- |
- |
8,413 |
- |
12,734 |
21,147 |
|||||||||
Deferred revenue adjustment due to acquisition |
- |
- |
- |
- |
- |
5,871 |
- |
- |
5,871 |
|||||||||
Separation costs |
- |
- |
- |
- |
- |
- |
- |
744 |
744 |
|||||||||
Adjusted EBITDA |
$ 29,949 |
$ 7,863 |
$ 3,473 |
$ 1,576 |
$ 42,861 |
$ 22,831 |
$ 7,318 |
$ (25,319) |
$ 47,691 |
|||||||||
Adjusted EBITDA margin |
32.0% |
22.2% |
18.2% |
24.1% |
27.7% |
15.6% |
14.9% |
13.6% |
||||||||||
Three Months Ended January 31, 2015 |
||||||||||||||||||
Executive Recruitment |
||||||||||||||||||
North America |
EMEA |
Asia Pacific |
South America |
Subtotal |
Hay Group |
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% |
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, 2016 |
||||||||||||||||||
Executive Recruitment |
||||||||||||||||||
North America |
EMEA |
Asia Pacific |
South America |
Subtotal |
Hay Group |
Futurestep |
Corporate |
Consolidated |
||||||||||
Fee revenue |
$ 276,667 |
$ 108,158 |
$ 59,307 |
$ 19,083 |
$ 463,215 |
$ 283,350 |
$ 145,587 |
$ - |
$ 892,152 |
|||||||||
Net income |
$ 25,058 |
|||||||||||||||||
Other loss, net |
9,812 |
|||||||||||||||||
Interest expense, net |
1,215 |
|||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |