Form: 8-K

Current report filing

June 11, 2015

Exhibit 99.1

For Immediate Release

Contacts:

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

For Media: Dan Gugler, (310) 226-2645

Korn Ferry International Announces Fourth Quarter and Fiscal 2015 Results of Operations – Surpassing $1 Billion in Annual Fee Revenue for the First Time

Highlights

 

  •   Korn Ferry reports record annual fee revenue of $1,028.2 million, an increase of $67.9 million or 7.1% ($91.8 million or 9.6% on a constant currency basis) over FY’14.

 

  •   Fourth quarter fee revenue was also a record at $271.8 million, an increase of $20.1 million or 8.0% ($35.8 million or 14.2% on a constant currency basis), from Q4 FY’14, with increases realized across all segments on a constant currency basis:

 

Futurestep

  22.0

Leadership and Talent Consulting

  14.5

Executive Recruitment

  12.1

 

  •   Adjusted EBITDA margin increased 130 basis points to 15.0% in Q4 FY’15 compared to 13.7% in Q4 FY’14. Full year adjusted EBITDA margin also increased 130 basis points to 15.7% in FY’15 compared to 14.4% in FY’14.

 

  •   Q4 FY’15 and Q4 FY’14 diluted and adjusted diluted earnings per share were $0.51 and $0.43, respectively.

 

  •   FY’15 diluted earnings per share was $1.76 compared to $1.48 in FY’14. Adjusted diluted earnings per share was $1.90 in FY’15 excluding $10.4 million of net restructuring and integration/acquisition costs, and $1.60 in FY’14 excluding $8.6 million of net restructuring, integration/acquisition and separation costs.

 

  •   The Company declared a quarterly dividend of $0.10 per share on June 10, 2015, payable on July 15, 2015 to stockholders of record on June 25, 2015.

 

  •   Effective June 5, 2015, the Company amended its unsecured revolving credit agreement; increasing its borrowing capacity to $150.0 million, with terms and conditions substantially similar to its existing facility.

Los Angeles, CA, June 11, 2015– Korn/Ferry International (NYSE: KFY), the preeminent authority on leadership and talent, today announced record fourth quarter fee revenue of $271.8 million and record annual fee revenue of $1,028.2 million. Fourth quarter diluted and adjusted diluted earnings per share were $0.51 compared to $0.43 in the year-ago quarter. Full year adjusted diluted earnings per share was $1.90, excluding net restructuring and integration/acquisition costs of $10.4 million. Including such costs, diluted earnings per share was $1.76 for the year ended April 30, 2015.

“Korn Ferry closed out the fiscal year with a strong quarter and record fee revenue of $271.8 million – 14.2% growth year over year and 11.4% growth sequentially, at constant currency, with diluted earnings per share of $0.51. With all service lines up year over year, our quarterly results propelled our fiscal year fee revenue to a record high of $1.03 billion – a major milestone in our firm’s history,”


said Gary D. Burnison, CEO, Korn Ferry. “The strategic transformation our firm has undertaken – from a mono line to a multi solutions talent advisory – is taking hold. Korn Ferry will continue to build on our leadership position in helping companies deliver superior business outcomes through impactful people strategies.”

Financial Results

(dollars in millions, except per share amounts)

 

                                                       
     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

Fee revenue

   $    271.8      $    251.7      $ 1,028.2      $    960.3   

Total revenue

   $ 282.2      $ 260.8      $ 1,066.1      $ 995.6   

Operating income

   $ 28.1      $ 24.5      $ 114.0      $ 91.6   

Operating margin

     10.3     9.7     11.1     9.5

Net income

   $ 25.5      $ 21.2      $ 88.4      $ 72.7   

Basic earnings per share

   $ 0.51      $ 0.44      $ 1.78      $ 1.51   

Diluted earnings per share

   $ 0.51      $ 0.43      $ 1.76      $ 1.48   

 

                                                       
EBITDA Results (a):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA

   $      40.2      $      34.5      $    151.3      $    129.7   

EBITDA margin

     14.8     13.7     14.7     13.5

 

                                                       
Adjusted Results (b):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA (a)

   $      40.7      $      34.5      $    161.7      $    138.3   

EBITDA margin (a)

     15.0     13.7     15.7     14.4

Net income

   $ 25.6      $ 21.2      $ 95.5      $ 78.5   

Basic earnings per share

   $ 0.52      $ 0.44      $ 1.93      $ 1.63   

Diluted earnings per share

   $ 0.51      $ 0.43      $ 1.90      $ 1.60   

 

(a) EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (recoveries), integration/acquisition costs and certain separation costs. EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliation).
(b) Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):

 

     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15      FY’14  

Integration/acquisition costs

   $        0.5      $          —      $        0.9       $        0.4      

Restructuring charges, net

   $ —         $ —         $ 9.5          $ 3.7      

Separation costs

   $ —         $ —         $ —          $ 4.5      

Fiscal 2015 Fourth Quarter Results

Fee revenue was $271.8 million in Q4 FY’15, an increase of $20.1 million, or 8.0% ($35.8 million, or 14.2% on a constant currency basis), compared to Q4 FY’14, primarily due to increases of $8.4 million, $6.6 million, and $5.1 million in fee revenue in Executive Recruitment, Leadership & Talent Consulting, and Futurestep, respectively. The overall fee revenue increase was driven by fee revenue growth in certain of our major markets – life science/healthcare, financial services, industrial and consumer, partially offset by a decline in technology.

Compensation and benefit expenses were $183.0 million in Q4 FY’15, an increase of $12.4 million, or 7.3%, compared to the year-ago quarter. The increase was driven, in part, by higher performance related bonus expense resulting from an increase in fee revenue and profitability as a result of the continued adoption of our strategy, including referrals between lines of business. Salaries and related payroll taxes and employee insurance were also higher due to an increase in the average headcount in Executive Recruitment and Futurestep in Q4 FY’15 compared to Q4 FY’14, reflecting our continued growth-related investments back into our business.


General and administrative expenses were $41.6 million in Q4 FY’15, an increase of $2.5 million, or 6.4%, from Q4 FY’14, mainly due to increases in foreign exchange losses and premise and office expenses, which were partially offset by a decline in travel related expenses.

Adjusted EBITDA was $40.7 million in Q4 FY’15, an increase of $6.2 million, or 18.0%, compared to Q4 FY’14. Adjusted EBITDA margin was 15.0% and 13.7% in Q4 FY’15 and Q4 FY’14, respectively. The increase in Adjusted EBITDA was primarily driven by the factors discussed above.

On a GAAP basis, operating income was $28.1 million in Q4 FY’15 and $24.5 million in Q4 FY’14 resulting in an operating margin of 10.3% in Q4 FY’15 compared to 9.7% in the year-ago quarter. Operating income was impacted by the above items.

Fiscal 2015 Results

Fee revenue was $1,028.2 million in FY’15, an increase of $67.9 million, or 7.1% ($91.8 million or 9.6% on a constant currency basis), compared to FY’14, primarily due to fee revenue increases of $28.5 million, $26.9 million, and $12.5 million in Executive Recruitment, Futurestep and Leadership & Talent Consulting, respectively. The overall higher fee revenue was driven by fee revenue growth in industrial, life science/healthcare, financial services and consumer sectors, offset by a decline in the education/non-profit sector, while the technology sector was essentially flat.

Adjusted EBITDA was $161.7 million during FY’15, an increase of $23.4 million, or 16.9%, compared to FY’14. Adjusted EBITDA margin was 15.7% and 14.4% in FY’15 and FY’14, respectively.

On a GAAP basis, operating income was $114.0 million in FY’15, an increase of $22.4 million, or 24.5%, compared to FY’14, resulting in an operating margin of 11.1% in FY’15 compared to 9.5% in FY’14.

Balance Sheet and Liquidity

Cash and marketable securities were $525.4 million at April 30, 2015, compared to $468.3 million at April 30, 2014. Net of amounts held in trust for deferred compensation plans and to pay FY’15 bonuses, cash and marketable securities were $235.6 million and $211.1 million at April 30, 2015 and 2014, respectively. As of April 30, 2015 and 2014, we held $143.4 million and $136.3 million, respectively, of cash and cash equivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay FY’15 bonuses. Cash and marketable securities increased by $57.1 million from April 30, 2014, primarily due to cash provided by operating activities, partially offset by Q1 FY’15 payments of FY’14 annual bonuses, $15.3 million to acquire Pivot Leadership and $5.1 million in dividend payments made to stockholders during the year.

In accordance with the Company’s dividend policy, the Company declared a quarterly dividend of $0.10 per share on June 10, 2015, payable on July 15, 2015 to stockholders of record on June 25, 2015.


Results by Segment

Selected Executive Recruitment Data

(dollars in millions)

 

                                       
     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

Fee revenue

   $ 156.6      $ 148.2      $ 597.4      $ 568.9   

Total revenue

   $ 161.7      $ 153.7      $ 619.3      $ 591.2   

Operating income

   $ 31.3      $ 28.4      $ 119.0      $ 116.4   

Operating margin

     20.0     19.1     19.9     20.5

Ending number of consultants

     452        432        452        432   

Average number of consultants

     448        431        442        416   

Engagements billed

     3,175        3,048        8,480        8,144   

New engagements (a)

     1,382        1,303        5,165        5,052   

 

                                       
EBITDA Results (b):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA

   $   33.4      $   31.7      $ 127.0      $ 126.5   

EBITDA margin

     21.3     21.4     21.3     22.2

 

                                       
Adjusted Results (c):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA (b)

   $   33.4      $   31.7      $ 132.4      $ 127.8   

EBITDA margin (b)

     21.3     21.4     22.2     22.5

 

(a) Represents new engagements opened in the respective period.
(b) EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).
(c) Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):

 

     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

Restructuring charges, net

   $     —         $     —         $     5.4         $     1.3      

Executive Recruitment

Fee revenue was $156.6 million in Q4 FY’15, an increase of $8.4 million, or 5.7% (an increase of $18.0 million, or 12.1% on a constant currency basis), compared to Q4 FY’14. The overall increase in fee revenue was primarily attributable to an increase of 4.2% in the number of engagements billed and a 1.4% increase in the weighted-average fees billed per engagement in Q4 FY’15 compared to Q4 FY’14. On a regional basis, fee revenue increased in North America by $7.3 million, or 9.1% ($8.0 million, or 10.0% on a constant currency basis), Asia Pacific by $0.8 million, or 3.7% ($2.3 million, or 10.6% on a constant currency basis), and South America by $0.8 million, or 13.3% ($2.2 million, or 36.7% on a constant currency basis), partially offset by a decline in EMEA by $0.5 million, or 1.2% (an increase of $5.5 million, or 13.7% on a constant currency basis).

Adjusted EBITDA was $33.4 million and $31.7 million during Q4 FY’15 and Q4 FY’14, respectively. The increase in Adjusted EBITDA was driven by higher fee revenues of $8.4 million, partially offset by increases in compensation and benefit expenses and general and administrative expenses of $4.9 million and $1.0 million, respectively. The increase in compensation and benefit expenses was primarily due to an increase in performance related bonus expense resulting from an increase in fee revenue and average headcount and in the fair value of the vested amounts owed under certain deferred compensation plans in Q4 FY’15 compared to Q4 FY’14. General and administrative expenses were higher due to an increase in foreign exchange loss and premise and office expense, partially offset by a decline in travel related expenses.


Operating income was $31.3 million in Q4 FY’15, an increase of $2.9 million, or 10.2%, compared to Q4 FY’14, resulting in an operating margin of 20.0% in Q4 FY’15 compared to 19.1% in Q4 FY’14. Operating income was impacted by all of the above items and a decline in depreciation expense of $1.0 million in Q4 FY’15 compared to the year-ago quarter.

Selected Leadership & Talent Consulting Data

(dollars in millions)

 

     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

Fee revenue

   $ 72.8      $ 66.2      $ 267.1      $ 254.6   

Total revenue

   $ 75.3      $ 68.4      $ 275.2      $ 263.0   

Operating income

   $ 8.4      $ 6.8      $ 28.2      $ 23.8   

Operating margin

     11.5     10.3     10.6     9.4

Ending number of consultants (a)

     164        127        164        127   

Staff utilization (b)

     74     70     71     67

 

EBITDA Results (c):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA

   $ 12.1      $ 10.0      $   41.6      $   36.4   

EBITDA margin

     16.6     15.1     15.6     14.3

 

Adjusted Results (d):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA (c)

   $ 12.1      $ 10.0      $   44.4      $   37.6   

EBITDA margin (c)

     16.6     15.1     16.6     14.8

 

(a) Represents number of employees originating consulting services.
(b) Calculated by dividing the number of hours of our full-time LTC professional staff, who recorded time to an engagement during the period, by the total available working hours during the same period.
(c) EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).
(d) Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):

 

     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

Restructuring charges, net

   $   —         $   —         $   2.8         $     1.2      

Leadership & Talent Consulting

Fee revenue was $72.8 million in Q4 FY’15, an increase of $6.6 million, or 10.0% ($9.6 million, or 14.5% on a constant currency basis), from the year-ago quarter. This increase is primarily attributed to higher consulting fee revenue of $5.4 million in Q4 FY’15 compared to Q4 FY’14 with the remaining increase being generated by product revenue. The increase in consulting revenue includes $3.7 million of fee revenue from Pivot Leadership which was acquired on March 1, 2015.

Adjusted EBITDA was $12.1 million during Q4 FY’15, an increase of $2.1 million, or 21.0%, compared to Q4 FY’14. Adjusted EBITDA margin was 16.6% in Q4 FY’15 compared to 15.1% in Q4 FY’14 due to higher fee revenue of $6.6 million, partially offset by increases in compensation and benefit expenses and general and administrative expenses of $2.8 million and $0.7 million, respectively. The increase in compensation and benefit expenses was due to an increase in performance related bonus expense, higher recruitment costs and an increase in the use of temporary workers to deliver the higher levels of fee revenue.


Operating income was $8.4 million in Q4 FY’15, an increase of $1.6 million compared to Q4 FY’14, resulting in an operating margin of 11.5% in the current quarter compared to 10.3% in the year-ago quarter. The increase in operating income was due to the factors impacting Adjusted EBITDA as discussed above and an increase in depreciation and amortization expense of $0.4 million in Q4 FY’15 compared to Q4 FY’14.

Selected Futurestep Data

(dollars in millions)

 

                                       
     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

Fee revenue

   $    42.4      $    37.3      $ 163.7      $ 136.8   

Total revenue

   $ 45.2      $ 38.7      $ 171.6      $ 141.4   

Operating income

   $ 5.5      $ 4.3      $ 19.9      $ 13.3   

Operating margin

     13.1     11.7     12.2     9.8

Engagements billed

     1,205        1,205        3,309        3,246   

New engagements (a)

     509        598        2,142        2,427   

 

                                       
EBITDA Results (b):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA

   $      6.1      $      4.8      $   21.9      $   15.7   

EBITDA margin

     14.4     13.1     13.4     11.5

 

                                       
Adjusted Results (c):    Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15     FY’14  

EBITDA (b)

   $      6.1      $      4.8      $   23.0      $   16.9   

EBITDA margin (b)

     14.4     13.1     14.1     12.3

 

(a) Represents new engagements opened in the respective period.
(b) EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).
(c) Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):

 

     Fourth Quarter     Year to Date  
     FY’15     FY’14     FY’15      FY’14  

Restructuring charges, net

   $      —         $     —         $     1.1        $     1.2      

Futurestep

Fee revenue was $42.4 million in Q4 FY’15, an increase of $5.1 million, or 13.7% ($8.2 million, or 22.0% on a constant currency basis), compared to the year-ago quarter. The increase in fee revenue was driven by a 13.9% increase in the weighted average fees billed per engagement in Q4 FY’15 compared to Q4 FY’14.

Adjusted EBITDA was $6.1 million during Q4 FY’15, an increase of $1.3 million, or 27.1%, compared to Q4 FY’14, due primarily to the increase in fee revenue of $5.1 million, partially offset by higher compensation and benefit expenses of $3.4 million and an increase in general and administrative expenses of $0.5 million due primarily to higher foreign currency losses in Q4 FY’15 compared to the year-ago quarter. The increase in compensation and benefit expenses was driven by higher salaries and related payroll taxes as a result of a 15% increase in average headcount and an increase in outside contractor expense. The higher average headcount and use of outside contractors are both related to the higher levels of fee revenue driven by the continued adoption of our strategy, including referrals between lines of business.


Operating income was $5.5 million in Q4 FY’15, an increase of $1.2 million, compared to Q4 FY’14, resulting in an operating margin of 13.1% in the current quarter compared to 11.7% in the year-ago quarter. The increase in operating income was due to the same factors impacting Adjusted EBITDA.

Outlook

The current strong U.S. dollar will negatively impact our FY’16 first quarter year-over-year revenue growth. Assuming worldwide economic conditions and financial markets remain where they are currently and considering the effect of foreign exchange rates, fee revenue is expected to be in the range of $258 million to $270 million in Q1 FY’16, and diluted earnings per share are likely to be in the range of $0.44 to $0.50.

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 www.kornferry.com, accessible through the Investor Relations section. 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.

 

 

About Korn Ferry

Korn Ferry is the preeminent authority on leadership and talent. For decades, clients have trusted us to recruit leaders throughout the world. Today we are their partner in designing strategies to accelerate business outcomes through talent. For more information, visit www.kornferry.com.


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, the dependence on attracting and retaining qualified and experienced consultants, our ability to successfully integrate acquired businesses, maintaining our brand name and professional reputation, potential legal liability, 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 the growth, alignment of our cost structure with our growth, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, consolidation of industries we serve, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, impairment of goodwill and other intangible assets, deferred tax assets, seasonality, our ability to successfully rationalize our cost structure and employment liability risk. For a detailed description of risks and uncertainties that could cause differences, please refer to Korn Ferry’s periodic filings with the Securities and Exchange Commission. Korn Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). In particular, it includes:

 

  •   adjusted net income, adjusted to exclude restructuring charges, integration and acquisition costs and certain separation costs, net of income tax effect;

 

  •   adjusted basic and diluted earnings per share, adjusted to exclude restructuring charges, integration and acquisition costs and certain separation costs, net of income tax effect;

 

  •   constant currency amounts that represent the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior year period;

 

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

 

  •   adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring charges, integration and acquisition costs and certain separation costs, 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.

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. The use of these non-GAAP financial measures facilitate comparisons to Korn Ferry’s historical performance. Korn Ferry includes these 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. In the case of constant currency amounts, management believes the presentation of such information provides meaningful 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]


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

 

     Three Months Ended
April 30,
    Year Ended
April 30,
 
     2015     2014     2015     2014  
     (unaudited)              

Fee revenue

   $ 271,717      $ 251,712      $ 1,028,152      $ 960,301   

Reimbursed out-of-pocket engagement expenses

     10,436        9,086        37,914        35,258   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  282,153      260,798      1,066,066      995,559   
  

 

 

   

 

 

   

 

 

   

 

 

 

Compensation and benefits

  182,886      170,595      691,450      646,889   

General and administrative expenses

  41,637      39,109      145,917      152,040   

Reimbursed expenses

  10,436      9,086      37,914      35,258   

Cost of services

  11,868      10,213      39,692      39,910   

Depreciation and amortization

  7,234      7,315      27,597      26,172   

Restructuring charges, net

  —        —        9,468      3,682   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  254,061      236,318      952,038      903,951   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  28,092      24,480      114,028      91,608   

Other income, net

  4,397      2,018      7,458      9,769   

Interest expense, net

  (358   (261   (1,784   (2,363
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

  32,131      26,237      119,702      99,014   

Equity in earnings of unconsolidated subsidiaries

  485      677      2,181      2,169   

Income tax provision

  7,134      5,703      33,526      28,492   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 25,482    $ 21,211    $ 88,357    $ 72,691   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share:

Basic

$ 0.51    $ 0.44    $ 1.78    $ 1.51   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

$ 0.51    $ 0.43    $ 1.76    $ 1.48   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding:

Basic

  49,288      48,523      49,052      48,162   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  49,890      49,458      49,766      49,145   
  

 

 

   

 

 

   

 

 

   

 

 

 


KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

    Three Months Ended April 30,     Year Ended April 30,  
    2015           2014     % Change     2015           2014     % Change  

Fee Revenue:

               

Executive recruitment:

               

North America

  $ 87,579        $ 80,230        9   $ 330,634        $ 306,768        8

EMEA

    39,677          40,175        (1 %)      153,465          147,917        4

Asia Pacific

    22,533          21,753        4     84,148          84,816        (1 %) 

South America

    6,794          6,028        13     29,160          29,374        (1 %) 
 

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

  156,583      148,186      6   597,407      568,875      5

Leadership & Talent Consulting

  72,749      66,279      10   267,018      254,636      5

Futurestep

  42,385      37,247      14   163,727      136,790      20
 

 

 

     

 

 

     

 

 

     

 

 

   

Total fee revenue

  271,717      251,712      8   1,028,152      960,301      7

Reimbursed out-of-pocket engagement expenses

  10,436      9,086      15   37,914      35,258      8
 

 

 

     

 

 

     

 

 

     

 

 

   

Total revenue

$ 282,153    $ 260,798      8 $ 1,066,066    $ 995,559      7
 

 

 

     

 

 

     

 

 

     

 

 

   
          Margin           Margin           Margin           Margin  

Operating Income:

               

Executive recruitment:

               

North America

  $ 20,030        22.9   $ 18,483        23.0   $ 80,818        24.4   $ 70,256        22.9

EMEA

    5,530        13.9     4,699        11.7     18,867        12.3     23,168        15.7

Asia Pacific

    4,589        20.4     4,380        20.1     14,631        17.4     17,274        20.4

South America

    1,191        17.5     761        12.6     4,704        16.1     5,654        19.2
 

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

  31,340      20.0   28,323      19.1   119,020      19.9   116,352      20.5

Leadership & Talent Consulting

  8,376      11.5   6,855      10.3   28,175      10.6   23,847      9.4

Futurestep

  5,573      13.1   4,343      11.7   19,940      12.2   13,352      9.8

Corporate

  (17,197   (15,041   (53,107   (61,943
 

 

 

     

 

 

     

 

 

     

 

 

   

Total operating income

$ 28,092      10.3 $ 24,480      9.7 $ 114,028      11.1 $ 91,608      9.5
 

 

 

     

 

 

     

 

 

     

 

 

   


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

     April 30,  
     2015     2014  

ASSETS

    

Cash and cash equivalents

   $ 380,838      $ 333,717   

Marketable securities

     25,757        9,566   

Receivables due from clients, net of allowance for doubtful accounts of $9,958 and $9,513 respectively

     188,543        175,986   

Income taxes and other receivables

     10,966        8,244   

Deferred income taxes

     3,827        4,486   

Prepaid expenses and other assets

     31,054        29,955   
  

 

 

   

 

 

 

Total current assets

  640,985      561,954   
  

 

 

   

 

 

 

Marketable securities, non-current

  118,819      124,993   

Property and equipment, net

  62,088      60,434   

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

  102,691      94,274   

Deferred income taxes

  56,014      55,039   

Goodwill

  254,440      257,582   

Intangible assets, net

  47,901      49,560   

Investments and other assets

  34,863      29,830   
  

 

 

   

 

 

 

Total assets

$ 1,317,801    $ 1,233,666   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable

$ 19,238    $ 19,375   

Income taxes payable

  3,813      13,014   

Compensation and benefits payable

  219,364      192,035   

Other accrued liabilities

  63,595      62,509   
  

 

 

   

 

 

 

Total current liabilities

  306,010      286,933   
  

 

 

   

 

 

 

Deferred compensation and other retirement plans

  173,432      169,235   

Other liabilities

  23,110      21,962   
  

 

 

   

 

 

 

Total liabilities

  502,552      478,130   
  

 

 

   

 

 

 

Stockholders’ equity

Common stock: $0.01 par value, 150,000 shares authorized, 62,863 and 62,282 shares issued and 50,573 and 49,811 shares outstanding, respectively

  463,839      449,631   

Retained earnings

  392,033      308,781   

Accumulated other comprehensive loss, net

  (40,623   (2,388
  

 

 

   

 

 

 

Stockholders’ equity

  815,249      756,024   

Less: notes receivable from stockholders

  —        (488
  

 

 

   

 

 

 

Total stockholders’ equity

  815,249      755,536   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

$ 1,317,801    $ 1,233,666   
  

 

 

   

 

 

 


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)

(in thousands, except per share amounts)

(unaudited)

 

     Three Months Ended
April 30, 2015
    Three Months Ended
April 30, 2014
 
     As Reported     Adjustments     As Adjusted     As Reported     Adjustments      As Adjusted  

Fee revenue

   $ 271,717        $ 271,717      $ 251,712         $ 251,712   

Reimbursed out-of-pocket engagement expenses

     10,436          10,436        9,086           9,086   
  

 

 

     

 

 

   

 

 

      

 

 

 

Total revenue

  282,153      282,153      260,798      260,798   
  

 

 

     

 

 

   

 

 

      

 

 

 

Compensation and benefits

  182,886      182,886      170,595      170,595   

General and administrative expenses

  41,637      (514   41,123      39,109      39,109   

Reimbursed expenses

  10,436      10,436      9,086      9,086   

Cost of services

  11,868      11,868      10,213      10,213   

Depreciation and amortization

  7,234      7,234      7,315      7,315   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total operating expenses

  254,061      (514   253,547      236,318      —        236,318   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

  28,092      514      28,606      24,480      —        24,480   

Other income, net

  4,397      4,397      2,018      2,018   

Interest expense, net

  (358   (358   (261   (261
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

  32,131      514      32,645      26,237      —        26,237   

Equity in earnings of unconsolidated subsidiaries

  485      485      677      677   

Income tax provision (1) (2)

  7,134      332      7,466      5,703      5,703   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net income

$ 25,482    $ 182    $ 25,664    $ 21,211    $ —      $ 21,211   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per common share:

Basic

$ 0.51    $ 0.52    $ 0.44    $ 0.44   
  

 

 

     

 

 

   

 

 

      

 

 

 

Diluted

$ 0.51    $ 0.51    $ 0.43    $ 0.43   
  

 

 

     

 

 

   

 

 

      

 

 

 

Weighted-average common shares outstanding:

Basic

  49,288      49,288      48,523      48,523   
  

 

 

     

 

 

   

 

 

      

 

 

 

Diluted

  49,890      49,890      49,458      49,458   
  

 

 

     

 

 

   

 

 

      

 

 

 

Explanation of Non-GAAP Adjustments

 

(1) The adjustments result in an effective tax rate of 23% for the as adjusted amounts for the three months ended April 30, 2015.
(2) The three months ended April 30, 2015 includes the tax effect on acquisition costs.


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)

(in thousands, except per share amounts)

(unaudited)

 

     Year Ended
April 30, 2015
    Year Ended
April 30, 2014
 
     As Reported     Adjustments     As Adjusted     As Reported     Adjustments     As Adjusted  

Fee revenue

   $ 1,028,152        $ 1,028,152      $ 960,301        $ 960,301   

Reimbursed out-of-pocket engagement expenses

     37,914          37,914        35,258          35,258   
  

 

 

     

 

 

   

 

 

     

 

 

 

Total revenue

  1,066,066      1,066,066      995,559      995,559   
  

 

 

     

 

 

   

 

 

     

 

 

 

Compensation and benefits

  691,450      —        691,450      646,889      (4,500   642,389   

General and administrative expenses

  145,917      (959   144,958      152,040      (394   151,646   

Reimbursed expenses

  37,914      37,914      35,258      35,258   

Cost of services

  39,692      39,692      39,910      39,910   

Depreciation and amortization

  27,597      27,597      26,172      26,172   

Restructuring charges, net

  9,468      (9,468   —        3,682      (3,682   —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  952,038      (10,427   941,611      903,951      (8,576   895,375   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  114,028      10,427      124,455      91,608      8,576      100,184   

Other income, net

  7,458      7,458      9,769      9,769   

Interest expense, net

  (1,784   (1,784   (2,363   (2,363
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

  119,702      10,427      130,129      99,014      8,576      107,590   

Equity in earnings of unconsolidated subsidiaries

  2,181      2,181      2,169      2,169   

Income tax provision (1) (2)

  33,526      3,282      36,808      28,492      2,796      31,288   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 88,357    $ 7,145    $ 95,502    $ 72,691    $ 5,780    $ 78,471   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share:

Basic

$ 1.78    $ 1.93    $ 1.51    $ 1.63   
  

 

 

     

 

 

   

 

 

     

 

 

 

Diluted

$ 1.76    $ 1.90    $ 1.48    $ 1.60   
  

 

 

     

 

 

   

 

 

     

 

 

 

Weighted-average common shares outstanding:

Basic

  49,052      49,052      48,162      48,162   
  

 

 

     

 

 

   

 

 

     

 

 

 

Diluted

  49,766      49,766      49,145      49,145   
  

 

 

     

 

 

   

 

 

     

 

 

 

Explanation of Non-GAAP Adjustments

 

(1) The adjustments result in an effective tax rate of 28% and 29% for the as adjusted amounts for the year ended April 30, 2015 and 2014, respectively.
(2) The year ended April 30, 2015 includes the tax effect on restructuring charges, net and acquisition costs, while the year ended April 30, 2014 includes the tax effect on restructuring charges, separation costs, and integration/acquisition costs associated with the acquisition of PDI Ninth House.


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

 

    Three Months Ended April 30, 2015  
    Executive Recruitment                          
    North
America
    EMEA     Asia Pacific     South
America
    Subtotal     Leadership
& Talent
Consulting
    Futurestep     Corporate     Consolidated  

Fee revenue

  $ 87,579      $ 39,677      $ 22,533      $ 6,794      $ 156,583      $ 72,749      $ 42,385      $ —        $ 271,717   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

                  $ 25,482   

Other income, net

                    (4,397

Interest expense, net

                    358   

Equity in earnings of unconsolidated subsidiaries, net

                    (485

Income tax provision

                    7,134   
                 

 

 

 

Operating income (loss)

  $ 20,030      $ 5,530      $ 4,589      $ 1,191      $ 31,340      $ 8,376      $ 5,573      $ (17,197     28,092   

Depreciation and amortization

    853        398        274        101        1,626        3,579        508        1,521        7,234   

Other income, net

    190        14        86        22        312        89        27        3,969        4,397   

Equity in earnings of unconsolidated subsidiaries, net

    145        —          —          —          145        —          —          340        485   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    21,218        5,942        4,949        1,314        33,423        12,044        6,108        (11,367     40,208   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA margin

    24.2     15.0     22.0     19.3     21.3     16.6     14.4       14.8

Acquisition costs

    —          —          —          —          —          —          —          514        514   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 21,218      $ 5,942      $ 4,949      $ 1,314      $ 33,423      $ 12,044      $ 6,108      $ (10,853   $ 40,722   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

    24.2     15.0     22.0     19.3     21.3     16.6     14.4       15.0
    Three Months Ended April 30, 2014  
    Executive Recruitment                          
    North
America
    EMEA     Asia Pacific     South
America
    Subtotal     Leadership
& Talent
Consulting
    Futurestep     Corporate     Consolidated  

Fee revenue

  $ 80,230      $ 40,175      $ 21,753      $ 6,028      $ 148,186      $ 66,279      $ 37,247      $ —        $ 251,712   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

                  $ 21,211   

Other income, net

                    (2,018

Interest expense, net

                    261   

Equity in earnings of unconsolidated subsidiaries, net

                    (677

Income tax provision

                    5,703   
                 

 

 

 

Operating income (loss)

  $ 18,483      $ 4,699      $ 4,380      $ 761      $ 28,323      $ 6,855      $ 4,343      $ (15,041     24,480   

Depreciation and amortization

    847        1,388        281        98        2,614        3,161        512        1,028        7,315   

Other income (loss), net

    102        229        59        293        683        (39     7        1,367        2,018   

Equity in earnings of unconsolidated subsidiaries, net

    125        —          —          —          125        —          —          552        677   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    19,557        6,316        4,720        1,152        31,745        9,977        4,862        (12,094     34,490   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA margin

    24.4     15.7     21.7     19.1     21.4     15.1     13.1       13.7

Adjusted EBITDA

  $ 19,557      $ 6,316      $ 4,720      $ 1,152      $ 31,745      $ 9,977      $ 4,862      $ (12,094   $ 34,490   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

    24.4     15.7     21.7     19.1     21.4     15.1     13.1       13.7


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

 

    Year Ended April 30, 2015  
    Executive Recruitment                          
    North
America
    EMEA     Asia Pacific     South
America
    Subtotal     Leadership
& Talent
Consulting
    Futurestep     Corporate     Consolidated  

Fee revenue

  $ 330,634      $ 153,465      $ 84,148      $ 29,160      $ 597,407      $ 267,018      $ 163,727      $ —        $ 1,028,152   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

                  $ 88,357   

Other income, net

                    (7,458

Interest expense, net

                    1,784   

Equity in earnings of unconsolidated subsidiaries, net

                    (2,181

Income tax provision

                    33,526   
                 

 

 

 

Operating income (loss)

  $ 80,818      $ 18,867      $ 14,631      $ 4,704      $ 119,020      $ 28,175      $ 19,940      $ (53,107     114,028   

Depreciation and amortization

    3,515        1,764        1,045        350        6,674        13,427        1,882        5,614        27,597   

Other income (loss), net

    288        83        369        109        849        (22     54        6,577        7,458   

Equity in earnings of unconsolidated subsidiaries, net

    426        —          —          —          426        —          —          1,755        2,181   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    85,047        20,714        16,045        5,163        126,969        41,580        21,876        (39,161     151,264   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA margin

    25.7     13.5     19.1     17.7     21.3     15.6     13.4       14.7

Restructuring charges, net

    1,151        3,987        17        229        5,384        2,758        1,154        172        9,468   

Acquisition costs

    —          —          —          —          —          —          —          959        959   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 86,198      $ 24,701      $ 16,062      $ 5,392      $ 132,353      $ 44,338      $ 23,030      $ (38,030   $ 161,691   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

    26.1     16.1     19.1     18.5     22.2     16.6     14.1       15.7
    Year Ended April 30, 2014  
    Executive Recruitment                          
    North
America
    EMEA     Asia Pacific     South
America
    Subtotal     Leadership
& Talent
Consulting
    Futurestep     Corporate     Consolidated  

Fee revenue

  $ 306,768      $ 147,917      $ 84,816      $ 29,374      $ 568,875      $ 254,636      $ 136,790      $ —        $ 960,301   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

                  $ 72,691   

Other income, net

                    (9,769

Interest expense, net

                    2,363   

Equity in earnings of unconsolidated subsidiaries, net

                    (2,169

Income tax provision

                    28,492   
                 

 

 

 

Operating income (loss)

  $ 70,256      $ 23,168      $ 17,274      $ 5,654      $ 116,352      $ 23,847      $ 13,352      $ (61,943     91,608   

Depreciation and amortization

    3,579        2,727        1,383        323        8,012        12,491        1,797        3,872        26,172   

Other income, net

    631        632        203        303        1,769        106        583        7,311        9,769   

Equity in earnings of unconsolidated subsidiaries, net

    383        —          —          —          383        —          —          1,786        2,169   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    74,849        26,527        18,860        6,280        126,516        36,444        15,732        (48,974     129,718   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA margin

    24.4     17.9     22.2     21.4     22.2     14.3     11.5       13.5

Restructuring charges, net

    816        460        60        —          1,336        1,149        1,134        63        3,682   

Separation costs

    —          —          —          —          —          —          —          4,500        4,500   

Integration/acquisition costs

    —          —          —          —          —          —          —          394        394   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 75,665      $ 26,987      $ 18,920      $ 6,280      $ 127,852      $ 37,593      $ 16,866      $ (44,017   $ 138,294   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

    24.7     18.2     22.3     21.4     22.5     14.8     12.3       14.4