Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE		Contacts:
		Investor Relations: Gregg Kvochak, (310) 556-8550
		Media: Dan Gugler, (310) 226-2645

Korn Ferry International Announces Fourth Quarter and Fiscal 2017 Results of Operations

Highlights

 

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Korn Ferry reports record fee revenue of $406.1 million in Q4 FY’17, driven by organic growth in Futurestep and the North America region of Executive Search.

 

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Korn Ferry reports record annual fee revenue of $1,565.5 million, driven by the Legacy Hay acquisition and organic growth in Futurestep.

 

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Operating income was $32.8 million in Q4 FY’17 with an operating margin of 8.1%. Adjusted EBITDA was $60.1 million with Adjusted EBITDA margin of $14.8%.

 

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Q4 FY’17 diluted earnings per share was $0.47 and Adjusted diluted earnings per share was $0.62.

 

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The Company continued to repurchase shares in the open market with cumulative share repurchases of 1.1 million since the Company began repurchasing in October 2016, representing a reduction of approximately 2% of outstanding shares of common stock.

 

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The Company declared a quarterly dividend of $0.10 per share on June 20, 2017 payable on July 14, 2017 to stockholders of record on June 30, 2017.

Los Angeles, CA, June 20, 2017 – Korn/Ferry International (NYSE: KFY), the preeminent global people and organizational advisory firm, today announced fourth quarter and annual fee revenue of $406.1 million and $1,565.5 million, respectively. Fourth quarter diluted earnings per share and adjusted diluted earnings per share were $0.47 and $0.62, respectively. Adjusted diluted earnings per share for the fourth quarter excluded $8.2 million, or $0.15 per share, of restructuring charges, net, integration/acquisition costs and separation costs.

“I am pleased to report record fee revenue of $406 million and strong profitability, with diluted earnings per share and adjusted diluted earnings per share of $0.47 and $0.62 and adjusted EBITDA of approximately $60 million during our recently completed fourth quarter. With continued momentum in all business lines, we achieved the highest fiscal year fee revenue in our firm’s history – up 20% year over year,” said Gary D. Burnison, CEO of Korn Ferry. “There is notable runway in this market for broader talent offerings. We continue to benefit from strong demand for our holistic approach – from our anchor executive search offering to organizational advisory services, leadership development, compensation and rewards and more. As we increasingly extend our brand, broaden our solutions and attract top talent to our firm, Korn Ferry is well-positioned for the future.”

 

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Selected Financial Results

(dollars in millions, except per share amounts) ^(a)

 

		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Fee revenue		$	406.1			$	399.9			$	1,565.5			$	1,292.1
Total revenue		$	419.6			$	417.1			$	1,621.7			$	1,346.7
Operating income		$	32.8			$	4.9			$	114.4			$	52.7
Operating margin			8.1	%			1.2	%			7.3	%			4.1	%
Net income attributable to Korn Ferry		$	26.9			$	5.8			$	84.2			$	30.9
Basic earnings per share		$	0.48			$	0.10			$	1.48			$	0.58
Diluted earnings per share		$	0.47			$	0.10			$	1.47			$	0.58
EBITDA Results (b):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
EBITDA		$	49.5			$	21.9			$	173.9			$	86.3
EBITDA margin			12.2	%			5.5	%			11.1	%			6.7	%
Adjusted Results (c):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Adjusted fee revenue		$	406.1			$	405.0			$	1,569.1			$	1,303.1
Adjusted EBITDA (b)		$	60.1			$	54.8			$	235.0			$	190.2
Adjusted EBITDA margin (b)			14.8	%			13.5	%			15.0	%			14.6	%
Adjusted net income attributable to Korn Ferry		$	35.2			$	32.8			$	128.8			$	110.9
Adjusted basic earnings per share		$	0.62			$	0.58			$	2.27			$	2.10
Adjusted diluted earnings per share		$	0.62			$	0.58			$	2.24			$	2.08
(a)    Numbers may not total due to rounding. (b)    EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges, net, integration/acquisition costs, separation costs and Venezuelan foreign currency loss and includes the deferred revenue adjustment related to the acquisition of HG (Luxembourg) S.à.r.l (“Legacy Hay”)). 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 adjust for the following, as applicable (see attached reconciliations):
		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Restructuring charges, net		$	6.3			$	2.4			$	34.6			$	33.0
Integration/acquisition costs		$	3.7			$	11.7			$	22.4			$	45.5
Deferred revenue adjustment related to the Legacy Hay acquisition		$	—			$	5.1			$	3.5			$	11.0
Separation costs		$	0.6			$	—			$	0.6			$	0.7
Write-off of debt issuance costs		$	—			$	—			$	1.0			$	—
Venezuelan foreign currency loss		$	—			$	13.7			$	—			$	13.7

Fiscal 2017 Fourth Quarter Results

Fee revenue was $406.1 million in Q4 FY’17, an increase of 1.6% (3.2% increase on a constant currency basis) compared to Q4 FY’16. Adjusted fee revenue was $406.1 million in Q4 FY’17, an increase of 0.3% (1.9% increase on a constant currency basis) compared to Q4 FY’16. The increase in fee revenue was due to organic growth in Futurestep and the North America region of Executive Search.

Operating margin was 8.1% in Q4 FY’17 compared to 1.2% in the year-ago quarter. In Q4 FY’17, the increase in operating margin was primarily due to decreases in integration/acquisition costs, lower foreign currency loss relating to the devaluation of the Venezuelan currency in Q4 FY’16 and a decrease in compensation expense.

Adjusted EBITDA margin was 14.8%, compared to 13.5% in the year-ago quarter. The increase in Adjusted EBITDA margin was primarily due to the improvement in margins in Executive Search due to higher fee revenue while operating expenses were relatively flat and higher margins in the Hay Group segment due to the synergies achieved in connection with the Legacy Hay acquisition.

 

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Fiscal 2017 Results

Fee revenue was $1,565.5 million in FY’17, an increase of 21.2% (23.3% increase on a constant currency basis) compared to FY’16. Adjusted fee revenue was $1,569.1 million in FY’17, an increase of 20.4% (22.6% increase on a constant currency basis) compared to FY’17. The growth was primarily due to an increase in fee revenue associated with the acquisition of Legacy Hay that was completed on December 1, 2015, and organic growth in Futurestep fee revenue.

Operating margin was 7.3% in FY’17 compared to 4.1% in FY’16. In FY’17, the increase in operating margin was primarily due to higher fee revenue of $273.4 million and decreases in integration/acquisition costs due to the Legacy Hay acquisition and the foreign currency loss relating to the devaluation of the Venezuelan currency in FY’16.

Adjusted EBITDA margin was 15.0%, compared to 14.6% in FY’16. The increase in Adjusted EBITDA margin was primarily due to the improvement in margins in the Hay Group segment due to the synergies achieved in connection with the Legacy Hay acquisition.

 

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Results by Segment

Selected Executive Search Data

(dollars in millions) ^(a)

 

		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Fee revenue		$	162.3			$	159.7			$	617.7			$	622.9
Total revenue		$	167.0			$	165.4			$	636.2			$	644.5
Operating income		$	30.6			$	23.0			$	124.3			$	131.7
Operating margin			18.8	%			14.4	%			20.1	%			21.1	%
Ending number of consultants			517				488				517				488
Average number of consultants			512				490				503				470
Engagements billed			3,530				3,395				9,008				8,375
New engagements (b)			1,525				1,463				5,933				5,517
EBITDA Results (c):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
EBITDA		$	33.6			$	25.1			$	132.8			$	138.3
EBITDA margin			20.7	%			15.7	%			21.5	%			22.2	%
Adjusted Results (d):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Adjusted EBITDA (c)		$	34.2			$	31.7			$	137.4			$	152.2
Adjusted EBITDA margin (c)			21.1	%			19.9	%			22.2	%			24.4	%

 

(a)	Numbers may not total due to rounding.

(b)	Represents new engagements opened in the respective 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’17				FY’16				FY’17				FY’16
Restructuring charges, net		$	0.6			$	—			$	4.6			$	7.3
Venezuelan foreign currency loss		$	—			$	6.6			$	—			$	6.6

Fee revenue was $162.3 million in Q4 FY’17, an increase of $2.6 million or 1.6% (an increase of $5.0 million or 3.1% on a constant currency basis) compared to Q4 FY’16. The overall increase in fee revenue was primarily attributable to higher fee revenue in our North America region.

Operating income was $30.6 million in Q4 FY’17 compared to $23.0 million in Q4 FY’16. Operating margin was 18.8% in Q4 FY’17 compared to 14.4% in the year-ago quarter. The increase in operating income was due to a decrease in general and administrative expenses as a result of lower foreign currency losses relating to the devaluation of the Venezuelan currency in FY’16 and higher fee revenue in Q4 FY’17 compared to Q4 FY’16.

Adjusted EBITDA was $34.2 million in Q4 FY’17 with an Adjusted EBITDA margin of 21.1% compared to $31.7 million and 19.9%, respectively, in Q4 FY’16. The increase in Adjusted EBITDA and Adjusted EBITDA margin was due to an increase in fee revenue while operating expenses remained relatively flat in Q4 FY’17 compared to Q4 FY’16.

 

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Selected Hay Group Data

(dollars in millions) ^(a)

 

		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Fee revenue		$	185.1			$	187.7			$	724.2			$	471.1
Total revenue		$	188.7			$	194.7			$	741.5			$	488.2
Operating income (loss)		$	16.1			$	2.9			$	47.3			$	(3.4	)
Operating margin			8.7	%			1.5	%			6.5	%			(0.7	)%
Ending number of consultants (b)			557				562				557				562
Staff utilization (c)			69	%			70	%			67	%			67	%
EBITDA Results (d):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
EBITDA		$	24.3			$	10.5			$	79.9			$	17.5
EBITDA margin			13.1	%			5.6	%			11.0	%			3.7	%
Adjusted Results (e):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Adjusted fee revenue		$	185.1			$	192.8			$	727.7			$	482.1
Adjusted EBITDA (d)		$	33.0			$	30.7			$	128.2			$	78.9
Adjusted EBITDA margin (d)			17.8	%			15.9	%			17.6	%			16.4	%

 

(a)	Numbers may not total due to rounding.

(b)	Represents number of employees originating consulting services.

(c)	Calculated by dividing the number of hours our full-time Hay Group professional staff record to engagements during the period, by the total available working hours during the same period.

(d)	EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(e)	Adjusted results are non-GAAP financial measures that adjust for the following (see attached reconciliations):

 

		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Restructuring charges, net		$	5.7			$	2.5			$	29.7			$	25.7
Integration/acquisition costs		$	2.4			$	5.5			$	14.4			$	17.6
Deferred revenue adjustment related to the Legacy Hay acquisition		$	—			$	5.1			$	3.5			$	11.0
Venezuelan foreign currency loss		$	—			$	7.1			$	—			$	7.1
Separation costs		$	0.6			$	—			$	0.6			$	—

Fee revenue was $185.1 million in Q4 FY’17 compared to $187.7 million in Q4 FY’16, a decrease of $2.6 million or 1.4% (an increase of $0.5 million or 0.3% on a constant currency basis) compared to the year-ago quarter. Adjusted fee revenue was $185.1 million in Q4 FY’17 compared to $192.8 million in Q4 FY’16, a decrease of $7.7 million or 4.0% (a decrease of $4.6 million or 2.4% on a constant currency basis) compared to the year-ago quarter.

Operating income was $16.1 million in Q4 FY’17, resulting in an operating margin of 8.7% in the current quarter compared to 1.5% in the year-ago quarter. Operating income increased by $13.2 million from operating income of $2.9 million in Q4 FY’16. The change in operating income was primarily due to a decrease in compensation and benefit expense and lower foreign currency losses relating to the devaluation of the Venezuelan currency in FY’16.

Adjusted EBITDA was $33.0 million in Q4 FY’17, an increase of $2.3 million compared to Q4 FY’16, resulting in Adjusted EBITDA margin of 17.8% in the current quarter.

 

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Selected Futurestep Data

(dollars in millions) ^(a)

 

		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Fee revenue		$	58.7			$	52.5			$	223.7			$	198.1
Total revenue		$	63.9			$	57.0			$	243.9			$	214.0
Operating income		$	8.1			$	7.0			$	30.0			$	26.7
Operating margin			13.9	%			13.3	%			13.4	%			13.5	%
Engagements billed (b)			1,095				978				2,800				2,149
New engagements (c)			576				547				2,193				1,913
EBITDA Results (d):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
EBITDA		$	8.8			$	7.9			$	32.7			$	29.5
EBITDA margin			15.0	%			15.0	%			14.6	%			14.9	%
Adjusted Results (e):		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Adjusted EBITDA (d)		$	8.8			$	7.9			$	32.8			$	29.5
Adjusted EBITDA margin (d)			15.0	%			15.0	%			14.7	%			14.9	%

 

(a)	Numbers may not total due to rounding.

(b)	Represents search engagements billed.

(c)	Represents new search engagements opened in the respective period.

(d)	EBITDA and EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(e)	Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):

 

		Fourth Quarter								Year to Date
		FY’17				FY’16				FY’17				FY’16
Restructuring charges, net		$	—			$	—			$	0.1			$	—

Fee revenue was $58.7 million in Q4 FY’17, an increase of $6.2 million or 11.8% (a $7.2 million or 13.7% increase on a constant currency basis), compared to the year-ago quarter. The higher fee revenue was driven by an increase in recruitment process outsourcing and professional search of $3.5 million and $2.7 million, respectively, in Q4 FY’17 compared to Q4 FY’16.

Operating income was $8.1 million in Q4 FY’17, an increase of $1.1 million compared to Q4 FY’16 operating income of $7.0 million. Operating margin was 13.9% in the current quarter compared to 13.3% in the year-ago quarter.

Adjusted EBITDA was $8.8 million during Q4 FY’17, an increase of $0.9 million compared to Q4 FY’16. Adjusted EBITDA margins were 15.0% in Q4 FY’17 and Q4 FY’16.

Outlook

Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis:

 

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Q1 FY’18 fee revenue is expected to be in the range of $382 million and $400 million; and

 

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Q1 FY’18 diluted earnings per share is likely to range between $0.43 to $0.51.

On a consolidated adjusted basis:

 

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Q1 FY’18 adjusted diluted earnings per share is expected to be in the range from $0.48 to $0.56.

 

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		Q1 FY’18 Earnings Per Share Outlook (1)
		Low				High
Consolidated diluted earnings per share		$	0.43			$	0.51
Restructuring charges, net			0.01				0.02
Retention bonuses			0.05				0.05
Tax rate impact			(0.01	)			(0.02	)
Consolidated adjusted diluted earnings per share		$	0.48			$	0.56

 

(1)	Consolidated adjusted diluted earnings per share is a non-GAAP financial measure that excludes the items listed in the table.

Earnings Conference Call Webcast

The earnings conference call will be held today at 4:30 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 ir.kornferry.com. 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.

 

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About Korn Ferry

Korn Ferry is the preeminent global people and organizational advisory firm. We help leaders, organizations and societies succeed by releasing the full power and potential of people. Our nearly 7,000 colleagues deliver services through Executive Search, Hay Group and Futurestep divisions. Visit kornferry.com for more information.

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 including Legacy Hay, our ability to recognize the anticipated benefits of the acquisition of Legacy Hay which may be affected by, among other things, competition, our ability to grow and manage growth profitability, maintain relationships with customers and suppliers and retain key employees, costs related to the acquisition of Legacy Hay, 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 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, our ability to successfully rationalize our cost structure 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:

 

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adjusted net income attributable to Korn/Ferry International, adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs, write-off of debt issuance costs and Venezuelan foreign currency loss and to include the deferred revenue adjustment related to the Legacy Hay acquisition, net of income tax effect;

 

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adjusted basic and diluted earnings per share, adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs, write-off of debt issuance costs and Venezuelan foreign currency loss and to include the deferred revenue adjustment related to the Legacy Hay acquisition, net of income tax effect; and in the case of the outlook section, also adjusted for tax rate impact;

 

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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;

 

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EBITDA, or earnings before interest, taxes, depreciation and amortization and EBITDA margin;

 

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Adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs and Venezuelan foreign currency loss and to include the deferred revenue adjustment related to the Legacy Hay acquisition and Adjusted EBITDA margin; and

 

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Adjusted fee revenue, which includes revenue that Hay Group would have realized over the ensuing year if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue.

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. These non-GAAP financial measures are performance measures and are not indicative of the liquidity of Korn Ferry. These charges represent 1) costs we incurred to acquire and integrate

 

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the Legacy Hay acquisition, 2) charges we incurred to restructure the combined company due to the acquisition of Legacy Hay, 3) separation costs, 4) debt issuance costs written-off upon replacement of our credit facility and 5) revenue that Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue. As such, reported fee revenue can make fee revenue and operating results appear to fluctuate more than they would if business combination accounting did not require deferred revenue to be written off. Adjusted fee revenue is not a measure that substitutes an individually tailored revenue recognition or measurement method for those of GAAP, rather, it is an adjustment for a short period of time that will provide better comparability in the current and future periods. Management believes the presentation of adjusted fee revenue assists management in its evaluation of ongoing operations and provides useful information to investors because it 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 distorted by write-offs required under business combination accounting 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. Management no longer has adjusted fee revenue after Q1 FY’17. The use of non-GAAP financial measures facilitates comparisons to Korn Ferry’s historical performance. Korn Ferry includes 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. Management further believes that EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company. In the case of constant currency amounts, management believes the presentation of such information provides useful 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]

 

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KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

 

		Three Months Ended April 30								Year Ended April 30
		2017				2016				2017				2016
		(unaudited)
Fee revenue		$	406,065			$	399,960			$	1,565,521			$	1,292,112
Reimbursed out-of-pocket engagement expenses			13,522				17,201				56,148				54,602
Total revenue			419,587				417,161				1,621,669				1,346,714
Compensation and benefits			275,493				286,852				1,071,507				897,345
General and administrative expenses			59,938				73,569				226,232				213,018
Reimbursed expenses			13,522				17,201				56,148				54,602
Cost of services			19,231				20,974				71,482				59,824
Depreciation and amortization			12,290				11,287				47,260				36,220
Restructuring charges, net			6,279				2,436				34,600				33,013
Total operating expenses			386,753				412,319				1,507,229				1,294,022
Operating income			32,834				4,842				114,440				52,692
Other income (loss), net			4,240				5,645				11,820				(4,167	)
Interest (expense) income, net			(2,052	)			1,452				(10,251	)			237
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries			35,022				11,939				116,009				48,762
Equity in earnings of unconsolidated subsidiaries			112				185				333				1,631
Income tax provision			7,398				5,749				29,104				18,960
Net income			27,736				6,375				87,238				31,433
Net income attributable to noncontrolling interest			(812	)			(520	)			(3,057	)			(520	)
Net income attributable to Korn/Ferry International		$	26,924			$	5,855			$	84,181			$	30,913
Earnings per common share attributable to Korn/Ferry International:
Basic		$	0.48			$	0.10			$	1.48			$	0.58
Diluted		$	0.47			$	0.10			$	1.47			$	0.58
Weighted-average common shares outstanding:
Basic			55,845				56,012				56,205				52,372
Diluted			56,571				56,574				56,900				52,929
Cash dividends declared per share:		$	0.10			$	0.10			$	0.40			$	0.40

---

KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

		Three Months Ended April 30,																Year Ended April 30,
		2017								2016				% Change				2017								2016				% Change
Fee Revenue:
Executive search:
North America		$	97,264							$	94,678				2.7	%		$	356,625							$	371,345				(4.0	%)
EMEA			37,210								36,161				2.9	%			146,506								144,319				1.5	%
Asia Pacific			20,061								21,199				(5.4	%)			80,169								80,506				(0.4	%)
Latin America			7,731								7,661				0.9	%			34,376								26,744				28.5	%
Total executive search			162,266								159,699				1.6	%			617,676								622,914				(0.8	%)
Hay Group			185,100								187,795				(1.4	%)			724,186								471,145				53.7	%
Futurestep			58,699								52,466				11.9	%			223,659								198,053				12.9	%
Total fee revenue			406,065								399,960				1.5	%			1,565,521								1,292,112				21.2	%
Reimbursed out-of-pocket engagement expenses			13,522								17,201				(21.4	%)			56,148								54,602				2.8	%
Total revenue		$	419,587							$	417,161				0.6	%		$	1,621,669							$	1,346,714				20.4	%
Operating Income (Loss):						Margin								Margin								Margin								Margin
Executive search:
North America		$	21,092				21.7	%		$	19,857				21.0	%		$	81,550				22.9	%		$	100,381				27.0	%
EMEA			6,805				18.3	%			5,695				15.7	%			27,854				19.0	%			20,607				14.3	%
Asia Pacific			2,364				11.8	%			2,904				13.7	%			8,580				10.7	%			12,572				15.6	%
Latin America			302				3.9	%			(5,498	)			(71.8	%)			6,268				18.2	%			(1,854	)			(6.9	%)
Total executive search			30,563				18.8	%			22,958				14.4	%			124,252				20.1	%			131,706				21.1	%
Hay Group			16,114				8.7	%			2,871				1.5	%			47,302				6.5	%			(3,415	)			(0.7	%)
Futurestep			8,137				13.9	%			6,987				13.3	%			29,986				13.4	%			26,702				13.5	%
Corporate			(21,980	)							(27,974	)							(87,100	)							(102,301	)
Total operating income		$	32,834				8.1	%		$	4,842				1.2	%		$	114,440				7.3	%		$	52,692				4.1	%

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KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

		April 30,
		2017				2016
ASSETS
Cash and cash equivalents		$	410,882			$	273,252
Marketable securities			4,363				11,338
Receivables due from clients, net of allowance for doubtful accounts of $15,455 and $11,292, respectively			345,314				315,975
Income taxes and other receivables			31,573				20,579
Prepaid expenses and other assets			51,542				43,130
Total current assets			843,674				664,274
Marketable securities, non-current			115,574				130,092
Property and equipment, net			109,567				95,436
Cash surrender value of company owned life insurance policies, net of loans			113,067				107,296
Deferred income taxes			20,175				27,163
Goodwill			576,865				590,072
Intangible assets, net			217,319				233,027
Investments and other assets			66,657				51,240
Total assets		$	2,062,898			$	1,898,600
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	37,481			$	26,634
Income taxes payable			4,526				8,396
Compensation and benefits payable			248,354				266,211
Term loan			19,754				30,000
Other accrued liabilities			148,464				145,023
Total current liabilities			458,579				476,264
Deferred compensation and other retirement plans			219,905				216,113
Term loan, non-current			236,222				110,000
Deferred tax liabilities			7,014				5,088
Other liabilities			54,130				43,834
Total liabilities			975,850				851,299
Stockholders’ equity
Common stock: $0.01 par value, 150,000 shares authorized, 70,811 and 69,273 shares issued and 56,938 and 57,272 shares outstanding, respectively			692,527				702,098
Retained earnings			461,976				401,113
Accumulated other comprehensive loss, net			(71,064	)			(57,911	)
Total Korn/Ferry International stockholders’ equity			1,083,439				1,045,300
Noncontrolling interest			3,609				2,001
Total stockholders’ equity			1,087,048				1,047,301
Total liabilities and stockholders’ equity		$	2,062,898			$	1,898,600

---

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

 

		Three Months Ended April 30,								Year Ended April 30,
		2017				2016				2017				2016
		(unaudited)
Fee revenue		$	406,065			$	399,960			$	1,565,521			$	1,292,112
Deferred revenue adjustment due to acquisition (1)			—				5,096				3,535				10,967
Adjusted fee revenue		$	406,065			$	405,056			$	1,569,056			$	1,303,079
Operating income		$	32,834			$	4,842			$	114,440			$	52,692
Depreciation and amortization			12,290				11,287				47,260				36,220
Other income (loss), net			4,240				5,645				11,820				(4,167	)
Equity in earnings of unconsolidated subsidiaries, net			112				185				333				1,631
EBITDA			49,476				21,959				173,853				86,376
Deferred revenue adjustment due to acquisition (1)			—				5,096				3,535				10,967
Restructuring charges, net (2)			6,279				2,436				34,600				33,013
Integration/acquisition costs (3)			3,702				11,594				22,379				45,409
Separation costs (4)			609				—				609				744
Venezuelan foreign currency loss (6)			—				13,720				—				13,720
Adjusted EBITDA		$	60,066			$	54,805			$	234,976			$	190,229
Operating margin			8.1	%			1.2	%			7.3	%			4.1	%
Depreciation and amortization			3.0	%			2.8	%			3.0	%			2.8	%
Other income (loss), net			1.1	%			1.4	%			0.8	%			(0.3	%)
Equity in earnings of unconsolidated subsidiaries, net			—				0.1	%			—				0.1	%
EBITDA margin			12.2	%			5.5	%			11.1	%			6.7	%
Deferred revenue adjustment due to acquisition (1)			—				1.2	%			0.2	%			0.8	%
Restructuring charges, net (2)			1.5	%			0.6	%			2.2	%			2.5	%
Integration/acquisition costs (3)			0.9	%			2.8	%			1.4	%			3.5	%
Separation costs (4)			0.2	%			—				0.1	%			0.1	%
Venezuelan foreign currency loss (6)			—				3.4	%			—				1.0	%
Adjusted EBITDA margin			14.8	%			13.5	%			15.0	%			14.6	%
Net income attributable to Korn/Ferry International		$	26,924			$	5,855			$	84,181			$	30,913
Deferred revenue adjustment due to acquisition (1)			—				5,096				3,535				10,967
Restructuring charges, net (2)			6,279				2,436				34,600				33,013
Integration/acquisition costs (3)			3,702				11,594				22,379				45,409
Separation costs (4)			609				—				609				744
Write-off of debt issuance costs (5)			—				—				954				—
Venezuelan foreign currency loss (6)			—				13,720				—				13,720
Tax effect on the above items (7)			(2,364	)			(5,846	)			(17,438	)			(23,819	)
Adjusted net income attributable to Korn/Ferry International		$	35,150			$	32,855			$	128,820			$	110,947
Basic earnings per common share		$	0.48			$	0.10			$	1.48			$	0.58
Deferred revenue adjustment due to acquisition (1)			—				0.09				0.06				0.20
Restructuring charges, net (2)			0.10				0.04				0.61				0.63
Integration/acquisition costs (3)			0.07				0.21				0.40				0.87
Separation costs (4)			0.01				—				0.01				0.01
Write-off of debt issuance costs (5)			—				—				0.02				—
Venezuelan foreign currency loss (6)			—				0.24				—				0.26
Tax effect on the above items (7)			(0.04	)			(0.10	)			(0.31	)			(0.45	)
Adjusted basic earnings per share		$	0.62			$	0.58			$	2.27			$	2.10
Diluted earnings per common share		$	0.47			$	0.10			$	1.47			$	0.58
Deferred revenue adjustment due to acquisition (1)			—				0.09				0.06				0.20
Restructuring charges, net (2)			0.10				0.04				0.60				0.62
Integration/acquisition costs (3)			0.07				0.21				0.39				0.86
Separation costs (4)			0.01				—				0.01				0.01
Write-off of debt issuance costs (5)			—				—				0.02				—
Venezuelan foreign currency loss (6)			—				0.24				—				0.26
Tax effect on the above items (7)			(0.03	)			(0.10	)			(0.31	)			(0.45	)
Adjusted diluted earnings per share		$	0.62			$	0.58			$	2.24			$	2.08

Explanation of Non-GAAP Adjustments

(1)

Increase in fee revenue relating to the deferred revenue recorded on the opening balance sheet of Hay Group, required by fair value accounting. The adjustment is included in the Hay Group segment. On a GAAP basis, Hay Group fee revenue was $185.1 million and $724.2 million during the three months and the year ended April 31, 2017 and $187.7 million and $471.1 million during the three months and year ended April 31, 2016, respectively. On an adjusted basis, Hay Group fee revenue was $185.1 million and $727.7 million during the three months and the year ended April 30, 2017 and $192.8 million and $482.1 million during the three months and year ended April 31, 2016, respectively.

(2)	Restructuring plan implemented in order to rationalize our cost structure by eliminating redundant positions and consolidating office space due to the acquisition of Legacy Hay on December 1, 2015.

(3)	Costs associated with completing the acquisition of Legacy Hay, such as legal and professional fees, and the on-going integration expenses to combine the companies.

(4)	Certain senior management separation charges.

(5)	Write-off of debt issuance costs as a result of replacing our prior Credit Agreement with a new senior secured Credit Agreement.

(6)	Foreign currency loss associated with the devaluation of the Venezuelan currency.

(7)	Tax effect on deferred revenue adjustment associated with the acquisition of Legacy Hay, restructuring charges, net, integration/acquisition costs, separation costs, write-off of debt issuance costs and foreign currency loss associated with the devaluation of the Venezuelan currency.

---

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (LOSS) (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

 

		Three Months Ended April 30, 2017
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
Fee revenue		$	97,264			$	37,210			$	20,061			$	7,731			$	162,266			$	185,100			$	58,699			$	—			$	406,065
Total revenue		$	100,501			$	38,392			$	20,299			$	7,767			$	166,959			$	188,711			$	63,917			$	—			$	419,587
Net income attributable to Korn/Ferry International																																		$	26,924
Net income attributable to noncontrolling interest																																			812
Other income, net																																			(4,240	)
Interest expense, net																																			2,052
Equity in earnings of unconsolidated subsidiaries, net																																			(112	)
Income tax provision																																			7,398
Operating income (loss)		$	21,092			$	6,805			$	2,364			$	302			$	30,563			$	16,114			$	8,137			$	(21,980	)			32,834
Depreciation and amortization			996				364				303				216				1,879				8,160				737				1,514				12,290
Other income (loss), net			332				22				129				526				1,009				(5	)			(87	)			3,323				4,240
Equity in earnings of unconsolidated subsidiaries, net			112				—				—				—				112				—				—				—				112
EBITDA			22,532				7,191				2,796				1,044				33,563				24,269				8,787				(17,143	)			49,476
EBITDA margin			23.2	%			19.3	%			13.9	%			13.5	%			20.7	%			13.1	%			15.0	%							12.2	%
Restructuring charges, net			13				501				(20	)			104				598				5,656				21				4				6,279
Integration/acquisition costs			—				—				—				—				—				2,447				—				1,255				3,702
Separation costs			—				—				—				—				—				609				—				—				609
Adjusted EBITDA		$	22,545			$	7,692			$	2,776			$	1,148			$	34,161			$	32,981			$	8,808			$	(15,884	)		$	60,066
Adjusted EBITDA margin			23.2	%			20.7	%			13.8	%			14.8	%			21.1	%			17.8	%			15.0	%							14.8	%
		Three Months Ended April 30, 2016
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
Fee revenue		$	94,678			$	36,161			$	21,199			$	7,661			$	159,699			$	187,795			$	52,466			$	—			$	399,960
Deferred revenue adjustment due to acquisition			—				—				—				—				—				5,096				—				—				5,096
Adjusted fee revenue		$	94,678			$	36,161			$	21,199			$	7,661			$	159,699			$	192,891			$	52,466			$	—			$	405,056
Total revenue		$	98,562			$	37,188			$	21,996			$	7,686			$	165,432			$	194,706			$	57,023			$	—			$	417,161
Net loss attributable to Korn/Ferry International																																		$	5,855
Net income attributable to noncontrolling interest																																			520
Other income, net																																			(5,645	)
Interest income, net																																			(1,452	)
Equity in earnings of unconsolidated subsidiaries, net																																			(185	)
Income tax provision																																			5,749
Operating income (loss)		$	19,857			$	5,695			$	2,904			$	(5,498	)		$	22,958			$	2,871			$	6,987			$	(27,974	)			4,842
Depreciation and amortization			796				219				237				88				1,340				7,796				614				1,537				11,287
Other income (loss), net			278				206				123				31				638				(131	)			277				4,861				5,645
Equity in earnings of unconsolidated subsidiaries, net			185				—				—				—				185				—				—				—				185
EBITDA			21,116				6,120				3,264				(5,379	)			25,121				10,536				7,878				(21,576	)			21,959
EBITDA margin			22.3	%			16.9	%			15.4	%			(70.2	%)			15.7	%			5.6	%			15.0	%							5.5	%
Restructuring charges, net			15				(59	)			—				(6	)			(50	)			2,441				49				(4	)			2,436
Integration/acquisition costs			—				—				—				—				—				5,555				—				6,039				11,594
Deferred revenue adjustment due to acquisition			—				—				—				—				—				5,096				—				—				5,096
Venezuelan foreign currency loss			—				—				—				6,635				6,635				7,085				—				—				13,720
Adjusted EBITDA		$	21,131			$	6,061			$	3,264			$	1,250			$	31,706			$	30,713			$	7,927			$	(15,541	)		$	54,805
Adjusted EBITDA margin			22.3	%			16.8	%			15.4	%			16.3	%			19.9	%			15.9	%			15.0	%							13.5	%

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KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

 

		Year Ended April 30, 2017
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
Fee revenue		$	356,625			$	146,506			$	80,169			$	34,376			$	617,676			$	724,186			$	223,659			$	—			$	1,565,521
Deferred revenue adjustment due to acquisition			—				—				—				—				—				3,535				—				—				3,535
Adjusted fee revenue		$	356,625			$	146,506			$	80,169			$	34,376			$	617,676			$	727,721			$	223,659			$	—			$	1,569,056
Total revenue		$	369,803			$	150,113			$	81,744			$	34,533			$	636,193			$	741,533			$	243,943			$	—			$	1,621,669
Net income attributable to Korn/Ferry International																																		$	84,181
Net income attributable to noncontrolling interest																																			3,057
Other income, net																																			(11,820	)
Interest expense, net																																			10,251
Equity in earnings of unconsolidated subsidiaries, net																																			(333	)
Income tax provision																																			29,104
Operating income (loss)		$	81,550			$	27,854			$	8,580			$	6,268			$	124,252			$	47,302			$	29,986			$	(87,100	)			114,440
Depreciation and amortization			3,812				1,030				1,060				483				6,385				32,262				2,818				5,795				47,260
Other income (loss), net			844				(15	)			300				684				1,813				341				(91	)			9,757				11,820
Equity in earnings of unconsolidated subsidiaries, net			333				—				—				—				333				—				—				—				333
EBITDA			86,539				28,869				9,940				7,435				132,783				79,905				32,713				(71,548	)			173,853
EBITDA margin			24.3	%			19.7	%			12.4	%			21.6	%			21.5	%			11.0	%			14.6	%							11.1	%
Restructuring charges, net			1,719				629				1,495				773				4,616				29,663				101				220				34,600
Integration/acquisition costs			—				—				—				—				—				14,440				—				7,939				22,379
Deferred revenue adjustment due to acquisition			—				—				—				—				—				3,535				—				—				3,535
Separation costs			—				—				—				—				—				609				—				—				609
Adjusted EBITDA		$	88,258			$	29,498			$	11,435			$	8,208			$	137,399			$	128,152			$	32,814			$	(63,389	)		$	234,976
Adjusted EBITDA margin			24.7	%			20.1	%			14.3	%			23.9	%			22.2	%			17.6	%			14.7	%							15.0	%
		Year Ended April 30, 2016
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
Fee revenue		$	371,345			$	144,319			$	80,506			$	26,744			$	622,914			$	471,145			$	198,053			$	—			$	1,292,112
Deferred revenue adjustment due to acquisition			—				—				—				—				—				10,967				—				—				10,967
Adjusted fee revenue		$	371,345			$	144,319			$	80,506			$	26,744			$	622,914			$	482,112			$	198,053			$	—			$	1,303,079
Total revenue		$	386,256			$	148,285			$	83,206			$	26,781			$	644,528			$	488,217			$	213,969			$	—			$	1,346,714
Net income attributable to Korn/Ferry International																																		$	30,913
Net income attributable to noncontrolling interest																																			520
Other loss, net																																			4,167
Interest income, net																																			(237	)
Equity in earnings of unconsolidated subsidiaries, net																																			(1,631	)
Income tax provision																																			18,960
Operating income (loss)		$	100,381			$	20,607			$	12,572			$	(1,854	)		$	131,706			$	(3,415	)		$	26,702			$	(102,301	)			52,692
Depreciation and amortization			3,267				1,029				941				312				5,549				21,854				2,386				6,431				36,220
Other (loss) income, net			(147	)			433				21				312				619				(868	)			364				(4,282	)			(4,167	)
Equity in earnings of unconsolidated subsidiaries, net			437				—				—				—				437				—				—				1,194				1,631
EBITDA			103,938				22,069				13,534				(1,230	)			138,311				17,571				29,452				(98,958	)			86,376
EBITDA margin			28.0	%			15.3	%			16.8	%			(4.6	%)			22.2	%			3.7	%			14.9	%							6.7	%
Restructuring charges, net			499				5,807				577				322				7,205				25,682				49				77				33,013
Integration/acquisition costs			—				—				—				—				—				17,607				—				27,802				45,409
Venezuelan foreign currency loss			—				—				—				6,635				6,635				7,085				—				—				13,720
Deferred revenue adjustment due to acquisition			—				—				—				—				—				10,967				—				—				10,967
Separation costs			—				—				—				—				—				—				—				744				744
Adjusted EBITDA		$	104,437			$	27,876			$	14,111			$	5,727			$	152,151			$	78,912			$	29,501			$	(70,335	)		$	190,229
Adjusted EBITDA margin			28.1	%			19.3	%			17.5	%			21.4	%			24.4	%			16.4	%			14.9	%							14.6	%