kfy-8k_20181205.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  December 5, 2018

 

 

KORN/FERRY INTERNATIONAL

(Exact name of registrant as specified in its charter)

 

 

Delaware

001-14505

95-2623879

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

1900 Avenue of the Stars, Suite 2600

Los Angeles, California 90067

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (310) 552-1834

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933

(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


 

Item 2.02 Results of Operations and Financial Condition.

On December 6, 2018, Korn/Ferry International (the “Company”) issued a press release announcing its second quarter fiscal year 2019 results.  A copy of the press release is attached hereto as Exhibit 99.1.  The information in this Item 2.02 and the exhibit hereto are furnished to, but not filed with, the Securities and Exchange Commission.

Item 8.01 Other Events.

Declaration of Dividend

On December 5, 2018, the Board of Directors of the Company (the “Board”) declared a cash dividend of $0.10 per share that will be paid on January 15, 2019 to holders of the Company’s common stock of record at the close of business on December 20, 2018.  The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board and will depend upon many factors, including the Company’s earnings, capital requirements, financial conditions, the terms of the Company’s indebtedness and other factors that the Board may deem to be relevant.  The Company may amend, revoke or suspend the dividend policy at any time and for any reason at its discretion.

Appointment of Non-Executive Chair of the Board

On December 6, 2018, the Board announced the appointment of Ms. Christina A. Gold, an existing member of the Board, as the Company’s Non-Executive Chair of the Board, effective January 1, 2019.  Ms. Gold will succeed Mr. George T. Shaheen in this role as part of a planned succession, and Mr. Shaheen will remain a member of the Board.

A copy of the Company’s press release issued in connection with the announcement of Ms. Gold’s appointment is attached as Exhibit 99.2 hereto.

 

Item 9.01 Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit 99.1

 

Press Release, dated December 6, 2018.

Exhibit 99.2

 

Press Release, dated December 6, 2018.

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

KORN/FERRY INTERNATIONAL

 

(Registrant)

 

 

Date: December 6, 2018

/s/ Robert P. Rozek

 

(Signature)

 

Name:

Robert P. Rozek

 

Title:

Executive Vice President, Chief Financial Officer and

Chief Corporate Officer

 

 

kfy-ex991_6.htm

Exhibit 99.1

 

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

  

Contacts:

 

  

Investor Relations: Gregg Kvochak, (310) 556-8550

 

  

Media: Dan Gugler, (310) 226-2645

 

Korn Ferry Announces Second Quarter Fiscal 2019

Results of Operations

 

Highlights

 

Korn Ferry reports fee revenue of $495.2 million in Q2 FY’19, an 11.8% increase (14.6% on a constant currency basis) from Q2 FY’18, driven by organic growth in all segments.

 

Operating income was $71.0 million in Q2 FY’19 with an operating margin of 14.3%.  Adjusted EBITDA was $80.3 million with Adjusted EBITDA margin of 16.2%.

 

Q2 FY’19 diluted earnings per share was $0.81 compared to diluted earnings per share of $0.64 in Q2 FY’18.  Adjusted diluted earnings per share was $0.85 in Q2 FY’19 compared to Adjusted diluted earnings per share of $0.67 in Q2 FY’18.

 

The Company continued with its balanced approach to capital allocation, buying back $22.7 million of stock during the quarter and declaring a quarterly dividend of $0.10 per share on December 5, 2018 payable on January 15, 2019 to stockholders of record on December 20, 2018.

 

 

In connection with the previously announced rebranding, the firm also announced that it will be formally changing its name from Korn/Ferry International to Korn Ferry, effective January 1, 2019 – a move reflecting the transformation of the organization to one unified brand.

Los Angeles, CA, December 6, 2018 Korn/Ferry International (NYSE: KFY), a global organizational consulting firm, today announced first quarter fee revenue of $495.2 million.  Second quarter diluted earnings per share was $0.81 and Adjusted diluted earnings per share was $0.85.  Adjusted diluted earnings per share for the second quarter excludes $2.8 million related to retention awards from a prior acquisition, or $0.04 per share.

“For Korn Ferry’s recently completed second quarter, we achieved the highest top line and bottom line results in our history, with fee revenue of approximately $495 million and Adjusted EBITDA and Adjusted EBITDA margin of approximately $80 million and 16.2%, respectively.  Our fee revenue grew approximately 12% year-over-year in the second quarter, 14.6% at constant currency, with strong growth across all of our geographies and solutions.  Additionally, during the quarter we continued to effectively deploy capital, repurchasing over $22 million of our shares.  Our return on invested capital continues to accelerate. From the end of FY’18 to the end of Q2 FY’19, our return on invested capital has now increased by over 200 basis points,” said Gary D. Burnison, CEO, Korn Ferry.

 

“Calendar year 2018 is the year we established ourselves as the preeminent global organizational consulting firm, a company whose purpose is to enable people and organizations to exceed their potential. When looking at the one professional we put in a new job every three minutes, the 1.2 million people we develop each year and 98% of the Fortune 500 who work with us – it is clear we are making a notable impact. I look forward to what the future holds as we ring in a New Year."

 

 

 

1


 

Selected Financial Results

(dollars in millions, except per share amounts) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Fee revenue

 

$

495.2

 

 

$

443.0

 

 

$

960.8

 

 

$

844.3

 

Total revenue

 

$

506.8

 

 

$

455.5

 

 

$

985.2

 

 

$

870.4

 

Operating income

 

$

71.0

 

 

$

52.5

 

 

$

15.9

 

 

$

94.4

 

Operating margin

 

 

14.3

%

 

 

11.8

%

 

 

1.7

%

 

 

11.2

%

Net income attributable to Korn Ferry

 

$

46.0

 

 

$

36.3

 

 

$

7.4

 

 

$

65.4

 

Basic earnings per share

 

$

0.82

 

 

$

0.65

 

 

$

0.13

 

 

$

1.16

 

Diluted earnings per share

 

$

0.81

 

 

$

0.64

 

 

$

0.13

 

 

$

1.15

 

 

EBITDA Results (b):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

EBITDA

 

$

77.5

 

 

$

68.4

 

 

$

38.6

 

 

$

126.0

 

EBITDA margin

 

 

15.7

%

 

 

15.4

%

 

 

4.0

%

 

 

14.9

%

 

Adjusted Results (c):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Adjusted EBITDA (b)

 

$

80.3

 

 

$

70.6

 

 

$

151.1

 

 

$

131.0

 

Adjusted EBITDA margin (b)

 

 

16.2

%

 

 

15.9

%

 

 

15.7

%

 

 

15.5

%

Adjusted net income attributable to Korn Ferry

 

$

48.2

 

 

$

37.8

 

 

$

92.4

 

 

$

69.0

 

Adjusted basic earnings per share

 

$

0.86

 

 

$

0.68

 

 

$

1.65

 

 

$

1.23

 

Adjusted diluted earnings per share

 

$

0.85

 

 

$

0.67

 

 

$

1.62

 

 

$

1.21

 

___________

(a)

Numbers may not total due to rounding.

(b)

EBITDA refers to earnings before interest, taxes, depreciation and amortization.  Adjusted EBITDA further adjusts EBITDA to exclude tradename write-offs, integration/acquisition costs and restructuring (recoveries) charges, net.  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 adjust for the following, as applicable (see attached reconciliations):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Tradename write-offs

 

$

-

 

 

$

-

 

 

$

106.6

 

 

$

-

 

Integration/acquisition costs

 

$

2.8

 

 

$

2.4

 

 

$

5.9

 

 

$

5.0

 

Restructuring (recoveries) charges, net

 

$

-

 

 

$

(0.2

)

 

$

-

 

 

$

0.1

 

 

Fee revenue was $495.2 million in Q2 FY’19, an increase of 11.8% (14.6% increase on a constant currency basis) compared to Q2 FY’18.  The increase in fee revenue was due to organic growth in all segments.

Operating margin was 14.3% in Q2 FY’19 compared to 11.8% in the year-ago quarter.  The increase in operating income was primarily due to the increase in fee revenue, partially offset by an increase in compensation and benefits.

Adjusted EBITDA margin was 16.2%, compared to 15.9% in the year-ago quarter.

2


 

 

Results by Segment

Selected Executive Search Data

(dollars in millions) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Fee revenue

 

$

197.6

 

 

$

176.8

 

 

$

390.6

 

 

$

338.0

 

Total revenue

 

$

202.0

 

 

$

180.6

 

 

$

400.1

 

 

$

346.4

 

Operating income

 

$

51.5

 

 

$

35.3

 

 

$

92.3

 

 

$

68.2

 

Operating margin

 

 

26.0

%

 

 

20.0

%

 

 

23.6

%

 

 

20.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

556

 

 

 

538

 

 

 

556

 

 

 

538

 

Average number of consultants

 

 

550

 

 

 

535

 

 

 

548

 

 

 

528

 

Engagements billed

 

 

3,968

 

 

 

3,723

 

 

 

6,144

 

 

 

5,752

 

New engagements (b)

 

 

1,757

 

 

 

1,578

 

 

 

3,465

 

 

 

3,171

 

 

EBITDA Results (c):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

EBITDA

 

$

49.2

 

 

$

37.7

 

 

$

96.0

 

 

$

73.0

 

EBITDA margin

 

 

24.9

%

 

 

21.4

%

 

 

24.6

%

 

 

21.6

%

 

Adjusted Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Adjusted EBITDA (c)

 

$

49.2

 

 

$

38.0

 

 

$

96.0

 

 

$

73.3

 

Adjusted EBITDA margin (c)

 

 

24.9

%

 

 

21.5

%

 

 

24.6

%

 

 

21.7

%

___________

(a)

Numbers may not total due to rounding.

(b)

Represents new 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):

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Restructuring charges, net

 

$

 

 

$

0.3

 

 

$

 

 

$

0.3

 

 

Fee revenue was $197.6 million in Q2 FY’19, an increase of $20.8 million or 11.8% (14.0% on a constant currency basis) compared to Q2 FY’18.  The increase in fee revenue was attributable to higher fee revenue in all regions.

Operating income was $51.5 million in Q2 FY’19 compared to $35.3 million in Q2 FY’18.  Operating margin was 26.0% in Q2 FY’19 compared to 20.0% in the year-ago quarter.  The increase in operating income was due to higher fee revenue in Q2 FY’19 compared to Q2 FY’18, partially offset by an increase in compensation and benefits expense driven by an increase in performance related bonus expense and an increase in average headcount.

Adjusted EBITDA was $49.2 million in Q2 FY’19 with an Adjusted EBITDA margin of 24.9% compared to $38.0 million and 21.5%, respectively, in the year-ago quarter.

 

 

 

 

 

3


 

 

 

 

Selected Advisory Data

(dollars in millions) (a)

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Fee revenue

 

$

217.1

 

 

$

200.0

 

 

$

412.5

 

 

$

379.4

 

Total revenue

 

$

221.4

 

 

$

203.8

 

 

$

421.6

 

 

$

387.1

 

Operating income (loss)

 

$

29.4

 

 

$

26.3

 

 

$

(53.7

)

 

$

45.4

 

Operating margin

 

 

13.6

%

 

 

13.2

%

 

 

(13.0

%)

 

 

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants (b)

 

 

570

 

 

 

594

 

 

 

570

 

 

 

594

 

Staff utilization (c)

 

 

67

%

 

 

67

%

 

 

67

%

 

 

65

%

 

EBITDA Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

EBITDA

 

$

36.7

 

 

$

34.9

 

 

$

(38.4

)

 

$

62.5

 

EBITDA margin

 

 

16.9

%

 

 

17.5

%

 

 

(9.3

%)

 

 

16.5

%

 

Adjusted Results (e):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Adjusted EBITDA (d)

 

$

39.4

 

 

$

36.8

 

 

$

73.9

 

 

$

67.1

 

Adjusted EBITDA margin (d)

 

 

18.2

%

 

 

18.4

%

 

 

17.9

%

 

 

17.7

%

 ___________

(a)

Numbers may not total due to rounding.

(b)

Represents number of employees originating consulting services.  

(c)

Calculated by dividing the number of hours our full-time Advisory professional staff record to engagements during the period, by the total available working hours during the same period.

(d)

EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(e)

Adjusted results are non-GAAP financial measures that adjust for the following (see attached reconciliations):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Tradename write-offs

 

$

 

 

$

 

 

$

106.6

 

 

$

 

Integration/acquisition costs

 

$

2.8

 

 

$

2.3

 

 

$

5.8

 

 

$

4.9

 

Restructuring recoveries, net

 

$

 

 

$

(0.5

)

 

$

 

 

$

(0.2

)

 

Fee revenue was $217.1 million in Q2 FY’19 compared to $200.0 million in Q2 FY’18, an increase of $17.1 million or 8.6% (11.8% on a constant currency basis) compared to Q2 FY’18.  The increase in fee revenue was primarily driven by Consulting across each of our Advisory solution areas.

Operating income was $29.4 million in Q2 FY’19 with an operating margin of 13.6% compared to operating income of $26.3 million and an operating margin of 13.2% in the year-ago quarter.  The increase in operating income was primarily due to higher fee revenue compared to the year-ago quarter, partially offset by an increase in compensation and benefits expense driven by an increase in performance related bonus expense.

Adjusted EBITDA was $39.4 million in Q2 FY’19 with an Adjusted EBITDA margin of 18.2% compared to $36.8 million and 18.4%, respectively, in the year-ago quarter.

4


 

Selected RPO and Professional Search Data

(dollars in millions) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

Fee revenue

 

$

80.5

 

 

$

66.3

 

 

$

157.8

 

 

$

126.9

 

Total revenue

 

$

83.4

 

 

$

71.0

 

 

$

163.5

 

 

$

136.9

 

Operating income

 

$

12.5

 

 

$

9.4

 

 

$

24.2

 

 

$

17.7

 

Operating margin

 

 

15.6

%

 

 

14.2

%

 

 

15.3

%

 

 

13.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engagements billed (b)

 

 

1,338

 

 

 

1,228

 

 

 

2,134

 

 

 

1,907

 

New engagements (c)

 

 

731

 

 

 

711

 

 

 

1,502

 

 

 

1,443

 

 

EBITDA Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’19

 

 

FY’18

 

 

FY’19

 

 

FY’18

 

EBITDA

 

$

13.2

 

 

$

10.2

 

 

$

25.7

 

 

$

19.3

 

EBITDA margin

 

 

16.4

%

 

 

15.4

%

 

 

16.3

%

 

 

15.2

%

___________

(a)

Numbers may not total due to rounding.

(b)

Represents professional search engagements billed.

(c)

Represents new professional search engagements opened in the respective period.

(d)

EBITDA and EBITDA margin are non-GAAP financial measures (see attached reconciliations).

 

Fee revenue was $80.5 million in Q2 FY’19, an increase of $14.2 million or 21.4% (24.4% increase on a constant currency basis), compared to the year-ago quarter.  The higher fee revenue was driven by an increase in fee revenue in professional search and recruitment process outsourcing of $8.2 million and $6.0 million, respectively, in Q2 FY’19 compared to Q2 FY’18.

Operating income was $12.5 million in Q2 FY’19, an increase of $3.1 million compared to Q2 FY’18 operating income of $9.4 million.  Operating margin was 15.6% in the current quarter compared to 14.2% in the year-ago quarter.  

EBITDA was $13.2 million during Q2 FY’19, an increase of $3.0 million compared to Q2 FY’18.  EBITDA margin was 16.4% in Q2 FY’19 and 15.4% in Q2 FY’18.

Outlook

Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis:

 

Q3 FY’19 fee revenue is expected to be in the range of $470 million and $490 million; and

 

Q3 FY’19 diluted earnings per share is likely to range between $0.76 to $0.84.

On a consolidated adjusted basis:

 

Q3 FY’19 Adjusted diluted earnings per share is expected to be in the range from $0.77 to $0.85.

5


 

 

 

 

Q3 FY’19

Earnings Per Share Outlook (1)

 

 

 

Low

 

 

High

 

Consolidated diluted earnings per share

 

$

0.76

 

 

$

0.84

 

Retention bonuses

 

 

0.01

 

 

 

0.01

 

Tax rate impact

 

 

 

 

 

 

Consolidated Adjusted diluted earnings per share

 

$

0.77

 

 

$

0.85

 

___________

(1)

Consolidated Adjusted diluted earnings per share is a non-GAAP financial measure that excludes the items listed in the table.

Earnings Conference Call Webcast

The earnings conference call will be held today at 11:00 AM (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 ir.kornferry.com.  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.

6


 

About Korn Ferry

 

Korn Ferry is a global organizational consulting firm.  We help clients synchronize strategy and talent to drive superior performance.  We work with organizations to design their structures, roles, and responsibilities.  We help them hire the right people to bring their strategy to life.  And we advise them on how to reward, develop, and motivate their people.  Visit kornferry.com for more information.

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, changes in demand for our services as a result of automation, the dependence on attracting and retaining qualified and experienced consultants, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, 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 growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, tax accounting effects of the Tax Act, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, seasonality, risks related to the integration of recently acquired businesses, employment liability risk, the impact of rebranding on the Company’s products and services; the expected timing of the Company’s rebranding and entity rationalization plan, and the costs of the Company’s rebranding and entity rationalization plan.  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 attributable to Korn/Ferry International, adjusted to exclude restructuring (recoveries) charges, net, integration/acquisition costs and tradename write-offs, net of income tax effect;

 

Adjusted basic and diluted earnings per share, adjusted to exclude restructuring (recoveries) charges, net, integration/acquisition costs and tradename write-offs, net of income tax effect; and in the case of the outlook section, also adjusted for tax rate impact;

 

Constant currency (calculated using a quarterly average) 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 (recoveries) charges, net, integration/acquisition costs and tradename write-offs, 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.

7


 

 

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.  These non-GAAP financial measures are performance measures and are not indicative of the liquidity of Korn Ferry.  These charges and other items represent 1) costs we incurred to acquire and integrate a portion of our Advisory business, 2) charges we incurred or recoveries we received to restructure the combined company due to the acquisition of a portion of our Advisory business, and 3) tradename write-offs associated with the rebranding plan initiated by Korn Ferry.  The use of non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance.  Korn Ferry includes 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.  Management further believes that EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company.  In the case of constant currency amounts, management believes the presentation of such information provides useful 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]

 

 

8


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(unaudited)

 

Fee revenue

 

$

495,205

 

 

$

443,018

 

 

$

960,773

 

 

$

844,272

 

Reimbursed out-of-pocket engagement expenses

 

 

11,588

 

 

 

12,450

 

 

 

24,382

 

 

 

26,113

 

           Total revenue

 

 

506,793

 

 

 

455,468

 

 

 

985,155

 

 

 

870,385

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

335,835

 

 

 

299,819

 

 

 

657,740

 

 

 

572,575

 

General and administrative expenses

 

 

57,738

 

 

 

58,603

 

 

 

226,462

 

 

 

116,864

 

Reimbursed expenses

 

 

11,588

 

 

 

12,450

 

 

 

24,382

 

 

 

26,113

 

Cost of services

 

 

19,627

 

 

 

19,883

 

 

 

37,954

 

 

 

35,696

 

Depreciation and amortization

 

 

11,018

 

 

 

12,447

 

 

 

22,749

 

 

 

24,656

 

Restructuring (recoveries) charges, net

 

 

-

 

 

 

(202

)

 

 

-

 

 

 

78

 

           Total operating expenses

 

 

435,806

 

 

 

403,000

 

 

 

969,287

 

 

 

775,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

70,987

 

 

 

52,468

 

 

 

15,868

 

 

 

94,403

 

Other (loss) income, net

 

 

(4,600

)

 

 

3,447

 

 

 

(109

)

 

 

6,801

 

Interest expense, net

 

 

(4,337

)

 

 

(3,624

)

 

 

(8,440

)

 

 

(7,304

)

         Income before provision (benefit) for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

               and equity in earnings of unconsolidated subsidiaries

 

 

62,050

 

 

 

52,291

 

 

 

7,319

 

 

 

93,900

 

Equity in earnings of unconsolidated subsidiaries

 

 

100

 

 

 

60

 

 

 

129

 

 

 

90

 

Income tax provision (benefit)

 

 

14,833

 

 

 

15,619

 

 

 

(1,277

)

 

 

27,829

 

Net income

 

 

47,317

 

 

 

36,732

 

 

 

8,725

 

 

 

66,161

 

           Net income attributable to noncontrolling interest

 

 

(1,283

)

 

 

(401

)

 

 

(1,302

)

 

 

(789

)

Net income attributable to Korn/Ferry International

 

$

46,034

 

 

$

36,331

 

 

$

7,423

 

 

$

65,372

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Korn/Ferry International:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

$

0.82

 

 

$

0.65

 

 

$

0.13

 

 

$

1.16

 

      Diluted

 

$

0.81

 

 

$

0.64

 

 

$

0.13

 

 

$

1.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

 

55,461

 

 

 

55,390

 

 

 

55,420

 

 

 

55,592

 

      Diluted

 

 

56,239

 

 

 

55,978

 

 

 

56,306

 

 

 

56,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.10

 

 

$

0.10

 

 

$

0.20

 

 

$

0.20

 

 

 


KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

 

 

 

Three Months Ended October 31,

 

 

Six Months Ended October 31,

 

 

 

2018

 

 

 

 

2017

 

 

% Change

 

 

2018

 

 

 

 

2017

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

$

115,863

 

 

 

 

$

101,544

 

 

 

14.1

%

 

$

227,960

 

 

 

 

$

193,377

 

 

 

17.9

%

 

EMEA

 

44,928

 

 

 

 

 

41,346

 

 

 

8.7

%

 

 

91,582

 

 

 

 

 

81,467

 

 

 

12.4

%

 

Asia Pacific

 

27,936

 

 

 

 

 

25,912

 

 

 

7.8

%

 

 

54,231

 

 

 

 

 

47,490

 

 

 

14.2

%

 

Latin America

 

8,907

 

 

 

 

 

7,964

 

 

 

11.8

%

 

 

16,785

 

 

 

 

 

15,623

 

 

 

7.4

%

Total Executive Search

 

197,634

 

 

 

 

 

176,766

 

 

 

11.8

%

 

 

390,558

 

 

 

 

 

337,957

 

 

 

15.6

%

Advisory

 

217,089

 

 

 

 

 

199,953

 

 

 

8.6

%

 

 

412,464

 

 

 

 

 

379,406

 

 

 

8.7

%

RPO and Professional Search

 

80,482

 

 

 

 

 

66,299

 

 

 

21.4

%

 

 

157,751

 

 

 

 

 

126,909

 

 

 

24.3

%

 

Total fee revenue

 

495,205

 

 

 

 

 

443,018

 

 

 

11.8

%

 

 

960,773

 

 

 

 

 

844,272

 

 

 

13.8

%

Reimbursed out-of-pocket engagement expenses

 

11,588

 

 

 

 

 

12,450

 

 

 

(6.9

%)

 

 

24,382

 

 

 

 

 

26,113

 

 

 

(6.6

%)

 

Total revenue

$

506,793

 

 

 

 

$

455,468

 

 

 

11.3

%

 

$

985,155

 

 

 

 

$

870,385

 

 

 

13.2

%

 

Operating income (loss):

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

$

35,328

 

 

 

30.5

%

 

$

23,039

 

 

 

22.7

%

 

$

61,842

 

 

 

27.1

%

 

$

45,109

 

 

 

23.3

%

 

EMEA

 

7,319

 

 

 

16.3

%

 

 

6,345

 

 

 

15.3

%

 

 

14,288

 

 

 

15.6

%

 

 

13,020

 

 

 

16.0

%

 

Asia Pacific

 

6,767

 

 

 

24.2

%

 

 

4,381

 

 

 

16.9

%

 

 

13,408

 

 

 

24.7

%

 

 

7,522

 

 

 

15.8

%

 

Latin America

 

2,053

 

 

 

23.0

%

 

 

1,527

 

 

 

19.2

%

 

 

2,807

 

 

 

16.7

%

 

 

2,553

 

 

 

16.3

%

Total Executive Search

 

51,467

 

 

 

26.0

%

 

 

35,292

 

 

 

20.0

%

 

 

92,345

 

 

 

23.6

%

 

 

68,204

 

 

 

20.2

%

Advisory

 

29,426

 

 

 

13.6

%

 

 

26,347

 

 

 

13.2

%

 

 

(53,653

)

 

 

(13.0