Annual report pursuant to Section 13 and 15(d)

Business Segments

v3.7.0.1
Business Segments
12 Months Ended
Apr. 30, 2017
Business Segments

11. Business Segments

The Company currently operates in three global businesses: Executive Search, Hay Group and Futurestep. The Executive Search segment focuses on recruiting Board of Director and C-level positions, in addition to research-based interviewing and onboarding solutions, for clients predominantly in the consumer, financial services, industrial, life sciences/healthcare and technology industries. Hay Group assists clients with ongoing assessment, compensation and development of their senior executives and management teams, and addresses four fundamental needs: Talent Strategy, Succession Management, Leadership Development, and Rewards, Motivation and Engagement, all underpinned by a comprehensive array of world-leading IP, products and tools. Futurestep is a global industry leader in high-impact talent acquisition solutions. Its portfolio of services includes global and regional RPO, project recruitment, individual professional search and consulting. The Executive Search business segment is managed by geographic regional leaders and Hay Group and Futurestep worldwide operations are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Hay Group and Futurestep report directly to the Chief Executive Officer of the Company. The Company also operates a Corporate segment to record global expenses of the Company.

The Company evaluates performance and allocates resources based on the Company’s chief operating decision maker’s (“CODM”) review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other than temporary impairment). The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA. For fiscal 2017 and 2016, Adjusted EBITDA includes deferred revenue adjustment related to the Legacy Hay acquisition, reflecting revenue that the Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA.

 

Financial highlights by business segment are as follows:

 

    Year Ended April 30, 2017  
    Executive Search                          
    North
America
    EMEA     Asia
Pacific
    Latin
America
    Subtotal     Hay
Group
    Futurestep     Corporate     Consolidated  
    (in thousands)  

Fee revenue

  $ 356,625     $ 146,506     $ 80,169     $ 34,376     $ 617,676     $ 724,186     $ 223,659     $     $ 1,565,521  

Deferred revenue adjustment due to acquisition

                                  3,535                   3,535  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted fee revenue

  $ 356,625     $ 146,506     $ 80,169     $ 34,376     $ 617,676     $ 727,721     $ 223,659     $     $ 1,569,056  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  $ 369,803     $ 150,113     $ 81,744     $ 34,533     $ 636,193     $ 741,533     $ 243,943     $     $ 1,621,669  

Net income attributable to Korn/Ferry International

                  $ 84,181  

Net income attributable to noncontrolling interest

                    3,057  

Other income, net

                    (11,820

Interest expense, net

                    10,251  

Equity in earnings of unconsolidated subsidiaries, net

                    (333

Income tax provision

                    29,104  
                 

 

 

 

Operating income (loss)

  $ 81,550     $ 27,854     $ 8,580     $ 6,268     $ 124,252     $ 47,302     $ 29,986     $ (87,100   $ 114,440  

Depreciation and amortization

    3,812       1,030       1,060       483       6,385       32,262       2,818       5,795       47,260  

Other income (loss), net

    844       (15     300       684       1,813       341       (91     9,757       11,820  

Equity in earnings of unconsolidated subsidiaries, net

    333                         333                         333  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    86,539       28,869       9,940       7,435       132,783       79,905       32,713       (71,548     173,853  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Restructuring charges, net

    1,719       629       1,495       773       4,616       29,663       101       220       34,600  

Integration/acquisition cost

                                  14,440             7,939       22,379  

Deferred revenue adjustment due to acquisition

                                  3,535                   3,535  

Separation costs

                                  609                   609  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 88,258     $ 29,498     $ 11,435     $ 8,208     $ 137,399     $ 128,152     $ 32,814     $ (63,389   $ 234,976  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Identifiable assets (1)

  $   340,069     $   158,927     $   87,845     $   26,897     $   613,738     $   1,057,611     $   116,717     $   274,832     $   2,062,898  

Long-lived assets (1)

  $ 23,746     $ 11,089     $ 8,371     $ 3,262     $ 46,468     $ 37,846     $ 6,693     $ 18,560     $ 109,567  

Goodwill (1)

  $ 46,201     $ 44,976     $ 972     $     $ 92,149     $ 457,241     $ 27,475     $     $ 576,865  

 

    Year Ended April 30, 2016  
    Executive Search                          
    North
America
    EMEA     Asia
Pacific
    Latin
America
    Subtotal     Hay
Group
    Futurestep     Corporate     Consolidated  
    (in thousands)  

Fee revenue

  $ 371,345     $ 144,319     $ 80,506     $ 26,744     $ 622,914     $ 471,145     $ 198,053     $     $ 1,292,112  

Deferred revenue adjustment due to acquisition

                                  10,967                   10,967  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted fee revenue

  $ 371,345     $ 144,319     $ 80,506     $ 26,744     $ 622,914     $ 482,112     $ 198,053     $     $ 1,303,079  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  $ 386,256     $ 148,285     $ 83,206     $ 26,781     $ 644,528     $ 488,217     $ 213,969     $     $ 1,346,714  

Net income attributable to Korn/Ferry International

                  $ 30,913  

Net income attributable to noncontrolling interest

                    520  

Other loss, net

                    4,167  

Interest income, net

                    (237

Equity in earnings of unconsolidated subsidiaries, net

                    (1,631

Income tax provision

                    18,960  
                 

 

 

 

Operating income (loss)

  $ 100,381     $ 20,607     $ 12,572     $ (1,854   $ 131,706     $ (3,415   $ 26,702     $ (102,301   $ 52,692  

Depreciation and amortization

    3,267       1,029       941       312       5,549       21,854       2,386       6,431       36,220  

Other (loss) income, net

    (147     433       21       312       619       (868     364       (4,282     (4,167

Equity in earnings of unconsolidated subsidiaries, net

    437                         437                   1,194       1,631  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    103,938       22,069       13,534       (1,230     138,311       17,571       29,452       (98,958     86,376  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Restructuring charges, net

    499       5,807       577       322       7,205       25,682       49       77       33,013  

Integration/acquisition costs

                                  17,607             27,802       45,409  

Venezuelan foreign currency loss

                      6,635       6,635       7,085                   13,720  

Deferred revenue adjustment due to acquisition

                                  10,967                   10,967  

Separation costs

                                              744       744  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $   104,437     $ 27,876     $   14,111     $ 5,727     $ 152,151     $ 78,912     $ 29,501     $ (70,335   $ 190,229  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Identifiable assets (1)

  $ 227,228     $   150,516     $ 86,394     $   24,273     $   488,411     $   1,005,457     $   104,396     $     300,336     $   1,898,600  

Long-lived assets (1)

  $ 19,044     $ 4,817     $ 3,708     $ 1,479     $ 29,048     $ 42,974     $ 4,635     $ 18,779     $ 95,436  

Goodwill (1)

  $ 48,320     $ 46,193     $ 972     $     $ 95,485     $ 465,937     $ 28,650     $     $ 590,072  

 

    Year Ended April 30, 2015  
    Executive Search                          
    North
America
    EMEA     Asia
Pacific
    Latin
America
    Subtotal     Hay
Group
    Futurestep     Corporate     Consolidated  
    (in thousands)  

Fee revenue

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

Total revenue

  $ 344,913     $ 158,052     $ 87,142     $ 29,218     $ 619,325     $ 275,220     $ 171,521     $     $ 1,066,066  

Net income attributable to Korn/Ferry International

                  $ 88,357  

Net income attributable to noncontrolling interest

                     

Other income, net

                    (7,458

Interest expense, net

                    1,784  

Equity in earnings of unconsolidated subsidiaries, net

                    (2,181

Income tax provision

                    33,526  
                 

 

 

 

Operating income (loss)

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

Depreciation and amortization

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

Other income (loss), net

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

Equity in earnings of unconsolidated subsidiaries, net

    426                         426                   1,755       2,181  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

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

Restructuring charges, net

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

Acquisition costs

                                              959       959  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Identifiable assets (1)

  $     327,446     $     156,072     $     94,099     $     25,328     $     602,945     $     265,546     $     103,782     $     345,528     $     1,317,801  

Long-lived assets (1)

  $ 17,271     $ 3,885     $ 4,235     $ 966     $ 26,357     $ 12,377     $ 4,204     $ 19,150     $ 62,088  

Goodwill (1)

  $ 49,603     $ 45,922     $ 972     $     $ 96,497     $ 129,549     $ 28,394     $     $ 254,440  

 

(1) As of the end of the fiscal year.

Fee revenue attributed to an individual customer or country, other than the U.S., did not account for more than 10% of the total in fiscal year 2017, 2016 or 2015. Fee revenue classified by country in which the Company derives revenues are as follows:

 

     Year Ended April 30,  
     2017      2016      2015  
     (in thousands)  

U.S.

   $ 728,871      $ 669,585      $ 557,024  

Other countries

     836,650        622,527        471,128  
  

 

 

    

 

 

    

 

 

 

Total fee revenue

   $           1,565,521      $           1,292,112      $           1,028,152  
  

 

 

    

 

 

    

 

 

 

 

Long-lived assets, excluding financial instruments and tax assets, classified by controlling countries over 10% of the total are as follows:

 

     Year Ended April 30,  
     2017      2016      2015  
     (in thousands)  

U.S. (1)

   $ 70,949      $ 64,525      $ 50,103  

Other countries

     38,618        30,911        11,985  
  

 

 

    

 

 

    

 

 

 

Total long-lived assets

   $           109,567      $           95,436      $           62,088  
  

 

 

    

 

 

    

 

 

 

 

(1) Includes Corporate long-lived assets