Korn Ferry Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Segments

Segments

12 Months Ended

Apr. 30, 2019

11. Segments

The Company currently operates through three global segments: Executive Search, Advisory and RPO & Professional Search. The Executive Search segment focuses on recruiting board level, chief executive and other senior executive and general management positions, in addition to research-based interviewing and onboarding solutions, for clients predominantly in the consumer goods, financial services, industrial, life sciences/healthcare and technology industries. Advisory assists clients to synchronize strategy and talent by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership Development and Rewards and Benefits, all underpinned by a comprehensive array of world-leading IP, products and tools. RPO & Professional Search 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 segment is managed by geographic regional leaders and Advisory and RPO & Professional Search worldwide operations are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Advisory and RPO & Professional Search 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, Adjusted EBITDA included deferred revenue adjustment related to the Hay Group acquisition, reflecting revenue that Advisory 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. For fiscal 2019 and 2018, management no longer had adjusted fee 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 operating segment are as follows:

	Year Ended April 30, 2019
	Executive Search
	North America		EMEA		Asia Pacific		Latin America		Subtotal		Advisory		RPO & Professional Search		Corporate			Consolidated
	(in thousands)
Fee revenue	$	455,826	$	182,829	$	104,291	$	31,896	$	774,842	$	821,048	$	330,143	$	—		$	1,926,033
Total revenue	$	469,743	$	186,131	$	105,543	$	31,960	$	793,377	$	838,620	$	341,865	$	—		$	1,973,862

Net income attributable to Korn Ferry																		$	102,651
Net income attributable to noncontrolling interest																			2,145
Other income, net																			(10,094	)
Interest expense, net																			16,891
Equity in earnings of unconsolidated subsidiaries, net																			(311	)
Income tax provision																			29,544
Operating income (loss)	$	120,754	$	29,974	$	24,364	$	3,998	$	179,090	$	5,617	$	50,884	$	(94,765	)	$	140,826
Depreciation and amortization		3,890		1,254		1,428		410		6,982		29,057		3,255		7,195			46,489
Other income (loss), net		6,388		432		281		322		7,423		3,198		268		(795	)		10,094
Equity in earnings of unconsolidated subsidiaries, net		311		—		—		—		311		—		—		—			311
EBITDA		131,343		31,660		26,073		4,730		193,806		37,872		54,407		(88,365	)		197,720
Integration/acquisition costs		—		—		—		—		—		6,559		—		187			6,746
Tradename write-offs		—		—		—		—		—		106,555		—		—			106,555
Adjusted EBITDA	$	131,343	$	31,660	$	26,073	$	4,730	$	193,806	$	150,986	$	54,407	$	(88,178	)	$	311,021

Identifiable assets (1)	$	427,089	$	171,120	$	116,006	$	24,600	$	738,815	$	1,045,432	$	166,492	$	384,113		$	2,334,852
Long-lived assets (1)	$	19,864	$	9,266	$	9,255	$	2,711	$	41,096	$	46,689	$	8,980	$	34,740		$	131,505
Goodwill (1)	$	46,571	$	45,480	$	972	$	—	$	93,023	$	457,361	$	27,914	$	—		$	578,298

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

	Year Ended April 30, 2018
	Executive Search
	North America		EMEA		Asia Pacific		Latin America		Subtotal		Advisory			RPO & Professional Search		Corporate			Consolidated
	(in thousands)
Fee revenue	$	408,098	$	173,725	$	96,595	$	30,624	$	709,042	$	785,013		$	273,162	$	—		$	1,767,217
Total revenue	$	421,260	$	177,234	$	98,062	$	30,717	$	727,273	$	801,005		$	291,241	$	—		$	1,819,519

Net income attributable to Korn Ferry																			$	133,779
Net income attributable to noncontrolling interest																				2,118
Other income, net																				(11,119	)
Interest expense, net																				13,832
Equity in earnings of unconsolidated subsidiaries, net																				(297	)
Income tax provision																				70,133
Operating income (loss)	$	100,397	$	26,768	$	18,425	$	4,022	$	149,612	$	100,535		$	39,396	$	(81,097	)	$	208,446
Depreciation and amortization		3,930		1,689		1,408		455		7,482		31,527			3,054		6,525			48,588
Other income, net		845		168		373		181		1,567		2,501			152		6,899			11,119
Equity in earnings of unconsolidated subsidiaries, net		297		—		—		—		297		—			—		—			297
EBITDA		105,469		28,625		20,206		4,658		158,958		134,563			42,602		(67,673	)		268,450
Restructuring charges (recoveries), net		—		—		313		—		313		(241	)		6		—			78
Integration/acquisition costs		—		—		—		—		—		9,151			—		279			9,430
Adjusted EBITDA	$	105,469	$	28,625	$	20,519	$	4,658	$	159,271	$	143,473		$	42,608	$	(67,394	)	$	277,958

Identifiable assets (1)	$	411,347	$	198,815	$	98,599	$	23,832	$	732,593	$	1,092,474		$	144,160	$	318,687		$	2,287,914
Long-lived assets (1)	$	22,813	$	11,018	$	10,834	$	3,203	$	47,868	$	42,605		$	6,390	$	23,038		$	119,901
Goodwill (1)	$	47,757	$	47,501	$	972	$	—	$	96,230	$	458,169		$	29,823	$	—		$	584,222

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

	Year Ended April 30, 2017
	Executive Search
	North America		EMEA			Asia Pacific		Latin America		Subtotal		Advisory		RPO & Professional Search			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																				$	84,181
Net income attributable to noncontrolling interest																					3,057
Other income, net																					(10,328	)
Interest expense, net																					14,607
Equity in earnings of unconsolidated subsidiaries, net																					(333	)
Income tax provision																					29,104
Operating income (loss)	$	81,621	$	27,854		$	8,580	$	6,268	$	124,323	$	47,429	$	29,995		$	(81,459	)	$	120,288
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		1,900		(91	)		6,706			10,328
Equity in earnings of unconsolidated subsidiaries, net		333		—			—		—		333		—		—			—			333
EBITDA		86,610		28,869			9,940		7,435		132,854		81,591		32,722			(68,958	)		178,209
Restructuring charges, net		1,719		629			1,495		773		4,616		29,663		101			220			34,600
Integration/acquisition costs		—		—			—		—		—		14,440		—			7,939			22,379
Deferred revenue adjustment due to acquisition		—		—			—		—		—		3,535		—			—			3,535
Separation costs		—		—			—		—		—		609		—			—			609
Adjusted EBITDA	$	88,329	$	29,498		$	11,435	$	8,208	$	137,470	$	129,838	$	32,823		$	(60,799	)	$	239,332

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

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

Fee revenue attributed to an individual customer or country, other than the U.S. and United Kingdom, did not account for more than 10% of the total fee revenue in fiscal 2019, 2018 or 2017. Fee revenue classified by country in which the Company derives revenues are as follows:

	Year Ended April 30,
	2019		2018		2017
	(in thousands)
U.S.	$	859,969	$	778,470	$	728,871
United Kingdom		202,055