kfy-8k_20191204.htm
false 0000056679 0000056679 2019-12-04 2019-12-04

 

 

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 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 December 5, 2019, Korn Ferry (the “Company”) issued a press release announcing its second 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 December 4, 2019, the Board of Directors of the Company declared a cash dividend of $0.10 per share that will be paid on January 15, 2020 to holders of the Company’s common stock of record at the close of business on December 20, 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 December 5, 2019

Exhibit 104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 


 

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: December 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 Second Quarter Fiscal 2020

Results of Operations

 

Highlights

 

Korn Ferry reports fee revenue of $492.4 million in Q2 FY’20.

 

Net income attributable to Korn Ferry was $42.8 million in Q2 FY’20.

 

Operating income was $61.9 million in Q2 FY’20 with an operating margin of 12.6%.  Adjusted EBITDA was $78.3 million with Adjusted EBITDA margin of 15.9%.

 

Q2 FY’20 diluted earnings per share and adjusted diluted earnings per share was $0.77 and $0.81, respectively.

 

The Company continued with its balanced approach to capital allocation, buying back 1.3 million shares or $49.2 million of stock during the quarter and declaring a quarterly dividend of $0.10 per share on December 4, 2019 payable on January 15, 2020 to stockholders of record on December 20, 2019.

 

Los Angeles, CA, December 5, 2019 Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced second quarter fee revenue of $492.4 million.  Second quarter diluted earnings per share was $0.77 and Adjusted diluted earnings per share was $0.81.  Adjusted diluted earnings per share for the second quarter excludes $2.6 million, or $0.04 per share, related to integration/acquisition costs associated with the recently completed acquisition of Miller Heiman Group, AchieveForum and Strategy Execution.

“For Korn Ferry’s recently completed second quarter, we generated fee revenue of approximately $492 million (down 1% using actual rates; up 1% on a constant currency basis) and consistent profitability with an Adjusted EBITDA margin of almost 16%.  Despite the confused socio-political climate, we continued to have a long-term balanced approach to capital deployment, acquiring three leadership development companies while repurchasing almost $50 million of stock during the quarter in addition to our normal quarterly dividend,” said Gary D. Burnison, CEO, Korn Ferry.

“We have historically only focused on a 10 percent subset of the $300 billion market for learning and development. The recent acquisitions of Miller Heiman, Strategy Execution and AchieveForum add professional development capabilities that will leverage our Korn Ferry Digital platform, tapping a much broader market opportunity.  Last month we celebrated our 50th anniversary, capping an unprecedented moment in Korn Ferry’s history as the preeminent global organizational consulting firm.  As our recent acquisitions attest, we continue to evolve our business to help clients synchronize their strategy, operations and talent.  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’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

492.4

 

 

$

495.2

 

 

$

976.9

 

 

$

960.8

 

Total revenue

 

$

504.2

 

 

$

506.8

 

 

$

1,000.4

 

 

$

985.2

 

Operating income

 

$

61.9

 

 

$

71.0

 

 

$

122.2

 

 

$

15.9

 

Operating margin

 

 

12.6

%

 

 

14.3

%

 

 

12.5

%

 

 

1.7

%

Net income attributable to Korn Ferry

 

$

42.8

 

 

$

46.0

 

 

$

85.8

 

 

$

7.4

 

Basic earnings per share

 

$

0.78

 

 

$

0.82

 

 

$

1.54

 

 

$

0.13

 

Diluted earnings per share

 

$

0.77

 

 

$

0.81

 

 

$

1.54

 

 

$

0.13

 

 

EBITDA Results (b):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

75.7

 

 

$

77.5

 

 

$

150.7

 

 

$

38.6

 

EBITDA margin

 

 

15.4

%

 

 

15.7

%

 

 

15.4

%

 

 

4.0

%

 

Adjusted Results (c):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (b)

 

$

78.3

 

 

$

80.3

 

 

$

153.3

 

 

$

151.1

 

Adjusted EBITDA margin (b)

 

 

15.9

%

 

 

16.2

%

 

 

15.7

%

 

 

15.7

%

Adjusted net income attributable to Korn Ferry

 

$

44.8

 

 

$

48.2

 

 

$

87.7

 

 

$

92.4

 

Adjusted basic earnings per share

 

$

0.81

 

 

$

0.86

 

 

$

1.58

 

 

$

1.65

 

Adjusted diluted earnings per share

 

$

0.81

 

 

$

0.85

 

 

$

1.57

 

 

$

1.62

 

___________

(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):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

106.6

 

Integration/acquisition costs

 

$

2.6

 

 

$

2.8

 

 

$

2.6

 

 

$

5.9

 

 

Fee revenue was $492.4 million in Q2 FY’20, a decrease of 1% (1% increase on a constant currency basis) compared to Q2 FY’19.  The decrease in fee revenue was due to lower fee revenue in Executive Search and Advisory, partially offset by growth in RPO and Professional Search.

Net income attributable to Korn Ferry was $42.8 million in Q2 FY’20 as compared to $46.0 million in Q2 FY’19.  The decrease in net income attributable to Korn Ferry resulted from a decrease in fee revenue and an increase in general and administrative expenses.

Operating margin was 12.6% in Q2 FY’20 compared to 14.3% in the year-ago quarter.  The decrease in operating margin was primarily due an increase in general and administrative expenses and lower fee revenue.

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

2


 

 

Results by Segment

Selected Advisory Data

(dollars in millions) (a)

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

209.8

 

 

$

217.1

 

 

$

405.3

 

 

$

412.5

 

Total revenue

 

$

213.9

 

 

$

221.4

 

 

$

413.2

 

 

$

421.6

 

Operating income (loss)

 

$

28.4

 

 

$

29.4

 

 

$

54.2

 

 

$

(53.7

)

Operating margin

 

 

13.5

%

 

 

13.6

%

 

 

13.4

%

 

 

(13.0

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (b)

 

 

1,776

 

 

 

1,636

 

 

 

1,776

 

 

 

1,636

 

Staff utilization (c)

 

 

69

%

 

 

67

%

 

 

68

%

 

 

67

%

 

EBITDA Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

37.0

 

 

$

36.7

 

 

$

71.5

 

 

$

(38.4

)

EBITDA margin

 

 

17.6

%

 

 

16.9

%

 

 

17.6

%

 

 

(9.3

%)

 

Adjusted Results (e):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (d)

 

$

37.0

 

 

$

39.4

 

 

$

71.5

 

 

$

73.9

 

Adjusted EBITDA margin (d)

 

 

17.6

%

 

 

18.2

%

 

 

17.6

%

 

 

17.9

%

 ___________

(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):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

106.6

 

Integration/acquisition costs

 

$

 

 

$

2.8

 

 

$

 

 

$

5.8

 

 

Fee revenue was $209.8 million in Q2 FY’20 compared to $217.1 million in Q2 FY’19, a decrease of $7.3 million or 3% (down 1% on a constant currency basis).

Operating income was $28.4 million in Q2 FY’20 with an operating margin of 13.5% compared to $29.4 million and an operating margin of 13.6%, respectively, in the year-ago quarter.

Adjusted EBITDA was $37.0 million in Q2 FY’20 with an Adjusted EBITDA margin of 17.6% compared to $39.4 million and 18.2%, respectively, in the year-ago quarter.

 

 

 

 

 

 

3


Selected Executive Search Data

(dollars in millions) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

187.9

 

 

$

197.6

 

 

$

381.1

 

 

$

390.6

 

Total revenue

 

$

192.0

 

 

$

202.0

 

 

$

390.0

 

 

$

400.1

 

Operating income

 

$

41.2

 

 

$

51.5

 

 

$

86.9

 

 

$

92.3

 

Operating margin

 

 

21.9

%

 

 

26.0

%

 

 

22.8

%

 

 

23.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

585

 

 

 

556

 

 

 

585

 

 

 

556

 

Average number of consultants

 

 

577

 

 

 

550

 

 

 

575

 

 

 

548

 

Engagements billed

 

 

3,848

 

 

 

3,968

 

 

 

6,086

 

 

 

6,144

 

New engagements (b)

 

 

1,719

 

 

 

1,757

 

 

 

3,414

 

 

 

3,465

 

 

EBITDA and Adjusted Results (c):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA and Adjusted EBITDA

 

$

44.0

 

 

$

49.2

 

 

$

92.9

 

 

$

96.0

 

EBITDA and Adjusted EBITDA margin

 

 

23.4

%

 

 

24.9

%

 

 

24.4

%

 

 

24.6

%

________

(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 $187.9 million and $197.6 million in Q2 FY’20 and Q2 FY’19, respectively, a decrease of $9.7 million or 5% (3% decrease on a constant currency basis).  The decrease in fee revenue was attributable to a decline in fee revenue in all regions.

Operating income was $41.2 million in Q2 FY’20 compared to $51.5 million in Q2 FY’19.  Operating margin was 21.9% in Q2 FY’20 compared to 26.0% in the year-ago quarter.  The decrease in operating income was mainly due to a decrease in fee revenue.

EBITDA was $44.0 million in Q2 FY’20 with an EBITDA margin of 23.4% compared to $49.2 million and 24.9%, respectively, in the year-ago quarter, mainly due to a decline in fee revenue.

 

4


 

Selected RPO and Professional Search Data

(dollars in millions) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

94.8

 

 

$

80.5

 

 

$

190.6

 

 

$

157.8

 

Total revenue

 

$

98.3

 

 

$

83.4

 

 

$

197.2

 

 

$

163.5

 

Operating income

 

$

15.1

 

 

$

12.5

 

 

$

30.1

 

 

$

24.2

 

Operating margin

 

 

15.9

%

 

 

15.6

%

 

 

15.8

%

 

 

15.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engagements billed (b)

 

 

1,441

 

 

 

1,338

 

 

 

2,274

 

 

 

2,134

 

New engagements (c)

 

 

693

 

 

 

731

 

 

 

1,460

 

 

 

1,502

 

 

EBITDA and Adjusted Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA and Adjusted EBITDA

 

$

16.1

 

 

$

13.2

 

 

$

32.2

 

 

$

25.7

 

EBITDA and Adjusted EBITDA margin

 

 

17.0

%

 

 

16.4

%

 

 

16.9

%

 

 

16.3

%

___________

(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 $94.8 million in Q2 FY’20, an increase of $14.3 million or 18% (20% 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 $11.6 million and $2.7 million, respectively, in Q2 FY’20 compared to Q2 FY’19.

Operating income was $15.1 million in Q2 FY’20, an increase of $2.6 million compared to Q2 FY’19 operating income of $12.5 million.  Operating margin was 15.9% in the current quarter compared to 15.6% in the year-ago quarter.  The increase in operating income was due to higher fee revenue in Q2 FY’20 compared to Q2 FY’19, partially offset by an increase in compensation and benefits expense driven by a 28% increase in average headcount.

EBITDA was $16.1 million during Q2 FY’20, an increase of $2.9 million compared to Q2 FY’19.  EBITDA margin was 17.0% in Q2 FY’20 and 16.4% in Q2 FY’19.

5


 

Outlook

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

 

Q3 FY’20 fee revenue is expected to be in the range of $490 million and $510 million; and

 

Q3 FY’20 diluted earnings per share is expected to range between $0.35 to $0.52.

On a consolidated adjusted basis:

 

Q3 FY’20 adjusted diluted earnings per share is expected to be in the range from $0.70 to $0.78.

 

 

 

Q3 FY’20

Earnings Per Share Outlook (1)

 

 

 

Low

 

 

High

 

 

 

 

 

 

 

 

 

 

Consolidated diluted earnings per share

 

$

0.35

 

 

$

0.52

 

Restructuring charges, net

 

 

0.40

 

 

 

0.32

 

Integration/acquisition costs

 

 

0.06

 

 

 

0.03

 

Tax rate impact

 

 

(0.11

)

 

 

(0.09

)

Consolidated Adjusted diluted earnings per share

 

$

0.70

 

 

$

0.78

 

___________

(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 4:30 PM (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 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 companies, including those of Miller Heiman Group, AchieveForum, and Strategy Execution (collectively, the “acquired companies”); the ability to recognize the anticipated benefits of the acquisition of the acquired companies; the costs related to the acquisition of the companies; 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 restructuring charges, net and 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 INCOME

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Fee revenue

 

$

492,389

 

 

$

495,205

 

 

$

976,938

 

 

$

960,773

 

Reimbursed out-of-pocket engagement expenses

 

 

11,788

 

 

 

11,588

 

 

 

23,437

 

 

 

24,382

 

           Total revenue

 

 

504,177

 

 

 

506,793

 

 

 

1,000,375

 

 

 

985,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

337,382

 

 

 

335,835

 

 

 

665,878

 

 

 

657,740

 

General and administrative expenses

 

 

62,009

 

 

 

57,738

 

 

 

127,816

 

 

 

226,462

 

Reimbursed expenses

 

 

11,788

 

 

 

11,588

 

 

 

23,437

 

 

 

24,382

 

Cost of services

 

 

18,414

 

 

 

19,627

 

 

 

35,549

 

 

 

37,954

 

Depreciation and amortization

 

 

12,715

 

 

 

11,018

 

 

 

25,492

 

 

 

22,749

 

           Total operating expenses

 

 

442,308

 

 

 

435,806

 

 

 

878,172

 

 

 

969,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

61,869

 

 

 

70,987

 

 

 

122,203

 

 

 

15,868

 

Other income (loss), net

 

 

1,133

 

 

 

(4,500

)

 

 

2,959

 

 

 

20

 

Interest expense, net

 

 

(4,210

)

 

 

(4,337

)

 

 

(8,267

)

 

 

(8,440

)

         Income before provision (benefit) for income taxes

 

 

58,792

 

 

 

62,150

 

 

 

116,895

 

 

 

7,448

 

Income tax provision (benefit)

 

 

15,760

 

 

 

14,833

 

 

 

30,213

 

 

 

(1,277

)

Net income

 

 

43,032

 

 

 

47,317

 

 

 

86,682

 

 

 

8,725

 

           Net income attributable to noncontrolling interest

 

 

(228

)

 

 

(1,283

)

 

 

(927

)

 

 

(1,302

)

Net income attributable to Korn Ferry

 

$

42,804

 

 

$

46,034

 

 

$

85,755

 

 

$

7,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Korn Ferry:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

$

0.78

 

 

$

0.82

 

 

$

1.54

 

 

$

0.13

 

      Diluted

 

$

0.77

 

 

$

0.81

 

 

$

1.54

 

 

$

0.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

 

54,568

 

 

 

55,461

 

 

 

54,917

 

 

 

55,420

 

      Diluted

 

 

54,716

 

 

 

56,239

 

 

 

55,170

 

 

 

56,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

 

2019

 

 

 

 

 

 

2018

 

 

% Change

 

 

2019

 

 

 

 

 

 

2018

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

$

209,760

 

 

 

 

 

 

$

217,089

 

 

 

(3.4

%)

 

$

405,286

 

 

 

 

 

 

$

412,464

 

 

 

(1.7

%)

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

113,818

 

 

 

 

 

 

 

115,863

 

 

 

(1.8

%)

 

 

225,540

 

 

 

 

 

 

 

227,960

 

 

 

(1.1

%)

 

EMEA

 

 

39,821

 

 

 

 

 

 

 

44,928

 

 

 

(11.4

%)

 

 

86,351

 

 

 

 

 

 

 

91,582

 

 

 

(5.7

%)

 

Asia Pacific

 

 

25,944

 

 

 

 

 

 

 

27,936

 

 

 

(7.1

%)

 

 

53,306

 

 

 

 

 

 

 

54,231

 

 

 

(1.7

%)

 

Latin America

 

 

8,272

 

 

 

 

 

 

 

8,907

 

 

 

(7.1

%)

 

 

15,857

 

 

 

 

 

 

 

16,785

 

 

 

(5.5

%)

Total Executive Search

 

 

187,855

 

 

 

 

 

 

 

197,634

 

 

 

(4.9

%)

 

 

381,054

 

 

 

 

 

 

 

390,558

 

 

 

(2.4

%)

RPO and Professional Search

 

 

94,774

 

 

 

 

 

 

 

80,482

 

 

 

17.8

%

 

 

190,598

 

 

 

 

 

 

 

157,751

 

 

 

20.8

%

 

Total fee revenue

 

 

492,389

 

 

 

 

 

 

 

495,205

 

 

 

(0.6

%)

 

 

976,938

 

 

 

 

 

 

 

960,773

 

 

 

1.7

%

Reimbursed out-of-pocket engagement expenses

 

 

11,788

 

 

 

 

 

 

 

11,588

 

 

 

1.7

%

 

 

23,437

 

 

 

 

 

 

 

24,382

 

 

 

(3.9

%)

 

Total revenue

 

$

504,177

 

 

 

 

 

 

$

506,793

 

 

 

(0.5

%)

 

$

1,000,375

 

 

 

 

 

 

$

985,155

 

 

 

1.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

Advisory

 

$

28,391

 

 

 

13.5

%

 

$

29,426

 

 

 

13.6

%

 

$

54,182

 

 

 

13.4

%

 

$

(53,653

)

 

 

(13.0

%)

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

28,124

 

 

 

24.7

%

 

 

35,328

 

 

 

30.5

%

 

 

58,446

 

 

 

25.9

%

 

 

61,842

 

 

 

27.1

%

 

EMEA

 

 

6,511

 

 

 

16.4

%

 

 

7,319

 

 

 

16.3

%

 

 

13,822

 

 

 

16.0

%

 

 

14,288

 

 

 

15.6

%

 

Asia Pacific

 

 

5,803

 

 

 

22.4

%

 

 

6,767

 

 

 

24.2

%

 

 

12,796

 

 

 

24.0

%

 

 

13,408

 

 

 

24.7

%

 

Latin America

 

 

791

 

 

 

9.6

%

 

 

2,053

 

 

 

23.0

%

 

 

1,801

 

 

 

11.4

%

 

 

2,807

 

 

 

16.7

%

Total Executive Search

 

 

41,229

 

 

 

21.9

%

 

 

51,467

 

 

 

26.0

%

 

 

86,865

 

 

 

22.8

%

 

 

92,345

 

 

 

23.6

%

RPO and Professional Search

 

 

15,094

 

 

 

15.9

%

 

 

12,516

 

 

 

15.6

%

 

 

30,135

 

 

 

15.8

%