05.12.2019 22:05:00

Korn Ferry Announces Second Quarter Fiscal 2020 Results of Operations

LOS ANGELES, Dec. 5, 2019 /PRNewswire/ --

Highlights

  • Korn Ferry reports fee revenue of $492.4 million in Q2 FY'20.
  • Net income attributable to Korn Ferry was $42.8 million in Q2 FY'20.
  • Operating income was $61.9 million in Q2 FY'20 with an operating margin of 12.6%. Adjusted EBITDA was $78.3 million with Adjusted EBITDA margin of 15.9%.
  • Q2 FY'20 diluted earnings per share and adjusted diluted earnings per share was $0.77 and $0.81, respectively.
  • The Company continued with its balanced approach to capital allocation, buying back 1.3 million shares or $49.2 million of stock during the quarter and declaring a quarterly dividend of $0.10 per share on December 4, 2019 payable on January 15, 2020 to stockholders of record on December 20, 2019.

Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced second quarter fee revenue of $492.4 million.  Second quarter diluted earnings per share was $0.77 and Adjusted diluted earnings per share was $0.81.  Adjusted diluted earnings per share for the second quarter excludes $2.6 million, or $0.04 per share, related to integration/acquisition costs associated with the recently completed acquisition of Miller Heiman Group, AchieveForum and Strategy Execution.

"For Korn Ferry's recently completed second quarter, we generated fee revenue of approximately $492 million (down 1% using actual rates; up 1% on a constant currency basis) and consistent profitability with an Adjusted EBITDA margin of almost 16%.  Despite the confused socio-political climate, we continued to have a long-term balanced approach to capital deployment, acquiring three leadership development companies while repurchasing almost $50 million of stock during the quarter in addition to our normal quarterly dividend," said Gary D. Burnison, CEO, Korn Ferry.

"We have historically only focused on a 10 percent subset of the $300 billion market for learning and development. The recent acquisitions of Miller Heiman, Strategy Execution and AchieveForum add professional development capabilities that will leverage our Korn Ferry Digital platform, tapping a much broader market opportunity.  Last month we celebrated our 50th anniversary, capping an unprecedented moment in Korn Ferry's history as the preeminent global organizational consulting firm.  As our recent acquisitions attest, we continue to evolve our business to help clients synchronize their strategy, operations and talent.  I look forward to what the future holds as we ring in a New Year."

Selected Financial Results
(dollars in millions, except per share amounts) (a)


Second Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

Fee revenue

$

492.4


$

495.2


$

976.9


$

960.8

Total revenue

$

504.2


$

506.8


$

1,000.4


$

985.2

Operating income

$

61.9


$

71.0


$

122.2


$

15.9

Operating margin


12.6%



14.3%



12.5%



1.7%

Net income attributable to Korn Ferry

$

42.8


$

46.0


$

85.8


$

7.4

Basic earnings per share

$

0.78


$

0.82


$

1.54


$

0.13

Diluted earnings per share

$

0.77


$

0.81


$

1.54


$

0.13


EBITDA Results (b):

Second Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

EBITDA

$

75.7


$

77.5


$

150.7


$

38.6

EBITDA margin


15.4%



15.7%



15.4%



4.0%


Adjusted Results (c):

Second Quarter


Year to Date






FY'20


FY'19


FY'20


FY'19

Adjusted EBITDA (b)

$

78.3


$

80.3


$

153.3


$

151.1

Adjusted EBITDA margin (b)


15.9%



16.2%



15.7%



15.7%

Adjusted net income attributable to Korn Ferry

$

44.8


$

48.2


$

87.7


$

92.4

Adjusted basic earnings per share

$

0.81


$

0.86


$

1.58


$

1.65

Adjusted diluted earnings per share

$

0.81


$

0.85


$

1.57


$

1.62

________________________

(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 tradename write-offs and integration/acquisition costs.  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):


Second Quarter


Year to Date






FY'20


FY'19


FY'20


FY'19

Tradename write-offs

$


$


$


$

106.6

Integration/acquisition costs

$

2.6


$

2.8


$

2.6


$

5.9

Fee revenue was $492.4 million in Q2 FY'20, a decrease of 1% (1% increase on a constant currency basis) compared to Q2 FY'19.  The decrease in fee revenue was due to lower fee revenue in Executive Search and Advisory, partially offset by growth in RPO and Professional Search.

Net income attributable to Korn Ferry was $42.8 million in Q2 FY'20 as compared to $46.0 million in Q2 FY'19.  The decrease in net income attributable to Korn Ferry resulted from a decrease in fee revenue and an increase in general and administrative expenses.

Operating margin was 12.6% in Q2 FY'20 compared to 14.3% in the year-ago quarter.  The decrease in operating margin was primarily due an increase in general and administrative expenses and lower fee revenue.

Adjusted EBITDA margin was 15.9%, compared to 16.2% in the year-ago quarter.

Results by Segment

Selected Advisory Data
(dollars in millions) (a)


Second Quarter


Year to Date



FY'20


FY'19


FY'20


FY'19


Fee revenue

$

209.8


$

217.1


$

405.3


$

412.5


Total revenue

$

213.9


$

221.4


$

413.2


$

421.6


Operating income (loss)

$

28.4


$

29.4


$

54.2


$

(53.7)


Operating margin


13.5%



13.6%



13.4%



(13.0%)















Ending number of consultants and execution staff (b)


1,776



1,636



1,776



1,636


Staff utilization (c)


69%



67%



68%



67%




EBITDA Results (d):

Second Quarter


Year to Date



FY'20


FY'19


FY'20


FY'19


EBITDA

$

37.0


$

36.7


$

71.5


$

(38.4)


EBITDA margin


17.6%



16.9%



17.6%



(9.3%)




Adjusted Results (e):

Second Quarter


Year to Date







FY'20


FY'19


FY'20


FY'19


Adjusted EBITDA (d)

$

37.0


$

39.4


$

71.5


$

73.9


Adjusted EBITDA margin (d)


17.6%



18.2%



17.6%



17.9%


________________________


(a)  

Numbers may not total due to rounding.


(b)

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


(c)

Calculated by dividing the number of hours our full-time Advisory 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):



Second Quarter


Year to Date







FY'20


FY'19


FY'20


FY'19


Tradename write-offs

$


$


$


$

106.6


Integration/acquisition costs

$


$

2.8


$


$

5.8



Fee revenue was $209.8 million in Q2 FY'20 compared to $217.1 million in Q2 FY'19, a decrease of $7.3 million or 3% (down 1% on a constant currency basis). 

Operating income was $28.4 million in Q2 FY'20 with an operating margin of 13.5% compared to $29.4 million and an operating margin of 13.6%, respectively, in the year-ago quarter.

Adjusted EBITDA was $37.0 million in Q2 FY'20 with an Adjusted EBITDA margin of 17.6% compared to $39.4 million and 18.2%, respectively, in the year-ago quarter.

Selected Executive Search Data
(dollars in millions) (a)



Second Quarter


Year to Date



FY'20


FY'19


FY'20


FY'19

Fee revenue


$

187.9


$

197.6


$

381.1


$

390.6

Total revenue


$

192.0


$

202.0


$

390.0


$

400.1

Operating income


$

41.2


$

51.5


$

86.9


$

92.3

Operating margin



21.9%



26.0%



22.8%



23.6%














Ending number of consultants



585



556



585



556

Average number of consultants



577



550



575



548

Engagements billed



3,848



3,968



6,086



6,144

New engagements (b)



1,719



1,757



3,414



3,465

EBITDA and Adjusted Results (c):


Second Quarter


Year to Date



FY'20


FY'19


FY'20


FY'19

EBITDA and Adjusted EBITDA


$

44.0


$

49.2


$

92.9


$

96.0

EBITDA and Adjusted EBITDA margin



23.4%



24.9%



24.4%



24.6%

________________________

(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).

Fee revenue was $187.9 million and $197.6 million in Q2 FY'20 and Q2 FY'19, respectively, a decrease of $9.7 million or 5% (3% 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 $41.2 million in Q2 FY'20 compared to $51.5 million in Q2 FY'19.  Operating margin was 21.9% in Q2 FY'20 compared to 26.0% in the year-ago quarter.  The decrease in operating income was mainly due to a decrease in fee revenue.

EBITDA was $44.0 million in Q2 FY'20 with an EBITDA margin of 23.4% compared to $49.2 million and 24.9%, respectively, in the year-ago quarter, mainly due to a decline in fee revenue.

Selected RPO and Professional Search Data
(dollars in millions) (a)



Second Quarter


Year to Date



FY'20


FY'19


FY'20


FY'19

Fee revenue


$

94.8


$

80.5


$

190.6


$

157.8

Total revenue


$

98.3


$

83.4


$

197.2


$

163.5

Operating income


$

15.1


$

12.5


$

30.1


$

24.2

Operating margin



15.9%



15.6%



15.8%



15.3%














Engagements billed (b)



1,441



1,338



2,274



2,134

New engagements (c)



693



731



1,460



1,502


EBITDA and Adjusted Results (d):


Second Quarter


Year to Date



FY'20


FY'19


FY'20


FY'19

EBITDA and Adjusted EBITDA


$

16.1


$

13.2


$

32.2


$

25.7

EBITDA and Adjusted EBITDA margin



17.0%



16.4%



16.9%



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 $94.8 million in Q2 FY'20, an increase of $14.3 million or 18% (20% increase on a constant currency basis), compared to the year-ago quarter.  The higher fee revenue was primarily driven by an increase in fee revenue in recruitment process outsourcing and professional search of $11.6 million and $2.7 million, respectively, in Q2 FY'20 compared to Q2 FY'19.

Operating income was $15.1 million in Q2 FY'20, an increase of $2.6 million compared to Q2 FY'19 operating income of $12.5 million.  Operating margin was 15.9% in the current quarter compared to 15.6% in the year-ago quarter.  The increase in operating income was due to higher fee revenue in Q2 FY'20 compared to Q2 FY'19, partially offset by an increase in compensation and benefits expense driven by a 28% increase in average headcount.

EBITDA was $16.1 million during Q2 FY'20, an increase of $2.9 million compared to Q2 FY'19.  EBITDA margin was 17.0% in Q2 FY'20 and 16.4% in Q2 FY'19.

Outlook

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

  • Q3 FY'20 fee revenue is expected to be in the range of $490 million and $510 million; and
  • Q3 FY'20 diluted earnings per share is expected to range between $0.35 to $0.52.

On a consolidated adjusted basis:

  • Q3 FY'20 adjusted diluted earnings per share is expected to be in the range from $0.70 to $0.78.

 


Q3 FY'20

Earnings Per Share Outlook (1)


Low


High







Consolidated diluted earnings per share

$

0.35


$

0.52

Restructuring charges, net


0.40



0.32

Integration/acquisition costs


0.06



0.03

Tax rate impact


(0.11)



(0.09)

Consolidated Adjusted diluted earnings per share

$

0.70


$

0.78

_______________________

 (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 (EST) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak.  The conference call will be webcast and available online at 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.

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.  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 FerryThe 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, 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 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 and tradename write-offs, net of income tax effect;
  • Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs and tradename write-offs, net of income tax effect; and in the case of the outlook section, also adjusted for restructuring charges, net and tax rate impact;
  • 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 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.

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 represent 1) costs we incurred to acquire and integrate a portion of our Advisory business and 2) tradename write-offs associated with the rebranding plan initiated by Korn Ferry.  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]

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 (in thousands, except per share amounts)



Three Months Ended


Six Months Ended


October 31,


October 31,


2019


2018


2019


2018

















(unaudited)




 Fee revenue

$

492,389


$

495,205


$

976,938


$

960,773

 Reimbursed out-of-pocket engagement expenses


11,788



11,588



23,437



24,382

           Total revenue


504,177



506,793



1,000,375



985,155













 Compensation and benefits


337,382



335,835



665,878



657,740

 General and administrative expenses


62,009



57,738



127,816



226,462

 Reimbursed expenses


11,788



11,588



23,437



24,382

 Cost of services


18,414



19,627



35,549



37,954

 Depreciation and amortization


12,715



11,018



25,492



22,749

           Total operating expenses


442,308



435,806



878,172



969,287













 Operating income


61,869



70,987



122,203



15,868

 Other income (loss), net


1,133



(4,500)



2,959



20

 Interest expense, net


(4,210)



(4,337)



(8,267)



(8,440)

         Income before provision (benefit) for income taxes


58,792



62,150



116,895



7,448

 Income tax provision (benefit)


15,760



14,833



30,213



(1,277)

 Net income


43,032



47,317



86,682



8,725

           Net income attributable to noncontrolling interest


(228)



(1,283)



(927)



(1,302)

 Net income attributable to Korn Ferry

$

42,804


$

46,034


$

85,755


$

7,423













 Earnings per common share attributable to Korn Ferry:












      Basic

$

0.78


$

0.82


$

1.54


$

0.13

      Diluted

$

0.77


$

0.81


$

1.54


$

0.13













 Weighted-average common shares outstanding:












      Basic


54,568



55,461



54,917



55,420

      Diluted


54,716



56,239



55,170



56,306













 Cash dividends declared per share:

$

0.10


$

0.10


$

0.20


$

0.20

 


KORN FERRY AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)



Three Months Ended October 31,


Six Months Ended October 31,


2019





2018


% Change


2019





2018


% Change

























Fee revenue:
























Advisory

$

209,760





$

217,089



(3.4%)


$

405,286





$

412,464



(1.7%)

Executive Search:

























North America


113,818






115,863



(1.8%)



225,540






227,960



(1.1%)


EMEA


39,821






44,928



(11.4%)



86,351






91,582



(5.7%)


Asia Pacific


25,944






27,936



(7.1%)



53,306






54,231



(1.7%)


Latin America


8,272






8,907



(7.1%)



15,857






16,785



(5.5%)

Total Executive Search


187,855






197,634



(4.9%)



381,054






390,558



(2.4%)

RPO and Professional Search


94,774






80,482



17.8%



190,598






157,751



20.8%


Total fee revenue


492,389






495,205



(0.6%)



976,938






960,773



1.7%

Reimbursed out-of-pocket engagement expenses


11,788






11,588



1.7%



23,437






24,382



(3.9%)


Total revenue

$

504,177





$

506,793



(0.5%)


$

1,000,375





$

985,155



1.5%


























Operating income (loss):




Margin





Margin





Margin





Margin

Advisory

$

28,391



13.5%


$

29,426



13.6%


$

54,182



13.4%


$

(53,653)



(13.0%)

Executive Search:

























North America


28,124



24.7%



35,328



30.5%



58,446



25.9%



61,842



27.1%


EMEA


6,511



16.4%



7,319



16.3%



13,822



16.0%



14,288



15.6%


Asia Pacific


5,803



22.4%



6,767



24.2%



12,796



24.0%



13,408



24.7%


Latin America


791



9.6%



2,053



23.0%



1,801



11.4%



2,807



16.7%

Total Executive Search


41,229



21.9%



51,467



26.0%



86,865



22.8%



92,345



23.6%

RPO and Professional Search


15,094



15.9%



12,516



15.6%



30,135



15.8%



24,161



15.3%

Corporate


(22,845)






(22,422)






(48,979)






(46,985)





 Total operating income

$

61,869



12.6%


$

70,987



14.3%


$

122,203



12.5%


$

15,868



1.7%

 

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)



October 31,


April 30,


2019


2019


(unaudited)




ASSETS






Cash and cash equivalents

$

464,423


$

626,360

Marketable securities


6,508



8,288

Receivables due from clients, net of allowance for doubtful accounts of $23,165 and $21,582 at October 31, 2019 and April 30, 2019, respectively


458,263



404,857

Income taxes and other receivables


40,506



26,767

Unearned compensation


48,195



42,003

Prepaid expenses and other assets


31,603



28,535

Total current assets


1,049,498



1,136,810







Marketable securities, non-current


138,055



132,463

Property and equipment, net


140,685



131,505

Operating lease right-of-use assets, net


214,421



-

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


128,626



126,000

Deferred income taxes


36,779



43,220

Goodwill


578,307



578,298

Intangible assets, net


76,288



82,948

Unearned compensation, non-current


101,308



80,924

Investments and other assets


22,314



22,684

Total assets

$

2,486,281


$

2,334,852







LIABILITIES AND STOCKHOLDERS' EQUITY






Accounts payable

$

30,599


$

39,156

Income taxes payable


15,018



21,145

Compensation and benefits payable


198,284



328,610

Operating lease liability, current


48,493



-

Other accrued liabilities


158,071



162,047

Total current liabilities


450,465



550,958







Deferred compensation and other retirement plans


274,241



257,635

Operating lease liability, non-current


200,266



-

Long-term debt


273,310



222,878

Deferred tax liabilities


1,064



1,103

Other liabilities


28,444



58,891

Total liabilities


1,227,790



1,091,465







Stockholders' equity






Common stock: $0.01 par value, 150,000 shares authorized, 73,120 and 72,442 shares issued and 55,315 and 56,431 shares outstanding at October 31, 2019 and April 30, 2019, respectively


601,686



656,463

Retained earnings


734,891



660,845

Accumulated other comprehensive loss, net


(80,646)



(76,652)

Total Korn Ferry stockholders' equity


1,255,931



1,240,656

Noncontrolling interest


2,560



2,731

Total stockholders' equity


1,258,491



1,243,387

Total liabilities and stockholders' equity

$

2,486,281


$

2,334,852

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)



Three Months Ended


Six Months Ended


October 31,


October 31,


2019


2018


2019


2018

















(unaudited)




 Net income attributable to Korn Ferry

$

42,804


$

46,034


$

85,755


$

7,423

 Net income attributable to non-controlling interest


228



1,283



927



1,302

 Net income


43,032



47,317



86,682



8,725

 Income tax provision (benefit)


15,760



14,833



30,213



(1,277)

 Income before provision (benefit) for income taxes


58,792



62,150



116,895



7,448

 Other (income) loss, net


(1,133)



4,500



(2,959)



(20)

 Interest expense, net


4,210



4,337



8,267



8,440

 Operating income


61,869



70,987



122,203



15,868

 Depreciation and amortization


12,715



11,018



25,492



22,749

 Other income (loss), net


1,133



(4,500)



2,959



20

         EBITDA


75,717



77,505



150,654



38,637

 Integration/acquisition costs (1)


2,615



2,835



2,615



5,942

 Tradename write-offs (2)


-



-



-



106,555

         Adjusted EBITDA

$

78,332


$

80,340


$

153,269


$

151,134













 Operating margin


12.6%



14.3%



12.5%



1.7%

 Depreciation and amortization


2.6%



2.3%



2.6%



2.3%

 Other income (loss), net


0.2%



(0.9%)



0.3%



-

         EBITDA margin


15.4%



15.7%



15.4%



4.0%

 Integration/acquisition costs (1)


0.5%



0.5%



0.3%



0.6%

 Tradename write-offs (2)


-



-



-



11.1%

         Adjusted EBITDA margin


15.9%



16.2%



15.7%



15.7%













 Net income attributable to Korn Ferry

$

42,804


$

46,034


$

85,755


$

7,423

 Integration/acquisition costs (1)


2,615



2,835



2,615



5,942

 Tradename write-offs (2)


-



-



-



106,555

 Tax effect on the adjusted items (3)


(668)



(634)



(668)



(27,527)

         Adjusted net income attributable to Korn Ferry

$

44,751


$

48,235


$

87,702


$

92,393













 Basic earnings per common share

$

0.78


$

0.82


$

1.54


$

0.13

 Integration/acquisition costs (1)


0.05



0.05



0.05



0.11

 Tradename write-offs (2)


-



-



-



1.92

 Tax effect on the adjusted items (3)


(0.02)



(0.01)



(0.01)



(0.51)

         Adjusted basic earnings per share

$

0.81


$

0.86


$

1.58


$

1.65













 Diluted earnings per common share

$

0.77


$

0.81


$

1.54


$

0.13

 Integration/acquisition costs (1)


0.05



0.05



0.04



0.11

 Tradename write-offs (2)


-



-



-



1.88

 Tax effect on the adjusted items (3)


(0.01)



(0.01)



(0.01)



(0.50)

         Adjusted diluted earnings per share

$

0.81


$

0.85


$

1.57


$

1.62

























Explanation of Non-GAAP Adjustments

(1) Costs associated with completing acquisitions, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies.

(2) 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.

(3) Tax effect on integration/acquisition costs and tradename write-offs.

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)



Three Months Ended October 31, 2019





Executive Search











Advisory


North America


EMEA


Asia Pacific


Latin America


Subtotal


RPO and Professional Search


Corporate


Consolidated




























Fee revenue

$

209,760


$

113,818


$

39,821


$

25,944


$

8,272


$

187,855


$

94,774


$

-


$

492,389

Total revenue

$

213,922


$

117,077


$

40,441


$

26,168


$

8,273


$

191,959


$

98,296


$

-


$

504,177




























Net income attributable to Korn Ferry

























$

42,804

Net income attributable to noncontrolling interest


























228

Other income, net


























(1,133)

Interest expense, net


























4,210

Income tax provision


























15,760

Operating income (loss)

$

28,391


$

28,124


$

6,511


$

5,803


$

791


$

41,229


$

15,094


$

(22,845)



61,869

Depreciation and amortization


8,042



869



450



329



315



1,963



990



1,720



12,715

Other income (loss), net


520



637



107



72



30



846



54



(287)



1,133

EBITDA


36,953



29,630



7,068



6,204



1,136



44,038



16,138



(21,412)



75,717

EBITDA margin


17.6%



26.0%



17.7%



23.9%



13.7%



23.4%



17.0%






15.4%




























Integration/acquisition costs


-



-



-



-



-



-



-



2,615



2,615

Adjusted EBITDA

$

36,953


$

29,630


$

7,068


$

6,204


$

1,136


$

44,038


$

16,138


$

(18,797)


$

78,332

Adjusted EBITDA margin


17.6%



26.0%



17.7%



23.9%



13.7%



23.4%



17.0%






15.9%
























































Three Months Ended October 31, 2018





Executive Search











Advisory


North America


EMEA


Asia Pacific


Latin America


Subtotal


RPO and Professional Search


Corporate


Consolidated

Fee revenue

$

217,089


$

115,863


$

44,928


$

27,936


$

8,907


$

197,634


$

80,482


$

-


$

495,205

Total revenue

$

221,419


$

119,322


$

45,636


$

28,146


$

8,912


$

202,016


$

83,358


$

-


$

506,793




























Net income attributable to Korn Ferry

























$

46,034

Net income attributable to noncontrolling interest


























1,283

Other loss, net


























4,500

Interest expense, net


























4,337

Income tax provision


























14,833

Operating income (loss)

$

29,426


$

35,328


$

7,319


$

6,767


$

2,053


$

51,467


$

12,516


$

(22,422)



70,987

Depreciation and amortization


6,964



968



95



375



101



1,539



761



1,754



11,018

Other income (loss), net


265



(3,981)



22



77



93



(3,789)



(79)



(897)



(4,500)

EBITDA


36,655



32,315



7,436



7,219



2,247



49,217



13,198



(21,565)



77,505

EBITDA margin


16.9%



27.9%



16.6%



25.8%



25.2%



24.9%



16.4%






15.7%




























Integration/acquisition costs


2,755



-



-



-



-



-



-



80



2,835

Adjusted EBITDA

$

39,410


$

32,315


$

7,436


$

7,219


$

2,247


$

49,217


$

13,198


$

(21,485)


$

80,340

Adjusted EBITDA margin


18.2%



27.9%



16.6%



25.8%



25.2%



24.9%



16.4%






16.2%

 

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)



Six Months Ended October 31, 2019





Executive Search








Advisory


North America


EMEA


Asia Pacific


Latin America


Subtotal


RPO and Professional Search


Corporate


Consolidated




























Fee revenue

$

405,286


$

225,540


$

86,351


$

53,306


$

15,857


$

381,054


$

190,598


$

-


$

976,938

Total revenue

$

413,242


$

232,523


$

87,753


$

53,836


$

15,860


$

389,972


$

197,161


$

-


$

1,000,375




























Net income attributable to Korn Ferry

























$

85,755

Net income attributable to noncontrolling interest


























927

Other income, net


























(2,959)

Interest expense, net


























8,267

Income tax provision


























30,213

Operating income (loss)

$

54,182


$

58,446


$

13,822


$

12,796


$

1,801


$

86,865


$

30,135


$

(48,979)



122,203

Depreciation and amortization


16,095



1,770



906



675



643



3,994



1,982



3,421



25,492

Other income (loss), net


1,246



1,777



119



87



87



2,070



128



(485)



2,959

EBITDA


71,523



61,993



14,847



13,558



2,531



92,929



32,245



(46,043)



150,654

EBITDA margin


17.6%



27.5%



17.2%



25.4%



16.0%



24.4%



16.9%






15.4%




























Integration/acquisition costs


-



-



-



-



-



-



-



2,615



2,615

Adjusted EBITDA

$

71,523


$

61,993


$

14,847


$

13,558


$

2,531


$

92,929


$

32,245


$

(43,428)


$

153,269

Adjusted EBITDA margin


17.6%



27.5%



17.2%



25.4%



16.0%



24.4%



16.9%






15.7%
























































Six Months Ended October 31, 2018





Executive Search








Advisory


North America


EMEA


Asia Pacific


Latin America


Subtotal


RPO and Professional Search


Corporate


Consolidated




























Fee revenue

$

412,464


$

227,960


$

91,582


$

54,231


$

16,785


$

390,558


$

157,751


$

-


$

960,773

Total revenue

$

421,566


$

235,079


$

93,385


$

54,771


$

16,815


$

400,050


$

163,539


$

-


$

985,155




























Net income attributable to Korn Ferry

























$

7,423

Net income attributable to noncontrolling interest


























1,302

Other income, net


























(20)

Interest expense, net


























8,440

Income tax benefit


























(1,277)

Operating income (loss)

$

(53,653)


$

61,842


$

14,288


$

13,408


$

2,807


$

92,345


$

24,161


$

(46,985)



15,868

Depreciation and amortization


14,395



1,947



465



745



208



3,365



1,522



3,467



22,749

Other income (loss), net


835



(480)



362



252



130



264



26



(1,105)



20

EBITDA


(38,423)



63,309



15,115



14,405



3,145



95,974



25,709



(44,623)



38,637

EBITDA margin


(9.3)%



27.8%



16.5%



26.6%



18.7%



24.6%



16.3%






4.0%




























Integration/acquisition costs


5,782



-



-



-



-



-



-



160



5,942

Tradename write-offs


106,555



-



-



-



-



-



-



-



106,555

Adjusted EBITDA

$

73,914


$

63,309


$

15,115


$

14,405


$

3,145


$

95,974


$

25,709


$

(44,463)


$

151,134

Adjusted EBITDA margin


17.9%



27.8%



16.5%



26.6%



18.7%



24.6%



16.3%






15.7%

 

 

Cision View original content:http://www.prnewswire.com/news-releases/korn-ferry-announces-second-quarter-fiscal-2020-results-of-operations-300970271.html

SOURCE Korn Ferry

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