Annual report pursuant to Section 13 and 15(d)

Segments

v3.20.2
Segments
12 Months Ended
Apr. 30, 2020
Segment Reporting [Abstract]  
Segments

11. Segments

Over the past year the Company invested in its digital business in order to digitize and harmonize the structure of its IP content and data and to build a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement. These investments combined with the recent acquisition of the Acquired Companies resulted in reassessing how the Company manages its Advisory business. Given the Company’s strategy and development of financial and operational metrics for the Consulting and Digital businesses the Company’s chief operating decision maker (“CODM”) had begun to make resource allocation decisions and assess performance separately between Consulting and Digital. Therefore, on November 1, 2019, the Company changed the composition of its global segments, and under the new reporting format, the Advisory segment was separated into two segments, Consulting and Digital. Revenues are directly attributed to a segment and expenses not directly associated with a specific segment are allocated based on the most relevant measures applicable, including revenues, headcount and other factors. Due to this change, the Company completed a qualitative assessment for any potential goodwill impairment both prior and immediately subsequent to the aforementioned change and determined that no impairment indicators were present. Operating results by segment prior to November 1, 2019 have been recast to conform to the new segment reporting.

The Company operates through four global segments:

 

1.

Consulting helps clients synchronize their strategy and their talent by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Rewards and Benefits. This work is supported and underpinned by a comprehensive range of some of the world’s leading lP and data.

 

 

2.

Digital leverages an artificial intelligence powered platform to identify structure, roles, capabilities and behaviours needed to drive business forward. This end to end system gives clients one enterprise-wide talent framework and delivers an achievable blueprint for success along with the guidance and tools to deliver it.

 

 

3.

Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent. Behavioral interviewing and proprietary assessments are used to determine ideal organizational fit, and salary benchmarking builds appropriate frameworks for compensation and retention.

 

 

4.

RPO and Professional Search combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to clients. Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions.

Executive Search is managed by geographic regional leaders. Worldwide operations for Consulting, Digital, and RPO and Professional Search are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Consulting, Digital, 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.

The Company evaluates performance and allocates resources based on the 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 in Note 1—Organization and Summary of Significant Accounting Policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA. The CODM is not provided asset information by reportable segment.

Financial highlights by operating segment are as follows:

 

 

 

Year Ended April 30, 2020

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North

America

 

 

EMEA

 

 

Asia

Pacific

 

 

Latin

America

 

 

Subtotal

 

 

RPO &

Professional

Search

 

 

Corporate

 

 

Consolidated

 

 

 

(in thousands)

 

Fee revenue

 

$

543,095

 

 

$

292,366

 

 

$

434,624

 

 

$

170,314

 

 

$

98,132

 

 

$

29,400

 

 

$

732,470

 

 

$

364,801

 

 

$

 

 

$

1,932,732

 

Total revenue

 

$

557,255

 

 

$

294,261

 

 

$

447,528

 

 

$

172,978

 

 

$

99,209

 

 

$

29,493

 

 

$

749,208

 

 

$

376,606

 

 

$

 

 

$

1,977,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

104,946

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,071

 

Other loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,879

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,184

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,945

 

Operating income (loss)

 

$

17,695

 

 

$

46,909

 

 

$

113,080

 

 

$

21,085

 

 

$

17,914

 

 

$

4,860

 

 

$

156,939

 

 

$

50,438

 

 

$

(95,956

)

 

$

176,025

 

Depreciation and amortization

 

 

17,567

 

 

 

19,261

 

 

 

3,452

 

 

 

1,713

 

 

 

1,311

 

 

 

1,182

 

 

 

7,658

 

 

 

3,906

 

 

 

6,919

 

 

 

55,311

 

Other income (loss), net

 

 

1,326

 

 

 

485

 

 

 

(3,051

)

 

 

139

 

 

 

11

 

 

 

51

 

 

 

(2,850

)

 

 

82

 

 

 

(1,922

)

 

 

(2,879

)

EBITDA

 

 

36,588

 

 

 

66,655

 

 

 

113,481

 

 

 

22,937

 

 

 

19,236

 

 

 

6,093

 

 

 

161,747

 

 

 

54,426

 

 

 

(90,959

)

 

 

228,457

 

Integration/acquisition costs

 

 

 

 

 

5,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,215

 

 

 

12,152

 

Restructuring charges, net

 

 

24,504

 

 

 

10,481

 

 

 

7,244

 

 

 

6,347

 

 

 

3,649

 

 

 

309

 

 

 

17,549

 

 

 

5,742

 

 

 

283

 

 

 

58,559

 

Separation costs

 

 

 

 

 

 

 

 

 

 

 

1,783

 

 

 

 

 

 

 

 

 

1,783

 

 

 

 

 

 

 

 

 

1,783

 

Adjusted EBITDA

 

$

61,092

 

 

$

83,073

 

 

$

120,725

 

 

$

31,067

 

 

$

22,885

 

 

$

6,402

 

 

$

181,079

 

 

$

60,168

 

 

$

(84,461

)

 

$

300,951

 

 

 

 

 

Year Ended April 30, 2019

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North

America

 

 

EMEA

 

 

Asia

Pacific

 

 

Latin

America

 

 

Subtotal

 

 

RPO &

Professional

Search

 

 

Corporate

 

 

Consolidated

 

 

 

(in thousands)

 

Fee revenue

 

$

568,321

 

 

$

252,727

 

 

$

455,826

 

 

$

182,829

 

 

$

104,291

 

 

$

31,896

 

 

$

774,842

 

 

$

330,143

 

 

$

 

 

$

1,926,033

 

Total revenue

 

$

585,893

 

 

$

252,727

 

 

$

469,743

 

 

$

186,131

 

 

$

105,543

 

 

$

31,960

 

 

$

793,377

 

 

$

341,865

 

 

$

 

 

$

1,973,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

102,651

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,145

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,405

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,891

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,544

 

Operating (loss) income

 

$

(34,115

)

 

$

39,732

 

 

$

120,754

 

 

$

29,974

 

 

$

24,364

 

 

$

3,998

 

 

$

179,090

 

 

$

50,884

 

 

$

(94,765

)

 

$

140,826

 

Depreciation and amortization

 

 

16,172

 

 

 

12,885

 

 

 

3,890

 

 

 

1,254

 

 

 

1,428

 

 

 

410

 

 

 

6,982

 

 

 

3,255

 

 

 

7,195

 

 

 

46,489

 

Other income (loss), net

 

 

2,203

 

 

 

995

 

 

 

6,699

 

 

 

432

 

 

 

281

 

 

 

322

 

 

 

7,734

 

 

 

268

 

 

 

(795

)

 

 

10,405

 

EBITDA

 

 

(15,740

)

 

 

53,612

 

 

 

131,343

 

 

 

31,660

 

 

 

26,073

 

 

 

4,730

 

 

 

193,806

 

 

 

54,407

 

 

 

(88,365

)

 

 

197,720

 

Integration/acquisition costs

 

 

5,304

 

 

 

1,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

187

 

 

 

6,746

 

Tradename write-offs

 

 

76,967

 

 

 

29,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

106,555

 

Adjusted EBITDA

 

$

66,531

 

 

$

84,455

 

 

$

131,343

 

 

$

31,660

 

 

$

26,073

 

 

$

4,730

 

 

$

193,806

 

 

$

54,407

 

 

$

(88,178

)

 

$

311,021

 

 

 

 

Year Ended April 30, 2018

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North

America

 

 

EMEA

 

 

Asia

Pacific

 

 

Latin

America

 

 

Subtotal

 

 

RPO &

Professional

Search

 

 

Corporate

 

 

Consolidated

 

 

 

(in thousands)

 

Fee revenue

 

$

540,529

 

 

$

244,484

 

 

$

408,098

 

 

$

173,725

 

 

$

96,595

 

 

$

30,624

 

 

$

709,042

 

 

$

273,162

 

 

$

 

 

$

1,767,217

 

Total revenue

 

$

556,521

 

 

$

244,484

 

 

$

421,260

 

 

$

177,234

 

 

$

98,062

 

 

$

30,717

 

 

$

727,273

 

 

$

291,241

 

 

$

 

 

$

1,819,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

133,779

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,118

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,416

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,832

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70,133

 

Operating income (loss)

 

$

22,408

 

 

$

78,127

 

 

$

100,397

 

 

$

26,768

 

 

$

18,425

 

 

$

4,022

 

 

$

149,612

 

 

$

39,396

 

 

$

(81,097

)

 

$

208,446

 

Depreciation and amortization

 

 

18,954

 

 

 

12,573

 

 

 

3,930

 

 

 

1,689

 

 

 

1,408

 

 

 

455

 

 

 

7,482

 

 

 

3,054

 

 

 

6,525

 

 

 

48,588

 

Other income, net

 

 

2,127

 

 

 

374

 

 

 

1,142

 

 

 

168

 

 

 

373

 

 

 

181

 

 

 

1,864

 

 

 

152

 

 

 

6,899

 

 

 

11,416

 

EBITDA

 

 

43,489

 

 

 

91,074

 

 

 

105,469

 

 

 

28,625

 

 

 

20,206

 

 

 

4,658

 

 

 

158,958

 

 

 

42,602

 

 

 

(67,673

)

 

 

268,450

 

Restructuring (recoveries) charges, net

 

 

(122

)

 

 

(119

)

 

 

 

 

 

 

 

 

313

 

 

 

 

 

 

313

 

 

 

6

 

 

 

 

 

 

78

 

Integration/acquisition costs

 

 

7,724

 

 

 

1,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

279

 

 

 

9,430

 

Adjusted EBITDA

 

$

51,091

 

 

$

92,382

 

 

$

105,469

 

 

$

28,625

 

 

$

20,519

 

 

$

4,658

 

 

$

159,271

 

 

$

42,608

 

 

$

(67,394

)

 

$

277,958

 

 

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 2020, 2019 or 2018. Fee revenue classified by country in which the Company derives revenues are as follows:

 

 

 

Year Ended April 30,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

U.S.

 

$

875,605

 

 

$

859,969

 

 

$

778,470

 

United Kingdom

 

 

204,271

 

 

 

202,055

 

 

 

176,091

 

Other countries

 

 

852,856

 

 

 

864,009

 

 

 

812,656

 

Total fee revenue

 

$

1,932,732

 

 

$

1,926,033

 

 

$

1,767,217

 

 

Other than the U.S. and United Kingdom, no single country had over 10% of the total long-lived assets, excluding financial instruments and tax assets. Long-lived assets, excluding financial instruments and tax assets, classified by location of the controlling statutory country are as follows:

 

 

 

Year Ended April 30,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

U.S. (1)

 

$

169,928

 

 

$

98,455

 

 

$

80,424

 

United Kingdom

 

 

35,739

 

 

 

6,466

 

 

 

7,792

 

Other countries

 

 

132,138

 

 

 

26,584

 

 

 

31,685

 

Total long-lived assets

 

$

337,805

 

 

$

131,505

 

 

$

119,901

 

 

(1)

Includes Corporate long-lived assets