Korn/Ferry International Announces an 11% Increase in Fee Revenue in the First Quarter
Highlights - First quarter fiscal 2009 fee revenue was $205.7 million, an increase of $20.3 million, or 11%, from $185.4 million in the same quarter last year. - First quarter fiscal 2009 diluted earnings per share was $0.36 compared to $0.36 in Q1'08.
LOS ANGELES, Sept. 9 /PRNewswire-FirstCall/ -- Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced first quarter fiscal 2009 diluted earnings per share of $0.36 compared to $0.36 in Q1'08.
"In the face of continued economic uncertainty, we believe our solid first quarter results reflect the long-term needs of our clients to attract and develop talent," said Gary D. Burnison, CEO, Korn/Ferry. "The combination of our proprietary talent management solutions, expansive geographic presence and world class colleagues create a unique platform from which we will continue to pursue our strategy of becoming the leading diversified human capital solutions company in the world."
Financial Results (dollars in millions, except per share amounts) First Quarter Q1'09 Q1'08 Fee Revenue $205.7 $185.4 Revenue $217.5 $196.3 Operating Income $23.8 $25.1 Operating Margin 11.5% 13.5% Net Income $15.9 $17.1 Basic Earnings Per Share $0.37 $0.38 Diluted Earnings Per Share $0.36 $0.36
Fee revenue of $205.7 million in Q1'09 increased $20.3 million, or 10.9%, from $185.4 million in Q1'08. Fee revenue improved due to an increase in revenue from all segments of the business including an increase in the number of search engagements opened as well as a 15% increase in the average fee billed per executive search engagement compared to the prior year. Exchange rates impacted fee revenue in Q1'09 favorably by $9.4 million compared to Q1'08 and excluding this favorable impact revenues increased 5.9% over the prior year's first quarter.
Compensation and benefits, excluding the $6.0 million unfavorable impact of exchange rates, were $136.1 million in Q1'09, an increase of $13.1 million, or 10.7%, compared to $123.0 million in Q1'08. The increase is attributable to profitability based compensation, modest investments in strategic business activities and to a lesser extent severance and related costs with the intention of maintaining consultant productivity. Actual compensation and benefits for Q1'09 was $142.1, an increase of 15.5% when compared to Q1'08.
General and administrative expenses, excluding the $1.8 million unfavorable impact of exchange rates, were $32.2 million in Q1'09 and increased by $0.5 million, or 1.6% from $31.7 million in Q1'08. The increase is primarily attributable to costs associated with business growth such as rent and utilities, and business development activities. Actual general and administrative expenses were $34.0 million in Q1'09 resulting in a 7.3% increase when compared to Q1'08.
Operating income was $23.8 million in Q1'09 compared to $25.1 million in Q1'08' a decrease of $1.3 million or 5.2% over Q1'08.
Balance Sheet and Liquidity
Cash, cash equivalents and marketable securities were $295.0 million at July 31, 2008 compared to $245.3 million at July 31, 2007. The increase was due primarily to improved operating cash flows.
Interest expense was $1.2 million in Q1'09 compared to $1.2 million in the same period last year. Interest expense in both years related primarily to borrowings under Korn/Ferry's COLI policies. At July 31, 2008, Korn/Ferry had no outstanding borrowings under its credit facility.
Results by Segment Selected Executive Recruitment Data (dollars in millions) First Quarter Q1'09 Q1'08 Fee Revenue $174.5 $159.8 Revenue $182.9 $166.7 Operating Income $31.7 $32.7 Operating Margin 18.1% 20.5% Average number of consultants 522 512 Engagements (a) 1,920 1,774 (a) Represents new engagements opened in the respective period.
Fee revenue was $174.5 million in Q1'09, an increase of $14.7 million, or 9.2%, from $159.8 million in Q1'08. Fee revenue improved in the majority of regions due to an increase in the overall number of engagements billed and average fee per engagement. Exchange rates impacted fee revenue in Q1'09 favorably by $7.3 million compared to Q1'08.
Operating income was $31.7 million in Q1'09 compared to $32.7 million in Q1'08 resulting in a decrease of $1.0 million or 3.1% from the prior year.
The total number of consultants at July 31, 2008 was 537, an increase of 21 from July 31, 2007 due primarily to the Company's annual promotion process.
Selected Futurestep Data (dollars in millions) First Quarter Q1'09 Q1'08 Fee Revenue $31.2 $25.6 Revenue $34.6 $29.6 Operating Income $2.9 $2.1 Operating Margin 9.2% 8.1%
Fee revenue was $31.2 million in Q1'09, an increase of $5.6 million, or 21.9%, from $25.6 million in Q1'08. Improvements in fee revenue were driven by an increase in the number of engagements billed and offset by a slight decrease in the average fee per engagement. Exchange rates impacted fee revenue in Q1'09 favorably by $2.1 million compared to Q1'08.
Operating income was $ 2.9 million in Q1'09 compared to $2.1 million in Q1'08.
Assuming constant foreign exchange rates, Korn/Ferry estimates that second quarter fiscal 2009 fee revenue is likely to be in the range of $185 million to $200 million and diluted earnings per share is likely to be in the range of $0.26 to $0.32.
Earnings Conference Call Webcast
The earnings conference call will be held today at 9:00 AM (EDT) and hosted by Gary Burnison, Chief Executive Officer, and Stephen Giusto, Chief Financial Officer. The conference call will be webcast and available online at http://www.kornferry.com, accessible through the Investor Relations section.
Korn/Ferry International (NYSE: KFY), with more than 90 offices in 39 countries, is a premier global provider of talent management solutions. Based in Los Angeles, the firm delivers an array of solutions that help clients to identify, deploy, develop, retain and reward their talent. For more information on the Korn/Ferry International family of companies, visit http://www.kornferry.com.
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. 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 which are beyond the control of Korn/Ferry. The potential risks and uncertainties relate to competition, the dependence on attracting and retaining qualified and experienced consultants, the portability of client relationships, local political or economic developments in or affecting countries where we have operations, including fluctuations in exchange rates, risks related to the growth and results of Futurestep, restrictions imposed by off-limits agreements, reliance on information systems 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.
[Tables attached] KORN/FERRY INTERNATIONAL AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) Quarter Ended July 31, 2008 2007 (unaudited) (unaudited) Fee revenue $205,733 $185,353 Reimbursed out-of-pocket engagement expenses 11,739 10,924 Total revenue 217,472 196,277 Compensation and benefits 142,123 122,986 General and administrative expense 34,030 31,701 Out-of-pocket engagement expenses 14,733 14,127 Depreciation and amortization 2,832 2,350 Total operating expense 193,718 171,164 Operating income 23,754 25,113 Interest and other income, net 380 1,498 Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries 24,134 26,611 Provision for income taxes 9,293 10,434 Equity in earnings of unconsolidated subsidiaries, net 1,063 923 Net income $15,904 $17,100 Basic earnings per common share $0.37 $0.38 Basic weighted average common shares outstanding 43,432 45,041 Diluted earnings per common share $0.36 $0.36 Diluted weighted average common shares outstanding 44,549 47,063 KORN/FERRY INTERNATIONAL AND SUBSIDIARIES FINANCIAL SUMMARY BY SEGMENT (in thousands) Quarter Ended July 31, 2008 2007 (unaudited) (unaudited) Fee Revenue: Executive recruitment: North America $93,974 $87,314 EMEA 51,590 44,722 Asia Pacific 21,403 22,661 South America 7,585 5,070 Total executive recruitment 174,552 159,767 Futurestep 31,181 25,586 Total fee revenue 205,733 185,353 Reimbursed out-of-pocket engagement expenses 11,739 10,924 Total revenue $217,472 $196,277 Operating Income (Loss): Margin Margin Executive recruitment: North America $18,637 19.8% $19,791 22.7% EMEA 8,486 16.4% 7,691 17.2% Asia Pacific 3,476 16.2% 4,537 20.0% South America 1,080 14.2% 661 13.0% Total executive recruitment 31,679 18.1% 32,680 20.5% Futurestep 2,855 9.2% 2,084 8.1% Corporate (10,780) (9,651) Total operating income $23,754 11.5% $25,113 13.5% KORN/FERRY INTERNATIONAL AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) As of As of July 31, 2008 April 30, 2008 (unaudited) ASSETS Cash and cash equivalents $205,949 $305,296 Marketable securities 2,865 5,940 Receivables due from clients, net of allowance for doubtful accounts of $12,558 and $11,504, respectively 138,716 119,952 Income taxes and other receivables 6,516 7,071 Deferred income taxes 9,817 10,401 Prepaid expenses 22,613 20,057 Total current assets 386,476 468,717 Marketable securities, non-current 86,215 78,026 Property and equipment, net 32,631 32,462 Cash surrender value of company owned life insurance policies, net of loans 81,556 81,377 Deferred income taxes 43,338 47,128 Goodwill 142,126 142,699 Intangible assets, net 15,399 15,519 Other assets 15,046 14,286 Total assets $802,787 $880,214 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $11,796 $15,309 Income taxes payable 18,755 20,948 Compensation and benefits payable 106,463 199,081 Other accrued liabilities 35,953 37,120 Total current liabilities 172,967 272,458 Deferred compensation and other retirement plans 111,153 105,719 Other liabilities 5,660 5,903 Total liabilities 289,780 384,080 Shareholders' equity Common stock: $0.01 par value, 150,000 shares authorized, 55,945 and 54,786 shares issued and 45,028 and 44,593 shares outstanding, respectively 362,351 358,568 Retained earnings 110,918 95,014 Accumulated other comprehensive income 40,282 43,097 Shareholders' equity 513,551 496,679 Less: Notes receivable from shareholders (544) (545) Total shareholders' equity 513,007 496,134 Total liabilities and shareholders' equity $802,787 $880,214
Investors, Stephen Giusto, +1-310-843-4144,
or Gregg Kvochak, +1-310-556-8550,
or Media, Anneli Ballard, +1-212-984-9350,
all of Korn|Ferry International
SOURCE Korn/Ferry International