Exhibit 99.1

 

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

  

Contacts:

 

  

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

 

  

Media: Dan Gugler, (310) 226-2645

 

Korn Ferry Announces Record Second Quarter Fiscal 2022

Results of Operations

 

Highlights

 

Korn Ferry reports record quarterly fee revenue of $639.4 million in Q2 FY’22, an increase of 47% from Q2 FY’21 and a sequential increase of 9% from Q1 FY’22.

 

Record net income attributable to Korn Ferry of $75.8 million and record diluted and adjusted diluted earnings per share of $1.38 and $1.53 in Q2 FY’22, respectively.

 

Operating income and Adjusted EBITDA were both all-time highs in Q2 FY’22 at $103.8 million (operating margin of 16.2%) and $134.9 million (Adjusted EBITDA margin of 21.1%), respectively.

 

Declared a quarterly dividend of $0.12 per share on December 7, 2021, which is payable on January 14, 2022, to stockholders of record on December 21, 2021.

 

Los Angeles, CA, December 8, 2021 Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced record second quarter fee revenue of $639.4 million. In addition, second quarter diluted earnings per share was $1.38 and adjusted diluted earnings per share was $1.53, both an all-time high.

“I am extremely pleased with our results during the fiscal second quarter, as Korn Ferry once again achieved all-time financial performance highs. We generated a record $639 million in fee revenue, up 47% year over year. Our diluted and adjusted diluted earnings per share, at $1.38 and $1.53, respectively and Adjusted EBITDA margin of 21.1% were also record highs,” said Gary D. Burnison, CEO, Korn Ferry.

“Our solid performance over recent quarters speaks to our agility, execution and operational excellence amid a time of great change. The new world of work is all about career nomads, aging demographics, a real war for talent, work from anywhere, anytime and the digitization of everything. Companies are re-imagining their businesses, from strategy to people to culture. This constant state of flux represents opportunity for Korn Ferry and we look forward to continuing to drive performance for clients in the New Year ahead.”

 

 

 


1


 

Selected Financial Results

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

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Fee revenue

 

$

639.4

 

 

$

435.4

 

 

$

1,224.8

 

 

$

779.5

 

Total revenue

 

$

643.4

 

 

$

437.8

 

 

$

1,231.5

 

 

$

784.7

 

Operating income

 

$

103.8

 

 

$

48.2

 

 

$

205.0

 

 

$

4.4

 

Operating margin

 

 

16.2

%

 

 

11.1

%

 

 

16.7

%

 

 

0.6

%

Net income (loss) attributable to Korn Ferry

 

$

75.8

 

 

$

27.8

 

 

$

150.6

 

 

$

(3.1

)

Basic earnings (loss) per share

 

$

1.40

 

 

$

0.51

 

 

$

2.78

 

 

$

(0.06

)

Diluted earnings (loss) per share

 

$

1.38

 

 

$

0.51

 

 

$

2.75

 

 

$

(0.06

)

 

Adjusted Results (b):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Adjusted EBITDA

 

$

134.9

 

 

$

66.2

 

 

$

256.2

 

 

$

76.8

 

Adjusted EBITDA margin

 

 

21.1

%

 

 

15.2

%

 

 

20.9

%

 

 

9.8

%

Adjusted net income attributable to Korn Ferry

 

$

83.9

 

 

$

29.5

 

 

$

158.8

 

 

$

19.3

 

Adjusted basic earnings per share

 

$

1.55

 

 

$

0.54

 

 

$

2.93

 

 

$

0.35

 

Adjusted diluted earnings per share

 

$

1.53

 

 

$

0.54

 

 

$

2.90

 

 

$

0.35

 

___________

(a)

Numbers may not total due to rounding.

(b)

Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and net restructuring charges when applicable. Adjusted results on a consolidated basis are non-GAAP financial measures that adjust for the following, as applicable (see attached reconciliations):

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Integration/acquisition costs

 

$

1.1

 

 

$

 

 

$

1.1

 

 

$

0.7

 

Impairment of fixed assets

 

$

1.9

 

 

$

 

 

$

1.9

 

 

$

 

Impairment of right of use assets

 

$

7.4

 

 

$

 

 

$

7.4

 

 

$

 

Restructuring charges, net

 

$

 

 

$

2.4

 

 

$

 

 

$

29.9

 

 

The Company reported record fee revenue in Q2 FY’22 of $639.4 million, an increase of 47% (up 46% on a constant currency basis) compared to Q2 FY’21.  Fee revenue increased in all lines of business. The increase in fee revenue when compared to Q2 FY’21 was primarily due to the record levels of new business in the quarter driven by the relevance of the Company’s solutions in helping businesses solve their organizational and human capital issues driven by secular changes (i.e., workforce transformation, Diversity, Equity & Inclusion (“DE&I”) and Environmental, Social and Governance (“ESG”)) in today’s business environment. Further, the coronavirus pandemic (“COVID-19”) adversely impacted the Company on a worldwide basis in Q2 FY’21.

Operating margin was 16.2% in Q2 FY’22 compared to 11.1% in the year-ago quarter.  Adjusted EBITDA margin was 21.1%, compared to Adjusted EBITDA margin of 15.2% in the year-ago quarter.  Net income attributable to Korn Ferry was $75.8 million in Q2 FY’22 compared to net income attributable to Korn Ferry of $27.8 million in Q2 FY’21.

The year-over-year improvement in operating margin was due to the increase in fee revenue discussed above, as well as cost savings realized from work being conducted virtually.  Partially offsetting this were increases in compensation and benefits expense, general and administrative expenses and cost of services expense.  The increase in compensation and benefits expense was driven by higher salaries and related payroll taxes and performance-related bonus expense due to the increase in fee revenue combined with increases in overall profitability and headcount.  The change in general and administrative expenses was primarily due to integration and acquisition costs incurred in connection with the Lucas Group acquisition and the impairment charges associated with the execution of the Company’s real estate footprint reduction strategy. In addition, the Company incurred higher marketing and business development expenses which contributed to record fee revenue and new business in the quarter, as well as increased legal professional fees.

The year-over-year improvement in Adjusted EBITDA was the result of all of the factors above with the exception of integration and acquisition costs and impairment charges which are adjusted out when calculating the metric.

2


 

Results by Line of Business

Selected Consulting Data

(dollars in millions) (a)

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Fee revenue

 

$

164.9

 

 

$

126.7

 

 

$

313.4

 

 

$

226.0

 

Total revenue

 

$

165.7

 

 

$

127.1

 

 

$

314.7

 

 

$

226.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (b)

 

 

1,739

 

 

 

1,491

 

 

 

1,739

 

 

 

1,491

 

Hours worked in thousands (c)

 

 

445

 

 

 

399

 

 

 

871

 

 

 

766

 

Average bill rate (d)

 

$

371

 

 

$

318

 

 

$

360

 

 

$

295

 

 

Adjusted Results (e):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Adjusted EBITDA

 

$

30.1

 

 

$

20.2

 

 

$

56.9

 

 

$

26.8

 

Adjusted EBITDA margin

 

 

18.2

%

 

 

15.9

%

 

 

18.2

%

 

 

11.8

%

 ___________

(a)

Numbers may not total due to rounding.

(b)

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

(c)

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

(d)

The amount of fee revenue divided by the number of hours worked by consultants and execution staff.

(e)

Adjusted results exclude the following:

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Impairment of fixed assets

 

$

0.3

 

 

$

 

 

$

0.3

 

 

$

 

Impairment of right of use assets

 

$

2.5

 

 

$

 

 

$

2.5

 

 

$

 

Restructuring charges, net

 

$

 

 

$

1.1

 

 

$

 

 

$

13.9

 

 

Fee revenue was $164.9 million in Q2 FY’22 compared to $126.7 million in Q2 FY’21, an increase of $38.2 million or 30% (up 29% on a constant currency basis). Growth in Consulting fee revenue continues to be driven by significant client workforce transformation initiatives including DE&I and ESG, delivered through our Organization Strategy, Assessment, and Leadership Development solutions. In addition, Total Rewards offering has increased as clients address compensation and retention issues associated with labor market dislocation and pay governance issues. Further, COVID-19 negatively impacted the Company on a worldwide basis in Q2 FY’21.

Adjusted EBITDA was $30.1 million in Q2 FY’22 with an Adjusted EBITDA margin of 18.2% compared to Adjusted EBITDA of $20.2 million with an associated margin of 15.9%, respectively, in the year-ago quarter. This improvement resulted from the increase in fee revenue outlined above, as well as cost savings realized from work being conducted virtually. These changes were partially offset by increases in both compensation and benefits expense and cost of services expense.  The increase in compensation and benefits expense was driven by higher salaries and related payroll taxes and performance-related bonus expense due to an increase in fee revenue combined with increases in overall profitability and headcount.

 

 

 

 

 

 


3


 

Selected Digital Data

(dollars in millions) (a)

 

Digital leverages an artificial intelligence powered, machine-learning platform to help identify the best structures, roles, capabilities, and behaviors needed to drive business forward. This end-to-end platform combines Korn Ferry proprietary data, client data, and external market data to help make better, faster decisions about organizations, leadership, and people.

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Fee revenue

 

$

88.6

 

 

$

75.0

 

 

$

169.3

 

 

$

131.0

 

Total revenue

 

$

88.7

 

 

$

75.0

 

 

$

169.4

 

 

$

131.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

282

 

 

 

299

 

 

 

282

 

 

 

299

 

Subscription & License fee revenue

 

$

26.3

 

 

$

22.7

 

 

$

50.7

 

 

$

43.8

 

 

Adjusted Results (b):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Adjusted EBITDA

 

$

28.6

 

 

$

23.1

 

 

$

54.2

 

 

$

31.0

 

Adjusted EBITDA margin

 

 

32.2

%

 

 

30.8

%

 

 

32.0

%

 

 

23.7

%

___________

(a)

Numbers may not total due to rounding.

(b)

Adjusted results exclude the following:

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Impairment of fixed assets

 

$

0.2

 

 

$

 

 

$

0.2

 

 

$

 

Impairment of right of use assets

 

$

1.3

 

 

$

 

 

$

1.3

 

 

$

 

Integration/acquisition costs

 

$

 

 

$

 

 

$

 

 

$

0.6

 

Restructuring charges, net

 

$

 

 

$

0.1

 

 

$

 

 

$

2.9

 

 

Fee revenue was $88.6 million in Q2 FY’22 compared to $75.0 million in Q2 FY’21, an increase of $13.6 million or 18% (up 17% on a constant currency basis).  The increase in fee revenue was primarily due to growth in total rewards offering as companies deal with elevated levels of attrition due to dislocation in the labor markets and professional development around sales effectiveness as companies reassess their commercial models in a post-COVID world.

Adjusted EBITDA was $28.6 million in Q2 FY’22 with an Adjusted EBITDA margin of 32.2% compared to $23.1 million and 30.8%, respectively, in the year-ago quarter.  Contributing to the increase were higher fee revenues as well as cost savings realized from work being conducted virtually. Partially offsetting this were increases in compensation and benefits expense and cost of services expense.  The increase in compensation and benefits expense was driven by higher performance-related bonus expense, salaries and related payroll taxes and commission expense as a result of increased fee revenue.

 


4


 

Selected Executive Search Data(a)

(dollars in millions) (b)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Fee revenue

 

$

235.5

 

 

$

148.1

 

 

$

452.4

 

 

$

268.2

 

Total revenue

 

$

236.5

 

 

$

148.6

 

 

$

454.1

 

 

$

269.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

570

 

 

 

512

 

 

 

570

 

 

 

512

 

Average number of consultants

 

 

568

 

 

 

511

 

 

 

547

 

 

 

534

 

Engagements billed

 

 

4,365

 

 

 

3,082

 

 

 

6,631

 

 

 

4,618

 

New engagements (c)

 

 

1,830

 

 

 

1,331

 

 

 

3,575

 

 

 

2,446

 

 

Adjusted Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Adjusted EBITDA

 

$

66.1

 

 

$

28.2

 

 

$

127.7

 

 

$

36.3

 

Adjusted EBITDA margin

 

 

28.1

%

 

 

19.1

%

 

 

28.2

%

 

 

13.5

%

________

(a)

Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.

(b)

Numbers may not total due to rounding.

(c)

Represents new engagements opened in the respective period.

(d)

Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that adjust for the following:

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Impairment of fixed assets

 

$

0.1

 

 

$

 

 

$

0.1

 

 

$

 

Impairment of right of use assets

 

$

0.9

 

 

$

 

 

$

0.9

 

 

$

 

Restructuring charges, net

 

$

 

 

$

0.9

 

 

$

 

 

$

10.0

 

 

Fee revenue was $235.5 million and $148.1 million in Q2 FY’22 and Q2 FY’21, respectively, a year-over-year increase of $87.4 million or 59% (up 58% on a constant currency basis).  Fee revenue increases were driven by an increase in the number of new search engagements as well as an increase in the average fee revenue per search. These increases were across all regions with the largest increase in North America.

Adjusted EBITDA was $66.1 million in Q2 FY’22 with an Adjusted EBITDA margin of 28.1% compared to Adjusted EBITDA of $28.2 million and Adjusted EBITDA margin of 19.1%, respectively, in the year-ago quarter.  This improvement resulted from the increase in fee revenue discussed above, as well as cost savings realized from work being conducted virtually.  These changes were partially offset by increases in compensation and benefits expense due to an increase in performance-related bonus expense and salaries and related payroll taxes as a result of increased fee revenue combined with increases in overall profitability and headcount. Also partially offsetting the increase in Adjusted EBITDA was an increase in general and administrative expenses due to higher business development and bad debt expense.

 

 

5


 

 

Selected RPO and Professional Search Data

(dollars in millions) (a)

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Fee revenue

 

$

150.5

 

 

$

85.7

 

 

$

289.8

 

 

$

154.3

 

Total revenue

 

$

152.5

 

 

$

87.1

 

 

$

293.2

 

 

$

157.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engagements billed (b)

 

 

1,824

 

 

 

1,173

 

 

 

2,925

 

 

 

1,778

 

New engagements (c)

 

 

1,048

 

 

 

657

 

 

 

2,036

 

 

 

1,221

 

 

Adjusted Results (d):

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Adjusted EBITDA

 

$

36.3

 

 

$

13.8

 

 

$

70.2

 

 

$

19.8

 

Adjusted EBITDA margin

 

 

24.1

%

 

 

16.1

%

 

 

24.2

%

 

 

12.8

%

___________

(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)

Adjusted results exclude the following:

 

 

 

Second Quarter

 

 

Year to Date

 

 

 

FY’22

 

 

FY’21

 

 

FY’22

 

 

FY’21

 

Impairment of fixed assets

 

$

1.3

 

 

$

 

 

$

1.3

 

 

$

 

Impairment of right of use assets

 

$

2.6

 

 

$

 

 

$

2.6

 

 

$

 

Restructuring charges, net

 

$

 

 

$

0.3

 

 

$

 

 

$

3.1

 

 

Fee revenue was $150.5 million in Q2 FY’22, an increase of $64.8 million or 76% (up 74% on a constant currency basis), compared to the year-ago quarter.  The higher fee revenue was driven by an increase in recruitment process outsourcing (“RPO”) fee revenue of $39.3 million or 69% (67% at constant currency) and an increase in Professional Search fee revenue of $25.5 million or 88% (86% at constant currency). The increase in RPO fee revenue is due to the wider adoption of RPO services in the market in combination with our differentiate solution, while Professional Search fee revenue increased due to an increase in both the number of engagements billed and the weighted-average fee billed per engagement.

Adjusted EBITDA was $36.3 million in Q2 FY’22 with an Adjusted EBITDA margin of 24.1% in Q2 FY’22 compared to $13.8 million and 16.1%, respectively, in the year-ago quarter.  The increase in Adjusted EBITDA was due to the higher fee revenue discussed above, as well as cost savings realized from work being conducted virtually. Partially offsetting this were increases in compensation and benefits expense and cost of services expense.  The increase in compensation and benefits was driven by higher salaries and related payroll taxes, the use of outside contractors and performance-related bonus expense as a result of increased fee revenue combined with increases in overall profitability and headcount.

 

6


 

 

Outlook

Assuming no new major pandemic lockdowns (including emerging variants), and worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis:

 

Q3 FY’22 fee revenue is expected to be in the range of $640 million and $660 million; and

 

Q3 FY’22 diluted earnings per share is expected to range between $1.38 to $1.56.

 

On a consolidated adjusted basis:

 

Q3 FY’22 adjusted diluted earnings per share is expected to be in the range from $1.42 to $1.58.

 

 

 

Q3 FY’22

Earnings Per Share Outlook (1)

 

 

 

Low

 

 

High

 

 

 

 

 

 

 

 

 

 

Consolidated diluted earnings per share

 

$

1.38

 

 

$

1.56

 

Integration/acquisition costs

 

 

0.05

 

 

 

0.04

 

Tax rate impact

 

 

(0.01

)

 

 

(0.02

)

Consolidated adjusted diluted earnings per share

 

$

1.42

 

 

$

1.58

 

________

 

(1)

Consolidated adjusted diluted earnings per share is a non-GAAP financial measure that excludes the items listed in the table.

 

Earnings Conference Call Webcast

The earnings conference call will be held today at 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 our outlook, projections, goals, strategies, future plans and expectations, and other statements of future events or conditions are forward-looking statements that involve a number of risks and uncertainties. Words such as “believes”, “expects”, “anticipates”, “goals”, “estimates”, “guidance”, “may”, “should”, “could”, “will” or “likely”, and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to expected demand for our products and services, 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.  Such statements are based on current expectations; 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 ultimate magnitude and duration of COVID-19 and any future pandemic or similar outbreaks, and related restrictions and operational requirements that apply to our business and the businesses of our clients, and any related negative impacts 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, changes and developments in government laws and regulations, evolving investor and customer expectations with regard to environmental matters, 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, the withdrawal of the United Kingdom from the European Union, expansion of social media platforms, seasonality, ability to effect acquisition and integrate acquired businesses 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, impairment of fixed assets, impairment of right of use assets and restructuring charges net of income tax effect;

 

Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets 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;

 

Consolidated and Executive Search Adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization, further adjusted to exclude integration/acquisition costs, impairment of fixed assets, impairment of right of use assets and restructuring charges, and Consolidated and Executive Search Adjusted EBITDA margin.

 

 

8


 

 

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

Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges 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 as well as cost incurred to acquire an RPO & Professional Search business, 2) impairment of fixed assets associated with the decision to terminate and sublease some of our offices, 3) impairment of right of use assets due to the decision to terminate and sublease some of our offices and 4) 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 Consolidated and Executive Search 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 Consolidated and Executive Search Adjusted 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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

Fee revenue

 

$

639,443

 

 

$

435,439

 

 

$

1,224,838

 

 

$

779,536

 

Reimbursed out-of-pocket engagement expenses

 

 

3,955

 

 

 

2,350

 

 

 

6,658

 

 

 

5,136

 

           Total revenue

 

 

643,398

 

 

 

437,789

 

 

 

1,231,496

 

 

 

784,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

431,640

 

 

 

307,185

 

 

 

827,876

 

 

 

591,197

 

General and administrative expenses

 

 

64,065

 

 

 

46,476

 

 

 

114,332

 

 

 

93,565

 

Reimbursed expenses

 

 

3,955

 

 

 

2,350

 

 

 

6,658

 

 

 

5,136

 

Cost of services

 

 

24,329

 

 

 

15,901

 

 

 

46,322

 

 

 

30,170

 

Depreciation and amortization

 

 

15,633

 

 

 

15,298

 

 

 

31,277

 

 

 

30,333

 

Restructuring charges, net

 

 

-

 

 

 

2,407

 

 

 

-

 

 

 

29,894

 

           Total operating expenses

 

 

539,622

 

 

 

389,617

 

 

 

1,026,465

 

 

 

780,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

103,776

 

 

 

48,172

 

 

 

205,031

 

 

 

4,377

 

Other income, net

 

 

5,066

 

 

 

277

 

 

 

9,513

 

 

 

11,439

 

Interest expense, net

 

 

(6,365

)

 

 

(7,494

)

 

 

(11,791

)

 

 

(14,388

)

Income before provision for income taxes

 

 

102,477

 

 

 

40,955

 

 

 

202,753

 

 

 

1,428

 

Income tax provision

 

 

26,145

 

 

 

12,877

 

 

 

50,024

 

 

 

4,205

 

Net income (loss)

 

 

76,332

 

 

 

28,078

 

 

 

152,729

 

 

 

(2,777

)

           Net income attributable to noncontrolling interest

 

 

(560

)

 

 

(300

)

 

 

(2,134

)

 

 

(278

)

Net income (loss) attributable to Korn Ferry

 

$

75,772

 

 

$

27,778

 

 

$

150,595

 

 

$

(3,055

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

$

1.40

 

 

$

0.51

 

 

$

2.78

 

 

$

(0.06

)

      Diluted

 

$

1.38

 

 

$

0.51

 

 

$

2.75

 

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

 

53,114

 

 

 

53,229

 

 

 

52,937

 

 

 

53,246

 

      Diluted

 

 

53,568

 

 

 

53,390

 

 

 

53,494

 

 

 

53,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.12

 

 

$

0.10

 

 

$

0.24

 

 

$

0.20

 

 

 


 

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY REPORTING SEGMENT

(dollars in thousands)

(unaudited)

 

 

 

 

 

Three Months Ended October 31,

 

 

Six Months Ended October 31,

 

 

 

 

2021

 

 

 

2020

 

 

% Change

 

 

2021

 

 

 

 

2020

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

$

164,893

 

 

 

 

$

126,685

 

 

 

30.2

%

 

$

313,371

 

 

 

 

$

226,003

 

 

 

38.7

%

Digital

 

 

88,639

 

 

 

 

 

75,043

 

 

 

18.1

%

 

 

169,310

 

 

 

 

 

131,016

 

 

 

29.2

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

158,197

 

 

 

 

 

91,168

 

 

 

73.5

%

 

 

296,875

 

 

 

 

 

160,483

 

 

 

85.0

%

 

EMEA

 

 

42,434

 

 

 

 

 

31,629

 

 

 

34.2

%

 

 

85,181

 

 

 

 

 

61,710

 

 

 

38.0

%

 

Asia Pacific

 

 

28,257

 

 

 

 

 

20,807

 

 

 

35.8

%

 

 

56,960

 

 

 

 

 

38,059

 

 

 

49.7

%

 

Latin America

 

 

6,571

 

 

 

 

 

4,456

 

 

 

47.5

%

 

 

13,347

 

 

 

 

 

7,951

 

 

 

67.9

%

Total Executive Search (a)

 

 

235,459

 

 

 

 

 

148,060

 

 

 

59.0

%

 

 

452,363

 

 

 

 

 

268,203

 

 

 

68.7

%

RPO and Professional Search

 

 

150,452

 

 

 

 

 

85,651

 

 

 

75.7

%

 

 

289,794

 

 

 

 

 

154,314

 

 

 

87.8

%

 

Total fee revenue

 

 

639,443

 

 

 

 

 

435,439

 

 

 

46.9

%

 

 

1,224,838

 

 

 

 

 

779,536

 

 

 

57.1

%

Reimbursed out-of-pocket engagement expenses

 

 

3,955

 

 

 

 

 

2,350

 

 

 

68.3

%

 

 

6,658

 

 

 

 

 

5,136

 

 

 

29.6

%

 

Total revenue

 

$

643,398

 

 

 

 

$

437,789

 

 

 

47.0

%

 

$

1,231,496

 

 

 

 

$

784,672

 

 

 

56.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Total Executive Search is the sum of the individual Executive Search Reporting Segments and is presented on a consolidated basis as it is consistent with the Company’s discussion of its Lines of Business, and financial metrics used by the Company’s investor base.

 

 


 

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

October 31,

 

 

April 30,

 

 

 

2021

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

725,391

 

 

$

850,778

 

Marketable securities

 

 

77,496

 

 

 

63,667

 

Receivables due from clients, net of allowance for doubtful accounts of $33,488 and $29,324 at October 31, 2021 and April 30, 2021, respectively

 

 

608,141

 

 

 

448,733

 

Income taxes and other receivables

 

 

37,515

 

 

 

40,024

 

Unearned compensation

 

 

63,639

 

 

 

53,206

 

Prepaid expenses and other assets

 

 

37,054

 

 

 

30,724

 

Total current assets

 

 

1,549,236

 

 

 

1,487,132

 

 

 

 

 

 

 

 

 

 

Marketable securities, non-current