Exhibit 99.1

 

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

  

Contacts:

 

  

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

 

  

Media: Dan Gugler, (310) 226-2645

 

Korn Ferry Announces Second Quarter Fiscal 2021

Results of Operations

 

FY’21 Second Quarter Performance

 

Korn Ferry reports fee revenue of $435.4 million in Q2 FY’21, a decrease of 12% (decrease of 12% on a constant currency basis) from Q2 FY’20. On a quarter sequential basis, Q2 FY’21 fee revenue increased 27% from Q1 FY’21.

 

Net income attributable to Korn Ferry was $27.8 million in Q2 FY’21.

 

Operating income was $48.2 million in Q2 FY’21 with an operating margin of 11.1%.  Adjusted EBITDA was $66.2 million with an Adjusted EBITDA margin of 15.2%.

 

Q2 FY’21 diluted earnings per share and adjusted diluted earnings per share was $0.51 and $0.54, respectively.

 

Los Angeles, CA, November 23, 2020 Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced second quarter fee revenue of $435.4 million.  Second quarter diluted earnings per share was $0.51 and adjusted diluted earnings per share was $0.54.  Adjusted diluted earnings per share for the second quarter excludes an aggregate of $1.7 million, net of tax or $0.03 per share, of restructuring charges, net, due to the coronavirus pandemic (“COVID-19”).

“During the recently completed second quarter, I’m pleased that Korn Ferry’s revenue was up 27% sequentially to $435 million. We had a sharp improvement in earnings and profitability with net income attributable to Korn Ferry of $28 million with an operating margin of 11.1% and $66 million of adjusted EBITDA and a 15.2% adjusted EBITDA margin,” said Gary D. Burnison, CEO, Korn Ferry. “I’m not only encouraged by the financial results, but extremely proud of all that has been accomplished by our Korn Ferry colleagues to help our business rebound so dramatically. The actions, strategy, solutions and messages we’ve taken to the marketplace have resonated. Our clients have responded, and our colleagues have been resilient through a year that none of us have experienced in our lifetimes.

“As we look to the calendar year ahead, almost every company on the planet is and will have to re-imagine their business. So forget the new normal, this is normal,” Burnison added. “Companies are rethinking their organizational structure, roles and responsibilities. How they compensate, engage and develop their workforce, along with the type of agile talent they hire and how they hire talent in a virtual world. That’s real, tangible opportunity for Korn Ferry.”

 

 

 

 


1


Selected Financial Results

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

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Fee revenue

 

$

435.4

 

 

$

492.4

 

 

$

779.5

 

 

$

976.9

 

Total revenue

 

$

437.8

 

 

$

504.2

 

 

$

784.7

 

 

$

1,000.4

 

Operating income

 

$

48.2

 

 

$

61.9

 

 

$

4.4

 

 

$

122.2

 

Operating margin

 

 

11.1

%

 

 

12.6

%

 

 

0.6

%

 

 

12.5

%

Net income (loss) attributable to Korn Ferry

 

$

27.8

 

 

$

42.8

 

 

$

(3.1

)

 

$

85.8

 

Basic earnings (loss) per share

 

$

0.51

 

 

$

0.78

 

 

$

(0.06

)

 

$

1.54

 

Diluted earnings (loss) per share

 

$

0.51

 

 

$

0.77

 

 

$

(0.06

)

 

$

1.54

 

 

EBITDA Results (b):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

EBITDA

 

$

63.7

 

 

$

75.7

 

 

$

46.1

 

 

$

150.7

 

EBITDA margin

 

 

14.6

%

 

 

15.4

%

 

 

5.9

%

 

 

15.4

%

 

Adjusted Results (c):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Adjusted EBITDA (b)

 

$

66.2

 

 

$

78.3

 

 

$

76.8

 

 

$

153.3

 

Adjusted EBITDA margin (b)

 

 

15.2

%

 

 

15.9

%

 

 

9.8

%

 

 

15.7

%

Adjusted net income attributable to Korn Ferry

 

$

29.5

 

 

$

44.8

 

 

$

19.3

 

 

$

87.7

 

Adjusted basic earnings per share

 

$

0.54

 

 

$

0.81

 

 

$

0.35

 

 

$

1.58

 

Adjusted diluted earnings per share

 

$

0.54

 

 

$

0.81

 

 

$

0.35

 

 

$

1.57

 

___________

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

(c)

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

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Integration/acquisition costs

 

$

 

 

$

2.6

 

 

$

0.7

 

 

$

2.6

 

Restructuring charges, net

 

$

2.4

 

 

$

 

 

$

29.9

 

 

$

 

 

Fee revenue was $435.4 million in Q2 FY’21, a decrease of 12% (down 12% on a constant currency basis) compared to Q2 FY’20.  The decrease in fee revenue across Executive Search, Consulting, and RPO and Professional Search, was primarily due to a decline in demand for our products and services due to the impact of COVID-19 on economies around the world. This decline in fee revenue was partially offset by an increase in Digital fee revenue when compared to Q2 FY’20, which was primarily due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution (the “acquired companies”) in the third quarter of fiscal 2020.

Actions taken by various government and other authoritative bodies in response to the COVID-19 caused a contraction in economic activity which translated into the decrease in fee revenue compared to the year-ago quarter. This decline in fee revenue was partially offset by savings associated with actions taken to align our cost structure with the lower level of business demand, and resulted in a net income attributable to Korn Ferry of $27.8 million in Q2 FY’21 as compared to net income attributable to Korn Ferry of $42.8 million in Q2 FY’20.

Operating margin was 11.1% in Q2 FY’21 compared to 12.6% in the year-ago quarter.  The decrease in operating margin was primarily due to the decline in fee revenue in Q2 FY’21 associated with the impact of COVID-19.

Adjusted EBITDA margin was 15.2%, compared to 15.9% in the year-ago quarter.


2


 

 

Results by Segment

Selected Consulting Data(a)

(dollars in millions) (b)

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Fee revenue

 

$

126.7

 

 

$

144.0

 

 

$

226.0

 

 

$

281.6

 

Total revenue

 

$

127.1

 

 

$

148.2

 

 

$

226.6

 

 

$

289.5

 

Operating income

 

$

14.6

 

 

$

9.8

 

 

$

3.7

 

 

$

21.6

 

Operating margin

 

 

11.5

%

 

 

6.8

%

 

 

1.6

%

 

 

7.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (c)

 

 

1,491

 

 

 

1,886

 

 

 

1,491

 

 

 

1,886

 

Hours worked in thousands (d)

 

 

399

 

 

 

463

 

 

 

766

 

 

 

915

 

Average billed rate (e)

 

$

318

 

 

$

311

 

 

$

295

 

 

$

308

 

 

EBITDA Results (f):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

EBITDA

 

$

19.0

 

 

$

14.6

 

 

$

12.9

 

 

$

31.3

 

EBITDA margin

 

 

15.0

%

 

 

10.1

%

 

 

5.7

%

 

 

11.1

%

 

Adjusted Results (g):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Adjusted EBITDA (f)

 

$

20.2

 

 

$

14.6

 

 

$

26.8

 

 

$

31.3

 

Adjusted EBITDA margin (f)

 

 

15.9

%

 

 

10.1

%

 

 

11.8

%

 

 

11.1

%

 ___________

(a)

In the third quarter of 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 Q2 FY’20 has 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)

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

(e)

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):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Restructuring charges, net

 

$

1.1

 

 

$

 

 

$

13.9

 

 

$

 

 

Fee revenue was $126.7 million in Q2 FY’21 compared to $144.0 million in Q2 FY’20, a decrease of $17.3 million or 12% (down 13% on a constant currency basis). This change was due to the decline in demand for our products and services due to the contraction in economic activity as a result of COVID-19.

Operating income was $14.6 million in Q2 FY’21 with an operating margin of 11.5% compared to operating income of $9.8 million and an operating margin of 6.8% in the year-ago quarter.  This change resulted from a decrease in compensation and benefits expense driven by a reduction in headcount and decreases in both general and administrative expenses and cost of services expense, all of which resulted from the cost saving initiatives that were put in place, partially offset by the decline in fee revenue outlined above and an increase in restructuring charges, net incurred in Q2 FY’21.

Adjusted EBITDA was $20.2 million in Q2 FY’21 with an Adjusted EBITDA margin of 15.9% compared to $14.6 million and 10.1%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the same factors impacting operating income outlined above except for restructuring charges.

3


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.

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Fee revenue

 

$

75.0

 

 

$

65.7

 

 

$

131.0

 

 

$

123.7

 

Total revenue

 

$

75.0

 

 

$

65.7

 

 

$

131.1

 

 

$

123.7

 

Operating income

 

$

15.8

 

 

$

18.6

 

 

$

13.2

 

 

$

32.6

 

Operating margin

 

 

21.1

%

 

 

28.2

%

 

 

10.1

%

 

 

26.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

299

 

 

 

348

 

 

 

299

 

 

 

348

 

Subscription & License fee revenue

 

$

22.7

 

 

$

15.9

 

 

$

43.8

 

 

$

31.3

 

 

EBITDA Results (c):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

EBITDA

 

$

23.0

 

 

$

22.4

 

 

$

27.5

 

 

$

40.2

 

EBITDA margin

 

 

30.7

%

 

 

34.1

%

 

 

21.0

%

 

 

32.5

%

 

Adjusted Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Adjusted EBITDA (c)

 

$

23.1

 

 

$

22.4

 

 

$

31.0

 

 

$

40.2

 

Adjusted EBITDA margin (c)

 

 

30.8

%

 

 

34.1

%

 

 

23.7

%

 

 

32.5

%

___________

 

(a)

In the third quarter of 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 Q2 FY’20 has 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):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Integration/acquisition costs

 

$

 

 

$

 

 

$

0.6

 

 

$

 

Restructuring charges, net

 

$

0.1

 

 

$

 

 

$

2.9

 

 

$

 

 

Fee revenue was $75.0 million in Q2 FY’21 compared to $65.7 million in Q2 FY’20, an increase of $9.3 million or 14% (13% on a constant currency basis).  The increase in fee revenue was primarily due to fee revenue generated by the acquired companies.

Operating income was $15.8 million in Q2 FY’21 with an operating margin of 21.1% compared to operating income of $18.6 million and an operating margin of 28.2% in the year-ago quarter.  Contributing to the change was an increase in compensation and benefits expense, cost of services expense and depreciation and amortization expense, relating to the acquired companies, which was partially offset by the cost saving initiatives that were put in place and an increase in fee revenue outlined above.

Adjusted EBITDA was $23.1 million in Q2 FY’21 with an Adjusted EBITDA margin of 30.8% compared to $22.4 million and 34.1%, respectively, in the year-ago quarter.  The increase in Adjusted EBITDA was due to the same factors impacting operating income described above except for depreciation and amortization expense.

 

4


Selected Executive Search Data

(dollars in millions) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Fee revenue

 

$

148.1

 

 

$

187.9

 

 

$

268.2

 

 

$

381.1

 

Total revenue

 

$

148.6

 

 

$

192.0

 

 

$

269.5

 

 

$

390.0

 

Operating income

 

$

25.6

 

 

$

41.2

 

 

$

13.3

 

 

$

86.9

 

Operating margin

 

 

17.3

%

 

 

21.9

%

 

 

5.0

%

 

 

22.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

512

 

 

 

585

 

 

 

512

 

 

 

585

 

Average number of consultants

 

 

511

 

 

 

577

 

 

 

534

 

 

 

575

 

Engagements billed

 

 

3,082

 

 

 

3,848

 

 

 

4,618

 

 

 

6,086

 

New engagements (b)

 

 

1,331

 

 

 

1,575

 

 

 

2,446

 

 

 

3,270

 

 

EBITDA Results (c):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

EBITDA

 

$

27.3

 

 

$

44.0

 

 

$

26.2

 

 

$

92.9

 

EBITDA margin

 

 

18.5

%

 

 

23.4

%

 

 

9.8

%

 

 

24.4

%

 

Adjusted Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Adjusted EBITDA (c)

 

$

28.2

 

 

$

44.0

 

 

$

36.3

 

 

$

92.9

 

Adjusted EBITDA margin (c)

 

 

19.1

%

 

 

23.4

%

 

 

13.5

%

 

 

24.4

%

________

(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):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Restructuring charges, net

 

$

0.9

 

 

$

 

 

$

10.0

 

 

$

 

 

Fee revenue was $148.1 million and $187.9 million in Q2 FY’21 and Q2 FY’20, respectively, a decrease of $39.8 million or 21% (down 22% 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 because of the worldwide economic downturn associated with COVID-19.

Operating income was $25.6 million in Q2 FY’21 compared to operating income of $41.2 million in Q2 FY’20.  Operating margin was 17.3% in Q2 FY’21 compared to 21.9% in the year-ago quarter.  The change was mainly due to a decrease in fee revenue in Q2 FY’21 as compared to the year-ago quarter, partially offset by a decrease in compensation and benefits expense driven by a reduction in headcount and a decline in general and administrative expenses, all of which resulted from the cost saving initiatives that were put in place.

Adjusted EBITDA was $28.2 million in Q2 FY’21 with an Adjusted EBITDA margin of 19.1% compared to $44.0 million and 23.4%, respectively, in the year-ago quarter.  The decrease in Adjusted EBITDA was due to the same factors impacting operating income described above.

5


 

Selected RPO and Professional Search Data

(dollars in millions) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Fee revenue

 

$

85.7

 

 

$

94.8

 

 

$

154.3

 

 

$

190.6

 

Total revenue

 

$

87.1

 

 

$

98.3

 

 

$

157.5

 

 

$

197.2

 

Operating income

 

$

12.5

 

 

$

15.1

 

 

$

14.7

 

 

$

30.1

 

Operating margin

 

 

14.6

%

 

 

15.9

%

 

 

9.5

%

 

 

15.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engagements billed (b)

 

 

1,173

 

 

 

1,441

 

 

 

1,778

 

 

 

2,274

 

New engagements (c)

 

 

657

 

 

 

693

 

 

 

1,221

 

 

 

1,460

 

 

EBITDA Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

EBITDA

 

$

13.5

 

 

$

16.1

 

 

$

16.8

 

 

$

32.2

 

EBITDA margin

 

 

15.7

%

 

 

17.0

%

 

 

10.9

%

 

 

16.9

%

 

Adjusted Results (e):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Adjusted EBITDA (d)

 

$

13.8

 

 

$

16.1

 

 

$

19.8

 

 

$

32.2

 

Adjusted EBITDA margin (d)

 

 

16.1

%

 

 

17.0

%

 

 

12.8

%

 

 

16.9

%

___________

(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):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’21

 

 

FY’20

 

 

FY’21

 

 

FY’20

 

Restructuring charges, net

 

$

0.3

 

 

$

 

 

$

3.1

 

 

$

 

 

Fee revenue was $85.7 million in Q2 FY’21, a decrease of $9.1 million or 10% (decrease of 11% on a constant currency basis), compared to the year-ago quarter.  The lower fee revenue was driven by a decrease in professional search and recruitment process outsourcing of $7.7 million and $1.4 million, respectively, due to of the worldwide economic downturn associated with COVID-19.  For the quarter, professional search was down 21% (22% on a constant currency) and RPO was down 3% (4% at constant currency), both compared to the year-ago quarter.

Operating income was $12.5 million in Q2 FY’21, a decrease of $2.6 million compared to operating income of $15.1 million in Q2 FY’20.  Operating margin was 14.6% in the current quarter compared to 15.9% in the year-ago quarter.  Adjusted EBITDA was $13.8 million in Q2 FY’21 with an Adjusted EBITDA margin of 16.1% in Q2 FY’21 compared to $16.1 million and 17.0%, respectively, in the year-ago quarter.  The decrease in operating income and Adjusted EBITDA was due to the lower fee revenue discussed above, partially offset by a decrease in compensation and benefits expense driven by a reduction in headcount and a decline in general and administrative expenses, both of which resulted from the cost saving initiatives that were put in place.

 

6


 

Outlook

Approximately three months have passed since our last earnings call and, while advances have been made in the science and societal and economic consequences of COVID-19, there remains significant uncertainty about the ultimate impact of COVID-19.  On the positive side, there have been several announcements around vaccines that have greater than 90% effectiveness.  In addition, the world has adopted new ways of working and interacting with substantial acceptance of business being conducted in a virtual world.  On the negative side, there are a number of unanswered questions regarding the capacity to manufacture the vaccines at scale as well as how they will be distributed and administered to the population at large.  In addition, we are seeing governments putting lockdowns back in place as the number of COVID-19 cases and hospitalizations reach all-time highs.

 

The constantly evolving and unprecedented nature of what we are currently experiencing, combined with all the unanswered questions 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 and first and second quarters of FY’21, we will not issue any specific revenue or earnings guidance for the third 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 (EST) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak.  The conference call will be webcast and available online at ir.kornferry.com.  We will also post to this section of our website earnings slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.

7


 

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”, “anticipates:” 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 restructuring plan, 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, and the potential opportunities for our business as a result of worldwide changes in how companies conduct business as a result of COVID-19.  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, treaties, or regulations on our business and our company, 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 and restructuring charges, net of income tax effect;

 

Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs and restructuring charges, 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; and

 

Adjusted EBITDA, which is EBITDA further adjusted to exclude integration/acquisition costs and restructuring charges, and Adjusted EBITDA margin.

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

8


 

 

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 and 2) charges we incurred to restructure the Company as a result of COVID-19. The use of non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance.  Korn Ferry includes non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making.  Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company’s operating results.  Management further believes that EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company.  In the case of constant currency percentages, management believes the presentation of such information provides useful supplemental information regarding Korn Ferry's performance as excluding the impact of exchange rate changes on Korn Ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the Company’s operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry's ongoing operations and financial and operational decision-making.

[Tables attached]

 

 

9


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

Fee revenue

 

$

435,439

 

 

$

492,389

 

 

$

779,536

 

 

$

976,938

 

Reimbursed out-of-pocket engagement expenses

 

 

2,350

 

 

 

11,788

 

 

 

5,136

 

 

 

23,437

 

           Total revenue

 

 

437,789

 

 

 

504,177

 

 

 

784,672

 

 

 

1,000,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

307,185

 

 

 

337,382

 

 

 

591,197

 

 

 

665,878

 

General and administrative expenses

 

 

46,476

 

 

 

62,009

 

 

 

93,565

 

 

 

127,816

 

Reimbursed expenses

 

 

2,350

 

 

 

11,788

 

 

 

5,136

 

 

 

23,437

 

Cost of services

 

 

15,901

 

 

 

18,414

 

 

 

30,170

 

 

 

35,549

 

Depreciation and amortization

 

 

15,298

 

 

 

12,715

 

 

 

30,333

 

 

 

25,492

 

Restructuring charges, net

 

 

2,407

 

 

 

-

 

 

 

29,894

 

 

 

-

 

           Total operating expenses

 

 

389,617

 

 

 

442,308

 

 

 

780,295

 

 

 

878,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

48,172

 

 

 

61,869

 

 

 

4,377

 

 

 

122,203

 

Other income, net

 

 

277

 

 

 

1,133

 

 

 

11,439

 

 

 

2,959

 

Interest expense, net

 

 

(7,494

)

 

 

(4,210

)

 

 

(14,388

)

 

 

(8,267

)

Income before provision for income taxes

 

 

40,955

 

 

 

58,792

 

 

 

1,428

 

 

 

116,895

 

Income tax provision

 

 

12,877

 

 

 

15,760

 

 

 

4,205

 

 

 

30,213

 

Net income (loss)

 

 

28,078

 

 

 

43,032

 

 

 

(2,777

)

 

 

86,682

 

           Net income attributable to noncontrolling interest

 

 

(300

)

 

 

(228

)

 

 

(278

)

 

 

(927

)

Net income (loss) attributable to Korn Ferry

 

$

27,778

 

 

$

42,804

 

 

$

(3,055

)

 

$

85,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

$

0.51

 

 

$

0.78

 

 

$

(0.06

)

 

$

1.54

 

      Diluted

 

$

0.51

 

 

$

0.77

 

 

$

(0.06

)

 

$

1.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

 

53,229

 

 

 

54,568

 

 

 

53,246

 

 

 

54,917

 

      Diluted

 

 

53,390

 

 

 

54,716

 

 

 

53,246

 

 

 

55,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.10

 

 

$

0.10

 

 

$

0.20

 

 

$

0.20

 

 

 


KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

 

 

 

 

Three Months Ended October 31,

 

 

Six Months Ended October 31,

 

 

 

 

2020

 

 

 

 

 

 

2019

 

 

% Change

 

 

2020

 

 

 

 

 

 

2019

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

$

126,685

 

 

 

 

 

 

$

144,036

 

 

 

(12.0

%)

 

$

226,003

 

 

 

 

 

 

$

281,578

 

 

 

(19.7

%)

Digital

 

 

75,043

 

 

 

 

 

 

 

65,724

 

 

 

14.2

%

 

 

131,016

 

 

 

 

 

 

 

123,708

 

 

 

5.9

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

91,168

 

 

 

 

 

 

 

113,818

 

 

 

(19.9

%)

 

 

160,483

 

 

 

 

 

 

 

225,540

 

 

 

(28.8

%)

 

EMEA

 

 

31,629

 

 

 

 

 

 

 

39,821

 

 

 

(20.6

%)

 

 

61,710

 

 

 

 

 

 

 

86,351

 

 

 

(28.5

%)

 

Asia Pacific

 

 

20,807

 

 

 

 

 

 

 

25,944

 

 

 

(19.8

%)

 

 

38,059

 

 

 

 

 

 

 

53,306

 

 

 

(28.6

%)

 

Latin America

 

 

4,456

 

 

 

 

 

 

 

8,272

 

 

 

(46.1

%)

 

 

7,951

 

 

 

 

 

 

 

15,857

 

 

 

(49.9

%)

Total Executive Search

 

 

148,060

 

 

 

 

 

 

 

187,855

 

 

 

(21.2

%)

 

 

268,203

 

 

 

 

 

 

 

381,054

 

 

 

(29.6

%)

RPO and Professional Search

 

 

85,651

 

 

 

 

 

 

 

94,774

 

 

 

(9.6

%)

 

 

154,314

 

 

 

 

 

 

 

190,598

 

 

 

(19.0

%)

 

Total fee revenue

 

 

435,439

 

 

 

 

 

 

 

492,389