05.12.2019 22:05:00
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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 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, 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% |
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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