Form: 8-K

Current report filing

July 2, 2020

Exhibit 99.1

 

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

  

Contacts:

 

  

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

 

  

Media: Dan Gugler, (310) 226-2645

 

Korn Ferry Announces Fourth Quarter and Fiscal 2020

Results of Operations

 

Highlights

 

Korn Ferry reports annual fee revenue of $1,932.7 million, essentially flat year-over-year (2.2% increase on a constant currency).

 

Net income attributable to Korn Ferry was $104.9 million in FY’20 with an operating margin of 9.1% and Adjusted EBITDA of $301.0 million and Adjusted EBITDA margin of 15.6%.

 

Fee revenue was $440.5 million in Q4 FY’20, a decrease of 10% (7.9% on a constant currency) as compared to Q4 FY’19.

 

Net loss attributable to Korn Ferry was $0.8 million in Q4 FY’20, with an operating margin of 5.0%.  Adjusted EBITDA was $69.6 million in Q4 FY’20 with an Adjusted EBITDA margin of 15.8%.

 

Q4 FY’20 diluted loss per share was $0.02 compared to diluted earnings per share of $0.89 in Q4 FY’19. Adjusted diluted earnings per share was $0.60 in Q4 FY’20 compared to $0.88 in Q4 FY’19.

 

The Company ended the year with a strong liquidity position with total cash and cash equivalents and marketable securities of $863 million, and after setting aside amounts for bonus payments and deferred compensation arrangements, investable cash was $532 million.

 

The Company repurchased 0.8 million shares, using $24.4 million of cash during the quarter. Further, the Company declared a quarterly dividend of $0.10 per share on July 1, 2020 payable on July 15, 2020 to stockholders of record on July 31, 2020.

 

Los Angeles, CA, July 2, 2020 Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced fourth quarter and annual fee revenue of $440.5 million and $1,932.7 million, respectively.  In addition, fourth quarter diluted loss per share was $0.02 and adjusted diluted earnings per share was $0.60.  Adjusted diluted earnings per share for the fourth quarter excludes an aggregate of $33.5 million, or $0.62 per share, of restructuring charges, net due to the corona virus pandemic (“COVID-19”), and integration/acquisition costs, net of tax due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution (“acquired companies”).

“During the fiscal fourth quarter we generated $441 million in fee revenue, down 10% year-over-year (7.9% at constant currency). Operating margin was 5% and Adjusted EBITDA margin was 15.8%,” said Gary D. Burnison, CEO, Korn Ferry.

As we manage our way through COVID-19, our Korn Ferry colleagues are showing their resilience by quickly pivoting to a different way of working – whether it’s from home or the rapid transition to the virtual delivery of our services and solutions to clients. I’m confident that our offerings are more relevant now than ever before,” Burnison added. “I truly feel that over the next 2 years there will be more change than in the last 10 years. Different work needs to get done, and work needs to get done differently. That’s an opportunity for our company.  As an organizational consulting firm, Korn Ferry is committed to promoting conscious inclusion – enabling all people and their organizations to exceed their potential – and to exceed potential, people need an abundance of opportunity, development, and sponsorship. Korn Ferry is the right firm at the right time to help organizations drive performance through change, and I have never been more proud of our company.”

 


1


 

Selected Financial Results

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

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

440.5

 

 

$

490.8

 

 

$

1,932.7

 

 

$

1,926.0

 

Total revenue

 

$

449.0

 

 

$

502.5

 

 

$

1,977.3

 

 

$

1,973.9

 

Operating income

 

$

22.2

 

 

$

62.3

 

 

$

176.0

 

 

$

140.8

 

Operating margin

 

 

5.0

%

 

 

12.7

%

 

 

9.1

%

 

 

7.3

%

Net (loss) income attributable to Korn Ferry

 

$

(0.8

)

 

$

50.3

 

 

$

104.9

 

 

$

102.7

 

Basic (loss) earnings per share

 

$

(0.02

)

 

$

0.90

 

 

$

1.91

 

 

$

1.84

 

Diluted (loss) earnings per share

 

$

(0.02

)

 

$

0.89

 

 

$

1.90

 

 

$

1.81

 

 

EBITDA Results (b):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

26.3

 

 

$

82.2

 

 

$

228.5

 

 

$

197.7

 

EBITDA margin

 

 

6.0

%

 

 

16.7

%

 

 

11.8

%

 

 

10.3

%

 

Adjusted Results (c):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (b)

 

$

69.6

 

 

$

82.2

 

 

$

301.0

 

 

$

311.0

 

Adjusted EBITDA margin (b)

 

 

15.8

%

 

 

16.7

%

 

 

15.6

%

 

 

16.1

%

Adjusted net income attributable to Korn Ferry

 

$

32.7

 

 

$

49.7

 

 

$

161.3

 

 

$

187.9

 

Adjusted basic earnings per share

 

$

0.60

 

 

$

0.89

 

 

$

2.94

 

 

$

3.36

 

Adjusted diluted earnings per share

 

$

0.60

 

 

$

0.88

 

 

$

2.91

 

 

$

3.31

 

___________

(a)

Numbers may not total due to rounding.

(b)

EBITDA refers to earnings before interest, taxes, depreciation, and amortization.  Adjusted EBITDA further adjusts EBITDA to exclude integration/acquisition costs, restructuring charges, net, separation costs and tradename write-offs. EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(c)

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

 

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Integration/acquisition costs

 

$

2.8

 

 

$

 

 

$

12.2

 

 

$

6.7

 

Restructuring charges, net

 

$

40.5

 

 

$

 

 

$

58.6

 

 

$

 

Separation costs

 

$

 

 

$

 

 

$

1.8

 

 

$

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

106.6

 

Debt refinancing costs

 

$

 

 

$

 

 

$

0.8

 

 

$

 

 

Fiscal 2020 Fourth Quarter Results

The Company reported fee revenue in Q4 FY’20 of $440.5 million, a decrease of 10% (decrease of 7.9% on a constant currency basis) compared to Q4 FY’19.  The decline in fee revenue was primarily due to the impact of COVID-19 on economies around the world, partially offset by fee revenue generated by the acquired companies in the Digital segment.

Net loss attributable to Korn Ferry was $0.8 million in Q4 FY’20 as compared to net income attributable to Korn Ferry of $50.3 million in Q4 FY’19.  The change from net income to a net loss attributable to Korn Ferry was primarily due to a decline in fee revenue and restructuring charges incurred in Q4 FY’20 in reaction to the impact of COVID-19, offset by decreases in compensation and benefits expense and income tax expense.

Operating margin was 5.0% in Q4 FY’20 compared to 12.7% in the year-ago quarter. The decrease in operating margin was primarily due to restructuring charges, net associated with the impact of COVID-19 and the decline in fee revenue in Q4 FY’20.

Adjusted EBITDA margin was 15.8%, compared to 16.7% in the year-ago quarter.

2


Fiscal 2020 Results

The Company reported fee revenue in FY’20 of $1,932.7 million, essentially flat when compared to FY’19.  Although fee revenue was essentially flat, there was a change in mix with an increase in Digital due to fee revenue generated by the acquired companies and an organic increase in RPO and Professional Search, offset by decreases in fee revenue in Executive Search and Consulting.

Net income attributable to Korn Ferry was $104.9 million in FY’20 as compared to $102.7 million in FY’19.  The increase in net income attributable to Korn Ferry was primarily due to a decrease in general and administrative expenses (due to trade name write-offs in FY’19), offset by increases in restructuring charges, net and in the Company’s effective income tax rate.

Operating income was $176.0 million in FY’20 with an operating margin of 9.1% compared to $140.8 million and 7.3% in FY’19.  The increase in operating income was primarily due to decreases in general and administrative expenses (due to trade name write-offs in FY’19) and compensation and benefits expense, partially offset by restructuring charges incurred in FY’20 associated with the impact of COVID-19 and the acquisition of the acquired companies.

Adjusted EBITDA was $301.0 million in FY’20 with Adjusted EBITDA margin of 15.6%, compared to $311.0 million and 16.1%, respectively, in the year-ago period.

3


 

 

Results by Segment

Selected Consulting Data(a)

(dollars in millions) (b)

 

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

121.0

 

 

$

144.4

 

 

$

543.1

 

 

$

568.3

 

Total revenue

 

$

123.4

 

 

$

148.7

 

 

$

557.3

 

 

$

585.9

 

Operating (loss) income

 

$

(6.6

)

 

$

13.3

 

 

$

17.7

 

 

$

(34.1

)

Operating margin

 

 

(5.4

%)

 

 

9.2

%

 

 

3.3

%

 

 

(6.0

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (c)

 

 

1,671

 

 

 

1,881

 

 

 

1,671

 

 

 

1,881

 

Hours worked in thousands (d)

 

 

415

 

 

439

 

 

 

1,758

 

 

 

1,703

 

Average billed rate (e)

 

$

292

 

 

$

329

 

 

$

309

 

 

$

334

 

 

EBITDA Results (f):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

(2.3

)

 

$

18.4

 

 

$

36.6

 

 

$

(15.7

)

EBITDA margin

 

 

(1.9

%)

 

 

12.7

%

 

 

6.7

%

 

 

(2.8

%)

 

Adjusted Results (g):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (f)

 

$

11.1

 

 

$

18.4

 

 

$

61.1

 

 

$

66.5

 

Adjusted EBITDA margin (f)

 

 

9.2

%

 

 

12.7

%

 

 

11.2

%

 

 

11.7

%

 ___________

(a)

In fiscal 2020, the Company changed the composition of its global segments.  Consulting segment represents the consulting business that was previously included in the Advisory segment. Segment data for Q4 FY’19 and YTD FY’19 have been recast to reflect the division of the Advisory segment into the Consulting and Digital segments.

(b)

Numbers may not total due to rounding.

(c)

Represents number of employees originating, delivering and executing consulting services.

(d)

Represents the number of hours worked by consultant and execution staff during the period.

(e)

Represents the amount of fee revenue divided by the number of hours worked by consultants and executive staff.

(f)

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

(g)

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

 

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Integration/acquisition costs

 

$

 

 

$

 

 

$

 

 

$

5.3

 

Restructuring charges, net

 

$

13.4

 

 

$

 

 

$

24.5

 

 

$

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

77.0

 

 

Reflecting the impact of COVID-19, fee revenue was $121.0 million in Q4 FY’20 compared to $144.4 million in Q4 FY’19, a decrease of $23.4 million or 16% (decrease of 14% on a constant currency basis).

Operating loss was $6.6 million in Q4 FY’20 with an operating margin of (5.4%) compared to operating income of $13.3 million and an operating margin of 9.2%, respectively, in the year-ago quarter.  The decrease in operating income was primarily due to restructuring charges, net incurred in Q4 FY’20 associated with the impact of COVID-19 and a decline in fee revenue, partially offset by decreases in compensation and benefits expense, general and administrative expenses and cost of services expense.

Adjusted EBITDA was $11.1 million in Q4 FY’20 with an Adjusted EBITDA margin of 9.2% compared to $18.4 million and 12.7%, respectively, in the year-ago quarter.

4


Selected Digital Data(a)

(dollars in millions) (b)

 

Digital is an integrated platform that gives clients direct access to people and organizational data, insights, analytics, and digital assets that when used together, give clients a common language for all talent matters.

 

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

69.3

 

 

$

62.7

 

 

$

292.4

 

 

$

252.7

 

Total revenue

 

$

69.9

 

 

$

62.7

 

 

$

294.3

 

 

$

252.7

 

Operating income

 

$

5.9

 

 

$

16.7

 

 

$

46.9

 

 

$

39.7

 

Operating margin

 

 

8.5

%

 

 

26.6

%

 

 

16.0

%

 

 

15.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

421

 

 

 

350

 

 

 

421

 

 

 

350

 

Subscription & License fee revenue

 

$

20.9

 

 

$

14.6

 

 

$

73.5

 

 

$

57.2

 

 

EBITDA Results (c):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

11.9

 

 

$

20.6

 

 

$

66.7

 

 

$

53.6

 

EBITDA margin

 

 

17.2

%

 

 

32.8

%

 

 

22.8

%

 

 

21.2

%

 

Adjusted Results (d):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (c)

 

$

17.0

 

 

$

20.6

 

 

$

83.1

 

 

$

84.5

 

Adjusted EBITDA margin (c)

 

 

24.5

%

 

 

32.8

%

 

 

28.4

%

 

 

33.4

%

___________

 

(a)

In the fiscal 2020, the Company changed the composition of its global segments.  Digital segment represents the products business that was previously included in the Advisory segment. Segment data for Q4 FY’19 and YTD FY’19 have been recast to reflect the division of the Advisory segment into the Consulting and Digital segments.

(b)

Numbers may not total due to rounding.

(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

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Integration/acquisition costs

 

$

1.6

 

 

$

 

 

$

5.9

 

 

$

1.3

 

Restructuring charges, net

 

$

3.4

 

 

$

 

 

$

10.5

 

 

$

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

29.6

 

 

Fee revenue was $69.3 million in Q4 FY’20 compared to $62.7 million in Q4 FY’19, an increase of $6.6 million or 11% (14% increase on a constant currency basis).  The increase in fee revenue was primarily due to fee revenue generated by the acquired companies.

Operating income was $5.9 million in Q4 FY’20 with an operating margin of 8.5% compared to $16.7 million and an operating margin of 26.6% in the year-ago quarter.  The decrease in operating income was due to an increase in operating expenses associated with the acquisition of the acquired companies in addition to restructuring charges, net incurred in Q4 FY’20 associated with the impact of COVID-19, partially offset by higher fee revenue.

Adjusted EBITDA was $17.0 million in Q4 FY’20 with an Adjusted EBITDA margin of 24.5% compared to $20.6 million and 32.8%, respectively, in the year-ago quarter.


5


Selected Executive Search Data

(dollars in millions) (a)

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

167.9

 

 

$

190.9

 

 

$

732.5

 

 

$

774.8

 

Total revenue

 

$

171.2

 

 

$

195.3

 

 

$

749.2

 

 

$

793.4

 

Operating income

 

$

37.4

 

 

$

42.0

 

 

$

156.9

 

 

$

179.1

 

Operating margin

 

 

22.3

%

 

 

22.0

%

 

 

21.4

%

 

 

23.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

556

 

 

 

565

 

 

 

556

 

 

 

565

 

Average number of consultants

 

 

569

 

 

 

558

 

 

 

560

 

 

 

553

 

Engagements billed

 

 

3,424

 

 

 

3,943

 

 

 

9,722

 

 

 

10,318

 

New engagements (b)

 

 

1,229

 

 

 

1,717

 

 

 

6,064

 

 

 

6,790

 

 

EBITDA Results (c):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

29.9

 

 

$

49.7

 

 

$

161.7

 

 

$

193.8

 

EBITDA margin

 

 

17.8

%

 

 

26.0

%

 

 

22.1

%

 

 

25.0

%

 

Adjusted Results (d):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (c)

 

$

47.5

 

 

$

49.7

 

 

$

181.1

 

 

$

193.8

 

Adjusted EBITDA margin (c)

 

 

28.3

%

 

 

26.0

%

 

 

24.7

%

 

 

25.0

%

________

(a)

Numbers may not total due to rounding.

(b)

Represents new engagements opened in the respective period.

(c)

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

(d)

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

 

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Restructuring charges, net

 

$

17.5

 

 

$

 

 

$

17.5

 

 

$

 

Separation costs

 

$

 

 

$

 

 

$

1.8

 

 

$

 

 

Fee revenue was $167.9 million and $190.9 million in Q4 FY’20 and Q4 FY’19, respectively, a decrease of $23.0 million or 12% (decrease of 10% on a constant currency basis).  The decrease in fee revenue was attributable to a decline in fee revenue in all regions due to the decrease in demand for our products and services as a result of the worldwide economic downturn associated with COVID-19.

Operating income was $37.4 million in Q4 FY’20 compared to $42.0 million in Q4 FY’19.  Operating margin was 22.3% in Q4 FY’20 compared to 22.0% in the year-ago quarter.  The decrease in operating income was mainly due to a decrease in fee revenue and restructuring charges, net incurred in Q4 FY’20 associated with the impact of COVID-19, partially offset by decreases in compensation and benefits expense (due to lower performance related bonus expense and a decrease in expenses associated with our deferred compensation and retirement plans) and general and administrative expenses in Q4 FY’20 compared to the year-ago quarter.

Adjusted EBITDA was $47.5 million in Q4 FY’20 with an Adjusted EBITDA margin of 28.3% compared to $49.7 million and 26.0%, respectively, in the year-ago quarter.

 

6


 

Selected RPO and Professional Search Data

(dollars in millions) (a)

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

82.4

 

 

$

92.8

 

 

$

364.8

 

 

$

330.1

 

Total revenue

 

$

84.5

 

 

$

95.8

 

 

$

376.6

 

 

$

341.9

 

Operating income

 

$

6.2

 

 

$

14.5

 

 

$

50.4

 

 

$

50.9

 

Operating margin

 

 

7.5

%

 

 

15.7

%

 

 

13.8

%

 

 

15.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engagements billed (b)

 

 

1,206

 

 

 

1,409

 

 

 

3,641

 

 

 

3,595

 

New engagements (c)

 

 

573

 

 

 

781

 

 

 

2,744

 

 

 

2,935

 

 

EBITDA Results (d):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

7.0

 

 

$

15.6

 

 

$

54.4

 

 

$

54.4

 

EBITDA margin

 

 

8.5

%

 

 

16.9

%

 

 

14.9

%

 

 

16.5

%

 

Adjusted Results (e):

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (d)

 

$

12.7

 

 

$

15.6

 

 

$

60.2

 

 

$

54.4

 

Adjusted EBITDA margin (d)

 

 

15.4

%

 

 

16.9

%

 

 

16.5

%

 

 

16.5

%

___________

(a)

Numbers may not total due to rounding.

(b)

Represents professional search engagements billed.

(c)

Represents new professional search engagements opened in the respective period.

(d)

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

(e)

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

 

 

 

Fourth Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Restructuring charges, net

 

$

5.7

 

 

$

 

 

$

5.7

 

 

$

 

 

 

Fee revenue was $82.4 million in Q4 FY’20, a decrease of $10.4 million or 11% (decrease of 9% on a constant currency basis), compared to the year-ago quarter.  The lower fee revenue resulted from the impact of COVID-19 and was driven by a decrease in fee revenue in recruitment process outsourcing and professional search of $6.2 million and $4.2 million, respectively, in Q4 FY’20 compared to Q4 FY’19.

Operating income was $6.2 million in Q4 FY’20, a decrease of $8.3 million compared to Q4 FY’19 operating income of $14.5 million.  Operating margin was 7.5% in Q4 FY’20 compared to 15.7% in the year-ago quarter.  The decrease in operating income was due to lower fee revenue in Q4 FY’20 compared to Q4 FY’19 and restructuring charges, net incurred in Q4 FY’20 associated with the impact of COVID-19. This was partially offset by a decrease in compensation and benefits expense due to lower performance related bonus expense, offset by an increase in salaries and related payroll taxes driven by an 8% increase in average headcount during the quarter.

Adjusted EBITDA was $12.7 million during Q4 FY’20, a decrease of $2.9 million compared to Q4 FY’19. Adjusted EBITDA margin was 15.4% in Q4 FY’20 and 16.9% in Q4 FY’19.

7


 

Outlook

Although COVID-19 has been with us for a number of months, significant uncertainty about its ultimate impact on society and the global economic environment remains. The pandemic has spread across the globe, infecting different parts of the world at varying points in time and with varying levels of intensity.  The response, out of necessity, has been conducted in large part at a very local level, with societies and economies closing and reopening at different points in time and in different ways. Further, the pandemic has had a profound and unprecedented impact on traditional behavior and societal norms. Governments and companies have mandated never before seen rules regarding working from home, social distancing, and workplace safety, and have severely restricted travel and in-person interaction.  

 

As the world begins to slowly and sporadically reopen, we are seeing a resurgence of COVID-19 cases in a number of geographies. The extent to which measures taken are reinstated and new and incremental measures are put in place, and the manner in which authoritative bodies continue to respond, remains a major unknown.  While our clients and colleagues are demonstrating real resiliency as they find new and different ways of working together (including the adoption of virtual delivery of our services and solutions), the unprecedented nature of what we are currently experiencing, combined with conflicting and ever-changing datapoints, continues to cloud the near-term predictability of our business.  Consequently, and consistent with our approach to the fourth quarter of FY’20, we will not issue any specific revenue or earnings guidance for the first quarter of FY’21. We plan to reassess the suspension of our guidance once we are comfortable that the coronavirus uncertainties have largely passed.

Earnings Conference Call Webcast

The earnings conference call will be held today at 12:00 PM (EDT) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak.  The conference call will be webcast and available online at ir.kornferry.com.  We will also post to this section of our website earnings slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.

8


 

About Korn Ferry

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

Forward-Looking Statements

Statements in this press release and our conference call that relate to future results and events (“forward-looking statements”) are based on Korn Ferry’s current expectations.  These statements, which include words such as “believes”, “expects” or “likely”, include references to our outlook as well as the expected benefits of the acquisition of the acquired companies (as defined below, the timing and expected benefits of our recently adopted restructuring plan and the magnitude and duration of the impact of the COVID-19 outbreak on our business, employees, customers and our ability to provide services in affected regions.  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 the magnitude and duration of the negative impact of the COVID-19 outbreak on our business, employees, customers and our ability to provide services in affected regions, global and local political or economic developments in or affecting countries where we have operations, competition, changes in demand for our services as a result of automation, the dependence on and costs of attracting and retaining qualified and experienced consultants, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, the portability of client relationships, consolidation of the industries we serve, currency fluctuations in our international operations, risks related to growth, alignment of our cost structure, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, dependence on third parties for the execution of critical functions, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, technical guidance relating to the Tax Act, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our indebtedness, the phase-out of the London Interbank Offered Rate, expansion of social media platforms, seasonality, ability to effect acquisition and integrate recently acquired companies, including those of Miller Heiman Group, AchieveForum, and Strategy Execution (collectively, the “acquired companies”); the ability to recognize the anticipated benefits of the acquisition of the acquired companies; the costs related to the acquisition of the acquired companies 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 attributable to Korn Ferry, adjusted to exclude integration/acquisition costs, restructuring charges, separation costs, tradename write-offs, and debt refinancing costs, net of income tax effect;

 

Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, restructuring charges, separation costs, tradename write-offs, and debt refinancing costs, net of income tax effect;

 

Constant currency (calculated using a quarterly average) percentages that represent the percentage change that would have resulted had exchange rates in the prior period been the same as those in effect in the current period;

 

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

 

Adjusted EBITDA, which is EBITDA further adjusted to exclude integration/acquisition costs, restructuring charges, separation costs and tradename write-offs and Adjusted EBITDA margin; and

 

Investable cash represents the amount of funds available to the Company after taking into consideration the accrued bonus that will be paid and the amount set aside for deferred compensation.

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.

9


 

 

Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges that may not be indicative of Korn Ferry’s ongoing operating results.  These non-GAAP financial measures are performance measures and are not indicative of the liquidity of Korn Ferry.  These charges, which are described in the footnotes in the attached reconciliations, represent 1) costs we incurred to acquire and integrate a portion of our Digital business, 2) charges we incurred to restructure the Company as a result of COVID-19 and due to acquisition of the acquired companies, 3) separation costs, 4) tradename write-offs associated with the rebranding plan initiated by Korn Ferry and 5) debt refinancing costs.  The use of non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance.  Korn Ferry includes non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making.  Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company’s operating results.  Management further believes that EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company.  Investable cash provides useful information surrounding the Company’s liquidity position since it is the amount of funds the Company has available to fund its operations after taking into account accrued bonuses that will be paid and the amount set aside for payments on deferred compensation plans. In the case of constant currency percentages, management believes the presentation of such information provides useful supplemental information regarding Korn Ferry's performance as excluding the impact of exchange rate changes on Korn Ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the Company’s operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry's ongoing operations and financial and operational decision-making.  

[Tables attached]

 

 

10


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATION

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

April 30,

 

 

April 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

440,469

 

 

$

490,756

 

 

$

1,932,732

 

 

$

1,926,033

 

Reimbursed out-of-pocket engagement expenses

 

 

8,507

 

 

 

11,779

 

 

 

44,598

 

 

 

47,829

 

           Total revenue

 

 

448,976

 

 

 

502,535

 

 

 

1,977,330

 

 

 

1,973,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

283,519

 

 

 

331,665

 

 

 

1,297,994

 

 

 

1,311,240

 

General and administrative expenses

 

 

59,786

 

 

 

64,350

 

 

 

258,957

 

 

 

351,991

 

Reimbursed expenses

 

 

8,507

 

 

 

11,779

 

 

 

44,598

 

 

 

47,829

 

Cost of services

 

 

19,515

 

 

 

20,467

 

 

 

85,886

 

 

 

75,487

 

Depreciation and amortization

 

 

14,956

 

 

 

11,999

 

 

 

55,311

 

 

 

46,489

 

Restructuring charges, net

 

 

40,466

 

 

 

-

 

 

 

58,559

 

 

 

-

 

           Total operating expenses

 

 

426,749

 

 

 

440,260

 

 

 

1,801,305

 

 

 

1,833,036

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

22,227

 

 

 

62,275

 

 

 

176,025

 

 

 

140,826

 

Other (loss) income, net

 

 

(10,893

)

 

 

7,922

 

 

 

(2,879

)

 

 

10,405

 

Interest expense, net

 

 

(6,998

)

 

 

(4,169

)

 

 

(22,184

)

 

 

(16,891

)

        Income before provision for income taxes

 

 

4,336

 

 

 

66,028

 

 

 

150,962

 

 

 

134,340

 

Income tax provision

 

 

4,957

 

 

 

15,401

 

 

 

43,945

 

 

 

29,544

 

Net (loss) income

 

 

(621

)

 

 

50,627

 

 

 

107,017

 

 

 

104,796

 

           Net income attributable to noncontrolling interest

 

 

(181

)

 

 

(363

)

 

 

(2,071

)

 

 

(2,145

)

Net (loss) income attributable to Korn Ferry

 

$

(802

)

 

$

50,264

 

 

$

104,946

 

 

$

102,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings per common share attributable to Korn Ferry:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

$

(0.02

)

 

$

0.90

 

 

$

1.91

 

 

$

1.84

 

      Diluted

 

$

(0.02

)

 

$

0.89

 

 

$

1.90

 

 

$

1.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

 

53,534

 

 

 

55,173

 

 

 

54,342

 

 

 

55,311

 

      Diluted

 

 

53,534

 

 

 

55,666

 

 

 

54,767

 

 

 

56,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.10

 

 

$

0.10

 

 

$

0.40

 

 

$

0.40

 

 

 


KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

 

 

 

 

Three Months Ended April 30,

 

 

Year Ended April 30,

 

 

 

 

2020

 

 

 

 

 

 

2019

 

 

% Change

 

 

2020

 

 

 

 

 

 

2019

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

$

120,992

 

 

 

 

 

 

$

144,363

 

 

 

(16.2

%)

 

$

543,095

 

 

 

 

 

 

$

568,321

 

 

 

(4.4

%)

Digital

 

 

69,269

 

 

 

 

 

 

 

62,719

 

 

 

10.4

%

 

 

292,366

 

 

 

 

 

 

 

252,727

 

 

 

15.7

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

102,196

 

 

 

 

 

 

 

113,651

 

 

 

(10.1

%)

 

 

434,624

 

 

 

 

 

 

 

455,826

 

 

 

(4.7

%)

 

EMEA

 

39,662

 

 

 

 

 

 

 

45,307

 

 

 

(12.5

%)

 

 

170,314

 

 

 

 

 

 

 

182,829

 

 

 

(6.8

%)

 

Asia Pacific

 

19,737

 

 

 

 

 

 

 

24,373

 

 

 

(19.0

%)

 

 

98,132

 

 

 

 

 

 

 

104,291

 

 

 

(5.9

%)

 

Latin America

 

6,260

 

 

 

 

 

 

 

7,557

 

 

 

(17.2

%)

 

 

29,400

 

 

 

 

 

 

 

31,896

 

 

 

(7.8

%)

Total Executive Search

 

 

167,855

 

 

 

 

 

 

 

190,888

 

 

 

(12.1

%)

 

 

732,470

 

 

 

 

 

 

 

774,842

 

 

 

(5.5

%)

RPO and Professional Search

 

 

82,353

 

 

 

 

 

 

 

92,786

 

 

 

(11.2

%)

 

 

364,801

 

 

 

 

 

 

 

330,143

 

 

 

10.5

%

 

Total fee revenue

 

440,469

 

 

 

 

 

 

 

490,756

 

 

 

(10.2

%)

 

 

1,932,732

 

 

 

 

 

 

 

1,926,033

 

 

 

0.3

%

Reimbursed out-of-pocket engagement expenses

 

 

8,507

 

 

 

 

 

 

 

11,779

 

 

 

(27.8

%)

 

 

44,598

 

 

 

 

 

 

 

47,829

 

 

 

(6.8

%)

 

Total revenue

$

448,976

 

 

 

 

 

 

$

502,535

 

 

 

(10.7

%)

 

$

1,977,330

 

 

 

 

 

 

$

1,973,862

 

 

 

0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income:

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

Consulting

 

$

(6,577

)

 

 

(5.4

%)

 

$

13,316

 

 

 

9.2

%

 

$

17,695

 

 

 

3.3

%

 

$

(34,115

)

 

 

(6.0

%)

Digital

 

 

5,873

 

 

 

8.5

%

 

 

16,675

 

 

 

26.6

%

 

 

46,909

 

 

 

16.0

%

 

 

39,732

 

 

 

15.7

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

32,826

 

 

 

32.1

%

 

 

28,316

 

 

 

24.9

%

 

 

113,080

 

 

 

26.0

%

 

 

120,754

 

 

 

26.5

%

 

EMEA

 

2,619

 

 

 

6.6

%

 

 

8,161

 

 

 

18.0

%

 

 

21,085

 

 

 

12.4

%

 

 

29,974

 

 

 

16.4

%

 

Asia Pacific

 

48

 

 

 

0.2

%

 

 

5,027

 

 

 

20.6

%

 

 

17,914

 

 

 

18.3

%

 

 

24,364

 

 

 

23.4

%

 

Latin America

 

1,861

 

 

 

29.7

%

 

 

538

 

 

 

7.1

%

 

 

4,860

 

 

 

16.5

%

 

 

3,998

 

 

 

12.5

%

Total Executive Search

 

 

37,354

 

 

 

22.3

%

 

 

42,042

 

 

 

22.0

%

 

 

156,939

 

 

 

21.4

%

 

 

179,090

 

 

 

23.1

%

RPO and Professional Search

 

 

6,159

 

 

 

7.5

%

 

 

14,547

 

 

 

15.7

%

 

 

50,438

 

 

 

13.8

%

 

 

50,884

 

 

 

15.4

%

Corporate

 

 

(20,582

)

 

 

 

 

 

 

(24,305

)

 

 

 

 

 

 

(95,956

)

 

 

 

 

 

 

(94,765

)

 

 

 

 

 

Total operating income

$

22,227

 

 

 

5.0

%

 

$

62,275

 

 

 

12.7

%

 

$

176,025

 

 

 

9.1

%

 

$

140,826

 

 

 

7.3

%

 

 

 

 


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

April 30,

 

 

April 30,

 

 

 

 

2020

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

689,244

 

 

$

626,360

 

Marketable securities

 

 

41,951

 

 

 

8,288

 

Receivables due from clients, net of allowance for doubtful accounts of $23,795 and $21,582 at April 30, 2020 and 2019, respectively

 

 

397,165

 

 

 

404,857

 

Income taxes and other receivables

 

 

38,755

 

 

 

26,767

 

Unearned compensation

 

 

43,117

 

 

 

42,003

 

Prepaid expenses and other assets

 

 

26,851

 

 

 

28,535

 

Total current assets

 

 

1,237,083

 

 

 

1,136,810

 

 

 

 

 

 

 

 

 

 

Marketable securities, non-current

 

 

132,134

 

 

 

132,463

 

Property and equipment, net

 

 

142,728

 

 

 

131,505

 

Operating lease right-of-use assets, net

 

 

195,077

 

 

 

-

 

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

 

 

146,408

 

 

 

126,000

 

Deferred income taxes

 

 

55,479

 

 

 

43,220

 

Goodwill

 

 

613,943

 

 

 

578,298

 

Intangible assets, net

 

 

111,926

 

 

 

82,948

 

Unearned compensation, non-current

 

 

79,510

 

 

 

80,924

 

Investments and other assets

 

 

29,540

 

 

 

22,684

 

Total assets

 

$

2,743,828

 

 

$

2,334,852

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

45,684

 

 

$

39,156

 

Income taxes payable

 

 

21,158

 

 

 

21,145

 

Compensation and benefits payable

 

 

280,911

 

 

 

328,610

 

Operating lease liability, current

 

 

54,851

 

 

 

-

 

Other accrued liabilities

 

 

221,603

 

 

 

162,047

 

Total current liabilities

 

 

624,207

 

 

 

550,958

 

 

 

 

 

 

 

 

 

 

Deferred compensation and other retirement plans

 

 

289,136

 

 

 

257,635

 

Operating lease liability, non-current

 

 

180,766

 

 

 

-

 

Long-term debt

 

 

394,144

 

 

 

222,878

 

Deferred tax liabilities

 

 

1,056

 

 

 

1,103

 

Other liabilities

 

 

30,828

 

 

 

58,891

 

Total liabilities

 

 

1,520,137

 

 

 

1,091,465

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized, 73,205 and 72,442 shares issued and 54,450 and 56,431 shares outstanding at April 30, 2020 and 2019, respectively

 

 

585,560

 

 

 

656,463

 

Retained earnings

 

 

742,993

 

 

 

660,845

 

Accumulated other comprehensive loss, net

 

 

(107,172

)

 

 

(76,652

)

Total Korn Ferry stockholders' equity

 

 

1,221,381

 

 

 

1,240,656

 

Noncontrolling interest

 

 

2,310

 

 

 

2,731

 

Total stockholders' equity

 

 

1,223,691

 

 

 

1,243,387

 

Total liabilities and stockholders' equity

 

$

2,743,828

 

 

$

2,334,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

April 30,

 

 

April 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Korn Ferry

$

(802

)

 

$

50,264

 

 

$

104,946

 

 

$

102,651

 

 

Net income attributable to non-controlling interest

 

181

 

 

 

363

 

 

 

2,071

 

 

 

2,145

 

 

      Net (loss) income

 

(621

)

 

 

50,627

 

 

 

107,017

 

 

 

104,796

 

 

Income tax provision

 

4,957

 

 

 

15,401

 

 

 

43,945

 

 

 

29,544

 

 

      Income before provision for income taxes

 

4,336

 

 

 

66,028

 

 

 

150,962

 

 

 

134,340

 

 

Other loss (income), net

 

10,893

 

 

 

(7,922

)

 

 

2,879

 

 

 

(10,405

)

 

Interest expense, net

 

6,998

 

 

 

4,169

 

 

 

22,184

 

 

 

16,891

 

 

      Operating income

 

22,227

 

 

 

62,275

 

 

 

176,025

 

 

 

140,826

 

 

Depreciation and amortization

 

14,956

 

 

 

11,999

 

 

 

55,311

 

 

 

46,489

 

 

Other (loss) income, net

 

(10,893

)

 

 

7,922

 

 

 

(2,879

)

 

 

10,405

 

 

         EBITDA

 

26,290

 

 

 

82,196

 

 

 

228,457

 

 

 

197,720

 

 

Integration/acquisition costs (1)

 

2,833

 

 

 

-

 

 

 

12,152

 

 

 

6,746

 

 

Restructuring charges, net (2)

 

40,466

 

 

 

-

 

 

 

58,559

 

 

 

-

 

 

Separation costs (3)

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

106,555

 

 

         Adjusted EBITDA

$

69,589

 

 

$

82,196

 

 

$

300,951

 

 

$

311,021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

5.0

%

 

 

12.7

%

 

 

9.1

%

 

 

7.3

%

 

Depreciation and amortization

 

3.4

%

 

 

2.4

%

 

 

2.8

%

 

 

2.4

%

 

Other (loss) income, net

 

(2.4

%)

 

 

1.6

%

 

 

(0.1

%)

 

 

0.6

%

 

         EBITDA margin

 

6.0

%

 

 

16.7

%

 

 

11.8

%

 

 

10.3

%

 

Integration/acquisition costs (1)

 

0.6

%

 

 

-

 

 

 

0.7

%

 

 

0.4

%

 

Restructuring charges, net (2)

 

9.2

%

 

 

-

 

 

 

3.0

%

 

 

-

 

 

Separation costs (3)

 

-

 

 

 

-

 

 

 

0.1

%

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

5.4

%

 

         Adjusted EBITDA margin

 

15.8

%

 

 

16.7

%

 

 

15.6

%

 

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Korn Ferry

$

(802

)

 

$

50,264

 

 

$

104,946

 

 

$

102,651

 

 

Integration/acquisition costs (1)

 

2,833

 

 

 

-

 

 

 

12,152

 

 

 

6,746

 

 

Restructuring charges, net (2)

 

40,466

 

 

 

-

 

 

 

58,559

 

 

 

-

 

 

Separation costs (3)

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

106,555

 

 

Debt refinancing costs (5)

 

-

 

 

 

-

 

 

 

828

 

 

 

-

 

 

Tax effect on the adjusted items (6)

 

(9,819

)

 

 

(598

)

 

 

(16,938

)

 

 

(28,094

)

 

         Adjusted net income attributable to Korn Ferry

$

32,678

 

 

$

49,666

 

 

$

161,330

 

 

$

187,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per common share

$

(0.02

)

 

$

0.90

 

 

$

1.91

 

 

$

1.84

 

 

Integration/acquisition costs (1)

 

0.05

 

 

 

-

 

 

 

0.22

 

 

 

0.12

 

 

Restructuring charges, net (2)

 

0.75

 

 

 

-

 

 

 

1.07

 

 

 

-

 

 

Separation costs (3)

 

-

 

 

 

-

 

 

 

0.03

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

1.93

 

 

Debt refinancing costs (5)

 

-

 

 

 

-

 

 

 

0.02

 

 

 

-

 

 

Tax effect on the adjusted items (6)

 

(0.18

)

 

 

(0.01

)

 

 

(0.31

)

 

 

(0.53

)

 

         Adjusted basic earnings per share

$

0.60

 

 

$

0.89

 

 

$

2.94

 

 

$

3.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per common share

$

(0.02

)

 

$

0.89

 

 

$

1.90

 

 

$

1.81

 

 

Integration/acquisition costs (1)

 

0.05

 

 

 

-

 

 

 

0.22

 

 

 

0.12

 

 

Restructuring charges, net (2)

 

0.75

 

 

 

-

 

 

 

1.06

 

 

 

-

 

 

Separation costs (3)

 

-

 

 

 

-

 

 

 

0.03

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

1.88

 

 

Debt refinancing costs (5)

 

-

 

 

 

-

 

 

 

0.01

 

 

 

-

 

 

Tax effect on the adjusted items (6)

 

(0.18

)

 

 

(0.01

)

 

 

(0.31

)

 

 

(0.50

)

 

         Adjusted diluted earnings per share

$

0.60

 

 

$

0.88

 

 

$

2.91

 

 

$

3.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Explanation of Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Costs associated with current and previous acquisitions, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.

 

(2)

Restructuring charges we incurred to rationalize our cost structure by eliminating redundant positions as a result of COVID-19 and due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution on November 1, 2019.

 

(3)

Costs associated with certain senior management separation charges.

 

(4)

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

 

(5)

Costs to write-off debt issuance costs and interest rate swap as a result of replacing our prior Credit Agreement with a new senior secured Credit Agreement.

 

(6)

Tax effect on integration/acquisition costs, restructuring charges, net, separation costs, tradename write-offs and write-off of debt issuance cost.

 

 


KORN FERRY AND SUBSIDIARIES

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

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

 

.

 

Three Months Ended April 30, 2020

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

120,992

 

 

$

69,269

 

 

$

102,196

 

 

$

39,662

 

 

$

19,737

 

 

$

6,260

 

 

$

167,855

 

 

$

82,353

 

 

$

-

 

 

$

440,469

 

Total revenue

 

$

123,423

 

 

$

69,890

 

 

$

104,775

 

 

$

40,148

 

 

$

20,008

 

 

$

6,282

 

 

$

171,213

 

 

$

84,450

 

 

$

-

 

 

$

448,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(802

)

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

181

 

Other loss net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,893

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,998

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,957

 

Operating (loss) income

 

$

(6,577

)

 

$

5,873

 

 

$

32,826

 

 

$

2,619

 

 

$

48

 

 

$

1,861

 

 

$

37,354

 

 

$

6,159

 

 

$

(20,582

)

 

 

22,227

 

Depreciation and amortization

 

 

4,379

 

 

 

6,105

 

 

 

835

 

 

 

385

 

 

 

307

 

 

 

244

 

 

 

1,771

 

 

 

945

 

 

 

1,756

 

 

 

14,956

 

Other loss, net

 

 

(143

)

 

 

(43

)

 

 

(8,791

)

 

 

(9

)

 

 

(182

)

 

 

(198

)

 

 

(9,180

)

 

 

(134

)

 

 

(1,393

)

 

 

(10,893

)

EBITDA

 

 

(2,341

)

 

 

11,935

 

 

 

24,870

 

 

 

2,995

 

 

 

173

 

 

 

1,907

 

 

 

29,945

 

 

 

6,970

 

 

 

(20,219

)

 

 

26,290

 

EBITDA margin

 

 

(1.9

%)

 

 

17.2

%

 

 

24.3

%

 

 

7.6

%

 

 

0.9

%

 

 

30.5

%

 

 

17.8

%

 

 

8.5

%

 

 

 

 

 

 

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration/acquisition costs

 

 

-

 

 

 

1,605

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,228

 

 

 

2,833

 

Restructuring, charges, net

 

 

13,443

 

 

 

3,449

 

 

 

7,244

 

 

 

6,347

 

 

 

3,649

 

 

 

309

 

 

 

17,549

 

 

 

5,742

 

 

 

283

 

 

 

40,466

 

Adjusted EBITDA

 

$

11,102

 

 

$

16,989

 

 

$

32,114

 

 

$

9,342

 

 

$

3,822

 

 

$

2,216

 

 

$

47,494

 

 

$

12,712

 

 

$

(18,708

)

 

$

69,589

 

Adjusted EBITDA margin

 

 

9.2

%

 

 

24.5

%

 

 

31.4

%

 

 

23.6

%

 

 

19.4

%

 

 

35.4

%

 

 

28.3

%

 

 

15.4

%

 

 

 

 

 

 

15.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended April 30, 2019

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

Fee revenue

 

$

144,363

 

 

$

62,719

 

 

$

113,651

 

 

$

45,307

 

 

$

24,373

 

 

$

7,557

 

 

$

190,888

 

 

$

92,786

 

 

$

-

 

 

$

490,756

 

Total revenue

 

$

148,658

 

 

$

62,719

 

 

$

116,939

 

 

$

46,107

 

 

$

24,726

 

 

$

7,572

 

 

$

195,344

 

 

$

95,814

 

 

$

-

 

 

$

502,535

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

50,264

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

363

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,922

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,169

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,401

 

Operating income (loss)

 

$

13,316

 

 

$

16,675

 

 

$

28,316

 

 

$

8,161

 

 

$

5,027

 

 

$

538

 

 

$

42,042

 

 

$

14,547

 

 

$

(24,305

)

 

 

62,275

 

Depreciation and amortization

 

 

3,953

 

 

 

3,402

 

 

 

973

 

 

 

387

 

 

 

345

 

 

 

105

 

 

 

1,810

 

 

 

930

 

 

 

1,904

 

 

 

11,999

 

Other income, net

 

 

1,096

 

 

 

481

 

 

 

5,553

 

 

 

44

 

 

 

163

 

 

 

59

 

 

 

5,819

 

 

 

165

 

 

 

361

 

 

 

7,922

 

EBITDA and Adjusted EBITDA

 

$

18,365

 

 

$

20,558

 

 

$

34,842

 

 

$

8,592

 

 

$

5,535

 

 

$

702

 

 

$

49,671

 

 

$

15,642

 

 

$

(22,040

)

 

$

82,196

 

EBITDA and Adjusted EBITDA margin

 

 

12.7

%

 

 

32.8

%

 

 

30.7

%

 

 

19.0

%

 

 

22.7

%

 

 

9.3

%

 

 

26.0

%

 

 

16.9

%

 

 

 

 

 

 

16.7

%

 

 

 

 

 

 

 

 

 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

 

 

 

Year Ended April 30, 2020

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

543,095

 

 

$

292,366

 

 

$

434,624

 

 

$

170,314

 

 

$

98,132

 

 

$

29,400

 

 

$

732,470

 

 

$

364,801

 

 

$

-

 

 

$

1,932,732

 

Total revenue

 

$

557,255

 

 

$

294,261

 

 

$

447,528

 

 

$

172,978

 

 

$

99,209

 

 

$

29,493

 

 

$

749,208

 

 

$

376,606

 

 

$

-

 

 

$

1,977,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

104,946

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,071

 

Other loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,879

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,184

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,945

 

Operating income (loss)

 

$

17,695

 

 

$

46,909

 

 

$

113,080

 

 

$

21,085

 

 

$

17,914

 

 

$

4,860

 

 

$

156,939

 

 

$

50,438

 

 

$

(95,956

)

 

 

176,025

 

Depreciation and amortization

 

 

17,567

 

 

 

19,261

 

 

 

3,452

 

 

 

1,713

 

 

 

1,311

 

 

 

1,182

 

 

 

7,658

 

 

 

3,906

 

 

 

6,919

 

 

 

55,311

 

Other income (loss), net

 

 

1,326

 

 

 

485

 

 

 

(3,051

)

 

 

139

 

 

 

11

 

 

 

51

 

 

 

(2,850

)

 

 

82

 

 

 

(1,922

)

 

 

(2,879

)

EBITDA

 

 

36,588

 

 

 

66,655

 

 

 

113,481

 

 

 

22,937

 

 

 

19,236

 

 

 

6,093

 

 

 

161,747

 

 

 

54,426

 

 

 

(90,959

)

 

 

228,457

 

EBITDA margin

 

 

6.7

%

 

 

22.8

%

 

 

26.1

%

 

 

13.5

%

 

 

19.6

%

 

 

20.7

%

 

 

22.1

%

 

 

14.9

%

 

 

 

 

 

 

11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration/acquisition costs

 

 

-

 

 

 

5,937

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,215

 

 

 

12,152

 

Restructuring charges, net

 

 

24,504

 

 

 

10,481

 

 

 

7,244

 

 

 

6,347

 

 

 

3,649

 

 

 

309

 

 

 

17,549

 

 

 

5,742

 

 

 

283

 

 

 

58,559

 

Separation costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

 

-

 

 

 

1,783

 

Adjusted EBITDA

 

$

61,092

 

 

$

83,073

 

 

$

120,725

 

 

$

31,067

 

 

$

22,885

 

 

$

6,402

 

 

$

181,079

 

 

$

60,168

 

 

$

(84,461

)

 

$

300,951

 

Adjusted EBITDA margin

 

 

11.2

%

 

 

28.4

%

 

 

27.8

%

 

 

18.2

%

 

 

23.3

%

 

 

21.8

%

 

 

24.7

%

 

 

16.5

%

 

 

 

 

 

 

15.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended April 30, 2019

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

568,321

 

 

$

252,727

 

 

$

455,826

 

 

$

182,829

 

 

$

104,291

 

 

$

31,896

 

 

$

774,842

 

 

$

330,143

 

 

$

-

 

 

$

1,926,033

 

Total revenue

 

$

585,893

 

 

$

252,727

 

 

$

469,743

 

 

$

186,131

 

 

$

105,543

 

 

$

31,960

 

 

$

793,377

 

 

$

341,865

 

 

$

-

 

 

$

1,973,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

102,651

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,145

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,405

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,891

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,544

 

Operating (loss) income

 

$

(34,115

)

 

$

39,732

 

 

$

120,754

 

 

$

29,974

 

 

$

24,364

 

 

$

3,998

 

 

$

179,090

 

 

$

50,884

 

 

$

(94,765

)

 

 

140,826

 

Depreciation and amortization

 

 

16,172

 

 

 

12,885

 

 

 

3,890

 

 

 

1,254

 

 

 

1,428

 

 

 

410

 

 

 

6,982

 

 

 

3,255

 

 

 

7,195

 

 

 

46,489

 

Other income (loss), net

 

 

2,203

 

 

 

995

 

 

 

6,699

 

 

 

432

 

 

 

281

 

 

 

322

 

 

 

7,734

 

 

 

268

 

 

 

(795

)

 

 

10,405

 

EBITDA

 

 

(15,740

)

 

 

53,612

 

 

 

131,343

 

 

 

31,660

 

 

 

26,073

 

 

 

4,730

 

 

 

193,806

 

 

 

54,407

 

 

 

(88,365

)

 

 

197,720

 

EBITDA margin

 

 

(2.8

%)

 

 

21.2

%

 

 

28.8

%

 

 

17.3

%

 

 

25.0

%

 

 

14.8

%

 

 

25.0

%

 

 

16.5

%

 

 

 

 

 

 

10.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration/acquisition costs

 

 

5,304

 

 

 

1,255

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

187

 

 

 

6,746

 

Tradename write-offs

 

 

76,967

 

 

 

29,588

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

106,555

 

Adjusted EBITDA

 

$

66,531

 

 

$

84,455

 

 

$

131,343

 

 

$

31,660

 

 

$

26,073

 

 

$

4,730

 

 

$

193,806

 

 

$

54,407

 

 

$

(88,178

)

 

$

311,021

 

Adjusted EBITDA margin

 

 

11.7

%

 

 

33.4

%

 

 

28.8

%

 

 

17.3

%

 

 

25.0

%

 

 

14.8

%

 

 

25.0

%

 

 

16.5

%

 

 

 

 

 

 

16.1

%

 


 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP) TO

INVESTABLE CASH (NON-GAAP)

(in thousands)

 

 

 

April 30,

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

689,244

 

 

 

add:

 

 

 

 

 

 

Marketable securities

 

 

174,085

 

 

 

less:

 

 

 

 

 

 

Bonus liability

 

 

189,976

 

 

 

Deferred compensation

 

 

141,412

 

 

 

Investable cash

 

$

531,941