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| 8-K - FORM 8-K - KORN FERRY | d742952d8k.htm |
Exhibit 99.1
For Immediate Release
Contacts:
Investor Relations: Gregg Kvochak, (310) 556-8550
For Media: Mike Distefano, (310) 843-4199
Korn Ferry International Announces Fourth Quarter and Fiscal
2014 Results of Operations
Highlights
| • | Korn Ferry reports record quarterly fee revenue of $251.7 million in the fourth quarter of 2014, an increase of 10.4% (the effect of exchange rates was not significant), from Q4 FY’13, with increases realized across all segments: |
| Actual | ||||
| Futurestep |
20.3 | % | ||
| Leadership and Talent Consulting |
10.1 | % | ||
| Executive Recruitment |
8.3 | % | ||
| • | Adjusted EBITDA margin was 13.7% in Q4 FY’14 compared to 12.2% in Q4 FY’13. |
| • | Q4 FY’14 diluted earnings per share was $0.43 compared to $0.25 in Q4 FY’13. Adjusted diluted earnings per share was $0.32 in Q4 FY’13, which excludes $3.5 million of net restructuring and integration/acquisition costs. No such costs were incurred in Q4 FY’14. |
| • | For the full year of FY’14, Korn Ferry reports record annual fee revenue of $960.3 million, an increase of 18.1% (19.1% on a constant currency basis) over FY’13. Adjusting for the prior year acquisitions, annual fee revenue increased 9.3% over FY’13. |
| • | FY’14 diluted earnings per share was $1.48 compared to $0.70 in FY’13. Adjusted diluted earnings per share was $1.60 in FY’14 and $1.10 in FY’13, excluding $8.6 million and $26.5 million of net restructuring, integration/acquisition and separation costs, respectively. |
Los Angeles, CA, June 16, 2014 – Korn/Ferry International (NYSE: KFY), a single source of leadership and talent consulting services, today announced record quarterly and annual fee revenues of $251.7 million and $960.3 million for the fourth quarter and FY’14, respectively. Fourth quarter diluted earnings per share were $0.43. Full year adjusted diluted earnings per share were $1.60, excluding restructuring, integration/acquisition, and separation costs of $8.6 million. Including such costs, diluted earnings per share was $1.48 for the year ended April 30, 2014.
“Korn Ferry closed out the fiscal year with a strong quarter – 10.7% growth in fee revenue for the quarter and 19.1% growth for the year, at constant currency – which represents the strongest top line results in the company’s history, with earnings per share of $0.43,” said Gary D. Burnison, CEO, Korn Ferry. “Korn Ferry’s performance is a testament to our differentiated strategy, robust intellectual property and talented people.”
Financial Results
(dollars in millions, except per share amounts)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 251.7 | $ | 227.9 | $ | 960.3 | $ | 812.8 | ||||||||
| Total revenue |
$ | 260.8 | $ | 238.6 | $ | 995.6 | $ | 849.7 | ||||||||
| Operating income |
$ | 24.5 | $ | 15.4 | $ | 91.6 | $ | 43.9 | ||||||||
| Operating margin |
9.7 | % | 6.8 | % | 9.5 | % | 5.4 | % | ||||||||
| Net income |
$ | 21.2 | $ | 12.2 | $ | 72.7 | $ | 33.3 | ||||||||
| Basic earnings per share |
$ | 0.44 | $ | 0.26 | $ | 1.51 | $ | 0.71 | ||||||||
| Diluted earnings per share |
$ | 0.43 | $ | 0.25 | $ | 1.48 | $ | 0.70 | ||||||||
| EBITDA Results (a): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 34.5 | $ | 24.3 | $ | 129.7 | $ | 71.3 | ||||||||
| EBITDA margin |
13.7 | % | 10.7 | % | 13.5 | % | 8.8 | % | ||||||||
| Adjusted Results (b): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 24.5 | $ | 18.9 | $ | 100.2 | $ | 70.4 | ||||||||
| Operating margin |
9.7 | % | 8.3 | % | 10.4 | % | 8.7 | % | ||||||||
| EBITDA (a) |
$ | 34.5 | $ | 27.8 | $ | 138.3 | $ | 97.8 | ||||||||
| EBITDA margin (a) |
13.7 | % | 12.2 | % | 14.4 | % | 12.0 | % | ||||||||
| Net income |
$ | 21.2 | $ | 15.6 | $ | 78.5 | $ | 52.8 | ||||||||
| Basic earnings per share |
$ | 0.44 | $ | 0.33 | $ | 1.63 | $ | 1.12 | ||||||||
| Diluted earnings per share |
$ | 0.43 | $ | 0.32 | $ | 1.60 | $ | 1.10 | ||||||||
| (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): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 2.9 | $ | 3.7 | $ | 22.8 | ||||||||
| Integration/acquisition costs |
$ | — | $ | 0.6 | $ | 0.4 | $ | 3.1 | ||||||||
| Separation costs |
$ | — | $ | — | $ | 4.5 | $ | 0.6 | ||||||||
Fiscal 2014 Fourth Quarter Results
Fee revenue was $251.7 million in Q4 FY’14, an increase of $23.8 million, or 10.4% (the effect of exchange rates was not significant), compared to the year-ago quarter, primarily driven by an $11.4 million, $6.3 million, and a $6.1 million increase in fee revenue in Executive Recruitment, Futurestep and Leadership & Talent Consulting, respectively. The overall fee revenue increase was driven by fee revenue growth in financial services, technology, life science/healthcare and the industrial sectors.
Compensation and benefit expenses were $170.6 million in Q4 FY’14, an increase of $16.2 million, or 10.5%, compared to the year-ago quarter. The increase was due to an increase in performance related bonus expense resulting from the increase in fee revenue and profitability, as well as an increase in salaries and related payroll taxes. The increase in salaries and related payroll taxes was due to a 3.5% increase in the average headcount in Q4 FY’14 compared to Q4 FY’13.
General and administrative expenses were $39.1 million in Q4 FY’14, a decrease of $1.0 million, or 2.5%, from the year-ago quarter, primarily due to a decrease in office and premise expense of $1.6 million due to synergies obtained from the PDI Ninth House and Global Novations acquisitions (the “prior year acquisitions”) and a decrease in foreign exchange loss of $0.6 million, offset by an increase in travel and business development related expenses in Q4 FY’14 compared to the year-ago quarter.
Adjusted EBITDA was $34.5 million in Q4 FY’14, an increase of $6.7 million, or 24.1%, compared to Q4 FY’13. Adjusted EBITDA margin was 13.7% and 12.2% in Q4 FY’14 and Q4 FY’13, respectively.
On a GAAP basis, operating income was $24.5 million in Q4 FY’14 and $15.4 million in Q4 FY’13 resulting in a margin of 9.7% in the current quarter compared to 6.8% in the year-ago quarter.
Fiscal 2014 Results
Fee revenue was $960.3 million in FY’14, an increase of $147.5 million, or 18.1% (19.1% on a constant currency basis), compared to FY’13. Adjusting for the prior year acquisitions, fee revenue was $888.4 million in FY’14, an increase of $75.6 million, or 9.3%, compared to FY’13. The increase in fee revenue was driven by a 9.2% increase in the number of engagements billed in FY’14 compared to FY’13. The overall fee revenue increase was driven by fee revenue growth in life science/healthcare, industrial, technology and financial services sectors.
Adjusted EBITDA was $138.3 million during FY’14, an increase of $40.5 million, or 41.4%, compared to FY’13. Adjusted EBITDA margin was 14.4% and 12.0% in FY’14 and FY’13, respectively.
On a GAAP basis, operating income was $91.6 million in FY’14, an increase of $47.7 million, or 108.7%, compared to FY’13, resulting in an operating margin of 9.5% in the current year compared to 5.4% in the prior year.
Balance Sheet and Liquidity
Cash and marketable securities were $468.3 million at April 30, 2014, compared to $366.0 million at April 30, 2013. Cash and marketable securities include $116.2 million held in trust for deferred compensation plans at April 30, 2014, compared to $98.0 million at April 30, 2013. Cash and marketable securities increased by $102.3 million from April 30, 2013, primarily attributable to cash provided by operating activities, partially offset by bonuses earned in fiscal 2013 and paid during the first quarter of fiscal 2014 and $15.0 million in contingent consideration paid to selling stockholders of PDI Ninth House.
Results by Segment
Selected Executive Recruitment Data
(dollars in millions)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 148.2 | $ | 136.8 | $ | 568.9 | $ | 522.5 | ||||||||
| Total revenue |
$ | 153.7 | $ | 142.8 | $ | 591.2 | $ | 544.8 | ||||||||
| Operating income |
$ | 28.4 | $ | 26.5 | $ | 116.4 | $ | 81.0 | ||||||||
| Operating margin |
19.1 | % | 19.4 | % | 20.5 | % | 15.5 | % | ||||||||
| Ending number of consultants |
432 | 399 | 432 | 399 | ||||||||||||
| Average number of consultants |
431 | 395 | 416 | 400 | ||||||||||||
| Engagements billed |
3,048 | 2,718 | 8,144 | 7,554 | ||||||||||||
| New engagements (a) |
1,303 | 1,231 | 5,052 | 4,750 | ||||||||||||
| EBITDA Results (b): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 31.7 | $ | 29.4 | $ | 126.5 | $ | 91.2 | ||||||||
| EBITDA margin |
21.4 | % | 21.5 | % | 22.2 | % | 17.5 | % | ||||||||
| Adjusted Results (c): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 28.4 | $ | 23.9 | $ | 117.7 | $ | 89.7 | ||||||||
| Operating margin |
19.1 | % | 17.5 | % | 20.7 | % | 17.2 | % | ||||||||
| EBITDA (b) |
$ | 31.7 | $ | 26.8 | $ | 127.8 | $ | 99.9 | ||||||||
| EBITDA margin (b) |
21.4 | % | 19.6 | % | 22.5 | % | 19.1 | % | ||||||||
| (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): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | (2.6 | ) | $ | 1.3 | $ | 8.1 | |||||||
| Separation costs |
$ | — | $ | — | $ | — | $ | 0.6 | ||||||||
Executive Recruitment
Fee revenue was $148.2 million in Q4 FY’14, an increase of $11.4 million, or 8.3% (the effect of exchange rates was not significant), compared to Q4 FY’13. The increase in fee revenue was driven by increases in Europe, North America and Asia Pacific, partially offset by a decrease in Latin America. This increase is primarily attributed to a 12.1% increase in the number of executive recruitment engagements billed, offset by a 3.4% decrease in the weighted-average fees billed per engagement in Q4 FY’14 compared to the Q4 FY’13.
Adjusted EBITDA was $31.7 million during Q4 FY’14, an increase of $4.9 million, or 18.3%, compared to Q4 FY’13. This increase is primarily attributed to the $11.4 million increase in fee revenue in Q4 FY’14 as compared to Q4 FY’13, partially offset by an increase of $5.9 million in compensation and benefit expenses driven primarily by an increase in performance related bonus expense and salaries and related payroll taxes. For the full year, adjusted EBITDA increased by $27.9 million due to a $46.4 million increase in fee revenue and a decrease in general and administrative expenses offset by an increase in compensation and benefit expenses.
On a GAAP basis, operating income was $28.4 million in Q4 FY’14, an increase of $1.9 million, or 7.2%, compared to Q4 FY’13, resulting in an operating margin of 19.1% in the current quarter compared to 19.4% in the year-ago quarter. On a GAAP basis, operating income was $116.4 million in FY’14, an increase of $35.4 million, or 43.7%, compared to FY’13, resulting in an operating margin of 20.5% in FY’14 compared to 15.5% in FY’13.
Selected Leadership & Talent Consulting Data
(dollars in millions)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 66.2 | $ | 60.1 | $ | 254.6 | $ | 168.1 | ||||||||
| Total revenue |
$ | 68.4 | $ | 63.1 | $ | 263.0 | $ | 176.6 | ||||||||
| Operating (loss) income |
$ | 6.8 | $ | (1.3 | ) | $ | 23.8 | $ | 6.4 | |||||||
| Operating margin |
10.3 | % | (2.1 | )% | 9.4 | % | 3.8 | % | ||||||||
| Ending number of consultants (a) |
127 | 133 | 127 | 133 | ||||||||||||
| Staff utilization (b) |
70 | % | 67 | % | 67 | % | 64 | % | ||||||||
| EBITDA Results (c): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 10.0 | $ | 1.2 | $ | 36.4 | $ | 12.4 | ||||||||
| EBITDA margin |
15.1 | % | 2.0 | % | 14.3 | % | 7.4 | % | ||||||||
| Adjusted Results (d): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 6.8 | $ | 3.8 | $ | 25.0 | $ | 16.6 | ||||||||
| Operating margin |
10.3 | % | 6.3 | % | 9.8 | % | 9.9 | % | ||||||||
| EBITDA (c) |
$ | 10.0 | $ | 6.3 | $ | 37.6 | $ | 22.6 | ||||||||
| EBITDA margin (c) |
15.1 | % | 10.4 | % | 14.8 | % | 13.4 | % | ||||||||
| (a) | Represents number of employees originating consulting services. |
| (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): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 5.1 | $ | 1.2 | $ | 10.2 | ||||||||
Leadership & Talent Consulting
Fee revenue was $66.2 million in Q4 FY’14, an increase of $6.1 million, or 10.1% (the effect of exchange rates was not significant), from the year-ago quarter. The increase in fee revenue was driven by increases in North America and Europe. This increase is primarily attributed to an increase in consulting fee revenue of $3.8 million and an increase in product revenue of $2.3 million in Q4 FY’14 compared to the year-ago quarter.
Adjusted EBITDA was $10.0 million during Q4 FY’14, an increase of $3.7 million, or 58.7%, compared to Q4 FY’13. Adjusted EBITDA margin was 15.1% in Q4 FY’14 compared to 10.4% in Q4 FY’13 due to an increase in fee revenue of $6.1 million and a decrease in general administrative expenses of $1.2 million, offset by an increase in compensation and benefit expense of $4.2 million. The decrease in general and administrative expenses was due to a decrease in office and premise expense due to synergies obtained from the prior year acquisitions. The increase in compensation and benefit expenses was due to an increase in performance related bonus expense, salaries and related payroll taxes, and an increase in the use of outside contractors. For the full year, adjusted EBITDA was $37.6 million, an increase of $15.0 million, or 66.4%, compared to FY’13. Adjusted EBITDA margin was 14.8% compared 13.4% in FY’13.
On a GAAP basis, operating income was $6.8 million in Q4 FY’14, an increase of $8.1 million compared to the year-ago quarter, resulting in an operating margin of 10.3% in the current quarter compared to (2.1%) in the year-ago quarter. On a GAAP basis, operating income was $23.8 million in FY’14, an increase of $17.4 million compared to FY’13 resulting in an operating margin of 9.4% in FY’14 compared to 3.8% in FY’13.
Selected Futurestep Data
(dollars in millions)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Fee revenue |
$ | 37.3 | $ | 31.0 | $ | 136.8 | $ | 122.2 | ||||||||
| Total revenue |
$ | 38.7 | $ | 32.7 | $ | 141.4 | $ | 128.3 | ||||||||
| Operating income |
$ | 4.3 | $ | 3.9 | $ | 13.3 | $ | 11.0 | ||||||||
| Operating margin |
11.7 | % | 12.4 | % | 9.8 | % | 9.0 | % | ||||||||
| Engagements billed |
1,205 | 1,032 | 3,246 | 3,074 | ||||||||||||
| New engagements (a) |
598 | 524 | 2,427 | 2,308 | ||||||||||||
| EBITDA Results (b): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| EBITDA |
$ | 4.8 | $ | 4.1 | $ | 15.7 | $ | 12.2 | ||||||||
| EBITDA margin |
13.1 | % | 13.3 | % | 11.5 | % | 10.0 | % | ||||||||
| Adjusted Results (c): | Fourth Quarter | Year to Date | ||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Operating income |
$ | 4.3 | $ | 4.3 | $ | 14.5 | $ | 14.5 | ||||||||
| Operating margin |
11.7 | % | 13.8 | % | 10.6 | % | 11.9 | % | ||||||||
| EBITDA (b) |
$ | 4.8 | $ | 4.5 | $ | 16.9 | $ | 15.7 | ||||||||
| EBITDA margin (b) |
13.1 | % | 14.7 | % | 12.3 | % | 12.9 | % | ||||||||
| (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): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’14 | FY’13 | FY’14 | FY’13 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | — | $ | 0.4 | $ | 1.2 | $ | 3.5 | ||||||||
Futurestep
Fee revenue was $37.3 million in Q4 FY’14, an increase of $6.3 million, or 20.3% (21.0% on a constant currency basis), compared to the year-ago quarter. The increase in fee revenue was driven by a 16.8% increase in the number of engagements billed and a 3.0% increase in the weighted average fees billed per engagement in Q4 FY’14 compared to Q4 FY’13. The increase was primarily due to large recruitment process outsourcing contracts entered into in the first six months of FY’14, which continued to be delivered in the current quarter and an increase in professional recruitment.
Adjusted EBITDA was $4.8 million during Q4 FY’14, an increase of $0.3 million, or 6.7%, compared to Q4 FY’13, due primarily to the increase in fee revenue of $6.3 million, offset by an increase in compensation and benefit expenses of $4.6 million (due to an increase in performance related bonus expense and headcount), an increase in cost of services expense of $0.7 million and an increase in general and administrative expenses of $0.5 million. For the full year, adjusted EBITDA increased $1.2 million due to the $14.6 million increase in fee revenue, partially offset by an increase in compensation and benefit expenses of $11.0 million and $2.3 million in cost of services expenses. The increase in compensation and benefit expenses for the full year 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 and an increase in performance related bonus expense.
On a GAAP basis, operating income was $4.3 million in Q4 FY’14, an increase of $0.4 million, compared to Q4 FY’13, resulting in an operating margin of 11.7% in the current quarter compared to 12.4% in the year-ago quarter. On a GAAP basis, operating income was $13.3 million in FY’14, an increase of $2.3 million, compared to FY’13, resulting in an operating margin of 9.8% in FY’14 compared to 9.0% in FY’13.
Outlook
As previously disclosed, over the past year we have implemented common technology systems designed to allow us to further integrate our legacy businesses with our recent acquisitions. Due to the efficiencies we expect to gain from these investments, other integration items from recent acquisitions and other cost savings initiatives, we plan to take additional actions to rationalize our cost structure in Q1 FY’15. We estimate the realized savings in FY’15 associated with these actions to be in the range of $0.08 to $0.10 per diluted earnings share with the cost of these actions in Q1 FY’15 to be in the range of $0.06 to $0.08 per diluted earnings share. Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, Q1 FY’15 fee revenue is likely to range from $240 million to $250 million and, after taking into consideration the actions discussed above, adjusted diluted earnings per share are likely to range from $0.37 to $0.43 with diluted earnings per share as measured by Generally Accepted Accounting Principles likely to range from $0.29 to $0.37.
Earnings Conference Call Webcast
The earnings conference call will be held today at 5:00 PM (EDT) 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. We will also post to this section of our website earnings slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.
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 | Year Ended | |||||||||||||||
| April 30, | April 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Fee revenue |
$ | 251,712 | $ | 227,902 | $ | 960,301 | $ | 812,831 | ||||||||
| Reimbursed out-of-pocket engagement expenses |
9,086 | 10,705 | 35,258 | 36,870 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
| Total revenue |
260,798 | 238,607 | 995,559 | 849,701 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Compensation and benefits |
170,595 | 154,487 | 646,889 | 555,346 | ||||||||||||
| General and administrative expenses |
39,109 | 40,096 | 152,040 | 142,771 | ||||||||||||
| Reimbursed expenses |
9,086 | 10,705 | 35,258 | 36,870 | ||||||||||||
| Cost of services |
10,213 | 9,129 | 39,910 | 28,977 | ||||||||||||
| Depreciation and amortization |
7,315 | 5,877 | 26,172 | 19,004 | ||||||||||||
| Restructuring charges, net |
— | 2,921 | 3,682 | 22,857 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
236,318 | 223,215 | 903,951 | 805,825 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
24,480 | 15,392 | 91,608 | 43,876 | ||||||||||||
| Other income, net |
2,018 | 2,501 | 9,769 | 6,309 | ||||||||||||
| Interest expense, net |
(261 | ) | (644 | ) | (2,363 | ) | (2,365 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
26,237 | 17,249 | 99,014 | 47,820 | ||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
677 | 543 | 2,169 | 2,110 | ||||||||||||
| Income tax provision |
5,703 | 5,595 | 28,492 | 16,637 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 21,211 | $ | 12,197 | $ | 72,691 | $ | 33,293 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per common share: |
||||||||||||||||
| Basic |
$ | 0.44 | $ | 0.26 | $ | 1.51 | $ | 0.71 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | 0.43 | $ | 0.25 | $ | 1.48 | $ | 0.70 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
48,523 | 47,452 | 48,162 | 47,224 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
49,458 | 48,345 | 49,145 | 47,883 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
KORN FERRY AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
| Three Months Ended April 30, | Year Ended April 30, | |||||||||||||||||||||||||||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||||||||||
| Fee Revenue: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 80,230 | $ | 77,511 | 4 | % | $ | 306,768 | $ | 290,317 | 6 | % | ||||||||||||||||||||
| EMEA |
40,175 | 32,242 | 25 | % | 147,917 | 128,807 | 15 | % | ||||||||||||||||||||||||
| Asia Pacific |
21,753 | 19,199 | 13 | % | 84,816 | 73,221 | 16 | % | ||||||||||||||||||||||||
| South America |
6,028 | 7,839 | (23 | %) | 29,374 | 30,134 | (3 | %) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
148,186 | 136,791 | 8 | % | 568,875 | 522,479 | 9 | % | ||||||||||||||||||||||||
| Leadership & Talent Consulting |
66,279 | 60,116 | 10 | % | 254,636 | 168,115 | 51 | % | ||||||||||||||||||||||||
| Futurestep |
37,247 | 30,995 | 20 | % | 136,790 | 122,237 | 12 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total fee revenue |
251,712 | 227,902 | 10 | % | 960,301 | 812,831 | 18 | % | ||||||||||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
9,086 | 10,705 | (15 | %) | 35,258 | 36,870 | (4 | %) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total revenue |
$ | 260,798 | $ | 238,607 | 9 | % | $ | 995,559 | $ | 849,701 | 17 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Reconciliation of Operating Income (GAAP) to Adjusted Operating Income |
| |||||||||||||||||||||||||||||||
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 18,483 | 23.0 | % | $ | 17,104 | 22.1 | % | $ | 70,256 | 22.9 | % | $ | 58,832 | 20.3 | % | ||||||||||||||||
| EMEA |
4,699 | 11.7 | % | 4,137 | 12.8 | % | 23,168 | 15.7 | % | 9,173 | 7.1 | % | ||||||||||||||||||||
| Asia Pacific |
4,380 | 20.1 | % | 3,482 | 18.1 | % | 17,274 | 20.4 | % | 6,973 | 9.5 | % | ||||||||||||||||||||
| South America |
761 | 12.6 | % | 1,761 | 22.5 | % | 5,654 | 19.2 | % | 5,987 | 19.9 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
28,323 | 19.1 | % | 26,484 | 19.4 | % | 116,352 | 20.5 | % | 80,965 | 15.5 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
6,855 | 10.3 | % | (1,292 | ) | (2.1 | %) | 23,847 | 9.4 | % | 6,424 | 3.8 | % | |||||||||||||||||||
| Futurestep |
4,343 | 11.7 | % | 3,834 | 12.4 | % | 13,352 | 9.8 | % | 10,975 | 9.0 | % | ||||||||||||||||||||
| Corporate |
(15,041 | ) | (13,634 | ) | (61,943 | ) | (54,488 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total operating income |
$ | 24,480 | 9.7 | % | $ | 15,392 | 6.8 | % | $ | 91,608 | 9.5 | % | $ | 43,876 | 5.4 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Restructuring, Separation, and Integration/Acquisition Costs, net: |
| |||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | — | — | $ | (1,853 | ) | (2.4 | %) | $ | 816 | 0.3 | % | $ | 3,583 | 1.2 | % | ||||||||||||||||
| EMEA |
— | — | (770 | ) | (2.4 | %) | 460 | 0.3 | % | 4,498 | 3.5 | % | ||||||||||||||||||||
| Asia Pacific |
— | — | 16 | 0.1 | % | 60 | 0.0 | % | 629 | 0.9 | % | |||||||||||||||||||||
| South America |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
— | — | (2,607 | ) | (1.9 | %) | 1,336 | 0.2 | % | 8,710 | 1.7 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
— | — | 5,080 | 8.4 | % | 1,149 | 0.4 | % | 10,198 | 6.1 | % | |||||||||||||||||||||
| Futurestep |
— | — | 441 | 1.4 | % | 1,134 | 0.8 | % | 3,527 | 2.9 | % | |||||||||||||||||||||
| Corporate |
598 | 4,957 | 4,044 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total restructuring, separation, and integration/acquisition costs, net |
$ | — | — | $ | 3,512 | 1.5 | % | $ | 8,576 | 0.9 | % | $ | 26,479 | 3.3 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Adjusted Operating Income: |
||||||||||||||||||||||||||||||||
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| (Excluding Restructuring, Separation, and Integration/Acquisition Costs, net) |
| |||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 18,483 | 23.0 | % | $ | 15,251 | 19.7 | % | $ | 71,072 | 23.2 | % | $ | 62,415 | 21.5 | % | ||||||||||||||||
| EMEA |
4,699 | 11.7 | % | 3,367 | 10.4 | % | 23,628 | 16.0 | % | 13,671 | 10.6 | % | ||||||||||||||||||||
| Asia Pacific |
4,380 | 20.1 | % | 3,498 | 18.2 | % | 17,334 | 20.4 | % | 7,602 | 10.4 | % | ||||||||||||||||||||
| South America |
761 | 12.6 | % | 1,761 | 22.5 | % | 5,654 | 19.2 | % | 5,987 | 19.9 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
28,323 | 19.1 | % | 23,877 | 17.5 | % | 117,688 | 20.7 | % | 89,675 | 17.2 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
6,855 | 10.3 | % | 3,788 | 6.3 | % | 24,996 | 9.8 | % | 16,622 | 9.9 | % | ||||||||||||||||||||
| Futurestep |
4,343 | 11.7 | % | 4,275 | 13.8 | % | 14,486 | 10.6 | % | 14,502 | 11.9 | % | ||||||||||||||||||||
| Corporate |
(15,041 | ) | (13,036 | ) | (56,986 | ) | (50,444 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total adjusted operating income |
$ | 24,480 | 9.7 | % | $ | 18,904 | 8.3 | % | $ | 100,184 | 10.4 | % | $ | 70,355 | 8.7 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
KORN FERRY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| April 30, | ||||||||
| 2014 | 2013 | |||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 333,717 | $ | 224,066 | ||||
| Marketable securities |
9,566 | 20,347 | ||||||
| Receivables due from clients, net of allowance for doubtful accounts of $9,513 and $9,097 respectively |
175,986 | 161,508 | ||||||
| Income taxes and other receivables |
8,244 | 8,944 | ||||||
| Deferred income taxes |
4,486 | 3,511 | ||||||
| Prepaid expenses and other assets |
29,955 | 28,724 | ||||||
|
|
|
|
|
|||||
| Total current assets |
561,954 | 447,100 | ||||||
|
|
|
|
|
|||||
| Marketable securities, non-current |
124,993 | 121,569 | ||||||
| Property and equipment, net |
60,434 | 53,628 | ||||||
| Cash surrender value of company owned life insurance policies, net of loans |
94,274 | 85,873 | ||||||
| Deferred income taxes |
55,039 | 63,203 | ||||||
| Goodwill |
257,582 | 257,293 | ||||||
| Intangible assets, net |
49,560 | 58,187 | ||||||
| Investments and other assets |
29,830 | 28,376 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 1,233,666 | $ | 1,115,229 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable |
$ | 19,375 | $ | 19,460 | ||||
| Income taxes payable |
13,014 | 5,502 | ||||||
| Compensation and benefits payable |
192,035 | 160,298 | ||||||
| Other accrued liabilities |
62,509 | 83,291 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
286,933 | 268,551 | ||||||
|
|
|
|
|
|||||
| Deferred compensation and other retirement plans |
169,235 | 159,706 | ||||||
| Other liabilities |
21,962 | 22,504 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
478,130 | 450,761 | ||||||
|
|
|
|
|
|||||
| Stockholders’ equity |
||||||||
| Common stock: $0.01 par value, 150,000 shares authorized, 62,282 and 61,022 shares issued and 49,811 and 48,734 shares outstanding, respectively |
449,631 | 431,508 | ||||||
| Retained earnings |
308,781 | 236,090 | ||||||
| Accumulated other comprehensive loss, net |
(2,388 | ) | (2,631 | ) | ||||
|
|
|
|
|
|||||
| Stockholders’ equity |
756,024 | 664,967 | ||||||
| Less: notes receivable from stockholders |
(488 | ) | (499 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
755,536 | 664,468 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 1,233,666 | $ | 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 | |||||||||||||||||||||||
| April 30, 2014 | April 30, 2013 | |||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 251,712 | $ | 251,712 | $ | 227,902 | $ | 227,902 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
9,086 | 9,086 | 10,705 | 10,705 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
260,798 | 260,798 | 238,607 | 238,607 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
170,595 | 170,595 | 154,487 | 154,487 | ||||||||||||||||||||
| General and administrative expenses |
39,109 | 39,109 | 40,096 | (591 | ) | 39,505 | ||||||||||||||||||
| Reimbursed expenses |
9,086 | 9,086 | 10,705 | 10,705 | ||||||||||||||||||||
| Cost of services |
10,213 | 10,213 | 9,129 | 9,129 | ||||||||||||||||||||
| Depreciation and amortization |
7,315 | 7,315 | 5,877 | 5,877 | ||||||||||||||||||||
| Restructuring charges, net |
— | — | 2,921 | (2,921 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
236,318 | — | 236,318 | 223,215 | (3,512 | ) | 219,703 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
24,480 | — | 24,480 | 15,392 | 3,512 | 18,904 | ||||||||||||||||||
| Other income, net |
2,018 | 2,018 | 2,501 | 2,501 | ||||||||||||||||||||
| Interest expense, net |
(261 | ) | (261 | ) | (644 | ) | (644 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
26,237 | — | 26,237 | 17,249 | 3,512 | 20,761 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
677 | 677 | 543 | 543 | ||||||||||||||||||||
| Income tax provision (1) (2) |
5,703 | 5,703 | 5,595 | 119 | 5,714 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 21,211 | $ | — | $ | 21,211 | $ | 12,197 | $ | 3,393 | $ | 15,590 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 0.44 | $ | 0.44 | $ | 0.26 | $ | 0.33 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 0.43 | $ | 0.43 | $ | 0.25 | $ | 0.32 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
48,523 | 48,523 | 47,452 | 47,452 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
49,458 | 49,458 | 48,345 | 48,345 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an effective tax rate of 28% for the as adjusted amounts for the three months ended April 30, 2013. |
| (2) | The three months ended April 30, 2013, includes the tax effect on restructuring charges and integration/acquisition costs associated with the acquisition of PDI Ninth House. |
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)
| Year Ended April 30, 2014 |
Year Ended April 30, 2013 |
|||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 960,301 | $ | 960,301 | $ | 812,831 | $ | 812,831 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
35,258 | 35,258 | 36,870 | 36,870 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
995,559 | 995,559 | 849,701 | 849,701 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
646,889 | (4,500 | ) | 642,389 | 555,346 | (516 | ) | 554,830 | ||||||||||||||||
| General and administrative expenses |
152,040 | (394 | ) | 151,646 | 142,771 | (3,106 | ) | 139,665 | ||||||||||||||||
| Reimbursed expenses |
35,258 | 35,258 | 36,870 | 36,870 | ||||||||||||||||||||
| Cost of services |
39,910 | 39,910 | 28,977 | 28,977 | ||||||||||||||||||||
| Depreciation and amortization |
26,172 | 26,172 | 19,004 | 19,004 | ||||||||||||||||||||
| Restructuring charges, net |
3,682 | (3,682 | ) | — | 22,857 | (22,857 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
903,951 | (8,576 | ) | 895,375 | 805,825 | (26,479 | ) | 779,346 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
91,608 | 8,576 | 100,184 | 43,876 | 26,479 | 70,355 | ||||||||||||||||||
| Other income, net |
9,769 | 9,769 | 6,309 | 6,309 | ||||||||||||||||||||
| Interest expense, net |
(2,363 | ) | (2,363 | ) | (2,365 | ) | (2,365 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
99,014 | 8,576 | 107,590 | 47,820 | 26,479 | 74,299 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
2,169 | 2,169 | 2,110 | 2,110 | ||||||||||||||||||||
| Income tax provision (1) (2) |
28,492 | 2,796 | 31,288 | 16,637 | 6,953 | 23,590 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 72,691 | $ | 5,780 | $ | 78,471 | $ | 33,293 | $ | 19,526 | $ | 52,819 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 1.51 | $ | 1.63 | $ | 0.71 | $ | 1.12 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 1.48 | $ | 1.60 | $ | 0.70 | $ | 1.10 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
48,162 | 48,162 | 47,224 | 47,224 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
49,145 | 49,145 | 47,883 | 47,883 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an effective tax rate of 29% and 32% for the as adjusted amounts for the year ended April 30, 2014 and 2013, respectively. |
| (2) | The year ended April 30, 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 April 30, 2014 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 148,186 | $ | 66,279 | $ | 37,247 | $ | — | $ | 251,712 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 21,211 | ||||||||||||||||||
| Other income, net |
(2,018 | ) | ||||||||||||||||||
| Interest expense, net |
261 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(677 | ) | ||||||||||||||||||
| Income tax provision |
5,703 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 28,323 | $ | 6,855 | $ | 4,343 | $ | (15,041 | ) | 24,480 | ||||||||||
| Depreciation and amortization |
2,614 | 3,161 | 512 | 1,028 | 7,315 | |||||||||||||||
| Other income (loss), net |
683 | (39 | ) | 7 | 1,367 | 2,018 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
125 | — | — | 552 | 677 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
31,745 | 9,977 | 4,862 | (12,094 | ) | 34,490 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
21.4 | % | 15.1 | % | 13.1 | % | 13.7 | % | ||||||||||||
| Adjusted EBITDA |
$ | 31,745 | $ | 9,977 | $ | 4,862 | $ | (12,094 | ) | $ | 34,490 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
21.4 | % | 15.1 | % | 13.1 | % | 13.7 | % | ||||||||||||
| Three Months Ended April 30, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 136,791 | $ | 60,116 | $ | 30,995 | $ | — | $ | 227,902 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 12,197 | ||||||||||||||||||
| Other income, net |
(2,501 | ) | ||||||||||||||||||
| Interest expense, net |
644 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(543 | ) | ||||||||||||||||||
| Income tax provision |
5,595 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 26,484 | $ | (1,292 | ) | $ | 3,834 | $ | (13,634 | ) | 15,392 | |||||||||
| Depreciation and amortization |
2,243 | 2,625 | 240 | 769 | 5,877 | |||||||||||||||
| Other income (loss), net |
518 | (146 | ) | 36 | 2,093 | 2,501 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
129 | — | — | 414 | 543 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
29,374 | 1,187 | 4,110 | (10,358 | ) | 24,313 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
21.5 | % | 2.0 | % | 13.3 | % | 10.7 | % | ||||||||||||
| Restructuring (recoveries) charges, net |
(2,607 | ) | 5,080 | 441 | 7 | 2,921 | ||||||||||||||
| Integration/acquisition costs |
— | — | — | 591 | 591 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 26,767 | $ | 6,267 | $ | 4,551 | $ | (9,760 | ) | $ | 27,825 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
19.6 | % | 10.4 | % | 14.7 | % | 12.2 | % | ||||||||||||
KORN FERRY AND SUBSIDIARIES
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO
EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
| Year Ended April 30, 2014 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 568,875 | $ | 254,636 | $ | 136,790 | $ | — | $ | 960,301 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 72,691 | ||||||||||||||||||
| Other income, net |
(9,769 | ) | ||||||||||||||||||
| Interest expense, net |
2,363 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(2,169 | ) | ||||||||||||||||||
| Income tax provision |
28,492 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 116,352 | $ | 23,847 | $ | 13,352 | $ | (61,943 | ) | 91,608 | ||||||||||
| Depreciation and amortization |
8,012 | 12,491 | 1,797 | 3,872 | 26,172 | |||||||||||||||
| Other income, net |
1,769 | 106 | 583 | 7,311 | 9,769 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
383 | — | — | 1,786 | 2,169 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
126,516 | 36,444 | 15,732 | (48,974 | ) | 129,718 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
22.2 | % | 14.3 | % | 11.5 | % | 13.5 | % | ||||||||||||
| 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 |
$ | 127,852 | $ | 37,593 | $ | 16,866 | $ | (44,017 | ) | $ | 138,294 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
22.5 | % | 14.8 | % | 12.3 | % | 14.4 | % | ||||||||||||
| Year Ended April 30, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 522,479 | $ | 168,115 | $ | 122,237 | $ | — | $ | 812,831 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 33,293 | ||||||||||||||||||
| Other income, net |
(6,309 | ) | ||||||||||||||||||
| Interest expense, net |
2,365 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
(2,110 | ) | ||||||||||||||||||
| Income tax provision |
16,637 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 80,965 | $ | 6,424 | $ | 10,975 | $ | (54,488 | ) | 43,876 | ||||||||||
| Depreciation and amortization |
8,991 | 6,012 | 1,180 | 2,821 | 19,004 | |||||||||||||||
| Other income (loss), net |
793 | (75 | ) | 51 | 5,540 | 6,309 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries |
434 | — | — | 1,676 | 2,110 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
91,183 | 12,361 | 12,206 | (44,451 | ) | 71,299 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
17.5 | % | 7.4 | % | 10.0 | % | 8.8 | % | ||||||||||||
| Restructuring charges, net |
8,194 | 10,198 | 3,527 | 938 | 22,857 | |||||||||||||||
| Integration/acquisition costs |
— | — | — | 3,106 | 3,106 | |||||||||||||||
| Separation costs |
516 | — | — | — | 516 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 99,893 | $ | 22,559 | $ | 15,733 | $ | (40,407 | ) | $ | 97,778 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
19.1 | % | 13.4 | % | 12.9 | % | 12.0 | % | ||||||||||||