EX-99.1
Published on June 15, 2016
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 2016 Results of Operations
Highlights
| Korn Ferry reports record annual and fourth quarter fee revenue, driven by organic growth, as well as the Hay Group acquisition. |
| The North America region of Executive Search and the Futurestep segment continued to deliver strong revenue growth. |
| Significant progress continues to be made on the Hay Group integration. |
| The Company entered into a Credit Agreement with a syndicate of banks providing for enhanced financial flexibility. |
| The Company declared a quarterly dividend of $0.10 per share on June 15, 2016, payable on July 15, 2016 to stockholders of record on June 27, 2016. |
Los Angeles, CA, June 15, 2016 Korn/Ferry International (NYSE: KFY), the preeminent global people and organizational advisory firm, today announced record fourth quarter and annual fee revenue of $399.9 million and $1.3 billion, or $405.0 million and $1.3 billion on an adjusted basis, respectively. Fourth quarter diluted earnings per share and adjusted diluted earnings per share were $0.10 and $0.58, respectively. FY16 diluted earnings per share were $0.58 and adjusted diluted earnings per share were $2.08. The adjusted diluted earnings per share for the fourth quarter and the full year excluded $32.9 million and $103.9 million, respectively, of restructuring charges, net, integration/acquisition and separation costs, a deferred revenue adjustment related to the Hay Group acquisition (which also impacted adjusted fee revenue) and a non-cash loss relating to the Venezuelan currency devaluation.
Korn Ferry closed strong in the final quarter of its fiscal year with fee revenue of $399.9 million representing 47% growth, or adjusted fee revenue of $405.0 million representing 49% growth, and diluted earnings per share of $0.10, or adjusted diluted earnings per share of $0.58, said Gary D. Burnison, CEO Korn Ferry. I am enormously proud of our company and the results we have achieved during the quarter, and at the same time, continuing to deliver on the Hay Group integration at a scope and pace that has exceeded our initial expectations.
We are in the midst of creating a new firm with 65% of our colleagues new to the organization in the last three years, due to expansion and growth. We are a company that accelerates our clients business performance through solutions and productized services that span from strategy implementation and organizational design to recruitment and leadership development to compensation and reward strategies. Our advisory business, now bolstered by our Hay Group combination, has given us more reasons to engage with clients. Also, our recruiting businesses, Executive Search and Futurestep, have never been stronger than they were in the fourth quarter. We are indeed creating the preeminent organizational and people advisory firm, Burnison added.
Hay Group Integration
In the fourth quarter of FY16, we continued to make significant progress on the Hay Group integration. The majority of our fourth quarter efforts were focused on activities associated with integration of our go-to-market activities, our intellectual property and content, our solution sets and service offerings, and our back office systems and business processes. We incurred a minimal amount of restructuring costs, including real estate co-location. The fourth quarter results benefitted from the third quarter restructuring and integration actions with the new Hay Group segment EBITDA margin coming in at 5.6%, or 15.9% on an adjusted basis.
As previously disclosed, the integration of Hay Group will be substantially complete in Q1 FY17, which will include additional consolidation of office space and the elimination of other redundant operational and general and administrative expenses. We estimate the cost of these actions to be in the range of $20 million to $26 million, resulting in incremental annualized savings of approximately $17 million to $23 million.
Selected Financial Results
(dollars in millions, except per share amounts)
Fourth Quarter | Year to Date | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Fee revenue |
$ | 399.9 | $ | 271.8 | $ | 1,292.1 | $ | 1,028.2 | ||||||||
Total revenue |
$ | 417.1 | $ | 282.2 | $ | 1,346.7 | $ | 1,066.1 | ||||||||
Operating income |
$ | 4.9 | $ | 28.1 | $ | 52.7 | $ | 114.0 | ||||||||
Operating margin |
1.2 | % | 10.3 | % | 4.1 | % | 11.1 | % | ||||||||
Net income attributable to Korn Ferry |
$ | 5.8 | $ | 25.5 | $ | 30.9 | $ | 88.4 | ||||||||
Basic earnings per share |
$ | 0.10 | $ | 0.51 | $ | 0.58 | $ | 1.78 | ||||||||
Diluted earnings per share |
$ | 0.10 | $ | 0.51 | $ | 0.58 | $ | 1.76 | ||||||||
EBITDA Results (a): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
EBITDA |
$ | 21.4 | $ | 40.2 | $ | 85.8 | $ | 151.3 | ||||||||
EBITDA margin |
5.4 | % | 14.8 | % | 6.6 | % | 14.7 | % | ||||||||
Adjusted Results (b): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Adjusted fee revenue |
$ | 405.0 | $ | 271.8 | $ | 1,303.1 | $ | 1,028.2 | ||||||||
Adjusted EBITDA (a) |
$ | 54.3 | $ | 40.7 | $ | 189.7 | $ | 161.7 | ||||||||
Adjusted EBITDA margin (a) |
13.4 | % | 15.0 | % | 14.6 | % | 15.7 | % | ||||||||
Adjusted net income attributable to Korn Ferry |
$ | 32.8 | $ | 25.6 | $ | 110.9 | $ | 95.5 | ||||||||
Adjusted basic earnings per share |
$ | 0.58 | $ | 0.52 | $ | 2.10 | $ | 1.93 | ||||||||
Adjusted diluted earnings per share |
$ | 0.58 | $ | 0.51 | $ | 2.08 | $ | 1.90 |
(a) | EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (recoveries), net, integration/acquisition costs, and includes the deferred revenue adjustment related to the Hay Group acquisition and separation costs. EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
(b) | Adjusted results are non-GAAP financial measures that adjust for the following (see attached reconciliations): |
Fourth Quarter | Year to Date | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Deferred revenue adjustment related to the Hay Group acquisition |
$ | 5.1 | $ | | $ | 11.0 | $ | | ||||||||
Restructuring charges, net |
$ | 2.4 | $ | | $ | 33.0 | $ | 9.5 | ||||||||
Integration/acquisition costs |
$ | 11.7 | $ | 0.5 | $ | 45.5 | $ | 0.9 | ||||||||
Venezuelan foreign currency loss |
$ | 13.7 | $ | | $ | 13.7 | $ | | ||||||||
Separation costs |
$ | | $ | | $ | 0.7 | $ | |
Fiscal 2016 Fourth Quarter Results
Fee revenue was $399.9 million in Q4 FY16 and adjusted fee revenue was $405.0 million (including $5.1 million in deferred revenue adjustment related to the Hay Group acquisition).
| Excluding fee revenue related to the Hay Group acquisition, fee revenue in Q4 FY16 increased 4.9% (7.1% on a constant currency basis), compared to Q4 FY15. |
| The growth was primarily due to increases in fee revenue in the North America region of Executive Search and the Futurestep segment. |
Operating margin was 1.2% in Q4 FY16 compared to 10.3% in the year-ago quarter. The decrease in operating margin was due to an increase in integration/acquisition costs as well as restructuring charges, net, a foreign currency loss relating to the devaluation of the Venezuelan currency and the deferred revenue adjustment referenced above.
EBITDA margin was 5.4% and Adjusted EBITDA margin was 13.4%. The year-over-year decline in Adjusted EBITDA margin (160 bps) was primarily due to an increase in compensation and benefits expense in the Futurestep segment and North America region of Executive Search to support the growth in revenue and an increased bonus expense associated with better than budgeted performance.
Fiscal 2016 Results
Fee revenue was $1,292.1 million in FY16 and adjusted fee revenue was $1,303.1 million (including $11.0 million in deferred revenue adjustment related to the Hay Group acquisition).
| Excluding fee revenue related to the Hay Group acquisition, fee revenue increased 7.5% (12.4% on a constant currency basis), compared to FY15. |
| Similar to the fourth quarter, the increase in fee revenue was primarily in the North America region of Executive Search and the Futurestep segment. In addition, a portion of the growth relates to Pivot Leadership which was acquired on March 1, 2015. |
Operating income was $52.7 million in FY16, resulting in an operating margin of 4.1% in FY16 compared to 11.1% in FY15. The decrease in operating income and margin was due to an increase in integration/acquisition and restructuring costs as well as a foreign currency loss relating to the devaluation of the Venezuelan currency and the deferred revenue adjustment referenced above.
In FY16, the Companys EBITDA margin was 6.6% and Adjusted EBITDA margin was 14.6%. The year-over-year decline (110 bps) in Adjusted EBITDA margin was caused by the net impact of adverse market movements on the assets and liabilities associated with our deferred compensation programs, foreign currency losses, and the effect of a non-recurring gain in FY15 relating to an insurance reimbursement for expenses incurred in prior years. The EBITDA margin for the combined Hay Group business was 3.7% and on an adjusted basis, the EBITDA margin was 16.4%, which is consistent with the prior year.
Results by Segment
Selected Executive Search Data
(dollars in millions)
Fourth Quarter | Year to Date | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Fee revenue |
$ | 159.7 | $ | 156.6 | $ | 622.9 | $ | 597.4 | ||||||||
Total revenue |
$ | 165.4 | $ | 161.7 | $ | 644.5 | $ | 619.3 | ||||||||
Operating income |
$ | 23.0 | $ | 31.3 | $ | 131.7 | $ | 119.0 | ||||||||
Operating margin |
14.4 | % | 20.0 | % | 21.1 | % | 19.9 | % | ||||||||
Ending number of consultants |
488 | 452 | 488 | 452 | ||||||||||||
Average number of consultants |
490 | 448 | 470 | 442 | ||||||||||||
Engagements billed |
3,395 | 3,175 | 8,375 | 8,480 | ||||||||||||
New engagements (a) |
1,463 | 1,382 | 5,517 | 5,165 | ||||||||||||
EBITDA Results (b): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
EBITDA |
$ | 24.6 | $ | 33.4 | $ | 137.8 | $ | 127.0 | ||||||||
EBITDA margin |
15.4 | % | 21.3 | % | 22.1 | % | 21.3 | % | ||||||||
Adjusted Results (c): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Adjusted EBITDA (b) |
$ | 31.2 | $ | 33.4 | $ | 151.7 | $ | 132.4 | ||||||||
Adjusted EBITDA margin (b) |
19.5 | % | 21.3 | % | 24.3 | % | 22.2 | % |
(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 | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Restructuring charges, net |
$ | | $ | | $ | 7.3 | $ | 5.4 | ||||||||
Venezuelan foreign currency loss |
$ | 6.6 | $ | | $ | 6.6 | $ | |
Executive Search
Fee revenue was $159.7 million in Q4 FY16, an increase of 2.0% (4.5% on a constant currency basis) compared to Q4 FY15. The overall increase in fee revenue was primarily attributable to higher fee revenues in our North America region.
Operating income was $23.0 million in Q4 FY16. Operating margin was 14.4% in Q4 FY16 compared to 20.0% in Q4 FY15. Operating income and margin were negatively impacted by the foreign currency loss relating to the devaluation of the Venezuelan currency and higher compensation and benefits expense associated with better revenue performance.
EBITDA was $24.6 million in Q4 FY16 with an EBITDA margin of 15.4% (negatively impacted by the same factors as operating income). Adjusted EBITDA was $31.2 million with an Adjusted EBITDA margin of 19.5%, slightly down from the prior year due primarily to the factors referenced above.
Selected Hay Group Data
(dollars in millions)
Fourth Quarter | Year to Date | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Fee revenue |
$ | 187.7 | $ | 72.8 | $ | 471.1 | $ | 267.1 | ||||||||
Total revenue |
$ | 194.7 | $ | 75.3 | $ | 488.2 | $ | 275.2 | ||||||||
Operating income (loss) |
$ | 2.9 | $ | 8.4 | $ | (3.4 | ) | $ | 28.2 | |||||||
Operating margin |
1.5 | % | 11.5 | % | (0.7 | )% | 10.6 | % | ||||||||
Ending number of consultants (a) |
562 | 164 | 562 | 164 | ||||||||||||
Staff utilization (b) |
70 | % | 74 | % | 67 | % | 71 | % | ||||||||
EBITDA Results (c): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
EBITDA |
$ | 10.5 | $ | 12.1 | $ | 17.5 | $ | 41.6 | ||||||||
EBITDA margin |
5.6 | % | 16.6 | % | 3.7 | % | 15.6 | % | ||||||||
Adjusted Results (d): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Adjusted fee revenue |
$ | 192.8 | $ | 72.8 | $ | 482.1 | $ | 267.1 | ||||||||
Adjusted EBITDA (c) |
$ | 30.7 | $ | 12.1 | $ | 78.9 | $ | 44.4 | ||||||||
Adjusted EBITDA margin (c) |
15.9 | % | 16.6 | % | 16.4 | % | 16.6 | % |
(a) | Represents number of employees originating consulting services. FY16 includes approximately 393 consultants from the acquisition of Legacy Hay. |
(b) | Calculated by dividing the number of hours our full-time Hay Group professional staff record to engagements 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 adjust for the following (see attached reconciliations): |
Fourth Quarter | Year to Date | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Deferred revenue adjustment related to the Hay Group acquisition |
$ | 5.1 | $ | | $ | 11.0 | $ | | ||||||||
Restructuring charges, net |
$ | 2.5 | $ | | $ | 25.7 | $ | 2.8 | ||||||||
Integration/acquisition costs |
$ | 5.5 | $ | | $ | 17.6 | $ | | ||||||||
Venezuelan foreign currency loss |
$ | 7.1 | $ | | $ | 7.1 | $ | |
Hay Group
Fee revenue was $187.7 million and, on an adjusted basis, fee revenue was $192.8 million in Q4 FY16 (including $5.1 million in deferred revenue adjustment related to the Hay Group acquisition). The acquisition of Hay Group contributed $114.9 million in fee revenue and $120.0 million on an adjusted basis in Q4 FY16. Excluding Hay Group revenues, fee revenue was flat quarter-over-quarter and up 1.2% on a constant currency basis.
Operating income was $2.9 million in Q4 FY16, resulting in an operating margin of 1.5%. The decrease in the margin from the prior year quarter was primarily due to the deferred revenue adjustment related to the Hay Group acquisition, restructuring charges, net, integration/acquisition costs and Venezuelan foreign currency loss.
EBITDA was $10.5 million in Q4 FY16, with a margin of 5.6%. Adjusted EBITDA was $30.7 million
during Q4 FY16, at an Adjusted EBITDA margin of 15.9%. As referenced above, the Company continues to make significant progress on the Hay Group integration as reflected in the Q4 FY16 Adjusted EBITDA margin after only five months of ownership.
Selected Futurestep Data
(dollars in millions)
Fourth Quarter | Year to Date | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Fee revenue |
$ | 52.5 | $ | 42.4 | $ | 198.1 | $ | 163.7 | ||||||||
Total revenue |
$ | 57.0 | $ | 45.2 | $ | 214.0 | $ | 171.6 | ||||||||
Operating income |
$ | 7.0 | $ | 5.5 | $ | 26.7 | $ | 19.9 | ||||||||
Operating margin |
13.3 | % | 13.1 | % | 13.5 | % | 12.2 | % | ||||||||
Engagements billed (a) |
978 | 791 | 2,149 | 1,968 | ||||||||||||
New engagements (b) |
547 | 440 | 1,913 | 1,590 | ||||||||||||
EBITDA Results (c): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
EBITDA |
$ | 7.9 | $ | 6.1 | $ | 29.5 | $ | 21.9 | ||||||||
EBITDA margin |
15.0 | % | 14.4 | % | 14.9 | % | 13.4 | % | ||||||||
Adjusted Results (d): | Fourth Quarter | Year to Date | ||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Adjusted EBITDA (c) |
$ | 7.9 | $ | 6.1 | $ | 29.5 | $ | 23.0 | ||||||||
Adjusted EBITDA margin (c) |
15.0 | % | 14.4 | % | 14.9 | % | 14.1 | % |
(a) | Represents search engagements billed. |
(b) | Represents new search engagements opened in the respective period. |
(c) | EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
(d) | Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
Fourth Quarter | Year to Date | |||||||||||||||
FY16 | FY15 | FY16 | FY15 | |||||||||||||
Restructuring charges, net |
$ | | $ | | $ | | $ | 1.1 |
Futurestep
Fee revenue was $52.5 million in Q4 FY16, an increase of 23.8% (27.1% on a constant currency basis), compared to the year-ago quarter.
| The higher fee revenue was driven by a $5.6 million increase in recruitment process outsourcing in Q4 FY16 compared to Q4 FY15. |
| The rest of the increase was due to higher fee revenue in professional search due to a 23.6% increase in engagements billed in Q4 FY16 compared to Q4 FY15. |
Operating income was $7.0 million in Q4 FY16, an increase of $1.5 million, compared to Q4 FY15, resulting in an operating margin of 13.3% in the current quarter compared to 13.1% in the year-ago quarter.
EBITDA and Adjusted EBITDA were both $7.9 million during Q4 FY16. EBITDA and Adjusted EBITDA margin were 15.0%, an increase of 60 bps from the prior year.
New Credit Agreement
On June 15, 2016, the Company entered into a new senior secured $400 million Credit Agreement (the Agreement) with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent, to provide for enhanced financial flexibility and in recognition of the accelerated pace of the Hay Group integration. The Agreement provides for, among other things: (a) a new senior secured term loan facility in an aggregate principal amount of $275 million (the Term Facility); (b) a new senior secured revolving credit facility (the Revolver) in an aggregate principal amount of $125 million, (c) annual term loan amortization of 7.5%, 7.5%, 10.0%, 10.0%, and 10.0%, with the remaining principal due at maturity (d) certain customary affirmative and negative covenants, including a maximum consolidated total leverage ratio and a minimum interest coverage ratio, and (e) an expanded definition of permitted add-backs to Adjusted EBITDA in recognition of the accelerated integration actions referenced above. The proceeds from the Agreement will be used to repay existing indebtedness and for working capital and general corporate purposes.
Both the Revolver and the Term Facility mature on June 15, 2021 and may be prepaid and terminated early by the Company at any time without premium or penalty (subject to customary LIBOR breakage fees).
Outlook
Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis:
| Q1 FY17 fee revenue is expected to be in the range of $371 million and $391 million; and |
| Q1 FY17 diluted earnings per share is likely to range between $0.02 to $0.20. |
On a consolidated as adjusted basis:
| Q1 FY17 adjusted fee revenue is expected to be in the range of $375 million and $395 million; and |
| Q1 FY17 adjusted diluted earnings per share is likely to range from $0.50 to $0.58. |
(1) | Korn Ferry consolidated adjusted fee revenue is a non-GAAP financial measure that includes revenue that Hay Group would have realized over the ensuing year if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue. |
(2) | Consolidated as adjusted diluted earnings per share is a non-GAAP financial measure that excludes the items listed below in the table above. |
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 global people and organizational advisory firm. We help leaders, organizations and societies succeed by releasing the full power and potential of people. Our nearly 7,000 colleagues deliver services through Executive Search, Hay Group and Futurestep divisions. Visit www.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 Ferrys 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 including Hay Group, our ability to recognize the anticipated benefits of the acquisition of Hay Group which may be affected by, among other things, competition, our ability to grow and manage growth profitability, maintain relationships with customers and suppliers and retain key employees, costs related to the acquisition of Hay Group, 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 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 Ferrys periodic filings with the Securities and Exchange Commission. Korn Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Measures
This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (GAAP). In particular, it includes:
| adjusted net income attributable to Korn/Ferry International, adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to the Hay Group acquisition, net of income tax effect; |
| adjusted basic and diluted earnings per share, adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to the Hay Group acquisition, net of income tax effect; and in the case of the outlook section, also adjusted for Venezuelan exchange rate and tax rate impact; |
| 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; |
| Adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to the Hay Group acquisition, and Adjusted EBITDA margin; |
| Consolidated adjusted fee revenue, which includes revenue that Hay Group would have realized over the ensuing year if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue; and |
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 Companys 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 Ferrys performance by excluding certain charges and other items that may not be indicative of Korn Ferrys 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 the Hay Group acquisition, 2) charges we incurred to restructure the combined company due to the acquisition of Hay Group, 3) foreign currency losses due to the devaluation of the Venezuelan currency and 4) revenue that Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue. As such, reported fee revenue can make fee revenue and operating results appear to fluctuate more than they would if business combination accounting did not require deferred revenue to be written off. Adjusted fee revenue is not a measure that substitutes an individually tailored revenue recognition or measurement method for those of GAAP, rather, it is an adjustment for a short period of time that will provide better comparability in the current and future periods. Management believes the presentation of adjusted fee revenue assists management in its evaluation of ongoing operations and provides useful information to investors because it allows investors to make more meaningful period-to-period comparisons of the Companys operating results, to better identify operating trends that may otherwise be distorted by write-offs required under business combination accounting and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferrys ongoing operations and financial and operational decision-making. Management will no longer have adjusted fee revenue after Q1 FY17. The use of these non-GAAP financial measures facilitates comparisons to Korn Ferrys 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 Ferrys 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 Ferrys performance as excluding the impact of exchange rate changes on Korn Ferrys financial performance allows investors to make more meaningful period-to-period comparisons of the Companys 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 Ferrys 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, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(unaudited) | ||||||||||||||||
Fee revenue |
$ | 399,960 | $ | 271,717 | $ | 1,292,112 | $ | 1,028,152 | ||||||||
Reimbursed out-of-pocket engagement expenses |
17,201 | 10,436 | 54,602 | 37,914 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
417,161 | 282,153 | 1,346,714 | 1,066,066 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Compensation and benefits |
286,852 | 182,886 | 897,345 | 691,450 | ||||||||||||
General and administrative expenses |
73,569 | 41,637 | 213,018 | 145,917 | ||||||||||||
Reimbursed expenses |
17,201 | 10,436 | 54,602 | 37,914 | ||||||||||||
Cost of services |
20,974 | 11,868 | 59,824 | 39,692 | ||||||||||||
Depreciation and amortization |
11,287 | 7,234 | 36,220 | 27,597 | ||||||||||||
Restructuring charges, net |
2,436 | | 33,013 | 9,468 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
412,319 | 254,061 | 1,294,022 | 952,038 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
4,842 | 28,092 | 52,692 | 114,028 | ||||||||||||
Other income (loss), net |
5,645 | 4,397 | (4,167 | ) | 7,458 | |||||||||||
Interest income (expense), net |
1,452 | (358 | ) | 237 | (1,784 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
11,939 | 32,131 | 48,762 | 119,702 | ||||||||||||
Equity in earnings of unconsolidated subsidiaries |
185 | 485 | 1,631 | 2,181 | ||||||||||||
Income tax provision |
5,749 | 7,134 | 18,960 | 33,526 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
6,375 | 25,482 | 31,433 | 88,357 | ||||||||||||
Net income attributable to noncontrolling interest |
(520 | ) | | (520 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Korn/Ferry International |
$ | 5,855 | $ | 25,482 | $ | 30,913 | $ | 88,357 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per common share attributable to Korn/Ferry International: |
||||||||||||||||
Basic |
$ | 0.10 | $ | 0.51 | $ | 0.58 | $ | 1.78 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$ | 0.10 | $ | 0.51 | $ | 0.58 | $ | 1.76 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average common shares outstanding: |
||||||||||||||||
Basic |
56,012 | 49,288 | 52,372 | 49,052 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
56,574 | 49,890 | 52,929 | 49,766 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash dividends declared per share: |
$ | 0.10 | $ | 0.10 | $ | 0.40 | $ | 0.10 | ||||||||
|
|
|
|
|
|
|
|
KORN FERRY AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
Three Months Ended April 30, | Year Ended April 30, | |||||||||||||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||||||||||||
Fee Revenue: |
||||||||||||||||||||||||||||||||
Executive search: |
||||||||||||||||||||||||||||||||
North America |
$ | 94,678 | $ | 87,579 | 8 | % | $ | 371,345 | $ | 330,634 | 12 | % | ||||||||||||||||||||
EMEA |
36,161 | 39,677 | (9 | %) | 144,319 | 153,465 | (6 | %) | ||||||||||||||||||||||||
Asia Pacific |
21,199 | 22,533 | (6 | %) | 80,506 | 84,148 | (4 | %) | ||||||||||||||||||||||||
Latin America |
7,661 | 6,794 | 13 | % | 26,744 | 29,160 | (8 | %) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total executive search |
159,699 | 156,583 | 2 | % | 622,914 | 597,407 | 4 | % | ||||||||||||||||||||||||
Hay Group |
187,795 | 72,749 | 158 | % | 471,145 | 267,018 | 76 | % | ||||||||||||||||||||||||
Futurestep |
52,466 | 42,385 | 24 | % | 198,053 | 163,727 | 21 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total fee revenue |
399,960 | 271,717 | 47 | % | 1,292,112 | 1,028,152 | 26 | % | ||||||||||||||||||||||||
Reimbursed out-of-pocket engagement expenses |
17,201 | 10,436 | 65 | % | 54,602 | 37,914 | 44 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total revenue |
$ | 417,161 | $ | 282,153 | 48 | % | $ | 1,346,714 | $ | 1,066,066 | 26 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Operating Income (Loss): | Margin | Margin | Margin | Margin | ||||||||||||||||||||||||||||
Executive search: |
||||||||||||||||||||||||||||||||
North America |
$ | 19,857 | 21.0 | % | $ | 20,030 | 22.9 | % | $ | 100,381 | 27.0 | % | $ | 80,818 | 24.4 | % | ||||||||||||||||
EMEA |
5,695 | 15.7 | % | 5,530 | 13.9 | % | 20,607 | 14.3 | % | 18,867 | 12.3 | % | ||||||||||||||||||||
Asia Pacific |
2,904 | 13.7 | % | 4,589 | 20.4 | % | 12,572 | 15.6 | % | 14,631 | 17.4 | % | ||||||||||||||||||||
Latin America |
(5,498 | ) | (71.8 | %) | 1,191 | 17.5 | % | (1,854 | ) | (6.9 | %) | 4,704 | 16.1 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total executive search |
22,958 | 14.4 | % | 31,340 | 20.0 | % | 131,706 | 21.1 | % | 119,020 | 19.9 | % | ||||||||||||||||||||
Hay Group |
2,871 | 1.5 | % | 8,376 | 11.5 | % | (3,415 | ) | (0.7 | %) | 28,175 | 10.6 | % | |||||||||||||||||||
Futurestep |
6,987 | 13.3 | % | 5,573 | 13.1 | % | 26,702 | 13.5 | % | 19,940 | 12.2 | % | ||||||||||||||||||||
Corporate |
(27,974 | ) | (17,197 | ) | (102,301 | ) | (53,107 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total operating (loss) income |
$ | 4,842 | 1.2 | % | $ | 28,092 | 10.3 | % | $ | 52,692 | 4.1 | % | $ | 114,028 | 11.1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
April 30, | ||||||||
2016 | 2015 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 273,252 | $ | 380,838 | ||||
Marketable securities |
11,338 | 25,757 | ||||||
Receivables due from clients, net of allowance for doubtful accounts of $11,292 and $9,958 respectively |
315,975 | 188,543 | ||||||
Income taxes and other receivables |
20,579 | 10,966 | ||||||
Prepaid expenses and other assets |
43,130 | 31,054 | ||||||
|
|
|
|
|||||
Total current assets |
664,274 | 637,158 | ||||||
|
|
|
|
|||||
Marketable securities, non-current |
130,092 | 118,819 | ||||||
Property and equipment, net |
95,436 | 62,088 | ||||||
Cash surrender value of company owned life insurance policies, net of loans |
107,296 | 102,691 | ||||||
Deferred income taxes |
83,715 | 59,841 | ||||||
Goodwill |
590,072 | 254,440 | ||||||
Intangible assets, net |
233,027 | 47,901 | ||||||
Investments and other assets |
51,240 | 34,863 | ||||||
|
|
|
|
|||||
Total assets |
$ | 1,955,152 | $ | 1,317,801 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Accounts payable |
$ | 26,634 | $ | 19,238 | ||||
Income taxes payable |
8,396 | 3,813 | ||||||
Compensation and benefits payable |
266,211 | 219,364 | ||||||
Term loan |
30,000 | | ||||||
Other accrued liabilities |
145,023 | 63,595 | ||||||
|
|
|
|
|||||
Total current liabilities |
476,264 | 306,010 | ||||||
|
|
|
|
|||||
Deferred compensation and other retirement plans |
216,113 | 173,432 | ||||||
Term loan, non-current |
110,000 | | ||||||
Deferred tax liabilities |
61,640 | | ||||||
Other liabilities |
43,834 | 23,110 | ||||||
|
|
|
|
|||||
Total liabilities |
907,851 | 502,552 | ||||||
|
|
|
|
|||||
Stockholders equity |
||||||||
Common stock: $0.01 par value, 150,000 shares authorized, 69,723 and 62,863 shares issued and 57,272 and 50,573 shares outstanding, respectively |
702,098 | 463,839 | ||||||
Retained earnings |
401,113 | 392,033 | ||||||
Accumulated other comprehensive loss, net |
(57,911 | ) | (40,623 | ) | ||||
Noncontrolling interest |
2,001 | | ||||||
|
|
|
|
|||||
Total stockholders equity |
1,047,301 | 815,249 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 1,955,152 | $ | 1,317,801 | ||||
|
|
|
|
KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
Three Months Ended April 30, |
Year Ended April 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(unaudited) | ||||||||||||||||
Fee revenue |
$ | 399,960 | $ | 271,717 | $ | 1,292,112 | $ | 1,028,152 | ||||||||
Deferred revenue adjustment due to acquisition (1) |
5,096 | | 10,967 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted fee revenue |
$ | 405,056 | $ | 271,717 | $ | 1,303,079 | $ | 1,028,152 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
$ | 4,842 | $ | 28,092 | $ | 52,692 | $ | 114,028 | ||||||||
Depreciation and amortization |
11,287 | 7,234 | 36,220 | 27,597 | ||||||||||||
Other income (loss), net |
5,645 | 4,397 | (4,167 | ) | 7,458 | |||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
185 | 485 | 1,631 | 2,181 | ||||||||||||
Net income attributable to noncontrolling interest |
(520 | ) | | (520 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA |
21,439 | 40,208 | 85,856 | 151,264 | ||||||||||||
Deferred revenue adjustment due to acquisition (1) |
5,096 | | 10,967 | | ||||||||||||
Restructuring charges, net (2) |
2,436 | | 33,013 | 9,468 | ||||||||||||
Integration/acquisition costs (3) |
11,594 | 514 | 45,409 | 959 | ||||||||||||
Venezuelan foreign currency loss (4) |
13,720 | | 13,720 | | ||||||||||||
Separation costs (5) |
| | 744 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 54,285 | $ | 40,722 | $ | 189,709 | $ | 161,691 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating margin |
1.2 | % | 10.3 | % | 4.1 | % | 11.1 | % | ||||||||
Depreciation and amortization |
2.8 | % | 2.7 | % | 2.8 | % | 2.7 | % | ||||||||
Other income (loss), net |
1.4 | % | 1.6 | % | (0.3 | %) | 0.7 | % | ||||||||
Equity in earnings of unconsolidated subsidiaries, net |
0.1 | % | 0.2 | % | 0.1 | % | 0.2 | % | ||||||||
Net income attributable to noncontrolling interest |
(0.1 | %) | | (0.1 | %) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA margin |
5.4 | % | 14.8 | % | 6.6 | % | 14.7 | % | ||||||||
Deferred revenue adjustment due to acquisition (1) |
1.2 | % | | 0.8 | % | | ||||||||||
Restructuring charges, net (2) |
0.6 | % | | 2.5 | % | 0.9 | % | |||||||||
Integration/acquisition costs (3) |
2.8 | % | 0.2 | % | 3.5 | % | 0.1 | % | ||||||||
Venezuelan foreign currency loss (4) |
3.4 | % | | 1.1 | % | | ||||||||||
Separation costs (5) |
| | 0.1 | % | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA margin |
13.4 | % | 15.0 | % | 14.6 | % | 15.7 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Korn/Ferry International |
$ | 5,855 | $ | 25,482 | $ | 30,913 | $ | 88,357 | ||||||||
Deferred revenue adjustment due to acquisition (1) |
5,096 | | 10,967 | | ||||||||||||
Restructuring charges, net (2) |
2,436 | | 33,013 | 9,468 | ||||||||||||
Integration/acquisition costs (3) |
11,594 | 514 | 45,409 | 959 | ||||||||||||
Venezuelan foreign currency loss (4) |
13,720 | | 13,720 | | ||||||||||||
Separation costs (5) |
| | 744 | | ||||||||||||
Tax effect on the above items (6) |
(5,846 | ) | (332 | ) | (23,819 | ) | (3,282 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted net income attributable to Korn/Ferry International |
$ | 32,855 | $ | 25,664 | $ | 110,947 | $ | 95,502 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic earnings per common share |
$ | 0.10 | $ | 0.51 | $ | 0.58 | $ | 1.78 | ||||||||
Deferred revenue adjustment due to acquisition (1) |
0.09 | | 0.20 | | ||||||||||||
Restructuring charges, net (2) |
0.04 | | 0.63 | 0.19 | ||||||||||||
Integration/acquisition costs (3) |
0.21 | 0.01 | 0.87 | 0.02 | ||||||||||||
Venezuelan foreign currency loss (4) |
0.24 | | 0.26 | | ||||||||||||
Separation costs (5) |
| | 0.01 | | ||||||||||||
Tax effect on the above items (6) |
(0.10 | ) | | (0.45 | ) | (0.06 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted basic earnings per share |
$ | 0.58 | $ | 0.52 | $ | 2.10 | $ | 1.93 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings per common share |
$ | 0.10 | $ | 0.51 | $ | 0.58 | $ | 1.76 | ||||||||
Deferred revenue adjustment due to acquisition (1) |
0.09 | | 0.20 | | ||||||||||||
Restructuring charges, net (2) |
0.04 | | 0.62 | 0.19 | ||||||||||||
Integration/acquisition costs (3) |
0.21 | | 0.86 | 0.02 | ||||||||||||
Venezuelan foreign currency loss (4) |
0.24 | | 0.26 | | ||||||||||||
Separation costs (5) |
| | 0.01 | | ||||||||||||
Tax effect on the above items (6) |
(0.10 | ) | | (0.45 | ) | (0.07 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted diluted earnings per share |
$ | 0.58 | $ | 0.51 | $ | 2.08 | $ | 1.90 | ||||||||
|
|
|
|
|
|
|
|
Explanation of Non-GAAP Adjustments
(1) | Increase in fee revenue relating to the deferred revenue recorded on the opening balance sheet of Hay Group, required by fair value accounting. The adjustment is included in the Hay Group segment. On a GAAP basis, Hay Group fee revenue was $187.7 million and $471.1 million during the three months and year ended April 30, 2016, respectively. On an adjusted basis, Hay Group fee revenue was $192.8 million and $482.1 million during the three months and year ended April 30, 2016, respectively. |
(2) | Restructuring plan implemented in order to rationalize our cost structure by eliminating redundant positions and consolidating office space due to the acquisition of Legacy Hay on December 1, 2015. |
(3) | Cost associated with completing the acquisition of Hay Group, such as legal and professional fees, and the on-going integration expenses to combine the companies. |
(4) | Foreign currency loss associated with the devaluation of the Venezuelan currency. |
(5) | Certain senior management separation charges. |
(6) | Tax effect on deferred revenue adjustment associated with the acquisition of Hay Group, restructuring charges, net, integration/acquisition costs, foreign currency loss associated with the devaluation of the Venezuelan currency and separation costs. |
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, 2016 | ||||||||||||||||||||||||||||||||||||
Executive Search | ||||||||||||||||||||||||||||||||||||
North America |
EMEA | Asia Pacific | Latin America |
Subtotal | Hay Group | Futurestep | Corporate | Consolidated | ||||||||||||||||||||||||||||
Fee revenue |
$ | 94,678 | $ | 36,161 | $ | 21,199 | $ | 7,661 | $ | 159,699 | $ | 187,795 | $ | 52,466 | $ | | $ | 399,960 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income |
$ | 6,375 | ||||||||||||||||||||||||||||||||||
Other income, net |
(5,645 | ) | ||||||||||||||||||||||||||||||||||
Interest income, net |
(1,452 | ) | ||||||||||||||||||||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
(185 | ) | ||||||||||||||||||||||||||||||||||
Income tax provision |
5,749 | |||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
Operating income (loss) |
$ | 19,857 | $ | 5,695 | $ | 2,904 | $ | (5,498 | ) | $ | 22,958 | $ | 2,871 | $ | 6,987 | $ | (27,974 | ) | 4,842 | |||||||||||||||||
Depreciation and amortization |
796 | 219 | 237 | 88 | 1,340 | 7,796 | 614 | 1,537 | 11,287 | |||||||||||||||||||||||||||
Other income (loss), net |
278 | 206 | 123 | 31 | 638 | (131 | ) | 277 | 4,861 | 5,645 | ||||||||||||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
185 | | | | 185 | | | | 185 | |||||||||||||||||||||||||||
Net income attributable to noncontrolling interest |
| | | (491 | ) | (491 | ) | (29 | ) | | | (520 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
EBITDA |
21,116 | 6,120 | 3,264 | (5,870 | ) | 24,630 | 10,507 | 7,878 | (21,576 | ) | 21,439 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
EBITDA margin |
22.3 | % | 16.9 | % | 15.4 | % | (76.6 | %) | 15.4 | % | 5.6 | % | 15.0 | % | 5.4 | % | ||||||||||||||||||||
Restructuring charges, net |
15 | (59 | ) | | (6 | ) | (50 | ) | 2,441 | 49 | (4 | ) | 2,436 | |||||||||||||||||||||||
Integration/acquisition costs |
| | | | | 5,555 | | 6,039 | 11,594 | |||||||||||||||||||||||||||
Venezuelan foreign currency loss |
| | | 6,635 | 6,635 | 7,085 | | | 13,720 | |||||||||||||||||||||||||||
Deferred revenue adjustment due to acquisition |
| | | | | 5,096 | | | 5,096 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Adjusted EBITDA |
$ | 21,131 | $ | 6,061 | $ | 3,264 | $ | 759 | $ | 31,215 | $ | 30,684 | $ | 7,927 | $ | (15,541 | ) | $ | 54,285 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Adjusted EBITDA margin |
22.3 | % | 16.8 | % | 15.4 | % | 9.9 | % | 19.5 | % | 15.9 | % | 15.0 | % | 13.4 | % | ||||||||||||||||||||
Three Months Ended April 30, 2015 | ||||||||||||||||||||||||||||||||||||
Executive Search | ||||||||||||||||||||||||||||||||||||
North America |
EMEA | Asia Pacific | Latin America |
Subtotal | Hay Group | 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 | % |
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, 2016 | ||||||||||||||||||||||||||||||||||||
Executive Search | ||||||||||||||||||||||||||||||||||||
North America |
EMEA | Asia Pacific | Latin America |
Subtotal | Hay Group | Futurestep | Corporate | Consolidated | ||||||||||||||||||||||||||||
Fee revenue |
$ | 371,345 | $ | 144,319 | $ | 80,506 | $ | 26,744 | $ | 622,914 | $ | 471,145 | $ | 198,053 | $ | | $ | 1,292,112 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income |
$ | 31,433 | ||||||||||||||||||||||||||||||||||
Other loss, net |
4,167 | |||||||||||||||||||||||||||||||||||
Interest income, net |
(237 | ) | ||||||||||||||||||||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
(1,631 | ) | ||||||||||||||||||||||||||||||||||
Income tax provision |
18,960 | |||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
Operating income (loss) |
$ | 100,381 | $ | 20,607 | $ | 12,572 | $ | (1,854 | ) | $ | 131,706 | $ | (3,415 | ) | $ | 26,702 | $ | (102,301 | ) | 52,692 | ||||||||||||||||
Depreciation and amortization |
3,267 | 1,029 | 941 | 312 | 5,549 | 21,854 | 2,386 | 6,431 | 36,220 | |||||||||||||||||||||||||||
Other (loss) income, net |
(147 | ) | 433 | 21 | 312 | 619 | (868 | ) | 364 | (4,282 | ) | (4,167 | ) | |||||||||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
437 | | | | 437 | | | 1,194 | 1,631 | |||||||||||||||||||||||||||
Net income attributable to noncontrolling interest |
| | | (491 | ) | (491 | ) | (29 | ) | | | (520 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
EBITDA |
103,938 | 22,069 | 13,534 | (1,721 | ) | 137,820 | 17,542 | 29,452 | (98,958 | ) | 85,856 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
EBITDA margin |
28.0 | % | 15.3 | % | 16.8 | % | (6.4 | %) | 22.1 | % | 3.7 | % | 14.9 | % | 6.6 | % | ||||||||||||||||||||
Restructuring charges, net |
499 | 5,807 | 577 | 322 | 7,205 | 25,682 | 49 | 77 | 33,013 | |||||||||||||||||||||||||||
Integration/acquisition costs |
| | | | | 17,607 | | 27,802 | 45,409 | |||||||||||||||||||||||||||
Venezuelan foreign currency loss |
| | | 6,635 | 6,635 | 7,085 | | | 13,720 | |||||||||||||||||||||||||||
Deferred revenue adjustment due to acquisition |
| | | | | 10,967 | | | 10,967 | |||||||||||||||||||||||||||
Separation costs |
| | | | | | | 744 | 744 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Adjusted EBITDA |
$ | 104,437 | $ | 27,876 | $ | 14,111 | $ | 5,236 | $ | 151,660 | $ | 78,883 | $ | 29,501 | $ | (70,335 | ) | $ | 189,709 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Adjusted EBITDA margin |
28.1 | % | 19.3 | % | 17.5 | % | 19.6 | % | 24.3 | % | 16.4 | % | 14.9 | % | 14.6 | % | ||||||||||||||||||||
Year Ended April 30, 2015 | ||||||||||||||||||||||||||||||||||||
Executive Search | ||||||||||||||||||||||||||||||||||||
North America |
EMEA | Asia Pacific | Latin America |
Subtotal | Hay Group | 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 | % |