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| 8-K - FORM 8-K - KORN FERRY | d686166d8k.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 Third Quarter Fiscal 2014
Results of Operations
Key highlights for the third quarter of fiscal 2014 are as follows:
| • | Korn Ferry reports record quarterly fee revenue of $242.2 million in Q3 FY’14, an increase of 21% on a constant currency basis compared to Q3 FY’13 (20% at actual exchange rates). Adjusting for the PDI Ninth House acquisition, quarterly fee revenue increased 14% on a constant currency basis (12% at actual exchange rates) from Q3 FY’13. |
| • | Fee revenue increased in all segments on a constant currency basis compared to Q3 FY’13. |
| Leadership and Talent Consulting |
52 | % (15% organically) | ||
| Futurestep |
20 | % | ||
| Executive Recruitment |
12 | % |
| • | Q3 FY’14 adjusted EBITDA margin was 14.5% compared to adjusted EBITDA margin of 12.5% in Q3 FY’13. |
| • | Q3 FY’14 diluted earnings per share was $0.43 compared to $0.20 in Q3 FY’13. Adjusted diluted earnings per share was $0.31 in Q3 FY’13, which excludes $7.5 million of net restructuring, integration/acquisition, and separation costs. No such costs were incurred in Q3 FY’14. |
Los Angeles, CA, March 6, 2014 - Korn Ferry (NYSE: KFY), a single source of leadership and talent acquisition and consulting services, today announced third quarter results with record fee revenue of $242.2 million and adjusted diluted earnings per share of $0.43.
“Korn Ferry had a strong third quarter, with year-over-year growth across all lines of business and within every region. We generated the strongest topline results in the company’s history, representing a 21% year-over-year increase in fee revenue, or 14% adjusting for the PDI Ninth House acquisition, on a constant currency basis, generating higher earnings per share,” said Gary D. Burnison, CEO, Korn Ferry. “In today’s environment, global organizations must create growth opportunities that far outstrip the potential of the global economy – ultimately through people. Validated by our results, Korn Ferry’s capabilities are being increasingly embraced by clients to unlock growth through innovative talent strategies.”
Financial Results
(dollars in millions, except per share amounts)
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 242.2 | $ | 202.0 | $ | 708.6 | $ | 584.9 | ||||||||
| Total revenue |
$ | 251.0 | $ | 210.3 | $ | 734.8 | $ | 611.1 | ||||||||
| Operating income |
$ | 27.3 | $ | 8.7 | $ | 67.1 | $ | 28.5 | ||||||||
| Operating margin |
11.3 | % | 4.3 | % | 9.5 | % | 4.9 | % | ||||||||
| Net income |
$ | 21.3 | $ | 9.5 | $ | 51.5 | $ | 21.1 | ||||||||
| Basic earnings per share |
$ | 0.44 | $ | 0.20 | $ | 1.07 | $ | 0.45 | ||||||||
| Diluted earnings per share |
$ | 0.43 | $ | 0.20 | $ | 1.05 | $ | 0.44 | ||||||||
| EBITDA Results (a): | ||||||||||||||||
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 35.2 | $ | 17.7 | $ | 95.2 | $ | 47.0 | ||||||||
| EBITDA margin |
14.5 | % | 8.8 | % | 13.4 | % | 8.0 | % | ||||||||
| Adjusted Results (b): | ||||||||||||||||
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 27.3 | $ | 16.2 | $ | 75.7 | $ | 51.5 | ||||||||
| Operating margin |
11.3 | % | 8.0 | % | 10.7 | % | 8.8 | % | ||||||||
| EBITDA (a) |
$ | 35.2 | $ | 25.2 | $ | 103.8 | $ | 70.0 | ||||||||
| EBITDA margin (a) |
14.5 | % | 12.5 | % | 14.6 | % | 12.0 | % | ||||||||
| Net income |
$ | 21.3 | $ | 15.0 | $ | 57.3 | $ | 37.2 | ||||||||
| Basic earnings per share |
$ | 0.44 | $ | 0.32 | $ | 1.19 | $ | 0.79 | ||||||||
| Diluted earnings per share |
$ | 0.43 | $ | 0.31 | $ | 1.17 | $ | 0.78 | ||||||||
| (a) | EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (net of recoveries), 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): |
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 4.4 | $ | 3.7 | $ | 19.9 | ||||||||
| Integration/acquisition costs |
$ | — | $ | 2.5 | $ | 0.4 | $ | 2.5 | ||||||||
| Separation costs |
$ | — | $ | 0.6 | $ | 4.5 | $ | 0.6 | ||||||||
Fee revenue was $242.2 million in Q3 FY’14, an increase of $40.2 million, or 21% on a constant currency basis (20% at actual exchange rates), compared to Q3 FY’13, primarily due to increases of $21.1 million, $13.5 million and $5.6 million in fee revenue in Leadership & Talent Consulting, Executive Recruitment and Futurestep, respectively. The overall fee revenue increase was driven by fee revenue growth in the technology, financial services and life science/healthcare sectors. Adjusting for the PDI Ninth House acquisition which was completed on December 31, 2012, fee revenue increased 14% on a constant currency basis (12% at actual exchange rates) in Q3 FY’14 compared to the year-ago quarter to $227.0 million in Q3 FY’14 from $202.0 million in Q3 FY’13.
Compensation and benefit expenses were $162.2 million in Q3 FY’14, an increase of $22.4 million, or 16%, compared to Q3 FY’13. Adjusting for the PDI Ninth House acquisition, compensation and benefit expenses increased 9% in Q3 FY’14 compared to the year-ago quarter to $152.8 million in Q3 FY’14 from $139.8 million in Q3 FY’13. The increase was due to an increase in performance related bonus expense and salaries and related payroll taxes. 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 11% increase in the average headcount in Q3 FY’14 compared to Q3 FY’13.
General and administrative expenses were $37.2 million in Q3 FY’14, an increase of $1.3 million, or 4%, compared to Q3 FY’13. Adjusted for the PDI Ninth House acquisition, general and administrative expenses decreased 3% in Q3 FY’14 compared to the year-ago quarter to $35.0 million in Q3 FY’14 from $35.9 million in Q3 FY’13. The decrease was primarily due to a decrease in integration/acquisition costs incurred in Q3 FY’13 as a result of the acquisition of PDI Ninth House, partially offset by an increase in legal and other professional service fees and bad debt expense.
Adjusted EBITDA was $35.2 million in Q3 FY’14, an increase of $10.0 million, or 40%, compared to Q3 FY’13. Adjusted EBITDA margin was 14.5% and 12.5% in Q3 FY’14 and Q3 FY’13, respectively.
On a GAAP basis, operating income was $27.3 million in Q3 FY’14, an increase of $18.6 million, or 214%, compared to Q3 FY’13 resulting in a margin of 11.3% in the current quarter compared to 4.3% in the year-ago quarter.
Balance Sheet and Liquidity
Cash and marketable securities were $377.2 million at January 31, 2014, compared to $366.0 million at April 30, 2013. Cash and marketable securities include $115.1 million held in trust for deferred compensation plans at January 31, 2014, compared to $98.0 million at April 30, 2013. Cash and marketable securities increased by $11.2 million from April 30, 2013, primarily attributable to cash provided by operating activities, partially offset by Q1 FY’14 payments of FY’13 annual bonuses and contingent consideration paid to selling shareholders of PDI Ninth House.
Results by Segment
Selected Executive Recruitment Data
(dollars in millions)
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 144.0 | $ | 130.5 | $ | 420.7 | $ | 385.7 | ||||||||
| Total revenue |
$ | 149.7 | $ | 135.7 | $ | 437.5 | $ | 402.0 | ||||||||
| Operating income |
$ | 31.6 | $ | 21.6 | $ | 88.0 | $ | 54.5 | ||||||||
| Operating margin |
22.0 | % | 16.6 | % | 20.9 | % | 14.1 | % | ||||||||
| Ending number of consultants |
429 | 390 | 429 | 390 | ||||||||||||
| Average number of consultants |
421 | 396 | 414 | 395 | ||||||||||||
| Engagements billed |
2,975 | 2,670 | 6,384 | 5,944 | ||||||||||||
| New engagements (a) |
1,233 | 1,138 | 3,749 | 3,519 | ||||||||||||
| EBITDA Results (b):
|
Third Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 33.6 | $ | 24.4 | $ | 94.8 | $ | 61.8 | ||||||||
| EBITDA margin |
23.3 | % | 18.7 | % | 22.5 | % | 16.0 | % | ||||||||
| Adjusted Results (c): | ||||||||||||||||
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 31.6 | $ | 22.2 | $ | 89.3 | $ | 65.8 | ||||||||
| Operating margin |
22.0 | % | 17.0 | % | 21.2 | % | 17.1 | % | ||||||||
| EBITDA (b) |
$ | 33.6 | $ | 25.0 | $ | 96.1 | $ | 73.1 | ||||||||
| EBITDA margin (b) |
23.3 | % | 19.1 | % | 22.8 | % | 19.0 | % | ||||||||
| (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): |
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | — | $ | 1.3 | $ | 10.7 | ||||||||
| Separation costs |
$ | — | $ | 0.6 | $ | — | $ | 0.6 | ||||||||
Executive Recruitment
Fee revenue was $144.0 million in Q3 FY’14, an increase of $13.5 million, or 12% on a constant currency basis (10% at actual exchange rates), compared to Q3 FY’13. The increase in fee revenue was driven by increases in all regions with the largest increases in North America and Europe. This increase is primarily attributed to an 11% increase in the number of executive recruitment engagements billed.
Adjusted EBITDA was $33.6 million during Q3 FY’14, an increase of $8.6 million, or 34%, compared to Q3 FY’13. Adjusted EBITDA margin was 23.3% in Q3 FY’14 compared to 19.1% in Q3 FY’13. This increase is primarily attributed to the $13.5 million increase in fee revenue in Q3 FY’14 as compared to Q3 FY’13, partially offset by an increase of $4.7 million in compensation and benefit expenses driven primarily by an increase in performance related bonus expense and salaries and related payroll taxes partially offset by a decline in employee insurance costs.
On a GAAP basis, operating income was $31.6 million in Q3 FY’14, an increase of $10.0 million, or 46% ($9.4 million, or 42% on an adjusted basis), compared to Q3 FY’13, resulting in an operating margin of 22.0% in the current quarter compared to 16.6% in the year-ago quarter.
Selected Leadership & Talent Consulting Data
(dollars in millions)
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 62.3 | $ | 41.2 | $ | 188.4 | $ | 108.0 | ||||||||
| Total revenue |
$ | 64.3 | $ | 43.1 | $ | 194.6 | $ | 113.5 | ||||||||
| Operating income |
$ | 5.7 | $ | (2.8 | ) | $ | 17.0 | $ | 7.7 | |||||||
| Operating margin |
9.1 | % | (6.8 | )% | 9.0 | % | 7.1 | % | ||||||||
| Ending number of consultants (a) |
125 | 149 | 125 | 149 | ||||||||||||
| Staff utilization (b) |
61 | % | 58 | % | 66 | % | 63 | % | ||||||||
| EBITDA Results (c): | ||||||||||||||||
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 8.9 | $ | (1.0 | ) | $ | 26.4 | $ | 11.2 | |||||||
| EBITDA margin |
14.5 | % | (2.4 | )% | 14.1 | % | 10.3 | % | ||||||||
| Adjusted Results (d): | ||||||||||||||||
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 5.7 | $ | 1.6 | $ | 18.2 | $ | 12.8 | ||||||||
| Operating margin |
9.1 | % | 4.0 | % | 9.6 | % | 11.9 | % | ||||||||
| EBITDA (c) |
$ | 8.9 | $ | 3.4 | $ | 27.6 | $ | 16.3 | ||||||||
| EBITDA margin (c) |
14.5 | % | 8.4 | % | 14.7 | % | 15.1 | % | ||||||||
| (a) | Represents number of employees originating consulting services. FY’14 and FY’13 include approximately 69 consultants and 92 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): |
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 4.4 | $ | 1.2 | $ | 5.1 | ||||||||
Leadership & Talent Consulting
Fee revenue was $62.3 million in Q3 FY’14, an increase of $21.1 million, or 52% on a constant currency basis (51% at actual exchange rates), from the year-ago quarter. Adjusting for the PDI Ninth House acquisition, fee revenue increased 15% on a constant currency basis (14% at actual exchange rates) in Q3 FY’14 compared to the year-ago quarter to $47.1 million in Q3 FY’14 from $41.2 million in Q3 FY’13.
Adjusted EBITDA was $8.9 million during Q3 FY’14, an increase of $5.5 million, or 162%, compared to Q3 FY’13. Adjusted EBITDA margin was 14.5% compared to 8.4% in Q3 FY’13. The increase in adjusted EBITDA was due to an increase in fee revenue, partially offset by an increase in compensation and benefit expense and general and administrative expenses, all primarily related to the acquisition of PDI Ninth House.
On a GAAP basis, operating income was $5.7 million in Q3 FY’14, an increase of $8.5 million, compared to Q3 FY’13. Operating margin was 9.1% in the current quarter, a significant improvement from negative operating margin of 6.8% in the year-ago quarter. The increase in operating income was driven by an increase in fee revenue and a decrease in restructuring expense of $4.4 million that took place in Q3 FY’13 as a result of the PDI Ninth House acquisition, offset by an increase in compensation and benefit expense.
Selected Futurestep Data
(dollars in millions)
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 35.9 | $ | 30.3 | $ | 99.5 | $ | 91.2 | ||||||||
| Total revenue |
$ | 37.0 | $ | 31.5 | $ | 102.7 | $ | 95.6 | ||||||||
| Operating income |
$ | 3.9 | $ | 3.7 | $ | 9.0 | $ | 7.1 | ||||||||
| Operating margin |
10.9 | % | 12.3 | % | 9.1 | % | 7.8 | % | ||||||||
| Engagements billed |
1,242 | 1,062 | 2,592 | 2,487 | ||||||||||||
| New engagements (a) |
584 | 513 | 1,829 | 1,784 | ||||||||||||
| EBITDA Results (b): |
||||||||||||||||
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 4.4 | $ | 4.1 | $ | 10.9 | $ | 8.1 | ||||||||
| EBITDA margin |
12.2 | % | 13.3 | % | 10.9 | % | 8.9 | % | ||||||||
| Adjusted Results (c): |
||||||||||||||||
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 3.9 | $ | 3.7 | $ | 10.2 | $ | 10.2 | ||||||||
| Operating margin |
10.9 | % | 12.3 | % | 10.2 | % | 11.2 | % | ||||||||
| EBITDA (b) |
$ | 4.4 | $ | 4.1 | $ | 12.1 | $ | 11.2 | ||||||||
| EBITDA margin (b) |
12.2 | % | 13.3 | % | 12.1 | % | 12.3 | % | ||||||||
| (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): |
| Third Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | — | $ | 1.2 | $ | 3.1 | ||||||||
Futurestep
Fee revenue was $35.9 million in Q3 FY’14, an increase of $5.6 million, or 20% on a constant currency basis (18% at actual exchange rates), compared to the year-ago quarter. The increase in fee revenue was driven by a 17% increase in the number of engagements billed in Q3 FY’14 compared to Q3 FY’13 driven by large recruitment process outsourcing contracts entered into in the prior quarter which began to be delivered in the current quarter and non-executive and other professional recruitment.
Adjusted EBITDA was $4.4 million during Q3 FY’14, an increase of $0.3 million, or 7%, compared to Q3 FY’13. Adjusted EBITDA margin decreased to 12.2% in Q3 FY’14 compared to 13.3% in Q3 FY’13. The increase in adjusted EBITDA was primarily due to an increase in fee revenue of $5.6 million, a decrease of $0.2 million in general and administrative expenses, partially offset by an increase in compensation and benefit expenses of $4.7 million and an increase in cost of services expense of $0.9 million. The increase in compensation and benefits expenses is primarily driven by an increase in staffing to accommodate a number of larger recruitment process outsourcing contracts won by the Company in the current fiscal year.
On a GAAP basis, operating income was $3.9 million in Q3 FY’14, an increase of $0.2 million, compared to Q3 FY’13 resulting in an operating margin of 10.9% in the current quarter compared to 12.3% in the year-ago quarter.
Outlook
Looking ahead to Q4 FY’14, assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, fee revenue is expected to be in the range of $240 million to $250 million in Q4 FY’14 and diluted earnings per share are likely to be in the range of $0.35 to $0.41.
Earnings Conference Call Webcast
The earnings conference call will be held today at 4:30 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), integration/acquisition and separation costs; |
| • | adjusted net income, adjusted to exclude restructuring (net of recoveries), integration/acquisition and separation costs, net of income tax effect; |
| • | adjusted basic and diluted earnings per share, adjusted to exclude restructuring (net of recoveries), 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), 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 | Nine Months Ended | |||||||||||||||
| January 31, | January 31, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Fee revenue |
$ | 242,184 | $ | 202,004 | $ | 708,589 | $ | 584,929 | ||||||||
| Reimbursed out-of-pocket engagement expenses |
8,753 | 8,268 | 26,172 | 26,165 | ||||||||||||
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|
|
|
|
|
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| Total revenue |
250,937 | 210,272 | 734,761 | 611,094 | ||||||||||||
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| Compensation and benefits |
162,228 | 139,788 | 476,294 | 400,859 | ||||||||||||
| General and administrative expenses |
37,265 | 35,915 | 112,931 | 102,675 | ||||||||||||
| Reimbursed expenses |
8,753 | 8,268 | 26,172 | 26,165 | ||||||||||||
| Cost of services |
9,056 | 8,066 | 29,697 | 19,848 | ||||||||||||
| Depreciation and amortization |
6,333 | 5,088 | 18,857 | 13,127 | ||||||||||||
| Restructuring charges, net |
— | 4,441 | 3,682 | 19,936 | ||||||||||||
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| Total operating expenses |
223,635 | 201,566 | 667,633 | 582,610 | ||||||||||||
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| Operating income |
27,302 | 8,706 | 67,128 | 28,484 | ||||||||||||
| Other income, net |
1,132 | 3,296 | 7,751 | 3,808 | ||||||||||||
| Interest expense, net |
(873 | ) | (360 | ) | (2,102 | ) | (1,721 | ) | ||||||||
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| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
27,561 | 11,642 | 72,777 | 30,571 | ||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
470 | 593 | 1,492 | 1,567 | ||||||||||||
| Income tax provision |
6,727 | 2,753 | 22,789 | 11,042 | ||||||||||||
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|||||||||
| Net income |
$ | 21,304 | $ | 9,482 | $ | 51,480 | $ | 21,096 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per common share: |
||||||||||||||||
| Basic |
$ | 0.44 | $ | 0.20 | $ | 1.07 | $ | 0.45 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | 0.43 | $ | 0.20 | $ | 1.05 | $ | 0.44 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
48,341 | 47,367 | 48,041 | 47,149 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
49,181 | 48,015 | 48,977 | 47,742 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
KORN FERRY AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
| Three Months Ended January 31, |
Nine Months Ended January 31, |
|||||||||||||||||||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||
| Fee Revenue: |
||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||
| North America |
$ | 77,208 | $ | 71,259 | 8 | % | $ | 226,538 | $ | 212,806 | 6 | % | ||||||||||||
| EMEA |
39,144 | 33,600 | 17 | % | 107,742 | 96,565 | 12 | % | ||||||||||||||||
| Asia Pacific |
20,213 | 18,301 | 10 | % | 63,063 | 54,022 | 17 | % | ||||||||||||||||
| South America |
7,477 | 7,334 | 2 | % | 23,346 | 22,295 | 5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total executive recruitment |
144,042 | 130,494 | 10 | % | 420,689 | 385,688 | 9 | % | ||||||||||||||||
| Leadership & Talent Consulting |
62,217 | 41,155 | 51 | % | 188,357 | 107,999 | 74 | % | ||||||||||||||||
| Futurestep |
35,925 | 30,355 | 18 | % | 99,543 | 91,242 | 9 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total fee revenue |
242,184 | 202,004 | 20 | % | 708,589 | 584,929 | 21 | % | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
8,753 | 8,268 | 6 | % | 26,172 | 26,165 | 0 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
$ | 250,937 | $ | 210,272 | 19 | % | $ | 734,761 | $ | 611,094 | 20 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reconciliation of Operating Income (GAAP) to Adjusted Operating Income
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 19,919 | 25.8 | % | $ | 14,637 | 20.5 | % | $ | 51,773 | 22.9 | % | $ | 41,728 | 19.6 | % | ||||||||||||||||
| EMEA |
6,649 | 17.0 | % | 4,177 | 12.4 | % | 18,469 | 17.1 | % | 5,036 | 5.2 | % | ||||||||||||||||||||
| Asia Pacific |
3,922 | 19.4 | % | 1,913 | 10.5 | % | 12,894 | 20.4 | % | 3,491 | 6.5 | % | ||||||||||||||||||||
| South America |
1,132 | 15.1 | % | 920 | 12.5 | % | 4,893 | 21.0 | % | 4,226 | 19.0 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
31,622 | 22.0 | % | 21,647 | 16.6 | % | 88,029 | 20.9 | % | 54,481 | 14.1 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
5,651 | 9.1 | % | (2,798 | ) | (6.8 | %) | 16,992 | 9.0 | % | 7,716 | 7.1 | % | |||||||||||||||||||
| Futurestep |
3,925 | 10.9 | % | 3,722 | 12.3 | % | 9,009 | 9.1 | % | 7,141 | 7.8 | % | ||||||||||||||||||||
| Corporate |
(13,896 | ) | (13,865 | ) | (46,902 | ) | (40,854 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total operating income |
$ | 27,302 | 11.3 | % | $ | 8,706 | 4.3 | % | $ | 67,128 | 9.5 | % | $ | 28,484 | 4.9 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Restructuring, Separation, and Integration/Acquisition Costs, net: | ||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | — | — | $ | — | — | $ | 816 | 0.3 | % | $ | 5,436 | 2.6 | % | ||||||||||||||||||
| EMEA |
— | — | 516 | 1.6 | % | 460 | 0.5 | % | 5,268 | 5.5 | % | |||||||||||||||||||||
| Asia Pacific |
— | — | — | — | 60 | 0.1 | % | 613 | 1.1 | % | ||||||||||||||||||||||
| South America |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
— | — | 516 | 0.4 | % | 1,336 | 0.3 | % | 11,317 | 3.0 | % | |||||||||||||||||||||
| Leadership & Talent Consulting |
— | — | 4,441 | 10.8 | % | 1,149 | 0.6 | % | 5,118 | 4.8 | % | |||||||||||||||||||||
| Futurestep |
— | — | — | — | 1,134 | 1.1 | % | 3,086 | 3.4 | % | ||||||||||||||||||||||
| Corporate |
2,515 | 4,957 | 3,446 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total restructuring, separation, and integration/acquisition costs, net |
$ | — | — | $ | 7,472 | 3.7 | % | $ | 8,576 | 1.2 | % | $ | 22,967 | 3.9 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Adjusted Operating Income:
(Excluding Restructuring, Separation, and |
||||||||||||||||||||||||||||||||
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 19,919 | 25.8 | % | $ | 14,637 | 20.5 | % | $ | 52,589 | 23.2 | % | $ | 47,164 | 22.2 | % | ||||||||||||||||
| EMEA |
6,649 | 17.0 | % | 4,693 | 14.0 | % | 18,929 | 17.6 | % | 10,304 | 10.7 | % | ||||||||||||||||||||
| Asia Pacific |
3,922 | 19.4 | % | 1,913 | 10.5 | % | 12,954 | 20.5 | % | 4,104 | 7.6 | % | ||||||||||||||||||||
| South America |
1,132 | 15.1 | % | 920 | 12.5 | % | 4,893 | 21.0 | % | 4,226 | 19.0 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
31,622 | 22.0 | % | 22,163 | 17.0 | % | 89,365 | 21.2 | % | 65,798 | 17.1 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
5,651 | 9.1 | % | 1,643 | 4.0 | % | 18,141 | 9.6 | % | 12,834 | 11.9 | % | ||||||||||||||||||||
| Futurestep |
3,925 | 10.9 | % | 3,722 | 12.3 | % | 10,143 | 10.2 | % | 10,227 | 11.2 | % | ||||||||||||||||||||
| Corporate |
(13,896 | ) | (11,350 | ) | (41,945 | ) | (37,408 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total adjusted operating income |
$ | 27,302 | 11.3 | % | $ | 16,178 | 8.0 | % | $ | 75,704 | 10.7 | % | $ | 51,451 | 8.8 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| January 31, | April 30, | |||||||
| 2014 | 2013 | |||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 247,784 | $ | 224,066 | ||||
| Marketable securities |
6,337 | 20,347 | ||||||
| Receivables due from clients, net of allowance for doubtful accounts of $10,125 and $9,097 respectively |
190,982 | 161,508 | ||||||
| Income taxes and other receivables |
8,979 | 8,944 | ||||||
| Deferred income taxes |
1,857 | 3,511 | ||||||
| Prepaid expenses and other assets |
29,834 | 28,724 | ||||||
|
|
|
|
|
|||||
| Total current assets |
485,773 | 447,100 | ||||||
|
|
|
|
|
|||||
| Marketable securities, non-current |
123,083 | 121,569 | ||||||
| Property and equipment, net |
55,009 | 53,628 | ||||||
| Cash surrender value of company owned life insurance policies, net of loans |
93,748 | 85,873 | ||||||
| Deferred income taxes |
60,347 | 63,203 | ||||||
| Goodwill |
255,792 | 257,293 | ||||||
| Intangible assets, net |
51,722 | 58,187 | ||||||
| Investments and other assets |
27,359 | 28,376 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 1,152,833 | $ | 1,115,229 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable |
$ | 17,187 | $ | 19,460 | ||||
| Income taxes payable |
12,879 | 5,502 | ||||||
| Compensation and benefits payable |
148,457 | 160,298 | ||||||
| Other accrued liabilities |
62,512 | 83,291 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
241,035 | 268,551 | ||||||
|
|
|
|
|
|||||
| Deferred compensation and other retirement plans |
168,629 | 159,706 | ||||||
| Other liabilities |
20,590 | 22,504 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
430,254 | 450,761 | ||||||
|
|
|
|
|
|||||
| Stockholders’ equity |
||||||||
| Common stock: $0.01 par value, 150,000 shares authorized, 62,196 and 61,022 shares issued and 49,707 and 48,734 shares outstanding, respectively |
446,542 | 431,508 | ||||||
| Retained earnings |
287,570 | 236,090 | ||||||
| Accumulated other comprehensive loss, net |
(11,042 | ) | (2,631 | ) | ||||
|
|
|
|
|
|||||
| Stockholders’ equity |
723,070 | 664,967 | ||||||
| Less: notes receivable from stockholders |
(491 | ) | (499 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
722,579 | 664,468 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 1,152,833 | $ | 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 | |||||||||||||||||||||||
| January 31, 2014 | January 31, 2013 | |||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 242,184 | $ | 242,184 | $ | 202,004 | $ | 202,004 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
8,753 | 8,753 | 8,268 | 8,268 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
250,937 | 250,937 | 210,272 | 210,272 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
162,228 | 162,228 | 139,788 | (516 | ) | 139,272 | ||||||||||||||||||
| General and administrative expenses |
37,265 | 37,265 | 35,915 | (2,515 | ) | 33,400 | ||||||||||||||||||
| Reimbursed expenses |
8,753 | 8,753 | 8,268 | 8,268 | ||||||||||||||||||||
| Cost of services |
9,056 | 9,056 | 8,066 | 8,066 | ||||||||||||||||||||
| Depreciation and amortization |
6,333 | 6,333 | 5,088 | 5,088 | ||||||||||||||||||||
| Restructuring charges, net |
— | — | 4,441 | (4,441 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
223,635 | — | 223,635 | 201,566 | (7,472 | ) | 194,094 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
27,302 | — | 27,302 | 8,706 | 7,472 | 16,178 | ||||||||||||||||||
| Other income, net |
1,132 | 1,132 | 3,296 | 3,296 | ||||||||||||||||||||
| Interest expense, net |
(873 | ) | (873 | ) | (360 | ) | (360 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
27,561 | — | 27,561 | 11,642 | 7,472 | 19,114 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
470 | 470 | 593 | 593 | ||||||||||||||||||||
| Income tax provision (1) (2) |
6,727 | 6,727 | 2,753 | 1,945 | 4,698 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 21,304 | $ | — | $ | 21,304 | $ | 9,482 | $ | 5,527 | $ | 15,009 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 0.44 | $ | 0.44 | $ | 0.20 | $ | 0.32 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 0.43 | $ | 0.43 | $ | 0.20 | $ | 0.31 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
48,341 | 48,341 | 47,367 | 47,367 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
49,181 | 49,181 | 48,015 | 48,015 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an effective tax rate of 25% for the as adjusted amounts for the three months ended January 31, 2013. |
| (2) | The three months ended January 31, 2013, includes the tax effect on restructuring charges, integration/acquisition costs associated with the acquisition of PDI Ninth House, and separation 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)
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
| January 31, 2014 | January 31, 2013 | |||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 708,589 | $ | 708,589 | $ | 584,929 | $ | 584,929 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
26,172 | 26,172 | 26,165 | 26,165 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
734,761 | 734,761 | 611,094 | 611,094 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
476,294 | (4,500 | ) | 471,794 | 400,859 | (516 | ) | 400,343 | ||||||||||||||||
| General and administrative expenses |
112,931 | (394 | ) | 112,537 | 102,675 | (2,515 | ) | 100,160 | ||||||||||||||||
| Reimbursed expenses |
26,172 | 26,172 | 26,165 | 26,165 | ||||||||||||||||||||
| Cost of services |
29,697 | 29,697 | 19,848 | 19,848 | ||||||||||||||||||||
| Depreciation and amortization |
18,857 | 18,857 | 13,127 | 13,127 | ||||||||||||||||||||
| Restructuring charges, net |
3,682 | (3,682 | ) | — | 19,936 | (19,936 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
667,633 | (8,576 | ) | 659,057 | 582,610 | (22,967 | ) | 559,643 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
67,128 | 8,576 | 75,704 | 28,484 | 22,967 | 51,451 | ||||||||||||||||||
| Other income, net |
7,751 | 7,751 | 3,808 | 3,808 | ||||||||||||||||||||
| Interest expense, net |
(2,102 | ) | (2,102 | ) | (1,721 | ) | (1,721 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
72,777 | 8,576 | 81,353 | 30,571 | 22,967 | 53,538 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
1,492 | 1,492 | 1,567 | 1,567 | ||||||||||||||||||||
| Income tax provision (1) (2) |
22,789 | 2,796 | 25,585 | 11,042 | 6,834 | 17,876 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 51,480 | $ | 5,780 | $ | 57,260 | $ | 21,096 | $ | 16,133 | $ | 37,229 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 1.07 | $ | 1.19 | $ | 0.45 | $ | 0.79 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 1.05 | $ | 1.17 | $ | 0.44 | $ | 0.78 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
48,041 | 48,041 | 47,149 | 47,149 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
48,977 | 48,977 | 47,742 | 47,742 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an effective tax rate of 31% and 33% for the as adjusted amounts for the nine months ended January 31, 2014 and 2013, respectively. |
| (2) | The nine months ended January 31, 2014 and 2013 include the tax effect on restructuring charges, separation costs, and integration/acquisition costs associated with the acquisition of PDI Ninth House. |
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 January 31, 2014 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 144,042 | $ | 62,217 | $ | 35,925 | $ | — | $ | 242,184 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 21,304 | ||||||||||||||||||
| Other income, net |
(1,132 | ) | ||||||||||||||||||
| Interest expense, net |
873 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(470 | ) | ||||||||||||||||||
| Income tax provision |
6,727 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 31,622 | $ | 5,651 | $ | 3,925 | $ | (13,896 | ) | 27,302 | ||||||||||
| Depreciation and amortization |
1,620 | 3,272 | 437 | 1,004 | 6,333 | |||||||||||||||
| Other income, net |
254 | 92 | 28 | 758 | 1,132 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
36 | — | — | 434 | 470 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
33,532 | 9,015 | 4,390 | (11,700 | ) | 35,237 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
23.3 | % | 14.5 | % | 12.2 | % | 14.5 | % | ||||||||||||
| Adjusted EBITDA |
$ | 33,532 | $ | 9,015 | $ | 4,390 | $ | (11,700 | ) | $ | 35,237 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
23.3 | % | 14.5 | % | 12.2 | % | 14.5 | % | ||||||||||||
| Three Months Ended January 31, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 130,494 | $ | 41,155 | $ | 30,355 | $ | — | $ | 202,004 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 9,482 | ||||||||||||||||||
| Other income, net |
(3,296 | ) | ||||||||||||||||||
| Interest expense, net |
360 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(593 | ) | ||||||||||||||||||
| Income tax provision |
2,753 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 21,647 | $ | (2,798 | ) | $ | 3,722 | $ | (13,865 | ) | 8,706 | |||||||||
| Depreciation and amortization |
2,247 | 1,764 | 324 | 753 | 5,088 | |||||||||||||||
| Other income, net |
325 | 37 | 5 | 2,929 | 3,296 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
148 | — | — | 445 | 593 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
24,367 | (997 | ) | 4,051 | (9,738 | ) | 17,683 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
18.7 | % | (2.4 | %) | 13.3 | % | 8.8 | % | ||||||||||||
| Restructuring charges, net |
— | 4,441 | — | — | 4,441 | |||||||||||||||
| Integration/acquisition costs |
— | — | — | 2,515 | 2,515 | |||||||||||||||
| Separation costs |
516 | — | — | — | 516 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 24,883 | $ | 3,444 | $ | 4,051 | $ | (7,223 | ) | $ | 25,155 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
19.1 | % | 8.4 | % | 13.3 | % | 12.5 | % | ||||||||||||
KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO
EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
| Nine Months Ended January 31, 2014 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 420,689 | $ | 188,357 | $ | 99,543 | $ | — | $ | 708,589 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 51,480 | ||||||||||||||||||
| Other income, net |
(7,751 | ) | ||||||||||||||||||
| Interest expense, net |
2,102 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(1,492 | ) | ||||||||||||||||||
| Income tax provision |
22,789 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 88,029 | $ | 16,992 | $ | 9,009 | $ | (46,902 | ) | 67,128 | ||||||||||
| Depreciation and amortization |
5,398 | 9,330 | 1,285 | 2,844 | 18,857 | |||||||||||||||
| Other income, net |
1,086 | 145 | 576 | 5,944 | 7,751 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
258 | — | — | 1,234 | 1,492 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
94,771 | 26,467 | 10,870 | (36,880 | ) | 95,228 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
22.5 | % | 14.1 | % | 10.9 | % | 13.4 | % | ||||||||||||
| 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 |
$ | 96,107 | $ | 27,616 | $ | 12,004 | $ | (31,923 | ) | $ | 103,804 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
22.8 | % | 14.7 | % | 12.1 | % | 14.6 | % | ||||||||||||
| Nine Months Ended January 31, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 385,688 | $ | 107,999 | $ | 91,242 | $ | — | $ | 584,929 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 21,096 | ||||||||||||||||||
| Other income, net |
(3,808 | ) | ||||||||||||||||||
| Interest expense, net |
1,721 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(1,567 | ) | ||||||||||||||||||
| Income tax provision |
11,042 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 54,481 | $ | 7,716 | $ | 7,141 | $ | (40,854 | ) | 28,484 | ||||||||||
| Depreciation and amortization |
6,748 | 3,387 | 940 | 2,052 | 13,127 | |||||||||||||||
| Other income, net |
275 | 71 | 15 | 3,447 | 3,808 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
305 | — | — | 1,262 | 1,567 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
61,809 | 11,174 | 8,096 | (34,093 | ) | 46,986 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
16.0 | % | 10.3 | % | 8.9 | % | 8.0 | % | ||||||||||||
| Restructuring charges, net |
10,801 | 5,118 | 3,086 | 931 | 19,936 | |||||||||||||||
| Integration/acquisition costs |
— | — | — | 2,515 | 2,515 | |||||||||||||||
| Separation costs |
516 | — | — | — | 516 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 73,126 | $ | 16,292 | $ | 11,182 | $ | (30,647 | ) | $ | 69,953 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
19.0 | % | 15.1 | % | 12.3 | % | 12.0 | % | ||||||||||||