KFY

KORN FERRY

Industrials | Mid Cap

$1.30

EPS Forecast

$683.6

Revenue Forecast

The company already released most recent quarter's earnings. We will publish our AI's next quarter's forecast around 2025-01-31
EX-99.1 2 kfy-ex991_6.htm EX-99.1 kfy-ex991_6.htm

Exhibit 99.1

 

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

  

Contacts:

 

  

Investor Relations: Gregg Kvochak, (310) 556-8550

 

  

Media: Dan Gugler, (310) 226-2645

 

Korn Ferry Announces Third Quarter Fiscal 2020

Results of Operations

 

Highlights

 

Korn Ferry reports fee revenue of $515.3 million in Q3 FY’20.

 

Net income attributable to Korn Ferry was $20.0 million in Q3 FY’20.

 

Operating income was $31.6 million in Q3 FY’20 with an operating margin of 6.1%.  Adjusted EBITDA was $78.1 million with an Adjusted EBITDA margin of 15.2%.

 

Q3 FY’20 diluted earnings per share and adjusted diluted earnings per share was $0.36 and $0.75, respectively.

 

During the third quarter, the Company completed the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution (“acquired companies”) that are part of a newly branded reporting segment— Korn Ferry Digital (formerly the Products Group).

 

During the third quarter, the Company renegotiated its existing revolving line of credit on more favorable terms and conditions and repaid the outstanding balance using proceeds from the issuance of $400 million, 4.625% Senior Notes.

 

The Company continued with its balanced approach to capital allocation, buying back 0.2 million shares or $6.1 million of stock during the quarter and declaring a quarterly dividend of $0.10 per share on March 10, 2020 payable on April 15, 2020 to stockholders of record on March 26, 2020.

 

Los Angeles, CA, March 10, 2020 Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced third quarter fee revenue of $515.3 million.  Third quarter diluted earnings per share was $0.36 and adjusted diluted earnings per share was $0.75.  Adjusted diluted earnings per share for the third quarter excludes an aggregate of $27.4 million, or $0.39 per share, of restructuring charges, net, and integration/acquisition costs, both associated with the recently completed acquisition of the acquired companies, separation costs and debt refinancing costs.

“For Korn Ferry’s recently completed third quarter, we generated fee revenue of approximately $515 million (up 8.6 percent using actual rates; up 9.4 percent on a constant currency basis) with net income attributable to Korn Ferry of $20 million and solid Adjusted EBITDA of $78 million,” said Gary D, Burnison, CEO, Korn Ferry.

“Organically and through M&A, our global scope and capability continues to expand. Today Korn Ferry is much more diversified and balanced, with almost two-thirds of our fee revenue generated outside of our historical core Executive Search business,” added Burnison. “We believe the expansion of our business into larger addressable markets offers higher growth potential and more durable and visible revenue streams. More recently, the acquisitions of Miller Heiman, Strategy Execution and AchieveForum have added professional development and upskill capabilities to our Korn Ferry Digital business, giving us a bigger presence in the learning and development space. Indeed, today’s Korn Ferry is the firm that synchronizes a client’s talent and strategy which will enable individuals, teams and organizations to exceed their potential. Finally, as we manage our way through the global COVID-19 situation, our unwavering commitment to protecting the health and safety of our colleagues, as well as our focus on our clients' success remain, as always, our top priorities.”

 

 

1


 

 

Selected Financial Results

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

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

515.3

 

 

$

474.5

 

 

$

1,492.3

 

 

$

1,435.3

 

Total revenue

 

$

528.0

 

 

$

486.2

 

 

$

1,528.4

 

 

$

1,471.3

 

Operating income

 

$

31.6

 

 

$

62.7

 

 

$

153.8

 

 

$

78.6

 

Operating margin

 

 

6.1

%

 

 

13.2

%

 

 

10.3

%

 

 

5.5

%

Net income attributable to Korn Ferry

 

$

20.0

 

 

$

45.0

 

 

$

105.7

 

 

$

52.4

 

Basic earnings per share

 

$

0.37

 

 

$

0.81

 

 

$

1.92

 

 

$

0.94

 

Diluted earnings per share

 

$

0.36

 

 

$

0.80

 

 

$

1.90

 

 

$

0.92

 

 

EBITDA Results (b):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

51.5

 

 

$

76.9

 

 

$

202.2

 

 

$

115.5

 

EBITDA margin

 

 

10.0

%

 

 

16.2

%

 

 

13.5

%

 

 

8.0

%

 

Adjusted Results (c):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (b)

 

$

78.1

 

 

$

77.7

 

 

$

231.4

 

 

$

228.8

 

Adjusted EBITDA margin (b)

 

 

15.2

%

 

 

16.4

%

 

 

15.5

%

 

 

15.9

%

Adjusted net income attributable to Korn Ferry

 

$

41.0

 

 

$

45.8

 

 

$

128.7

 

 

$

138.2

 

Adjusted basic earnings per share

 

$

0.75

 

 

$

0.82

 

 

$

2.33

 

 

$

2.47

 

Adjusted diluted earnings per share

 

$

0.75

 

 

$

0.81

 

 

$

2.31

 

 

$

2.43

 

___________

(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 integration/acquisition costs, restructuring charges, net, separation costs and tradename write-offs. 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):

 

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Integration/acquisition costs

 

$

6.7

 

 

$

0.8

 

 

$

9.3

 

 

$

6.7

 

Restructuring charges, net

 

$

18.1

 

 

$

 

 

$

18.1

 

 

$

 

Separation costs

 

$

1.8

 

 

$

 

 

$

1.8

 

 

$

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

106.6

 

Debt refinancing costs

 

$

0.8

 

 

$

 

 

$

0.8

 

 

$

 

 

Fee revenue was $515.3 million in Q3 FY’20, an increase of 9% (9% increase on a constant currency basis) compared to Q3 FY’19.  The increase in fee revenue was primarily due to the fee revenue generated by the acquired companies and the increase in fee revenue in RPO and Professional Search, partially offset by a decline in Executive Search.

Net income attributable to Korn Ferry was $20.0 million in Q3 FY’20 as compared to $45.0 million in Q3 FY’19.  The decrease in net income attributable to Korn Ferry was primarily due to restructuring charges, net and integration/acquisition costs, both associated with the acquisition of the acquired companies, management separation costs, and an increase in interest expense related to the newly issued 4.625% Senior Notes.

Operating margin was 6.1% in Q3 FY’20 compared to 13.2% in the year-ago quarter.  

Adjusted EBITDA margin was 15.2%, compared to 16.4% in the year-ago quarter.

2


 

Results by Segment

Selected Consulting Data(a)

(dollars in millions) (b)

 

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

140.5

 

 

$

139.0

 

 

$

422.1

 

 

$

424.0

 

Total revenue

 

$

144.3

 

 

$

143.2

 

 

$

433.8

 

 

$

437.2

 

Operating income (loss)

 

$

2.7

 

 

$

11.8

 

 

$

24.3

 

 

$

(47.4

)

Operating margin

 

 

1.9

%

 

 

8.5

%

 

 

5.8

%

 

 

(11.2

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants and execution staff (c)

 

 

1,792

 

 

 

1,832

 

 

 

1,792

 

 

 

1,832

 

Hours worked in thousands (d)

 

428

 

 

406

 

 

 

1,344

 

 

 

1,263

 

Average billed rate (e)

 

$

328

 

 

$

342

 

 

$

314

 

 

$

336

 

 

EBITDA Results (f):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

7.6

 

 

$

16.4

 

 

$

38.9

 

 

$

(34.1

)

EBITDA margin

 

 

5.4

%

 

 

11.8

%

 

 

9.2

%

 

 

(8.0

%)

 

Adjusted Results (g):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (f)

 

$

18.7

 

 

$

17.0

 

 

$

50.0

 

 

$

48.2

 

Adjusted EBITDA margin (f)

 

 

13.3

%

 

 

12.2

%

 

 

11.8

%

 

 

11.4

%

 ___________

(a)

In the third quarter of fiscal 2020, the Company changed the composition of its global segments.  Consulting segment represents the consulting business that was previously included in the Advisory segment. Segment data for Q3 FY’19 and YTD FY19 have been recast to reflect the division of the Advisory segment into the Consulting and Digital segments.

(b)

Numbers may not total due to rounding.

(c)

Represents number of employees originating, delivering and executing consulting services.

(d)

The number of hours worked by consultant and execution staff during the period.

(e)

The amount of fee revenue divided by the number of hours worked by consultants and executive staff.

(f)

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

(g)

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

 

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Integration/acquisition costs

 

$

 

 

$

0.7

 

 

$

 

 

$

5.3

 

Restructuring charges, net

 

$

11.1

 

 

$

 

 

$

11.1

 

 

$

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

77.0

 

 

Fee revenue was $140.5 million in Q3 FY’20 compared to $139.0 million in Q3 FY’19, an increase of $1.5 million or 1% (up 2% on a constant currency basis).

Operating income was $2.7 million in Q3 FY’20 with an operating margin of 1.9% compared to $11.8 million and an operating margin of 8.5%, respectively, in the year-ago quarter.  The decrease in operating income was primarily due to restructuring charges, net incurred in Q3 FY’20.

Adjusted EBITDA was $18.7 million in Q3 FY’20 with an Adjusted EBITDA margin of 13.3% compared to $17.0 million and 12.2%, respectively, in the year-ago quarter.


3


Selected Digital Data(a)

(dollars in millions) (b)

 

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

99.4

 

 

$

62.5

 

 

$

223.1

 

 

$

190.0

 

Total revenue

 

$

100.7

 

 

$

62.5

 

 

$

224.4

 

 

$

190.0

 

Operating income

 

$

8.5

 

 

$

17.5

 

 

$

41.0

 

 

$

23.1

 

Operating margin

 

 

8.5

%

 

 

28.0

%

 

 

18.4

%

 

 

12.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

464

 

 

 

370

 

 

 

464

 

 

 

370

 

Subscription & License fee revenue

 

$

21.3

 

 

$

14.2

 

 

$

52.7

 

 

$

42.6

 

 

EBITDA Results (c):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

14.5

 

 

$

21.0

 

 

$

54.7

 

 

$

33.1

 

EBITDA margin

 

 

14.6

%

 

 

33.6

%

 

 

24.5

%

 

 

17.4

%

 

Adjusted Results (d):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (c)

 

$

25.9

 

 

$

21.1

 

 

$

66.1

 

 

$

63.9

 

Adjusted EBITDA margin (c)

 

 

26.0

%

 

 

33.8

%

 

 

29.6

%

 

 

33.6

%

___________

 

(a)

In the third quarter of fiscal 2020, the Company changed the composition of its global segments.  Digital segment represents the products business that was previously included in the Advisory segment. Segment data for Q3 FY’19 and YTD FY19 have been recast to reflect the division of the Advisory segment into the Consulting and Digital segments.

(b)

Numbers may not total due to rounding.  

(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 adjust for the following (see attached reconciliations):

 

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Integration/acquisition costs

 

$

4.3

 

 

$

0.1

 

 

$

4.3

 

 

$

1.3

 

Restructuring charges, net

 

$

7.0

 

 

$

 

 

$

7.0

 

 

$

 

Tradename write-offs

 

$

 

 

$

 

 

$

 

 

$

29.6

 

 

Fee revenue was $99.4 million in Q3 FY’20 compared to $62.5 million in Q3 FY’19, an increase of $36.9 million or 59% (up  61% on a constant currency basis).  The increase in fee revenue was primarily due to fee revenue generated by the acquired companies.

Operating income was $8.5 million in Q3 FY’20 with an operating margin of 8.5% compared to $17.5 million and an operating margin of 28.0% in the year-ago quarter.  The decrease in operating income was due to restructuring charges, net incurred in Q3 FY’20 and an increase in integration/acquisition costs incurred in Q3 FY’20, both associated with the acquisition of the acquired companies, compared to the year-ago quarter.

Adjusted EBITDA was $25.9 million in Q3 FY’20 with an Adjusted EBITDA margin of 26.0% compared to $21.1 million and 33.8%, respectively, in the year-ago quarter.

 

4


 

Selected Executive Search Data

(dollars in millions) (a)

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

183.6

 

 

$

193.4

 

 

$

564.6

 

 

$

584.0

 

Total revenue

 

$

188.0

 

 

$

198.0

 

 

$

578.0

 

 

$

598.0

 

Operating income

 

$

32.7

 

 

$

44.7

 

 

$

119.6

 

 

$

137.0

 

Operating margin

 

 

17.8

%

 

 

23.1

%

 

 

21.2

%

 

 

23.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending number of consultants

 

 

582

 

 

 

552

 

 

 

582

 

 

 

552

 

Average number of consultants

 

 

583

 

 

 

554

 

 

 

573

 

 

 

546

 

Engagements billed

 

 

3,767

 

 

 

3,849

 

 

 

8,077

 

 

 

8,201

 

New engagements (b)

 

 

1,565

 

 

 

1,608

 

 

 

4,835

 

 

 

5,073

 

 

EBITDA Results (c):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA

 

$

38.9

 

 

$

48.2

 

 

$

131.8

 

 

$

144.1

 

EBITDA margin

 

 

21.2

%

 

 

24.9

%

 

 

23.3

%

 

 

24.7

%

 

Adjusted Results (d):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Adjusted EBITDA (c)

 

$

40.7

 

 

$

48.2

 

 

$

133.6

 

 

$

144.1

 

Adjusted EBITDA margin (c)

 

 

22.1

%

 

 

24.9

%

 

 

23.7

%

 

 

24.7

%

________

(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 adjust for the following (see attached reconciliations):

 

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Separation costs

 

$

1.8

 

 

$

 

 

$

1.8

 

 

$

 

 

Fee revenue was $183.6 million and $193.4 million in Q3 FY’20 and Q3 FY’19, respectively, a decrease of $9.8 million or 5% (5% decrease on a constant currency basis).  The decrease in fee revenue was attributable to a decline in fee revenue in all regions.

Operating income was $32.7 million in Q3 FY’20 compared to $44.7 million in Q3 FY’19.  Operating margin was 17.8% in Q3 FY’20 compared to 23.1% in the year-ago quarter.  The decrease in operating income was mainly due to a decrease in fee revenue and an increase in compensation and benefits expense due to management separation costs incurred in Q3 FY’20.

Adjusted EBITDA was $40.7 million in Q3 FY’20 with an Adjusted EBITDA margin of 22.1% compared to $48.2 million and 24.9%, respectively, in the year-ago quarter.

 

5


 

Selected RPO and Professional Search Data

(dollars in millions) (a)

 

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

Fee revenue

 

$

91.9

 

 

$

79.6

 

 

$

282.4

 

 

$

237.4

 

Total revenue

 

$

95.0

 

 

$

82.5

 

 

$

292.2

 

 

$

246.1

 

Operating income

 

$

14.1

 

 

$

12.2

 

 

$

44.3

 

 

$

36.3

 

Operating margin

 

 

15.4

%

 

 

15.3

%

 

 

15.7

%

 

 

15.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engagements billed (b)

 

 

1,375

 

 

 

1,296

 

 

 

3,030

 

 

 

2,809

 

New engagements (c)

 

 

711

 

 

 

652

 

 

 

2,171

 

 

 

2,154

 

 

EBITDA and Adjusted Results (d):

 

Third Quarter

 

 

Year to Date

 

 

 

FY’20

 

 

FY’19

 

 

FY’20

 

 

FY’19

 

EBITDA and Adjusted EBITDA

 

$

15.2

 

 

$

13.1

 

 

$

47.5

 

 

$

38.8

 

EBITDA and Adjusted EBITDA margin

 

 

16.6

%

 

 

16.4

%

 

 

16.8

%

 

 

16.3

%

___________

(a)

Numbers may not total due to rounding.

(b)

Represents professional search engagements billed.

(c)

Represents new professional search engagements opened in the respective period.

(d)

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

 

Fee revenue was $91.9 million in Q3 FY’20, an increase of $12.3 million or 15% (16% increase on a constant currency basis), compared to the year-ago quarter.  The higher fee revenue was driven by an increase in fee revenue in recruitment process outsourcing and professional search of $9.1 million and $3.2 million, respectively, in Q3 FY’20 compared to Q3 FY’19.

Operating income was $14.1 million in Q3 FY’20, an increase of $1.9 million compared to Q3 FY’19 operating income of $12.2 million.  Operating margin was 15.4% in the current quarter compared to 15.3% in the year-ago quarter.  The increase in operating income was due to higher fee revenue in Q3 FY’20 compared to Q3 FY’19, partially offset by an increase in compensation and benefits expense driven by a 24% increase in average headcount.

EBITDA was $15.2 million during Q3 FY’20, an increase of $2.1 million compared to Q3 FY’19.  EBITDA margin was 16.6% in Q3 FY’20 and 16.4% in Q3 FY’19.

6


 

Outlook

The uncertainty caused by the coronavirus, primarily due to the largescale efforts being taken to contain its continued spread and the number of conflicting and rapidly changing datapoints regarding the impact of the virus on society, has clouded the near-term predictability of our business.  In recent weeks and days, out of an abundance of caution, select governments and companies have implemented social distancing - limiting either travel or in person individual or group face-to-face interaction.  The extent to which further, incremental measures are put in place or additional authoritative bodies adopt such measures is a major unknown.  The measures taken to date will most certainly impact our business for the fiscal fourth quarter and potentially beyond and due to the rapidly changing nature of this crisis, combined with the lack of visibility with respect to further measures to be taken, it is too difficult for us to accurately assess and quantify the impact at this point.  Consequently, we will not be issuing any specific revenue and earnings guidance for the fourth quarter.  We will reassess the suspension of our guidance once we are comfortable that the coronavirus uncertainties have passed.

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.

7


 

About Korn Ferry

Korn Ferry is a global organizational consulting firm.  We help clients synchronize strategy and talent to drive superior performance.  We work with organizations to design their structures, roles, and responsibilities.  We help them hire the right people to bring their strategy to life.  And we advise them on how to reward, develop, and motivate their people.  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 as well as the expected benefits of the acquisition of the acquired companies (as defined below, the timing and expected benefits of our recently adopted restructuring plan and the potential negative impact of the coronavirus (COVID-19) outbreak on our business, employees, customers and our ability to provide services in affected regions.  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, changes in demand for our services as a result of automation, the dependence on and costs of attracting and retaining qualified and experienced consultants, our ability to maintain relationships with customers and suppliers and retain key employees, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, the portability of client relationships, consolidation of the industries we serve, 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, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, the utilization and billing rates of our consultants, dependence on third parties for the execution of critical functions, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, technical guidance relating to the Tax Act, impairment of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our indebtedness, the phase-out of the London Interbank Offered Rate, the potential negative impact of the coronavirus (COVID-19) outbreak on our business, employees, customers and our ability to provide services in affected regions, expansion of social media platforms, seasonality, ability to effect acquisition and integrate recently acquired companies, including those of Miller Heiman Group, AchieveForum, and Strategy Execution (collectively, the “acquired companies”); the ability to recognize the anticipated benefits of the acquisition of the acquired companies; the costs related to the acquisition of the acquired companies; employment liability risk, the impact of rebranding on the Company’s products and services; the expected timing of the Company’s rebranding and entity rationalization plan, and the costs of the Company’s rebranding and entity rationalization plan.  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 net income attributable to Korn Ferry, adjusted to exclude integration/acquisition costs, restructuring charges, separation costs, tradename write-offs, and debt refinancing costs, net of income tax effect;

 

Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, restructuring charges, separation costs, tradename write-offs, and debt refinancing costs, net of income tax effect;

 

Constant currency (calculated using a quarterly average) percentages that represent the percentage change that would have resulted had exchange rates in the prior period been the same as those in effect in the current period;

 

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

 

Adjusted EBITDA, which is EBITDA further adjusted to exclude integration/acquisition costs, restructuring charges, separation costs and tradename write-offs 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.

8


 

 

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 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, which are described in the footnotes in the attached reconciliations, represent 1) costs we incurred to acquire and integrate a portion of our Digital business, 2) charges we incurred to restructure the Company due to acquisition of the acquired companies, 3) separation costs, 4) tradename write-offs associated with the rebranding plan initiated by Korn Ferry and 5) debt refinancing costs.  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.  Adjusted net income attributable to Korn Ferry, adjusted basic and diluted earnings per share and Adjusted EBITDA, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the Company’s operating results.  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 percentages, 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]

 

 

9


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 31,

 

 

January 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

Fee revenue

 

$

515,325

 

 

$

474,504

 

 

$

1,492,263

 

 

$

1,435,277

 

Reimbursed out-of-pocket engagement expenses

 

 

12,654

 

 

 

11,668

 

 

 

36,091

 

 

 

36,050

 

           Total revenue

 

 

527,979

 

 

 

486,172

 

 

 

1,528,354

 

 

 

1,471,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

348,597

 

 

 

321,835

 

 

 

1,014,475

 

 

 

979,575

 

General and administrative expenses

 

 

71,355

 

 

 

61,179

 

 

 

199,171

 

 

 

287,641

 

Reimbursed expenses

 

 

12,654

 

 

 

11,668

 

 

 

36,091

 

 

 

36,050

 

Cost of services

 

 

30,822

 

 

 

17,066

 

 

 

66,371

 

 

 

55,020

 

Depreciation and amortization

 

 

14,863

 

 

 

11,741

 

 

 

40,355

 

 

 

34,490

 

Restructuring charges, net

 

 

18,093

 

 

 

-

 

 

 

18,093

 

 

 

-

 

           Total operating expenses

 

 

496,384

 

 

 

423,489

 

 

 

1,374,556

 

 

 

1,392,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

31,595

 

 

 

62,683

 

 

 

153,798

 

 

 

78,551

 

Other income, net

 

 

5,055

 

 

 

2,463

 

 

 

8,014

 

 

 

2,483

 

Interest expense, net

 

 

(6,919

)

 

 

(4,282

)

 

 

(15,186

)

 

 

(12,722

)

         Income before provision for income taxes

 

 

29,731

 

 

 

60,864

 

 

 

146,626

 

 

 

68,312

 

Income tax provision

 

 

8,775

 

 

 

15,420

 

 

 

38,988

 

 

 

14,143

 

Net income

 

 

20,956

 

 

 

45,444

 

 

 

107,638

 

 

 

54,169

 

           Net income attributable to noncontrolling interest

 

 

(963

)

 

 

(480

)

 

 

(1,890

)

 

 

(1,782

)

Net income attributable to Korn Ferry

 

$

19,993

 

 

$

44,964

 

 

$

105,748

 

 

$

52,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Korn Ferry:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

$

0.37

 

 

$

0.81

 

 

$

1.92

 

 

$

0.94

 

      Diluted

 

$

0.36

 

 

$

0.80

 

 

$

1.90

 

 

$

0.92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

 

53,999

 

 

 

55,233

 

 

 

54,611

 

 

 

55,358

 

      Diluted

 

 

54,264

 

 

 

55,753

 

 

 

55,006

 

 

 

56,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

$

0.10

 

 

$

0.10

 

 

$

0.30

 

 

$

0.30

 

 

 


KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

 

 

 

 

Three Months Ended January 31,

 

 

Nine Months Ended January 31,

 

 

 

 

2020

 

 

 

 

 

 

2019

 

 

% Change

 

 

2020

 

 

 

 

 

 

2019

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

$

140,525

 

 

 

 

 

 

$

139,029

 

 

 

1.1

%

 

$

422,103

 

 

 

 

 

 

$

423,958

 

 

 

(0.4

%)

Digital

 

 

99,389

 

 

 

 

 

 

 

62,473

 

 

 

59.1

%

 

 

223,097

 

 

 

 

 

 

 

190,008

 

 

 

17.4

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

106,888

 

 

 

 

 

 

 

114,215

 

 

 

(6.4

%)

 

 

332,428

 

 

 

 

 

 

 

342,175

 

 

 

(2.8

%)

 

EMEA

 

 

44,301

 

 

 

 

 

 

 

45,940

 

 

 

(3.6

%)

 

 

130,652

 

 

 

 

 

 

 

137,522

 

 

 

(5.0

%)

 

Asia Pacific

 

 

25,089

 

 

 

 

 

 

 

25,687

 

 

 

(2.3

%)

 

 

78,395

 

 

 

 

 

 

 

79,918

 

 

 

(1.9

%)

 

Latin America

 

 

7,283

 

 

 

 

 

 

 

7,554

 

 

 

(3.6

%)

 

 

23,140

 

 

 

 

 

 

 

24,339

 

 

 

(4.9

%)

Total Executive Search

 

 

183,561

 

 

 

 

 

 

 

193,396

 

 

 

(5.1

%)

 

 

564,615

 

 

 

 

 

 

 

583,954

 

 

 

(3.3

%)

RPO and Professional Search

 

 

91,850

 

 

 

 

 

 

 

79,606

 

 

 

15.4

%

 

 

282,448

 

 

 

 

 

 

 

237,357

 

 

 

19.0

%

 

Total fee revenue

 

 

515,325

 

 

 

 

 

 

 

474,504

 

 

 

8.6

%

 

 

1,492,263

 

 

 

 

 

 

 

1,435,277

 

 

 

4.0

%

Reimbursed out-of-pocket engagement expenses

 

 

12,654

 

 

 

 

 

 

 

11,668

 

 

 

8.5

%

 

 

36,091

 

 

 

 

 

 

 

36,050

 

 

 

0.1

%

 

Total revenue

 

$

527,979

 

 

 

 

 

 

$

486,172

 

 

 

8.6

%

 

$

1,528,354

 

 

 

 

 

 

$

1,471,327

 

 

 

3.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

 

 

 

 

 

Margin

 

Consulting

 

$

2,663

 

 

 

1.9

%

 

$

11,782

 

 

 

8.5

%

 

$

24,272

 

 

 

5.8

%

 

$

(47,431

)

 

 

(11.2

%)

Digital

 

 

8,463

 

 

 

8.5

%

 

 

17,497

 

 

 

28.0

%

 

 

41,036

 

 

 

18.4

%

 

 

23,057

 

 

 

12.1

%

Executive Search:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

21,808

 

 

 

20.4

%

 

 

30,596

 

 

 

26.8

%

 

 

80,254

 

 

 

24.1

%

 

 

92,438

 

 

 

27.0

%

 

EMEA

 

 

4,644

 

 

 

10.5

%

 

 

7,525

 

 

 

16.4

%

 

 

18,466

 

 

 

14.1

%

 

 

21,813

 

 

 

15.9

%

 

Asia Pacific

 

 

5,070

 

 

 

20.2

%

 

 

5,929

 

 

 

23.1

%

 

 

17,866

 

 

 

22.8

%

 

 

19,337

 

 

 

24.2

%

 

Latin America

 

 

1,198

 

 

 

16.4

%

 

 

653

 

 

 

8.6

%

 

 

2,999

 

 

 

13.0

%

 

 

3,460

 

 

 

14.2

%

Total Executive Search

 

 

32,720

 

 

 

17.8

%

 

 

44,703

 

 

 

23.1

%

 

 

119,585

 

 

 

21.2

%

 

 

137,048

 

 

 

23.5

%

RPO and Professional Search

 

 

14,144

 

 

 

15.4

%

 

 

12,176

 

 

 

15.3

%

 

 

44,279

 

 

 

15.7

%

 

 

36,337

 

 

 

15.3

%

Corporate

 

 

(26,395

)

 

 

 

 

 

 

(23,475

)

 

 

 

 

 

 

(75,374

)

 

 

 

 

 

 

(70,460

)

 

 

 

 

 

Total operating income

 

$

31,595

 

 

 

6.1

%

 

$

62,683

 

 

 

13.2

%

 

$

153,798

 

 

 

10.3

%

 

$

78,551

 

 

 

5.5

%

 

 

 

 


KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

January 31,

 

 

April 30,

 

 

 

 

2020

 

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

563,708

 

 

$

626,360

 

Marketable securities

 

 

41,022

 

 

 

8,288

 

Receivables due from clients, net of allowance for doubtful accounts of $25,168 and $21,582 at January 31, 2020 and April 30, 2019, respectively

 

 

472,261

 

 

 

404,857

 

Income taxes and other receivables

 

 

38,656

 

 

 

26,767

 

Unearned compensation

 

 

46,386

 

 

 

42,003

 

Prepaid expenses and other assets

 

 

35,094

 

 

 

28,535

 

Total current assets

 

 

1,197,127

 

 

 

1,136,810

 

 

 

 

 

 

 

 

 

 

Marketable securities, non-current

 

 

143,789

 

 

 

132,463

 

Property and equipment, net

 

 

143,230

 

 

 

131,505

 

Operating lease right-of-use assets, net

 

 

209,236

 

 

 

-

 

Cash surrender value of company-owned life insurance policies, net of loans

 

 

145,305

 

 

 

126,000

 

Deferred income taxes

 

 

44,928

 

 

 

43,220

 

Goodwill

 

 

615,513

 

 

 

578,298

 

Intangible assets, net

 

 

116,882

 

 

 

82,948

 

Unearned compensation, non-current

 

 

93,934

 

 

 

80,924

 

Investments and other assets

 

 

29,705

 

 

 

22,684

 

Total assets

 

$

2,739,649

 

 

$

2,334,852

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

36,044

 

 

$

39,156

 

Income taxes payable

 

 

17,128

 

 

 

21,145

 

Compensation and benefits payable

 

 

258,789

 

 

 

328,610

 

Operating lease liability, current

 

 

53,592

 

 

 

-

 

Other accrued liabilities

 

 

194,838

 

 

 

162,047

 

Total current liabilities

 

 

560,391

 

 

 

550,958

 

 

 

 

 

 

 

 

 

 

Deferred compensation and other retirement plans

 

 

283,293

 

 

 

257,635

 

Operating lease liability, non-current

 

 

194,209

 

 

 

-

 

Long-term debt

 

 

393,986

 

 

 

222,878

 

Deferred tax liabilities

 

 

837

 

 

 

1,103

 

Other liabilities

 

 

29,280

 

 

 

58,891

 

Total liabilities

 

 

1,461,996

 

 

 

1,091,465

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock: $0.01 par value, 150,000 shares authorized, 73,210 and 72,442 shares issued and 55,258 and 56,431 shares outstanding at January 31, 2020 and April 30, 2019, respectively

 

 

604,609

 

 

 

656,463

 

Retained earnings

 

 

749,301

 

 

 

660,845

 

Accumulated other comprehensive loss, net

 

 

(78,810

)

 

 

(76,652

)

Total Korn Ferry stockholders' equity

 

 

1,275,100

 

 

 

1,240,656

 

Noncontrolling interest

 

 

2,553

 

 

 

2,731

 

Total stockholders' equity

 

 

1,277,653

 

 

 

1,243,387

 

Total liabilities and stockholders' equity

 

$

2,739,649

 

 

$

2,334,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 31,

 

 

January 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

Net income attributable to Korn Ferry

$

19,993

 

 

$

44,964

 

 

$

105,748

 

 

$

52,387

 

 

Net income attributable to non-controlling interest

 

963

 

 

 

480

 

 

 

1,890

 

 

 

1,782

 

 

Net income

 

20,956

 

 

 

45,444

 

 

 

107,638

 

 

 

54,169

 

 

Income tax provision

 

8,775

 

 

 

15,420

 

 

 

38,988

 

 

 

14,143

 

 

Income before provision for income taxes

 

29,731

 

 

 

60,864

 

 

 

146,626

 

 

 

68,312

 

 

Other income, net

 

(5,055

)

 

 

(2,463

)

 

 

(8,014

)

 

 

(2,483

)

 

Interest expense, net

 

6,919

 

 

 

4,282

 

 

 

15,186

 

 

 

12,722

 

 

Operating income

 

31,595

 

 

 

62,683

 

 

 

153,798

 

 

 

78,551

 

 

Depreciation and amortization

 

14,863

 

 

 

11,741

 

 

 

40,355

 

 

 

34,490

 

 

Other income, net

 

5,055

 

 

 

2,463

 

 

 

8,014

 

 

 

2,483

 

 

         EBITDA

 

51,513

 

 

 

76,887

 

 

 

202,167

 

 

 

115,524

 

 

Integration/acquisition costs (1)

 

6,704

 

 

 

804

 

 

 

9,319

 

 

 

6,746

 

 

Restructuring charges, net (2)

 

18,093

 

 

 

-

 

 

 

18,093

 

 

 

-

 

 

Separation costs (3)

 

1,783

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

106,555

 

 

         Adjusted EBITDA

$

78,093

 

 

$

77,691

 

 

$

231,362

 

 

$

228,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

6.1

%

 

 

13.2

%

 

 

10.3

%

 

 

5.5

%

 

Depreciation and amortization

 

2.9

%

 

 

2.5

%

 

 

2.7

%

 

 

2.4

%

 

Other income, net

 

1.0

%

 

 

0.5

%

 

 

0.5

%

 

 

0.1

%

 

         EBITDA margin

 

10.0

%

 

 

16.2

%

 

 

13.5

%

 

 

8.0

%

 

Integration/acquisition costs (1)

 

1.3

%

 

 

0.2

%

 

 

0.7

%

 

 

0.5

%

 

Restructuring charges, net (2)

 

3.5

%

 

 

-

 

 

 

1.2

%

 

 

-

 

 

Separation costs (3)

 

0.4

%

 

 

-

 

 

 

0.1

%

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

7.4

%

 

         Adjusted EBITDA margin

 

15.2

%

 

 

16.4

%

 

 

15.5

%

 

 

15.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

$

19,993

 

 

$

44,964

 

 

$

105,748

 

 

$

52,387

 

 

Integration/acquisition costs (1)

 

6,704

 

 

 

804

 

 

 

9,319

 

 

 

6,746

 

 

Restructuring charges, net (2)

 

18,093

 

 

 

-

 

 

 

18,093

 

 

 

-

 

 

Separation costs (3)

 

1,783

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

106,555

 

 

Debt refinancing costs (5)

 

828

 

 

 

-

 

 

 

828

 

 

 

-

 

 

Tax effect on the adjusted items (6)

 

(6,451

)

 

 

31

 

 

 

(7,119

)

 

 

(27,496

)

 

         Adjusted net income attributable to Korn Ferry

$

40,950

 

 

$

45,799

 

 

$

128,652

 

 

$

138,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.37

 

 

$

0.81

 

 

$

1.92

 

 

$

0.94

 

 

Integration/acquisition costs (1)

 

0.12

 

 

 

0.01

 

 

 

0.17

 

 

 

0.12

 

 

Restructuring charges, net (2)

 

0.34

 

 

 

-

 

 

 

0.33

 

 

 

-

 

 

Separation costs (3)

 

0.03

 

 

 

-

 

 

 

0.03

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

1.92

 

 

Debt refinancing costs (5)

 

0.02

 

 

 

-

 

 

 

0.02

 

 

 

-

 

 

Tax effect on the adjusted items (6)

 

(0.13

)

 

 

-

 

 

 

(0.14

)

 

 

(0.51

)

 

         Adjusted basic earnings per share

$

0.75

 

 

$

0.82

 

 

$

2.33

 

 

$

2.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

$

0.36

 

 

$

0.80

 

 

$

1.90

 

 

$

0.92

 

 

Integration/acquisition costs (1)

 

0.12

 

 

 

0.01

 

 

 

0.17

 

 

 

0.12

 

 

Restructuring charges, net (2)

 

0.34

 

 

 

-

 

 

 

0.33

 

 

 

-

 

 

Separation costs (3)

 

0.03

 

 

 

-

 

 

 

0.03

 

 

 

-

 

 

Tradename write-offs (4)

 

-

 

 

 

-

 

 

 

-

 

 

 

1.89

 

 

Debt refinancing costs (5)

 

0.02

 

 

 

-

 

 

 

0.02

 

 

 

-

 

 

Tax effect on the adjusted items (6)

 

(0.12

)

 

 

-

 

 

 

(0.14

)

 

 

(0.50

)

 

         Adjusted diluted earnings per share

$

0.75

 

 

$

0.81

 

 

$

2.31

 

 

$

2.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Explanation of Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Costs associated with current and previous acquisitions, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.

 

(2)

Restructuring plan implemented in order to rationalize our cost structure by eliminating redundant positions due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution on November 1, 2019.

 

(3)

Costs associated with certain senior management separation charges.

 

(4)

The Company implemented a plan to go to market under a single, master brand architecture to simplify the Company’s organizational structure by eliminating and/or consolidating certain legal entities and implemented a rebranding of the Company to offer the Company’s current products and services using the “Korn Ferry” name, branding and trademarks. As a result of this the Company was required under U.S. generally accepted accounting principles to record a one-time, non-cash tradename write-offs.

 

(5)

Costs to write-off debt issuance costs and interest rate swap as a result of replacing our prior Credit Agreement with a new senior secured Credit Agreement.

 

(6)

Tax effect on integration/acquisition costs, restructuring charges, net, separation costs, tradename write-offs and write-off of debt issuance cost.

 

 

 

 

 

 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

 

.

 

Three Months Ended January 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

140,525

 

 

$

99,389

 

 

$

106,888

 

 

$

44,301

 

 

$

25,089

 

 

$

7,283

 

 

$

183,561

 

 

$

91,850

 

 

$

-

 

 

$

515,325

 

Total revenue

 

$

144,298

 

 

$

100,663

 

 

$

110,230

 

 

$

45,077

 

 

$

25,365

 

 

$

7,351

 

 

$

188,023

 

 

$

94,995

 

 

$

-

 

 

$

527,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

19,993

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

963

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,055

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,919

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,775

 

Operating income (loss)

 

$

2,663

 

 

$

8,463

 

 

$

21,808

 

 

$

4,644

 

 

$

5,070

 

 

$

1,198

 

 

$

32,720

 

 

$

14,144

 

 

$

(26,395

)

 

 

31,595

 

Depreciation and amortization

 

 

4,417

 

 

 

5,832

 

 

 

847

 

 

 

422

 

 

 

329

 

 

 

295

 

 

 

1,893

 

 

 

979

 

 

 

1,742

 

 

 

14,863

 

Other income (loss), net

 

 

558

 

 

 

193

 

 

 

3,963

 

 

 

29

 

 

 

106

 

 

 

162

 

 

 

4,260

 

 

 

88

 

 

 

(44

)

 

 

5,055

 

EBITDA

 

 

7,638

 

 

 

14,488

 

 

 

26,618

 

 

 

5,095

 

 

 

5,505

 

 

 

1,655

 

 

 

38,873

 

 

 

15,211

 

 

 

(24,697

)

 

 

51,513

 

EBITDA margin

 

 

5.4

%

 

 

14.6

%

 

 

24.9

%

 

 

11.5

%

 

 

21.9

%

 

 

22.7

%

 

 

21.2

%

 

 

16.6

%

 

 

 

 

 

 

10.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration/acquisition costs

 

 

-

 

 

 

4,332

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,372

 

 

 

6,704

 

Restructuring, charges, net

 

 

11,061

 

 

 

7,032

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,093

 

Separation costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

 

-

 

 

 

1,783

 

Adjusted EBITDA

 

$

18,699

 

 

$

25,852

 

 

$

26,618

 

 

$

6,878

 

 

$

5,505

 

 

$

1,655

 

 

$

40,656

 

 

$

15,211

 

 

$

(22,325

)

 

$

78,093

 

Adjusted EBITDA margin

 

 

13.3

%

 

 

26.0

%

 

 

24.9

%

 

 

15.5

%

 

 

21.9

%

 

 

22.7

%

 

 

22.1

%

 

 

16.6

%

 

 

 

 

 

 

15.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended January 31, 2019

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

Fee revenue

 

$

139,029

 

 

$

62,473

 

 

$

114,215

 

 

$

45,940

 

 

$

25,687

 

 

$

7,554

 

 

$

193,396

 

 

$

79,606

 

 

$

-

 

 

$

474,504

 

Total revenue

 

$

143,204

 

 

$

62,473

 

 

$

117,725

 

 

$

46,639

 

 

$

26,046

 

 

$

7,573

 

 

$

197,983

 

 

$

82,512

 

 

$

-

 

 

$

486,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

44,964

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

480

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,463

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,282

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,420

 

Operating income (loss)

 

$

11,782

 

 

$

17,497

 

 

$

30,596

 

 

$

7,525

 

 

$

5,929

 

 

$

653

 

 

$

44,703

 

 

$

12,176

 

 

$

(23,475

)

 

 

62,683

 

Depreciation and amortization

 

 

4,001

 

 

 

3,306

 

 

 

970

 

 

 

402

 

 

 

338

 

 

 

97

 

 

 

1,807

 

 

 

803

 

 

 

1,824

 

 

 

11,741

 

Other income (loss), net

 

 

582

 

 

 

204

 

 

 

1,626

 

 

 

26

 

 

 

(134

)

 

 

133

 

 

 

1,651

 

 

 

77

 

 

 

(51

)

 

 

2,463

 

EBITDA

 

 

16,365

 

 

 

21,007

 

 

 

33,192

 

 

 

7,953

 

 

 

6,133

 

 

 

883

 

 

 

48,161

 

 

 

13,056

 

 

 

(21,702

)

 

 

76,887

 

EBITDA margin

 

 

11.8

%

 

 

33.6

%

 

 

29.1

%

 

 

17.3

%

 

 

23.9

%

 

 

11.7

%

 

 

24.9

%

 

 

16.4

%

 

 

 

 

 

 

16.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration/acquisition costs

 

 

650

 

 

 

127

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27

 

 

 

804

 

Adjusted EBITDA

 

$

17,015

 

 

$

21,134

 

 

$

33,192

 

 

$

7,953

 

 

$

6,133

 

 

$

883

 

 

$

48,161

 

 

$

13,056

 

 

$

(21,675

)

 

$

77,691

 

Adjusted EBITDA margin

 

 

12.2

%

 

 

33.8

%

 

 

29.1

%

 

 

17.3

%

 

 

23.9

%

 

 

11.7

%

 

 

24.9

%

 

 

16.4

%

 

 

 

 

 

 

16.4

%

 

 

 

 

 

 

 

 

 


KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

 

 

 

Nine Months Ended January 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

422,103

 

 

$

223,097

 

 

$

332,428

 

 

$

130,652

 

 

$

78,395

 

 

$

23,140

 

 

$

564,615

 

 

$

282,448

 

 

$

-

 

 

$

1,492,263

 

Total revenue

 

$

433,832

 

 

$

224,371

 

 

$

342,753

 

 

$

132,830

 

 

$

79,201

 

 

$

23,211

 

 

$

577,995

 

 

$

292,156

 

 

$

-

 

 

$

1,528,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

105,748

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,890

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,014

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,186

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,988

 

Operating income (loss)

 

$

24,272

 

 

$

41,036

 

 

$

80,254

 

 

$

18,466

 

 

$

17,866

 

 

$

2,999

 

 

$

119,585

 

 

$

44,279

 

 

$

(75,374

)

 

 

153,798

 

Depreciation and amortization

 

 

13,188

 

 

 

13,156

 

 

 

2,617

 

 

 

1,328

 

 

 

1,004

 

 

 

938

 

 

 

5,887

 

 

 

2,961

 

 

 

5,163

 

 

 

40,355

 

Other income (loss), net

 

 

1,469

 

 

 

528

 

 

 

5,740

 

 

 

148

 

 

 

193

 

 

 

249

 

 

 

6,330

 

 

 

216

 

 

 

(529

)

 

 

8,014

 

EBITDA

 

 

38,929

 

 

 

54,720

 

 

 

88,611

 

 

 

19,942

 

 

 

19,063

 

 

 

4,186

 

 

 

131,802

 

 

 

47,456

 

 

 

(70,740

)

 

 

202,167

 

EBITDA margin

 

 

9.2

%

 

 

24.5

%

 

 

26.7

%

 

 

15.3

%

 

 

24.3

%

 

 

18.1

%

 

 

23.3

%

 

 

16.8

%

 

 

 

 

 

 

13.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration/acquisition costs

 

 

-

 

 

 

4,332

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,987

 

 

 

9,319

 

Restructuring charges, net

 

 

11,061

 

 

 

7,032

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,093

 

Separation costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

 

-

 

 

 

1,783

 

 

 

-

 

 

 

-

 

 

 

1,783

 

Adjusted EBITDA

 

$

49,990

 

 

$

66,084

 

 

$

88,611

 

 

$

21,725

 

 

$

19,063

 

 

$

4,186

 

 

$

133,585

 

 

$

47,456

 

 

$

(65,753

)

 

$

231,362

 

Adjusted EBITDA margin

 

 

11.8

%

 

 

29.6

%

 

 

26.7

%

 

 

16.6

%

 

 

24.3

%

 

 

18.1

%

 

 

23.7

%

 

 

16.8

%

 

 

 

 

 

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended January 31, 2019

 

 

 

 

 

 

 

 

 

 

 

Executive Search

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

Digital

 

 

North America

 

 

EMEA

 

 

Asia Pacific

 

 

Latin America

 

 

Subtotal

 

 

RPO and Professional Search

 

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

423,958

 

 

$

190,008

 

 

$

342,175

 

 

$

137,522

 

 

$

79,918

 

 

$

24,339

 

 

$

583,954

 

 

$

237,357

 

 

$

-

 

 

$

1,435,277

 

Total revenue

 

$

437,235

 

 

$

190,008

 

 

$

352,804

 

 

$

140,024

 

 

$

80,817

 

 

$

24,388

 

 

$

598,033

 

 

$

246,051

 

 

$

-

 

 

$

1,471,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Korn Ferry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

52,387

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,782

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,483

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,722

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,143

 

Operating income (loss)

 

$

(47,431

)

 

$

23,057

 

 

$

92,438

 

 

$

21,813

 

 

$

19,337

 

 

$

3,460

 

 

$

137,048

 

 

$

36,337

 

 

$

(70,460

)

 

 

78,551

 

Depreciation and amortization

 

 

12,219

 

 

 

9,483

 

 

 

2,917

 

 

 

867

 

 

 

1,083

 

 

 

305

 

 

 

5,172

 

 

 

2,325

 

 

 

5,291

 

 

 

34,490

 

Other income (loss), net

 

 

1,107

 

 

 

514

 

 

 

1,146

 

 

 

388

 

 

 

118

 

 

 

263

 

 

 

1,915

 

 

 

103

 

 

 

(1,156

)

 

 

2,483

 

EBITDA

 

 

(34,105

)

 

 

33,054

 

 

 

96,501

 

 

 

23,068

 

 

 

20,538

 

 

 

4,028

 

 

 

144,135

 

 

 

38,765

 

 

 

(66,325

)

 

 

115,524

 

EBITDA margin

 

 

(8.0

%)

 

 

17.4

%

 

 

28.2

%

 

 

16.8

%

 

 

25.7

%

 

 

16.5

%

 

 

24.7

%

 

 

16.3

%

 

 

 

 

 

 

8.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration/acquisition costs

 

 

5,304

 

 

 

1,255

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

187

 

 

 

6,746

 

Tradename write-offs

 

 

76,967

 

 

 

29,588

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

106,555

 

Adjusted EBITDA

 

$

48,166

 

 

$

63,897

 

 

$

96,501

 

 

$

23,068

 

 

$

20,538

 

 

$

4,028

 

 

$

144,135

 

 

$

38,765

 

 

$

(66,138

)

 

$

228,825

 

Adjusted EBITDA margin

 

 

11.4

%

 

 

33.6

%

 

 

28.2

%

 

 

16.8

%

 

 

25.7

%

 

 

16.5

%

 

 

24.7

%

 

 

16.3

%

 

 

 

 

 

 

15.9

%