kfy-8k_20190731.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):  September 4, 2019

 

 

KORN FERRY

(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) (Zip code)

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

 

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))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

KFY

New York Stock Exchange

 

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 September 5, 2019, Korn Ferry (the “Company”) issued a press release announcing its first quarter fiscal year 2020 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.

On September 4, 2019, the Board of Directors of the Company declared a cash dividend of $0.10 per share that will be paid on October 15, 2019 to holders of the Company’s common stock of record at the close of business on September 27, 2019.  The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board of Directors 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 of Directors 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.

Item 9.01 Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit 99.1

 

Press Release, dated September 5, 2019.

 

 


 

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

 

(Registrant)

 

 

Date: September 5, 2019

/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 First Quarter Fiscal 2020

Results of Operations

 

Highlights

 

Korn Ferry reports fee revenue of $484.5 million in Q1 FY’20, an increase of 4% (7% at constant currency) from Q1 FY’19.

 

Net income attributable to Korn Ferry was $43.0 million in Q1 FY’20.

 

Operating income was $60.3 million in Q1 FY’20 with an operating margin of 12.5%.  EBITDA was $74.9 million with EBITDA margin of 15.5%.

 

Q1 FY’20 diluted earnings per share and adjusted diluted earnings per share was $0.76.

 

The Company continued with its balanced approach to capital allocation, buying back 968,000 shares or $37.2 million of stock through today and declaring a quarterly dividend of $0.10 per share on September 4, 2019 payable on October 15, 2019 to stockholders of record on September 27, 2019.

 

Los Angeles, CA, September 5, 2019 Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced first quarter fee revenue of $484.5 million with diluted earnings per share of $0.76.

“I am pleased to report fee revenue of $484.5 million, an increase of 4% quarter over quarter with 7% growth at constant currency for the fiscal first quarter, led by our RPO & Professional Search offering, which grew 24% quarter over quarter or 27% at constant currency – the 21st consecutive quarter of near double-digit growth at actual and constant currency. Earnings remained strong in the first quarter with net income attributable to Korn Ferry of $43.0 million and EBITDA at $74.9 million. We also continue to allocate capital to share repurchases, buying back, fiscal year to date, approximately 968,000 shares, using total cash of approximately $37.2 million,” said Gary D. Burnison, CEO, Korn Ferry.

“Our financial results for the first quarter demonstrate the durability of our business model. We are substantially different today than we were even a few years ago. We’ve evolved from a mono-line business to a global organizational consulting firm – synchronizing a client’s strategy and talent to drive superior performance. More than organizational strategy or compensation advisory, more than talent acquisition and more than leadership development – Korn Ferry enables people and organizations to be more than: simply put, to exceed their potential.”

 

 

 

 

 

1


 

Selected Financial Results

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

 

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

484.5

 

 

$

465.6

 

Total revenue

 

$

496.2

 

 

$

478.4

 

Operating income (loss)

 

$

60.3

 

 

$

(55.1

)

Operating margin

 

 

12.5

%

 

 

(11.8

%)

Net income (loss) attributable to Korn Ferry

 

$

43.0

 

 

$

(38.6

)

Basic earnings (loss) per share

 

$

0.77

 

 

$

(0.70

)

Diluted earnings (loss) per share

 

$

0.76

 

 

$

(0.70

)

 

EBITDA Results (b):

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

74.9

 

 

$

(38.9

)

EBITDA margin

 

 

15.5

%

 

 

(8.3

%)

 

Adjusted Results (c):

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (b)

 

$

74.9

 

 

$

70.8

 

Adjusted EBITDA margin (b)

 

 

15.5

%

 

 

15.2

%

Adjusted net income attributable to Korn Ferry

 

$

43.0

 

 

$

44.2

 

Adjusted basic earnings per share

 

$

0.77

 

 

$

0.79

 

Adjusted diluted earnings per share

 

$

0.76

 

 

$

0.78

 

___________

(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 and integration/acquisition costs.  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):

 

 

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Tradename write-offs

$

 

 

$

 

106.6

 

Integration/acquisition costs

$

 

 

$

 

3.1

 

 

Fee revenue was $484.5 million in Q1 FY’20, an increase of 4% (7% increase on a constant currency basis) compared to Q1 FY’19.  The increase in fee revenue was due to growth in RPO and Professional Search.

Net income attributable to Korn Ferry was $43.0 million in Q1 FY’20 as compared to a loss of $38.6 million in Q1 FY’19.  The increase in net income attributable to Korn Ferry resulted from a decrease in general and administrative expenses mainly due to the $106.6 million tradename write-offs in Q1 FY’19, partially offset by an increase in income tax provision in Q1 FY’20.

Operating margin was 12.5% in Q1 FY’20 compared to (11.8%) in the year-ago quarter.  The increase in operating margin was primarily due to the decrease in general and administrative expenses as described above and an increase in fee revenue, partially offset by an increase in compensation and benefits.

Adjusted EBITDA margin was 15.5%, compared to 15.2% in the year-ago quarter.

2


 

 

Results by Segment

Selected Advisory Data

(dollars in millions) (a)

 

 

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

195.5

 

 

$

195.4

 

Total revenue

 

$

199.3

 

 

$

200.1

 

Operating income (loss)

 

$

25.8

 

 

$

(83.1

)

Operating margin

 

 

13.2

%

 

 

(42.5

%)

 

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (b)

 

 

1,758

 

 

 

1,621

 

Staff utilization (c)

 

 

67

%

 

 

67

%

 

EBITDA Results (d):

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

34.6

 

 

$

(75.1

)

EBITDA margin

 

 

17.7

%

 

 

(38.4

%)

 

Adjusted Results (e):

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (d)

 

$

34.6

 

 

$

34.5

 

Adjusted EBITDA margin (d)

 

 

17.7

%

 

 

17.7

%

 ___________

(a)

Numbers may not total due to rounding.

(b)

Represents number of employees originating, delivering and executing advisory 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):

 

 

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Tradename write-offs

 

$

 

 

$

106.6

 

Integration/acquisition costs

 

$

 

 

$

3.0

 

 

Fee revenue was $195.5 million in Q1 FY’20 compared to $195.4 million in Q1 FY’19, flat as reported and up 3% on a constant currency basis.

Operating income was $25.8 million in Q1 FY’20 with an operating margin of 13.2% compared to an operating loss of $83.1 million and an operating margin of (42.5%) in the year-ago quarter.  The change of $108.9 million from the operating loss in the year-ago quarter to operating income in the current quarter was primarily due to the tradename write-offs in Q1 FY’19 of $106.6 million.

Adjusted EBITDA was $34.6 million in Q1 FY’20 with an Adjusted EBITDA margin of 17.7% compared to $34.5 million and 17.7%, respectively, in the year-ago quarter.

 

 

 

 

 

3


 

Selected Executive Search Data

(dollars in millions) (a)

 

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

193.2

 

 

$

192.9

 

Total revenue

 

$

198.0

 

 

$

198.0

 

Operating income

 

$

45.6

 

 

$

40.9

 

Operating margin

 

 

23.6

%

 

 

21.2

%

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

569

 

 

 

545

 

Average number of consultants

 

 

567

 

 

 

543

 

Engagements billed

 

 

3,855

 

 

 

3,822

 

New engagements (b)

 

 

1,695

 

 

 

1,708

 

 

EBITDA and Adjusted Results (c):

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

EBITDA and Adjusted EBITDA

 

$

48.9

 

 

$

46.8

 

EBITDA and Adjusted EBITDA margin

 

 

25.3

%

 

 

24.2

%

________

(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).

 

Fee revenue was $193.2 million and $192.9 million in Q1 FY’20 and Q1 FY’19, respectively, flat as reported and up 2% on a constant currency basis.

Operating income was $45.6 million in Q1 FY’20 compared to $40.9 million in Q1 FY’19.  Operating margin was 23.6% in Q1 FY’20 compared to 21.2% in the year-ago quarter.  The increase in operating income was mainly due to a decrease in compensation and benefits expense.

EBITDA was $48.9 million in Q1 FY’20 with an EBITDA margin of 25.3% compared to $46.8 million and 24.2%, respectively, in the year-ago quarter.

 

4


 

Selected RPO and Professional Search Data

(dollars in millions) (a)

 

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

95.8

 

 

$

77.3

 

Total revenue

 

$

98.9

 

 

$

80.2

 

Operating income

 

$

15.0

 

 

$

11.6

 

Operating margin

 

 

15.7

%

 

 

15.1

%

 

 

 

 

 

 

 

 

 

Engagements billed (b)

 

 

1,436

 

 

 

1,346

 

New engagements (c)

 

 

767

 

 

 

771

 

 

EBITDA and Adjusted Results (d):

 

First Quarter

 

 

 

FY’20

 

 

FY’19

 

EBITDA and Adjusted EBITDA

 

$

16.1

 

 

$

12.5

 

EBITDA and Adjusted EBITDA margin

 

 

16.8

%

 

 

16.2

%

___________

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

Fee revenue was $95.8 million in Q1 FY’20, an increase of $18.5 million or 24% (27% increase on a constant currency basis), compared to the year-ago quarter.  The higher fee revenue was primarily driven by an increase in fee revenue in recruitment process outsourcing and professional search of $11.9 million and $6.6 million, respectively, in Q1 FY’20 compared to Q1 FY’19.

Operating income was $15.0 million in Q1 FY’20, an increase of $3.4 million compared to Q1 FY’19 operating income of $11.6 million.  Operating margin was 15.7% in the current quarter compared to 15.1% in the year-ago quarter.  The increase in operating income was due to higher fee revenue in Q1 FY’20 compared to Q1 FY’19, partially offset by an increase in compensation and benefits expense driven by a 31% increase in average headcount.

EBITDA was $16.1 million during Q1 FY’20, an increase of $3.6 million compared to Q1 FY’19.  EBITDA margin was 16.8% in Q1 FY’20 and 16.2% in Q1 FY’19.

Outlook

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

 

Q2 FY’20 fee revenue is expected to be in the range of $485 million and $505 million; and

 

Q2 FY’20 diluted earnings per share is likely to range between $0.76 to $0.84.

5


 

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 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 and costs of 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, consolidation of the industries we serve, 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, dependence on third parties for the execution of critical functions, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, technical guidance relating to the Tax Act, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our indebtedness, the phase-out of the London Interbank Offered Rate, expansion of social media platforms, seasonality, ability to effect acquisition and integrate 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, adjusted to exclude integration/acquisition costs and tradename write-offs, net of income tax effect;

 

Adjusted basic and diluted earnings per share, adjusted to exclude 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) percentages that represent the percentage change that would have resulted had exchange rates in the prior period been the same as those in effect in the current period;

 

EBITDA, or earnings before interest, taxes, depreciation and amortization and EBITDA margin; and

 

Adjusted EBITDA, which is EBITDA further adjusted to exclude 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 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 represent 1) costs we incurred to acquire and integrate a portion of our Advisory business and 2) 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.  Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company’s operating results.  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 percentages, 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 OPERATIONS

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

 

July 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Fee revenue

 

$

484,549

 

 

$

465,568

 

Reimbursed out-of-pocket engagement expenses

 

 

11,649

 

 

 

12,794

 

           Total revenue

 

 

496,198

 

 

 

478,362

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

328,496

 

 

 

321,905

 

General and administrative expenses

 

 

65,807

 

 

 

168,724

 

Reimbursed expenses

 

 

11,649

 

 

 

12,794

 

Cost of services

 

 

17,135

 

 

 

18,327

 

Depreciation and amortization

 

 

12,777

 

 

 

11,731

 

           Total operating expenses

 

 

435,864

 

 

 

533,481

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

60,334

 

 

 

(55,119

)

Other income, net

 

 

1,826

 

 

 

4,520

 

Interest expense, net

 

 

(4,057

)

 

 

(4,103

)

 

 

 

 

 

 

 

 

 

         Income (loss) before provision (benefit) for income taxes

 

 

58,103

 

 

 

(54,702

)

Income tax provision (benefit)

 

 

14,453

 

 

 

(16,110

)

Net income (loss)

 

 

43,650

 

 

 

(38,592

)

           Net income attributable to noncontrolling interest

 

 

(699

)

 

 

(19

)

Net income (loss) attributable to Korn Ferry

 

$

42,951

 

 

$

(38,611

)

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share attributable to Korn Ferry:

 

 

 

 

 

 

 

 

      Basic

 

$

0.77

 

 

$

(0.70

)

      Diluted

 

$

0.76

 

 

$

(0.70

)

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

      Basic

 

 

55,266

 

 

 

55,378

 

      Diluted

 

 

55,635

 

 

 

55,378

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.10

 

 

$

0.10

 

 

 


KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

 

 

 

Three Months Ended July 31,

 

 

 

2019

 

 

 

 

2018

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

$

195,526

 

 

 

 

$

195,375

 

 

 

0.1

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

111,722

 

 

 

 

 

112,097

 

 

 

(0.3

%)

 

EMEA

 

46,530

 

 

 

 

 

46,654

 

 

 

(0.3

%)

 

Asia Pacific

 

27,362

 

 

 

 

 

26,295

 

 

 

4.1

%

 

Latin America

 

7,585

 

 

 

 

 

7,878

 

 

 

(3.7

%)

Total Executive Search

 

193,199

 

 

 

 

 

192,924

 

 

 

0.1

%

RPO and Professional Search

 

95,824

 

 

 

 

 

77,269

 

 

 

24.0

%

 

Total fee revenue

 

484,549

 

 

 

 

 

465,568

 

 

 

4.1

%

Reimbursed out-of-pocket engagement expenses

 

11,649

 

 

 

 

 

12,794

 

 

 

(8.9

%)

 

Total revenue

$

496,198

 

 

 

 

$

478,362

 

 

 

3.7

%

 

Operating income (loss):

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

Advisory

$

25,791

 

 

 

13.2

%

 

$

(83,079

)

 

 

(42.5

%)

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

30,322

 

 

 

27.1

%

 

 

26,514

 

 

 

23.7

%

 

EMEA

 

7,311

 

 

 

15.7

%

 

 

6,969

 

 

 

14.9

%

 

Asia Pacific

 

6,993

 

 

 

25.6

%

 

 

6,641

 

 

 

25.3

%

 

Latin America

 

1,010

 

 

 

13.3

%

 

 

754

 

 

 

9.6

%

Total Executive Search

 

45,636

 

 

 

23.6

%

 

 

40,878

 

 

 

21.2

%

RPO and Professional Search

 

15,041

 

 

 

15.7

%

 

 

11,645

 

 

 

15.1

%

Corporate

 

(26,134

)

 

 

 

 

 

 

(24,563

)

 

 

 

 

 

Total operating income (loss)

$

60,334

 

 

 

12.5

%

 

$

(55,119

)

 

 

(11.8

%)

 

 

 


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

July 31,

 

 

April 30,

 

 

 

 

2019

 

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

424,637

 

 

$

626,360

 

Marketable securities

 

 

8,508

 

 

 

8,288

 

Receivables due from clients, net of allowance for doubtful accounts of $21,732 and $21,582 at July 31, 2019 and April 30, 2019, respectively

 

 

432,758

 

 

 

404,857

 

Income taxes and other receivables

 

 

30,529

 

 

 

26,767

 

Unearned compensation

 

 

45,380

 

 

 

42,003

 

Prepaid expenses and other assets

 

 

33,311

 

 

 

28,535

 

Total current assets

 

 

975,123

 

 

 

1,136,810

 

 

 

 

 

 

 

 

 

 

Marketable securities, non-current

 

 

134,148

 

 

 

132,463

 

Property and equipment, net

 

 

137,367

 

 

 

131,505

 

Operating lease right-of-use assets, net

 

 

219,412

 

 

 

-

 

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

 

 

126,752

 

 

 

126,000

 

Deferred income taxes

 

 

41,191

 

 

 

43,220

 

Goodwill

 

 

578,567

 

 

 

578,298

 

Intangible assets, net

 

 

79,581

 

 

 

82,948

 

Unearned compensation, non-current

 

 

92,365

 

 

 

80,924

 

Investments and other assets

 

 

22,052

 

 

 

22,684

 

Total assets

 

$

2,406,558

 

 

$

2,334,852

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

33,174

 

 

$

39,156

 

Income taxes payable

 

 

19,199

 

 

 

21,145

 

Compensation and benefits payable

 

 

156,208

 

 

 

328,610

 

Operating lease liability, current

 

 

46,854

 

 

 

-

 

Other accrued liabilities

 

 

156,218

 

 

 

162,047

 

Total current liabilities

 

 

411,653

 

 

 

550,958

 

 

 

 

 

 

 

 

 

 

Deferred compensation and other retirement plans

 

 

269,380

 

 

 

257,635

 

Operating lease liability, non-current

 

 

207,603

 

 

 

-

 

Long-term debt

 

 

223,094

 

 

 

222,878

 

Deferred tax liabilities

 

 

1,048

 

 

 

1,103

 

Other liabilities

 

 

29,386

 

 

 

58,891

 

Total liabilities

 

 

1,142,164

 

 

 

1,091,465

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized, 73,076 and 72,442 shares issued and 56,596 and 56,431 shares outstanding at July 31, 2019 and April 30, 2019, respectively

 

 

645,299

 

 

 

656,463

 

Retained earnings

 

 

697,715

 

 

 

660,845

 

Accumulated other comprehensive loss, net

 

 

(82,114

)

 

 

(76,652

)

Total Korn Ferry stockholders' equity

 

 

1,260,900

 

 

 

1,240,656

 

Noncontrolling interest

 

 

3,494

 

 

 

2,731

 

Total stockholders' equity

 

 

1,264,394

 

 

 

1,243,387

 

Total liabilities and stockholders' equity

 

$

2,406,558

 

 

$

2,334,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

 

July 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Net income (loss) attributable to Korn Ferry

 

$

42,951

 

 

$

(38,611

)

Net income attributable to non-controlling interest

 

 

699

 

 

 

19

 

Net income (loss)

 

 

43,650

 

 

 

(38,592

)

Income tax provision (benefit)

 

 

14,453

 

 

 

(16,110

)

Income (loss) before provision (benefit) for income taxes

 

 

58,103

 

 

 

(54,702

)

Other income, net

 

 

(1,826

)

 

 

(4,520

)

Interest expense, net

 

 

4,057

 

 

 

4,103

 

Operating income (loss), net

 

 

60,334

 

 

 

(55,119

)

Depreciation and amortization

 

 

12,777

 

 

 

11,731

 

Other income, net

 

 

1,826

 

 

 

4,520

 

           EBITDA

 

 

74,937

 

 

 

(38,868

)

Integration/acquisition costs (1)

 

 

-

 

 

 

3,107

 

Tradename write-offs (2)

 

 

-

 

 

 

106,555

 

           Adjusted EBITDA

 

$

74,937

 

 

$

70,794

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

12.5

%

 

 

(11.8

%)

Depreciation and amortization

 

 

2.6

%

 

 

2.5

%

Other income, net

 

 

0.4

%

 

 

1.0

%

            EBITDA margin

 

 

15.5

%

 

 

(8.3

%)

Integration/acquisition costs (1)

 

 

-

 

 

 

0.6

%

Tradename write-offs (2)

 

 

-

 

 

 

22.9

%

           Adjusted EBITDA margin

 

 

15.5

%

 

 

15.2

%

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Korn Ferry

 

$

42,951

 

 

$

(38,611

)

Integration/acquisition costs (1)

 

 

-

 

 

 

3,107

 

Tradename write-offs (2)

 

 

-

 

 

 

106,555

 

Tax effect on the adjusted items (3)

 

 

-

 

 

 

(26,893

)

           Adjusted net income attributable to Korn Ferry

 

$

42,951

 

 

$

44,158

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

0.77

 

 

$

(0.70

)

Integration/acquisition costs (1)

 

 

-

 

 

 

0.06

 

Tradename write-offs (2)

 

 

-

 

 

 

1.92

 

Tax effect on the adjusted items (3)

 

 

-

 

 

 

(0.49

)

           Adjusted basic earnings per share

 

$

0.77

 

 

$

0.79

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

 

$

0.76

 

 

$

(0.70

)

Integration/acquisition costs (1)

 

 

-

 

 

 

0.06

 

Tradename write-offs (2)

 

 

-

 

 

 

1.90

 

Tax effect on the adjusted items (3)

 

 

-

 

 

 

(0.48

)

           Adjusted diluted earnings per share

 

$

0.76

 

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Explanation of Non-GAAP Adjustments

 

 

 

 

 

 

 

 

(1) Costs associated with completing a previous acquisition, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.

 

(2) The Company implemented a plan to go to market under a single, master brand architecture to simplify the Company’s organizational structure by eliminating and/or consolidating certain legal entities implemented a rebranding of the Company to offer the Company’s current products and services using the “Korn Ferry” name, branding and trademarks. As a result of this the Company was required under U.S. generally accepted accounting principles to record a one-time, non-cash tradename write-offs.

 

(3) Tax effect on integration/acquisition costs and tradename write-offs.

 

 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME (LOSS) AND OPERATING INCOME (LOSS) (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

 

 

 

Three Months Ended July 31, 2019

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

195,526

 

 

$

111,722

 

 

$

46,530

 

 

$

27,362

 

 

$

7,585

 

 

$

193,199

 

 

$

95,824

 

 

$

-

 

 

$

484,549

 

Total revenue

 

$

199,320

 

 

$

115,446

 

 

$

47,312

 

 

$

27,668

 

 

$

7,587

 

 

$

198,013

 

 

$

98,865

 

 

$

-

 

 

$

496,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

42,951

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

699

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,826

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,057

 

Income tax provision