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| 8-K - FORM 8-K - KORN FERRY | d637265d8k.htm |
Exhibit 99.1
For Immediate Release
Contacts:
Investor Relations: Gregg Kvochak, (310) 556-8550
For Media: Mike Distefano, (310) 843-4199
Korn Ferry Announces Second Quarter Fiscal 2014
Results of Operations
Key highlights for the second quarter of fiscal 2014 are as follows:
| • | Korn Ferry reports record quarterly fee revenue of $238.0 million in Q2 FY’14, an increase of 23% on a constant currency basis compared to Q2 FY’13 (21% at actual exchange rates). Excluding the prior year acquisitions, quarterly fee revenue increased 8% on a constant currency basis from Q2 FY’13. |
| • | Fee revenue in Executive Recruitment was $140.1 million in Q2 FY’14, which grew 11%, on a constant currency basis, from Q2 FY’13. |
| • | Fee revenue in Leadership & Talent Consulting was $66.0 million in Q2 FY’14, up 73%, on a constant currency basis, from Q2 FY’13 and up 9% sequentially. |
| • | Fee revenue in Futurestep was $31.9 million in Q2 FY’14, up 8%, on a constant currency basis, from Q2 FY’13. |
| • | Q2 FY’14 adjusted EBITDA margin was 15.4% compared to adjusted EBITDA margin of 12.5% in Q2 FY’13. |
| • | Q2 FY’14 adjusted diluted earnings per share, excluding separation charges of $2.0 million, was a record $0.41 compared to adjusted diluted earnings per share, excluding net restructuring charges of $15.5 million, of $0.25 in Q2 FY’13. Including such costs, Q2 FY’14 and Q2 FY’13 diluted earnings per share was $0.38 and $0.03, respectively. |
Los Angeles, CA, December 4, 2013 - Korn Ferry (NYSE: KFY), a single source of leadership and talent consulting services, today announced record second quarter results with fee revenue of $238.0 million and adjusted diluted earnings per share of $0.41, excluding separation charges of $2.0 million. Including such charges, diluted earnings per share was $0.38 in the three months ended October 31, 2013.
“I am extremely proud of what Korn Ferry has accomplished. The second quarter represented the strongest top line results in the company’s history and represents a 23% year over year increase in fee revenue, or 8% excluding the prior year acquisitions, on a constant currency basis. Once again, we delivered strong margin expansion and earnings per share growth in the quarter. Our firm’s alignment to broad talent management offerings is taking hold, as evidenced by our non-Search businesses generating 41% of the revenue mix aided by the performance of the prior year acquisitions – an all-time high,” said Gary D. Burnison, CEO of Korn Ferry. “In the current economy, the winning companies will be those that can find and develop outperforming leaders in an underperforming economy. This environment is creating an opportunity for Korn Ferry – as we help clients drive growth by more effectively linking their business and talent strategies.”
Financial Results
(dollars in millions, except per share amounts)
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 238.0 | $ | 196.2 | $ | 466.4 | $ | 382.9 | ||||||||
| Total revenue |
$ | 246.2 | $ | 204.8 | $ | 483.8 | $ | 400.8 | ||||||||
| Operating income |
$ | 23.2 | $ | 2.8 | $ | 39.8 | $ | 19.8 | ||||||||
| Operating margin |
9.7 | % | 1.4 | % | 8.5 | % | 5.2 | % | ||||||||
| Net income |
$ | 18.8 | $ | 1.2 | $ | 30.2 | $ | 11.6 | ||||||||
| Basic earnings per share |
$ | 0.39 | $ | 0.03 | $ | 0.63 | $ | 0.25 | ||||||||
| Diluted earnings per share |
$ | 0.38 | $ | 0.03 | $ | 0.62 | $ | 0.24 | ||||||||
| EBITDA Results (a): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 34.7 | $ | 8.9 | $ | 60.0 | $ | 29.3 | ||||||||
| EBITDA margin |
14.6 | % | 4.6 | % | 12.9 | % | 7.7 | % | ||||||||
| Adjusted Results (b): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 25.2 | $ | 18.3 | $ | 48.4 | $ | 35.3 | ||||||||
| Operating margin |
10.6 | % | 9.3 | % | 10.4 | % | 9.2 | % | ||||||||
| EBITDA (a) |
$ | 36.7 | $ | 24.4 | $ | 68.6 | $ | 44.8 | ||||||||
| EBITDA margin (a) |
15.4 | % | 12.5 | % | 14.7 | % | 11.7 | % | ||||||||
| Net income |
$ | 20.0 | $ | 11.8 | $ | 36.0 | $ | 22.2 | ||||||||
| Basic earnings per share |
$ | 0.41 | $ | 0.25 | $ | 0.75 | $ | 0.47 | ||||||||
| Diluted earnings per share |
$ | 0.41 | $ | 0.25 | $ | 0.74 | $ | 0.47 | ||||||||
| (a) | EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (net of recoveries) and/or transaction, integration/acquisition and separation costs. EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliation). |
| (b) | Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Separation costs |
$ | 2.0 | $ | — | $ | 4.5 | $ | — | ||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 15.5 | $ | 3.7 | $ | 15.5 | ||||||||
| Integration/acquisition costs |
$ | — | $ | — | $ | 0.4 | $ | — | ||||||||
Fee revenue was $238.0 million in Q2 FY’14, an increase of $41.8 million, or 23% on a constant currency basis (21% at actual exchange rates), compared to Q2 FY’13, primarily due to an increase of $27.6 million and $12.3 million in fee revenue in Leadership & Talent Consulting and Executive Recruitment, respectively. The overall fee revenue increase was driven by fee revenue growth in the life science/healthcare, industrial, technology and financial services sectors. Excluding the PDI Ninth House and Global Novations acquisitions (the “prior year acquisitions”), fee revenue increased 7% in Q2 FY’14 compared to the year-ago quarter (8% on a constant currency basis) to $204.7 million in Q2 FY’14 from $191.0 million in Q2 FY’13.
Compensation and benefit expenses were $161.3 million in Q2 FY’14, an increase of $28.2 million, or 21%, compared to Q2 FY’13. The prior year acquisitions contributed $14.5 million to the increase in compensation and benefit expenses. The remainder of the increase was due to an increase in performance related bonus expense, salaries and related payroll taxes and an increase in expense associated with company contributions to deferred compensation plans. The increase in the performance related bonus expense resulted from an increase in fee revenue and profitability. The increase in salaries and related payroll taxes was due to an increase in the headcount in both Futurestep and Leadership & Talent Consulting.
General and administrative expenses were $35.8 million in Q2 FY’14, an increase of $2.4 million, or 7%, compared to Q2 FY’13. The prior year acquisitions contributed $3.6 million to the increase in general and administrative expenses in Q2 FY’14 compared to Q2 FY’13. Excluding the costs from the prior year acquisitions, there was a decline in general and administrative expenses of $1.2 million during the same period. The decline was due to a gain as a result of favorable exchange rates in Q2 FY’14 compared to Q2 FY’13 and a decrease in business development expenses.
Adjusted EBITDA was $36.7 million in Q2 FY’14, an increase of $12.3 million, or 50%, compared to Q2 FY’13. Adjusted EBITDA margin was 15.4% and 12.5% in Q2 FY’14 and Q2 FY’13, respectively.
On a GAAP basis, operating income was $23.2 million in Q2 FY’14, an increase of $20.4 million, or 729%, compared to Q2 FY’13 resulting in a margin of 9.7% in the current quarter compared to 1.4% in the year-ago quarter.
Balance Sheet and Liquidity
Cash and marketable securities were $314.9 million at October 31, 2013, compared to $366.0 million at April 30, 2013. Cash and marketable securities include $118.0 million held in trust for deferred compensation plans at October 31, 2013, compared to $98.0 million at April 30, 2013. Cash and marketable securities decreased by $51.1 million from April 30, 2013, mainly due to Q1 FY’14 payments of FY’13 annual bonuses and contingent consideration paid to selling shareholders of PDI Ninth House partially offset by cash provided by operating activities.
Results by Segment
Selected Executive Recruitment Data
(dollars in millions)
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 140.1 | $ | 127.8 | $ | 276.7 | $ | 255.2 | ||||||||
| Total revenue |
$ | 145.3 | $ | 133.1 | $ | 287.8 | $ | 266.3 | ||||||||
| Operating income |
$ | 28.1 | $ | 10.5 | $ | 56.4 | $ | 32.9 | ||||||||
| Operating margin |
20.1 | % | 8.1 | % | 20.4 | % | 12.9 | % | ||||||||
| Ending number of consultants |
412 | 402 | 412 | 402 | ||||||||||||
| Average number of consultants |
414 | 409 | 406 | 401 | ||||||||||||
| Engagements billed |
2,965 | 2,656 | 4,690 | 4,377 | ||||||||||||
| New engagements (a) |
1,300 | 1,172 | 2,516 | 2,381 | ||||||||||||
| EBITDA Results (b): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 30.7 | $ | 12.5 | $ | 61.2 | $ | 37.4 | ||||||||
| EBITDA margin |
21.9 | % | 9.8 | % | 22.1 | % | 14.7 | % | ||||||||
| Adjusted Results (c): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 28.1 | $ | 21.2 | $ | 57.7 | $ | 43.6 | ||||||||
| Operating margin |
20.1 | % | 16.6 | % | 20.9 | % | 17.1 | % | ||||||||
| EBITDA (b) |
$ | 30.7 | $ | 23.2 | $ | 62.5 | $ | 48.1 | ||||||||
| EBITDA margin (b) |
21.9 | % | 18.2 | % | 22.6 | % | 18.9 | % | ||||||||
| (a) | Represents new engagements opened in the respective period. |
| (b) | 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 exclude the following (see attached reconciliations): |
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 10.7 | $ | 1.3 | $ | 10.7 | ||||||||
Executive Recruitment
Fee revenue was $140.1 million in Q2 FY’14, an increase of $12.3 million, or 11% on a constant currency basis (10% at actual exchange rates), compared to Q2 FY’13. The increase in fee revenue was driven by fee revenue increases in all regions with the largest increases in North America and Asia. This increase is primarily attributed to a 12% increase in the number of executive recruitment engagements billed, partially offset by a 2% decrease in the weighted-average fee billed per engagement compared to the year-ago quarter.
Adjusted EBITDA was $30.7 million during Q2 FY’14, an increase of $7.5 million, or 32%, compared to Q2 FY’13. Adjusted EBITDA margin was 21.9%, in Q2 FY’14 compared to 18.2% in Q2 FY’13. This increase is primarily attributed to the $12.3 million increase in fee revenue in Q2 FY’14 as compared to Q2 FY’13, combined with a decrease of $1.1 million in general and administrative expenses, partially offset by an increase of $6.8 million in compensation and benefit expenses driven primarily by an increase in performance related bonus expense.
On a GAAP basis, operating income was $28.1 million in Q2 FY’14, an increase of $17.6 million, or 168% ($6.9 million, or 33% on an adjusted basis), compared to Q2 FY’13, resulting in an operating margin of 20.1% in the current quarter compared to 8.1% in the year-ago quarter.
Selected Leadership & Talent Consulting Data
(dollars in millions)
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 66.0 | $ | 38.4 | $ | 126.1 | $ | 66.8 | ||||||||
| Total revenue |
$ | 68.2 | $ | 40.6 | $ | 130.3 | $ | 70.4 | ||||||||
| Operating income |
$ | 7.0 | $ | 6.2 | $ | 11.3 | $ | 10.5 | ||||||||
| Operating margin |
10.6 | % | 16.3 | % | 9.0 | % | 15.7 | % | ||||||||
| Ending number of consultants (a) |
129 | 72 | 129 | 72 | ||||||||||||
| Staff utilization (b) |
70 | % | 67 | % | 68 | % | 66 | % | ||||||||
| EBITDA Results (c): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 10.3 | $ | 7.3 | $ | 17.5 | $ | 12.2 | ||||||||
| EBITDA margin |
15.5 | % | 18.9 | % | 13.8 | % | 18.2 | % | ||||||||
| Adjusted Results (d): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 7.0 | $ | 6.9 | $ | 12.5 | $ | 11.2 | ||||||||
| Operating margin |
10.6 | % | 18.0 | % | 9.9 | % | 16.7 | % | ||||||||
| EBITDA (c) |
$ | 10.3 | $ | 8.0 | $ | 18.7 | $ | 12.9 | ||||||||
| EBITDA margin (c) |
15.5 | % | 20.7 | % | 14.7 | % | 19.2 | % | ||||||||
| (a) | Represents number of employees originating consulting services. FY’14 and FY’13 include approximately 70 consultants and 22 consultants, respectively, from the prior year acquisitions. |
| (b) | Calculated by dividing the number of hours of our full-time LTC professional staff, who recorded time to an engagement during the period, by the total available working hours during the same 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 exclude the following (see attached reconciliations): |
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 0.7 | $ | 1.2 | $ | 0.7 | ||||||||
Leadership & Talent Consulting
Fee revenue was $66.0 million in Q2 FY’14, an increase of $27.6 million, or 73% on a constant currency basis (72% at actual exchange rates), from the year-ago quarter. Excluding the prior year acquisitions, fee revenue was essentially flat on a constant currency basis, in Q2 FY’14 compared to Q2 FY’13, but up 3% sequentially.
Adjusted EBITDA was $10.3 million during Q2 FY’14, an increase of $2.3 million, or 29%, compared to Q2 FY’13. Adjusted EBITDA margin was 15.5% compared to 20.7% in Q2 FY’13. The increase in adjusted EBITDA is due to an increase in fee revenue, partially offset by an increase in compensation and benefit expenses, both primarily related to the prior year acquisitions.
On a GAAP basis, operating income was $7.0 million in Q2 FY’14, an increase of $0.8 million, or 13%, compared to Q2 FY’13 driven by an increase in productivity as measured by staff utilization. Operating margin was 10.6% in the current quarter compared to 16.3% in the year-ago quarter.
Selected Futurestep Data
(dollars in millions)
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 31.9 | $ | 30.0 | $ | 63.6 | $ | 60.9 | ||||||||
| Total revenue |
$ | 32.7 | $ | 31.1 | $ | 65.7 | $ | 64.1 | ||||||||
| Operating income |
$ | 2.6 | $ | 0.2 | $ | 5.1 | $ | 3.4 | ||||||||
| Operating margin |
8.0 | % | 0.8 | % | 8.0 | % | 5.6 | % | ||||||||
| Engagements billed |
1,195 | 1,152 | 1,952 | 2,005 | ||||||||||||
| New engagements (a) |
620 | 626 | 1,245 | 1,271 | ||||||||||||
| EBITDA Results (b): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 3.0 | $ | 0.5 | $ | 6.5 | $ | 4.0 | ||||||||
| EBITDA margin |
9.3 | % | 1.9 | % | 10.2 | % | 6.6 | % | ||||||||
| Adjusted Results (c): | Second Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 2.6 | $ | 3.3 | $ | 6.3 | $ | 6.5 | ||||||||
| Operating margin |
8.0 | % | 11.1 | % | 9.8 | % | 10.7 | % | ||||||||
| EBITDA (b) |
$ | 3.0 | $ | 3.6 | $ | 7.7 | $ | 7.1 | ||||||||
| EBITDA margin (b) |
9.3 | % | 12.1 | % | 12.0 | % | 11.7 | % | ||||||||
| (a) | Represents new engagements opened in the respective period. |
| (b) | 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 exclude the following (see attached reconciliations): |
| Second Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 3.1 | $ | 1.2 | $ | 3.1 | ||||||||
Futurestep
Fee revenue was $31.9 million in Q2 FY’14, an increase of $1.9 million, or 8% on a constant currency basis (6% at actual exchange rates), compared to the year-ago quarter. The increase in fee revenue was driven by a 4% increase in the number of engagements billed and a 2% increase in weighted-average fee billed per engagement in Q2 FY’14 compared to Q2 FY’13 driven by increases in recruitment process outsourcing and non-executive and other professional recruitment.
Adjusted EBITDA was $3.0 million during Q2 FY’14, a decrease of $0.6 million, or 17%, compared to Q2 FY’13. Adjusted EBITDA margin decreased to 9.3% in Q2 FY’14 compared to 12.1% in Q2 FY’13. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to an increase of $1.9 million in compensation and benefit expenses, an increase in cost of services expense of $0.4 million, and an increase in general and administrative of $0.2 million, partially offset by an increase in fee revenue of $1.9 million. The increase in compensation and benefit expenses was driven by an increase in salaries and related payroll taxes due to a 13% increase in the average headcount primarily associated with an increase in staffing to accommodate a number of larger recruitment process outsourcing contracts won by the Company in the quarter and for which delivery will occur in subsequent periods.
On a GAAP basis, operating income was $2.6 million in Q2 FY’14, an increase of $2.4 million, compared to Q2 FY’13 resulting in an operating margin of 8.0% in the current quarter compared to 0.8% in the year-ago quarter.
Outlook
The third quarter is our seasonal low quarter due to the heavy concentration of holidays which results in lower productivity. Given this and assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, fee revenue is expected to be in the range of $221 million to $237 million in Q3 FY’14 and diluted earnings per share are likely to be in the range of $0.30 to $0.38.
Earnings Conference Call Webcast
The earnings conference call will be held today at 5:00 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 www.kornferry.com, accessible through the Investor Relations section.
About Korn Ferry
At Korn Ferry, we design, build, attract and ignite talent. Since our inception, clients have trusted us to help recruit world-class leadership. Today, we are a single source for leadership and talent consulting services to empower businesses and leaders to reach their goals. Our solutions range from executive recruitment and leadership development programs, to enterprise learning, succession planning and recruitment process outsourcing (RPO). Visit www.kornferry.com for more information on Korn Ferry, and www.kornferryinstitute.com for thought leadership, intellectual property and research.
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” or “likely” include references to our outlook. 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 competition, the dependence on attracting and retaining qualified and experienced consultants, our ability to successfully integrate acquired businesses, maintaining our brand name and professional reputation, potential legal liability, the portability of client relationships, global and local political or economic developments in or affecting countries where we have operations, currency fluctuations in our international operations, risks related to the growth, alignment of our cost structure with our growth, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, consolidation of industries we serve, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, impairment of goodwill and other intangible assets, deferred tax assets, seasonality 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 operating income and operating margin, adjusted to exclude restructuring (net of recoveries) and/or transaction, integration/acquisition and separation costs; |
| • | adjusted net income, adjusted to exclude restructuring (net of recoveries) and/or transaction, integration/acquisition and separation costs, net of income tax effect; |
| • | adjusted basic and diluted earnings per share, adjusted to exclude restructuring (net of recoveries) and/or transaction, integration/acquisition and separation costs, net of income tax effect; |
| • | constant currency amounts that represent the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior year period; |
| • | EBITDA, or earnings before interest, taxes, depreciation and amortization and EBITDA margin; and |
| • | adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring (net of recoveries) and/or transaction, integration/acquisition and separation costs, 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.
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 and other items that may not be indicative of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitate comparisons to Korn Ferry’s historical performance. Korn Ferry includes these 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. In the case of constant currency amounts, management believes the presentation of such information provides meaningful 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]
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
| Three Months Ended | Six Months Ended | |||||||||||||||
| October 31, | October 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Fee revenue |
$ | 237,968 | $ | 196,231 | $ | 466,405 | $ | 382,925 | ||||||||
| Reimbursed out-of-pocket engagement expenses |
8,269 | 8,568 | 17,419 | 17,897 | ||||||||||||
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| Total revenue |
246,237 | 204,799 | 483,824 | 400,822 | ||||||||||||
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| Compensation and benefits |
161,296 | 133,035 | 314,066 | 261,071 | ||||||||||||
| General and administrative expenses |
35,795 | 33,317 | 75,666 | 66,760 | ||||||||||||
| Reimbursed expenses |
8,269 | 8,568 | 17,419 | 17,897 | ||||||||||||
| Cost of services |
11,132 | 7,318 | 20,641 | 11,782 | ||||||||||||
| Depreciation and amortization |
6,580 | 4,297 | 12,524 | 8,039 | ||||||||||||
| Restructuring charges, net |
— | 15,495 | 3,682 | 15,495 | ||||||||||||
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| Total operating expenses |
223,072 | 202,030 | 443,998 | 381,044 | ||||||||||||
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| Operating income |
23,165 | 2,769 | 39,826 | 19,778 | ||||||||||||
| Other income, net |
4,352 | 1,529 | 6,619 | 512 | ||||||||||||
| Interest expense, net |
(638 | ) | (762 | ) | (1,229 | ) | (1,361 | ) | ||||||||
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| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
26,879 | 3,536 | 45,216 | 18,929 | ||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
557 | 344 | 1,022 | 974 | ||||||||||||
| Income tax provision |
8,677 | 2,684 | 16,062 | 8,289 | ||||||||||||
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| Net income |
$ | 18,759 | $ | 1,196 | $ | 30,176 | $ | 11,614 | ||||||||
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|
|
|
|
|||||||||
| Earnings per common share: |
||||||||||||||||
| Basic |
$ | 0.39 | $ | 0.03 | $ | 0.63 | $ | 0.25 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | 0.38 | $ | 0.03 | $ | 0.62 | $ | 0.24 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
48,118 | 47,269 | 47,892 | 47,040 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
48,816 | 47,834 | 48,748 | 47,658 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
KORN FERRY AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
| Three Months Ended October 31, | Six Months Ended October 31, | |||||||||||||||||||||||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||||||||||||||||||||||
| Fee Revenue: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 75,183 | $ | 69,441 | 8 | % | $ | 149,330 | $ | 141,547 | 5 | % | ||||||||||||||||||||
| EMEA |
34,221 | 33,142 | 3 | % | 68,598 | 62,965 | 9 | % | ||||||||||||||||||||||||
| Asia Pacific |
21,722 | 18,338 | 18 | % | 42,850 | 35,721 | 20 | % | ||||||||||||||||||||||||
| South America |
8,866 | 6,827 | 30 | % | 15,869 | 14,961 | 6 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
139,992 | 127,748 | 10 | % | 276,647 | 255,194 | 8 | % | ||||||||||||||||||||||||
| Leadership & Talent Consulting |
66,078 | 38,452 | 72 | % | 126,140 | 66,844 | 89 | % | ||||||||||||||||||||||||
| Futurestep |
31,898 | 30,031 | 6 | % | 63,618 | 60,887 | 4 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total fee revenue |
237,968 | 196,231 | 21 | % | 466,405 | 382,925 | 22 | % | ||||||||||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
8,269 | 8,568 | (3 | %) | 17,419 | 17,897 | (3 | %) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total revenue |
$ | 246,237 | $ | 204,799 | 20 | % | $ | 483,824 | $ | 400,822 | 21 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Reconciliation of Operating Income (GAAP) to Adjusted Operating Income |
|
|||||||||||||||||||||||||||||||
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 15,530 | 20.7 | % | $ | 9,017 | 13.0 | % | $ | 31,854 | 21.3 | % | $ | 27,091 | 19.1 | % | ||||||||||||||||
| EMEA |
5,860 | 17.1 | % | (929 | ) | (2.8 | %) | 11,820 | 17.2 | % | 859 | 1.4 | % | |||||||||||||||||||
| Asia Pacific |
4,472 | 20.6 | % | 1,080 | 5.9 | % | 8,972 | 20.9 | % | 1,578 | 4.4 | % | ||||||||||||||||||||
| South America |
2,265 | 25.5 | % | 1,217 | 17.8 | % | 3,761 | 23.7 | % | 3,306 | 22.1 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
28,127 | 20.1 | % | 10,385 | 8.1 | % | 56,407 | 20.4 | % | 32,834 | 12.9 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
7,006 | 10.6 | % | 6,252 | 16.3 | % | 11,341 | 9.0 | % | 10,514 | 15.7 | % | ||||||||||||||||||||
| Futurestep |
2,539 | 8.0 | % | 237 | 0.8 | % | 5,084 | 8.0 | % | 3,419 | 5.6 | % | ||||||||||||||||||||
| Corporate |
(14,507 | ) | (14,105 | ) | (33,006 | ) | (26,989 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total operating income |
$ | 23,165 | 9.7 | % | $ | 2,769 | 1.4 | % | $ | 39,826 | 8.5 | % | $ | 19,778 | 5.2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Restructuring, Separation, and Integration/Acquisition Costs, net: |
|
|||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | — | — | $ | 5,436 | 7.8 | % | $ | 816 | 0.6 | % | $ | 5,436 | 3.9 | % | |||||||||||||||||
| EMEA |
— | — | 4,752 | 14.3 | % | 460 | 0.7 | % | 4,752 | 7.5 | % | |||||||||||||||||||||
| Asia Pacific |
— | — | 613 | 3.3 | % | 60 | 0.2 | % | 613 | 1.7 | % | |||||||||||||||||||||
| South America |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
— | — | 10,801 | 8.5 | % | 1,336 | 0.5 | % | 10,801 | 4.2 | % | |||||||||||||||||||||
| Leadership & Talent Consulting |
— | — | 677 | 1.7 | % | 1,149 | 0.9 | % | 677 | 1.0 | % | |||||||||||||||||||||
| Futurestep |
— | — | 3,086 | 10.3 | % | 1,134 | 1.8 | % | 3,086 | 5.1 | % | |||||||||||||||||||||
| Corporate |
2,000 | 931 | 4,957 | 931 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total restructuring, separation, and integration/acquisition costs, net |
$ | 2,000 | 0.9 | % | $ | 15,495 | 7.9 | % | $ | 8,576 | 1.9 | % | $ | 15,495 | 4.0 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| Adjusted Operating Income: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 15,530 | 20.7 | % | $ | 14,453 | 20.8 | % | $ | 32,670 | 21.9 | % | $ | 32,527 | 23.0 | % | ||||||||||||||||
| EMEA |
5,860 | 17.1 | % | 3,823 | 11.5 | % | 12,280 | 17.9 | % | 5,611 | 8.9 | % | ||||||||||||||||||||
| Asia Pacific |
4,472 | 20.6 | % | 1,693 | 9.2 | % | 9,032 | 21.1 | % | 2,191 | 6.1 | % | ||||||||||||||||||||
| South America |
2,265 | 25.5 | % | 1,217 | 17.8 | % | 3,761 | 23.7 | % | 3,306 | 22.1 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
28,127 | 20.1 | % | 21,186 | 16.6 | % | 57,743 | 20.9 | % | 43,635 | 17.1 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
7,006 | 10.6 | % | 6,929 | 18.0 | % | 12,490 | 9.9 | % | 11,191 | 16.7 | % | ||||||||||||||||||||
| Futurestep |
2,539 | 8.0 | % | 3,323 | 11.1 | % | 6,218 | 9.8 | % | 6,505 | 10.7 | % | ||||||||||||||||||||
| Corporate |
(12,507 | ) | (13,174 | ) | (28,049 | ) | (26,058 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total adjusted operating income |
$ | 25,165 | 10.6 | % | $ | 18,264 | 9.3 | % | $ | 48,402 | 10.4 | % | $ | 35,273 | 9.2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| October 31, | April 30, | |||||||
| 2013 | 2013 | |||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 182,628 | $ | 224,066 | ||||
| Marketable securities |
6,531 | 20,347 | ||||||
| Receivables due from clients, net of allowance for doubtful accounts of $9,775 and $9,097 respectively |
199,247 | 161,508 | ||||||
| Income taxes and other receivables |
6,675 | 8,944 | ||||||
| Deferred income taxes |
2,622 | 3,511 | ||||||
| Prepaid expenses and other assets |
31,097 | 28,724 | ||||||
|
|
|
|
|
|||||
| Total current assets |
428,800 | 447,100 | ||||||
|
|
|
|
|
|||||
| Marketable securities, non-current |
125,754 | 121,569 | ||||||
| Property and equipment, net |
52,651 | 53,628 | ||||||
| Cash surrender value of company owned life insurance policies, net of loans |
90,898 | 85,873 | ||||||
| Deferred income taxes |
60,552 | 63,203 | ||||||
| Goodwill |
259,071 | 257,293 | ||||||
| Intangible assets, net |
53,879 | 58,187 | ||||||
| Investments and other assets |
28,841 | 28,376 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 1,100,446 | $ | 1,115,229 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable |
$ | 18,281 | $ | 19,460 | ||||
| Income taxes payable |
9,251 | 5,502 | ||||||
| Compensation and benefits payable |
119,163 | 160,298 | ||||||
| Other accrued liabilities |
61,332 | 83,291 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
208,027 | 268,551 | ||||||
|
|
|
|
|
|||||
| Deferred compensation and other retirement plans |
167,792 | 159,706 | ||||||
| Other liabilities |
20,800 | 22,504 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
396,619 | 450,761 | ||||||
|
|
|
|
|
|||||
| Stockholders’ equity |
||||||||
| Common stock: $0.01 par value, 150,000 shares authorized, 61,729 and 61,022 shares issued and 49,441 and 48,734 shares outstanding, respectively |
439,377 | 431,508 | ||||||
| Retained earnings |
266,266 | 236,090 | ||||||
| Accumulated other comprehensive loss, net |
(1,322 | ) | (2,631 | ) | ||||
|
|
|
|
|
|||||
| Stockholders’ equity |
704,321 | 664,967 | ||||||
| Less: notes receivable from stockholders |
(494 | ) | (499 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
703,827 | 664,468 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 1,100,446 | $ | 1,115,229 | ||||
|
|
|
|
|
|||||
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||
| October 31, 2013 | October 31, 2012 | |||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 237,968 | $ | 237,968 | $ | 196,231 | $ | 196,231 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
8,269 | 8,269 | 8,568 | 8,568 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
246,237 | 246,237 | 204,799 | 204,799 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
161,296 | (2,000 | ) | 159,296 | 133,035 | 133,035 | ||||||||||||||||||
| General and administrative expenses |
35,795 | 35,795 | 33,317 | 33,317 | ||||||||||||||||||||
| Reimbursed expenses |
8,269 | 8,269 | 8,568 | 8,568 | ||||||||||||||||||||
| Cost of services |
11,132 | 11,132 | 7,318 | 7,318 | ||||||||||||||||||||
| Depreciation and amortization |
6,580 | 6,580 | 4,297 | 4,297 | ||||||||||||||||||||
| Restructuring charges, net |
— | — | 15,495 | (15,495 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
223,072 | (2,000 | ) | 221,072 | 202,030 | (15,495 | ) | 186,535 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
23,165 | 2,000 | 25,165 | 2,769 | 15,495 | 18,264 | ||||||||||||||||||
| Other income, net |
4,352 | 4,352 | 1,529 | 1,529 | ||||||||||||||||||||
| Interest expense, net |
(638 | ) | (638 | ) | (762 | ) | (762 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
26,879 | 2,000 | 28,879 | 3,536 | 15,495 | 19,031 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
557 | 557 | 344 | 344 | ||||||||||||||||||||
| Income tax provision (1) (2) |
8,677 | 791 | 9,468 | 2,684 | 4,889 | 7,573 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 18,759 | $ | 1,209 | $ | 19,968 | $ | 1,196 | $ | 10,606 | $ | 11,802 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 0.39 | $ | 0.41 | $ | 0.03 | $ | 0.25 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 0.38 | $ | 0.41 | $ | 0.03 | $ | 0.25 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
48,118 | 48,118 | 47,269 | 47,269 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
48,816 | 48,816 | 47,834 | 47,834 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an effective tax rate of 33% and 40% for the as adjusted amounts for the three months ended October 31, 2013 and 2012, respectively. |
| (2) | The three months ended October 31, 2013, includes the tax effect on separation charges, while the three months ended October 31, 2012, includes the tax effect on restructuring charges. |
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
(in thousands, except per share amounts)
(unaudited)
| Six Months Ended | Six Months Ended | |||||||||||||||||||||||
| October 31, 2013 | October 31, 2012 | |||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 466,405 | $ | 466,405 | $ | 382,925 | $ | 382,925 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
17,419 | 17,419 | 17,897 | 17,897 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
483,824 | 483,824 | 400,822 | 400,822 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
314,066 | (4,500 | ) | 309,566 | 261,071 | 261,071 | ||||||||||||||||||
| General and administrative expenses |
75,666 | (394 | ) | 75,272 | 66,760 | 66,760 | ||||||||||||||||||
| Reimbursed expenses |
17,419 | 17,419 | 17,897 | 17,897 | ||||||||||||||||||||
| Cost of services |
20,641 | 20,641 | 11,782 | 11,782 | ||||||||||||||||||||
| Depreciation and amortization |
12,524 | 12,524 | 8,039 | 8,039 | ||||||||||||||||||||
| Restructuring charges, net |
3,682 | (3,682 | ) | — | 15,495 | (15,495 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
443,998 | (8,576 | ) | 435,422 | 381,044 | (15,495 | ) | 365,549 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
39,826 | 8,576 | 48,402 | 19,778 | 15,495 | 35,273 | ||||||||||||||||||
| Other income, net |
6,619 | 6,619 | 512 | 512 | ||||||||||||||||||||
| Interest expense, net |
(1,229 | ) | (1,229 | ) | (1,361 | ) | (1,361 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
45,216 | 8,576 | 53,792 | 18,929 | 15,495 | 34,424 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
1,022 | 1,022 | 974 | 974 | ||||||||||||||||||||
| Income tax provision (1) (2) |
16,062 | 2,796 | 18,858 | 8,289 | 4,889 | 13,178 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 30,176 | $ | 5,780 | $ | 35,956 | $ | 11,614 | $ | 10,606 | $ | 22,220 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 0.63 | $ | 0.75 | $ | 0.25 | $ | 0.47 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 0.62 | $ | 0.74 | $ | 0.24 | $ | 0.47 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
47,892 | 47,892 | 47,040 | 47,040 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
48,748 | 48,748 | 47,658 | 47,658 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an effective tax rate of 35% and 38% for the as adjusted amounts for the six months ended October 31, 2013 and 2012, respectively. |
| (2) | The six months ended October 31, 2013 includes the tax effect on restructuring charges, separation costs, and integration/acquisition costs associated with the acquisition of PDI Ninth House, while the six months ended October 31, 2012, includes the tax effect on restructuring charges. |
KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO
EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
| Three Months Ended October 31, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 139,992 | $ | 66,078 | $ | 31,898 | $ | — | $ | 237,968 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 18,759 | ||||||||||||||||||
| Other income, net |
(4,352 | ) | ||||||||||||||||||
| Interest expense, net |
638 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(557 | ) | ||||||||||||||||||
| Income tax provision |
8,677 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 28,127 | $ | 7,006 | $ | 2,539 | $ | (14,507 | ) | 23,165 | ||||||||||
| Depreciation and amortization |
2,000 | 3,161 | 440 | 979 | 6,580 | |||||||||||||||
| Other income (loss), net |
451 | 45 | (17 | ) | 3,873 | 4,352 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
120 | — | — | 437 | 557 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
30,698 | 10,212 | 2,962 | (9,218 | ) | 34,654 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
21.9 | % | 15.5 | % | 9.3 | % | 14.6 | % | ||||||||||||
| Separation costs |
— | — | — | 2,000 | 2,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 30,698 | $ | 10,212 | $ | 2,962 | $ | (7,218 | ) | $ | 36,654 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
21.9 | % | 15.5 | % | 9.3 | % | 15.4 | % | ||||||||||||
| Three Months Ended October 31, 2012 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 127,748 | $ | 38,452 | $ | 30,031 | $ | — | $ | 196,231 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 1,196 | ||||||||||||||||||
| Other income, net |
(1,529 | ) | ||||||||||||||||||
| Interest expense, net |
762 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(344 | ) | ||||||||||||||||||
| Income tax provision |
2,684 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 10,385 | $ | 6,252 | $ | 237 | $ | (14,105 | ) | 2,769 | ||||||||||
| Depreciation and amortization |
2,295 | 1,006 | 320 | 676 | 4,297 | |||||||||||||||
| Other (loss) income, net |
(108 | ) | 19 | 1 | 1,617 | 1,529 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(70 | ) | — | — | 414 | 344 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
12,502 | 7,277 | 558 | (11,398 | ) | 8,939 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
9.8 | % | 18.9 | % | 1.9 | % | 4.6 | % | ||||||||||||
| Restructuring charges, net |
10,801 | 677 | 3,086 | 931 | 15,495 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 23,303 | $ | 7,954 | $ | 3,644 | $ | (10,467 | ) | $ | 24,434 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
18.2 | % | 20.7 | % | 12.1 | % | 12.5 | % | ||||||||||||
KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO
EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
| Six Months Ended October 31, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 276,647 | $ | 126,140 | $ | 63,618 | $ | — | $ | 466,405 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 30,176 | ||||||||||||||||||
| Other income, net |
(6,619 | ) | ||||||||||||||||||
| Interest expense, net |
1,229 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(1,022 | ) | ||||||||||||||||||
| Income tax provision |
16,062 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 56,407 | $ | 11,341 | $ | 5,084 | $ | (33,006 | ) | 39,826 | ||||||||||
| Depreciation and amortization |
3,778 | 6,058 | 848 | 1,840 | 12,524 | |||||||||||||||
| Other income, net |
832 | 53 | 548 | 5,186 | 6,619 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
222 | — | — | 800 | 1,022 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
61,239 | 17,452 | 6,480 | (25,180 | ) | 59,991 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
22.1 | % | 13.8 | % | 10.2 | % | 12.9 | % | ||||||||||||
| Restructuring charges, net |
1,336 | 1,149 | 1,134 | 63 | 3,682 | |||||||||||||||
| Separation costs |
— | — | — | 4,500 | 4,500 | |||||||||||||||
| Integration/acquisition costs |
— | — | — | 394 | 394 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 62,575 | $ | 18,601 | $ | 7,614 | $ | (20,223 | ) | $ | 68,567 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
22.6 | % | 14.7 | % | 12.0 | % | 14.7 | % | ||||||||||||
| Six Months Ended October 31, 2012 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 255,194 | $ | 66,844 | $ | 60,887 | $ | — | $ | 382,925 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 11,614 | ||||||||||||||||||
| Other income, net |
(512 | ) | ||||||||||||||||||
| Interest expense, net |
1,361 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(974 | ) | ||||||||||||||||||
| Income tax provision |
8,289 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 32,834 | $ | 10,514 | $ | 3,419 | $ | (26,989 | ) | 19,778 | ||||||||||
| Depreciation and amortization |
4,501 | 1,623 | 616 | 1,299 | 8,039 | |||||||||||||||
| Other (loss) income, net |
(50 | ) | 34 | 10 | 518 | 512 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
157 | — | — | 817 | 974 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
37,442 | 12,171 | 4,045 | (24,355 | ) | 29,303 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
14.7 | % | 18.2 | % | 6.6 | % | 7.7 | % | ||||||||||||
| Restructuring charges, net |
10,801 | 677 | 3,086 | 931 | 15,495 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 48,243 | $ | 12,848 | $ | 7,131 | $ | (23,424 | ) | $ | 44,798 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
18.9 | % | 19.2 | % | 11.7 | % | 11.7 | % | ||||||||||||