Korn Ferry International Announces Fourth Quarter and Fiscal 2016 Results of Operations
"
Gary D. Burnison, CEO
Korn Ferry. "I am enormously proud of our company and the results we have achieved during the quarter, and at the same time, continuing to deliver on the
"We are in the midst of creating a new firm – with 65% of our colleagues new to the organization in the last three years, due to expansion and growth. We are a company that accelerates our clients' business performance through solutions and productized services that span from strategy implementation and organizational design to recruitment and leadership development to compensation and reward strategies. Our advisory business, now bolstered by our
Hay Group Integration
In the fourth quarter of FY'16, we continued to make significant progress on the
As previously disclosed, the integration of
Selected Financial Results |
|||||||||||||
Fourth Quarter |
Year to Date |
||||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
||||||||||
Fee revenue |
\\$ 399.9 |
\\$ 271.8 |
\\$ 1,292.1 |
\\$ 1,028.2 |
|||||||||
Total revenue |
\\$ 417.1 |
\\$ 282.2 |
\\$ 1,346.7 |
\\$ 1,066.1 |
|||||||||
Operating income |
\\$ 4.9 |
\\$ 28.1 |
\\$ 52.7 |
\\$ 114.0 |
|||||||||
Operating margin |
1.2% |
10.3% |
4.1% |
11.1% |
|||||||||
Net income attributable to Korn Ferry |
\\$ 5.8 |
\\$ 25.5 |
\\$ 30.9 |
\\$ 88.4 |
|||||||||
Basic earnings per share |
\\$ 0.10 |
\\$ 0.51 |
\\$ 0.58 |
\\$ 1.78 |
|||||||||
Diluted earnings per share |
\\$ 0.10 |
\\$ 0.51 |
\\$ 0.58 |
\\$ 1.76 |
|||||||||
EBITDA Results (a): |
Fourth Quarter |
Year to Date |
|||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
||||||||||
EBITDA |
\\$ 21.4 |
\\$ 40.2 |
\\$ 85.8 |
\\$ 151.3 |
|||||||||
EBITDA margin |
5.4% |
14.8% |
6.6% |
14.7% |
|||||||||
Adjusted Results (b): |
Fourth Quarter |
Year to Date |
|||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
||||||||||
Adjusted fee revenue |
\\$ 405.0 |
\\$ 271.8 |
\\$ 1,303.1 |
\\$ 1,028.2 |
|||||||||
Adjusted EBITDA (a) |
\\$ 54.3 |
\\$ 40.7 |
\\$ 189.7 |
\\$ 161.7 |
|||||||||
Adjusted EBITDA margin (a) |
13.4% |
15.0% |
14.6% |
15.7% |
|||||||||
Adjusted net income attributable to Korn Ferry |
\\$ 32.8 |
\\$ 25.6 |
\\$ 110.9 |
\\$ 95.5 |
|||||||||
Adjusted basic earnings per share |
\\$ 0.58 |
\\$ 0.52 |
\\$ 2.10 |
\\$ 1.93 |
|||||||||
Adjusted diluted earnings per share |
\\$ 0.58 |
\\$ 0.51 |
\\$ 2.08 |
\\$ 1.90 |
|||||||||
(a) |
EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (recoveries), net, integration/acquisition costs, and includes the deferred revenue adjustment related to the Hay Group acquisition and separation costs. EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
||||||||||||
(b) |
Adjusted results are non-GAAP financial measures that adjust for the following (see attached reconciliations): |
||||||||||||
Fourth Quarter |
Year to Date |
||||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
||||||||||
Deferred revenue adjustment related to the Hay Group acquisition |
\\$ 5.1 |
\\$ — |
\\$ 11.0 |
\\$ — |
|||||||||
Restructuring charges, net |
\\$ 2.4 |
\\$ — |
\\$ 33.0 |
\\$ 9.5 |
|||||||||
Integration/acquisition costs |
\\$ 11.7 |
\\$ 0.5 |
\\$ 45.5 |
\\$ 0.9 |
|||||||||
Venezuelan foreign currency loss |
\\$ 13.7 |
\\$ — |
\\$ 13.7 |
\\$ — |
|||||||||
Separation costs |
\\$ — |
\\$ — |
\\$ 0.7 |
\\$ — |
Fiscal 2016 Fourth Quarter Results
Fee revenue was
- Excluding fee revenue related to the
Hay Group acquisition, fee revenue in Q4 FY'16 increased 4.9% (7.1% on a constant currency basis), compared to Q4 FY'15. - The growth was primarily due to increases in fee revenue in the
North America region of Executive Search and the Futurestep segment.
Operating margin was 1.2% in Q4 FY'16 compared to 10.3% in the year-ago quarter. The decrease in operating margin was due to an increase in integration/acquisition costs as well as restructuring charges, net, a foreign currency loss relating to the devaluation of the Venezuelan currency and the deferred revenue adjustment referenced above.
EBITDA margin was 5.4% and Adjusted EBITDA margin was 13.4%. The year-over-year decline in Adjusted EBITDA margin (160 bps) was primarily due to an increase in compensation and benefits expense in the Futurestep segment and
Fiscal 2016 Results
Fee revenue was
- Excluding fee revenue related to the
Hay Group acquisition, fee revenue increased 7.5% (12.4% on a constant currency basis), compared to FY'15. - Similar to the fourth quarter, the increase in fee revenue was primarily in the
North America region of Executive Search and the Futurestep segment. In addition, a portion of the growth relates to Pivot Leadership which was acquired onMarch 1, 2015 .
Operating income was
In FY'16, the Company's EBITDA margin was 6.6% and Adjusted EBITDA margin was 14.6%. The year-over-year decline (110 bps) in Adjusted EBITDA margin was caused by the net impact of adverse market movements on the assets and liabilities associated with our deferred compensation programs, foreign currency losses, and the effect of a non-recurring gain in FY'15 relating to an insurance reimbursement for expenses incurred in prior years. The EBITDA margin for the combined
Results by Segment
Selected Executive Search Data |
||||||||||||
Fourth Quarter |
Year to Date |
|||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
Fee revenue |
\\$ 159.7 |
\\$ 156.6 |
\\$ 622.9 |
\\$ 597.4 |
||||||||
Total revenue |
\\$ 165.4 |
\\$ 161.7 |
\\$ 644.5 |
\\$ 619.3 |
||||||||
Operating income |
\\$ 23.0 |
\\$ 31.3 |
\\$ 131.7 |
\\$ 119.0 |
||||||||
Operating margin |
14.4% |
20.0% |
21.1% |
19.9% |
||||||||
Ending number of consultants |
488 |
452 |
488 |
452 |
||||||||
Average number of consultants |
490 |
448 |
470 |
442 |
||||||||
Engagements billed |
3,395 |
3,175 |
8,375 |
8,480 |
||||||||
New engagements (a) |
1,463 |
1,382 |
5,517 |
5,165 |
||||||||
EBITDA Results (b): |
Fourth Quarter |
Year to Date |
||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
EBITDA |
\\$ 24.6 |
\\$ 33.4 |
\\$ 137.8 |
\\$ 127.0 |
||||||||
EBITDA margin |
15.4% |
21.3% |
22.1% |
21.3% |
||||||||
Adjusted Results (c): |
Fourth Quarter |
Year to Date |
||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
Adjusted EBITDA (b) |
\\$ 31.2 |
\\$ 33.4 |
\\$ 151.7 |
\\$ 132.4 |
||||||||
Adjusted EBITDA margin (b) |
19.5% |
21.3% |
24.3% |
22.2% |
||||||||
(a) |
Represents new engagements opened in the respective period. |
|||||||||||
(b) |
EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
|||||||||||
(c) |
Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
|||||||||||
Fourth Quarter |
Year to Date |
|||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
Restructuring charges, net |
\\$ — |
\\$ — |
\\$ 7.3 |
\\$ 5.4 |
||||||||
Venezuelan foreign currency loss |
\\$ 6.6 |
\\$ — |
\\$ 6.6 |
\\$ — |
Executive Search
Fee revenue was
Operating income was
EBITDA was
Selected Hay Group Data (dollars in millions) |
||||||||||||||
Fourth Quarter |
Year to Date |
|||||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||||
Fee revenue |
\\$ 187.7 |
\\$ 72.8 |
\\$ 471.1 |
\\$ 267.1 |
||||||||||
Total revenue |
\\$ 194.7 |
\\$ 75.3 |
\\$ 488.2 |
\\$ 275.2 |
||||||||||
Operating income (loss) |
\\$ 2.9 |
\\$ 8.4 |
\\$ (3.4) |
\\$ 28.2 |
||||||||||
Operating margin |
1.5% |
11.5% |
(0.7)% |
10.6% |
||||||||||
Ending number of consultants (a) |
562 |
164 |
562 |
164 |
||||||||||
Staff utilization (b) |
70% |
74% |
67% |
71% |
||||||||||
EBITDA Results (c): |
Fourth Quarter |
Year to Date |
||||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||||
EBITDA |
\\$ 10.5 |
\\$ 12.1 |
\\$ 17.5 |
\\$ 41.6 |
||||||||||
EBITDA margin |
5.6% |
16.6% |
3.7% |
15.6% |
||||||||||
Adjusted Results (d): |
Fourth Quarter |
Year to Date |
||||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||||
Adjusted fee revenue |
\\$ 192.8 |
\\$ 72.8 |
\\$ 482.1 |
\\$ 267.1 |
||||||||||
Adjusted EBITDA (c) |
\\$ 30.7 |
\\$ 12.1 |
\\$ 78.9 |
\\$ 44.4 |
||||||||||
Adjusted EBITDA margin (c) |
15.9% |
16.6% |
16.4% |
16.6% |
||||||||||
(a) |
Represents number of employees originating consulting services. FY'16 includes approximately 393 consultants from the acquisition of Legacy Hay. |
|||||||||||||
(b) |
Calculated by dividing the number of hours our full-time Hay Group professional staff record to engagements during the period, by the total available working hours during the same period. |
|||||||||||||
(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): |
|||||||||||||
Fourth Quarter |
Year to Date |
|||||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||||
Deferred revenue adjustment related to the Hay Group acquisition |
\\$ 5.1 |
\\$ — |
\\$ 11.0 |
\\$ — |
||||||||||
Restructuring charges, net |
\\$ 2.5 |
\\$ — |
\\$ 25.7 |
\\$ 2.8 |
||||||||||
Integration/acquisition costs |
\\$ 5.5 |
\\$ — |
\\$ 17.6 |
\\$ — |
||||||||||
Venezuelan foreign currency loss |
\\$ 7.1 |
\\$ — |
\\$ 7.1 |
\\$ — |
Fee revenue was
Operating income was
EBITDA was
Selected Futurestep Data (dollars in millions) |
||||||||||||
Fourth Quarter |
Year to Date |
|||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
Fee revenue |
\\$ 52.5 |
\\$ 42.4 |
\\$ 198.1 |
\\$ 163.7 |
||||||||
Total revenue |
\\$ 57.0 |
\\$ 45.2 |
\\$ 214.0 |
\\$ 171.6 |
||||||||
Operating income |
\\$ 7.0 |
\\$ 5.5 |
\\$ 26.7 |
\\$ 19.9 |
||||||||
Operating margin |
13.3% |
13.1% |
13.5% |
12.2% |
||||||||
Engagements billed (a) |
978 |
791 |
2,149 |
1,968 |
||||||||
New engagements (b) |
547 |
440 |
1,913 |
1,590 |
||||||||
EBITDA Results (c): |
Fourth Quarter |
Year to Date |
||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
EBITDA |
\\$ 7.9 |
\\$ 6.1 |
\\$ 29.5 |
\\$ 21.9 |
||||||||
EBITDA margin |
15.0% |
14.4% |
14.9% |
13.4% |
||||||||
Adjusted Results (d): |
Fourth Quarter |
Year to Date |
||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
Adjusted EBITDA (c) |
\\$ 7.9 |
\\$ 6.1 |
\\$ 29.5 |
\\$ 23.0 |
||||||||
Adjusted EBITDA margin (c) |
15.0% |
14.4% |
14.9% |
14.1% |
||||||||
(a) |
Represents search engagements billed. |
|||||||||||
(b) |
Represents new search engagements opened in the respective period. |
|||||||||||
(c) |
EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
|||||||||||
(d) |
Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
|||||||||||
Fourth Quarter |
Year to Date |
|||||||||||
FY'16 |
FY'15 |
FY'16 |
FY'15 |
|||||||||
Restructuring charges, net |
\\$ — |
\\$ — |
\\$ — |
\\$ 1.1 |
Futurestep
Fee revenue was
- The higher fee revenue was driven by a
\\$5.6 million increase in recruitment process outsourcing in Q4 FY'16 compared to Q4 FY'15. - The rest of the increase was due to higher fee revenue in professional search due to a 23.6% increase in engagements billed in Q4 FY'16 compared to Q4 FY'15.
Operating income was
EBITDA and Adjusted EBITDA were both
New Credit Agreement
On June 15, 2016, the Company entered into a new senior secured
Both the Revolver and the Term Facility mature on
Outlook
Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis:
- Q1 FY'17 fee revenue is expected to be in the range of
\\$371 million and\\$391 million ; and - Q1 FY'17 diluted earnings per share is likely to range between
\\$0.02 to \\$0.20 .
On a consolidated as adjusted basis:
- Q1 FY'17 adjusted fee revenue is expected to be in the range of
\\$375 million and\\$395 million ; and - Q1 FY'17 adjusted diluted earnings per share is likely to range from
\\$0.50 to \\$0.58 .
Q1 FY'17 Fee Revenue Outlook(1) |
Q1 FY'17; Earnings Per Share Outlook(2) |
||||||||||||
Low |
High |
Low |
High |
||||||||||
(in millions) |
|||||||||||||
Korn Ferry consolidated fee revenue |
\\$ 371 |
\\$ 391 |
Consolidated diluted earnings per share |
\\$ 0.02 |
\\$ 0.20 |
||||||||
Legacy Hay Group deferred revenue adjustment |
4 |
4 |
Legacy Hay Group deferred revenue adjustment |
0.05 |
0.05 |
||||||||
Korn Ferry consolidated adjusted fee revenue |
\\$ 375 |
\\$ 395 |
Integration/acquisition costs |
0.06 |
0.03 |
||||||||
Restructuring charges, net |
0.30 |
0.23 |
|||||||||||
Retention bonuses |
0.05 |
0.05 |
|||||||||||
Tax rate impact |
0.02 |
0.02 |
|||||||||||
Consolidated as adjusted diluted earnings per share |
\\$ 0.50 |
\\$ 0.58 |
|||||||||||
(1) |
Korn Ferry consolidated adjusted fee revenue is a non-GAAP financial measure that includes revenue that Hay Group would have realized over the ensuing year if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue. |
||||||||||||
(2) |
Consolidated as adjusted diluted earnings per share is a non-GAAP financial measure that excludes the items listed below in the table above. |
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 www.kornferry.com, accessible through the Investor Relations section. We will also post to this section of our website earnings slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.
About
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
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 International , adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to theHay Group acquisition, net of income tax effect; - adjusted basic and diluted earnings per share, adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to the
Hay Group acquisition, net of income tax effect; and in the case of the outlook section, also adjusted for Venezuelan exchange rate and tax rate impact; - constant currency amounts that represent the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior year period;
- EBITDA, or earnings before interest, taxes, depreciation and amortization and EBITDA margin;
- Adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring charges, net, integration/acquisition costs, separation costs and includes the deferred revenue adjustment related to the
Hay Group acquisition, and Adjusted EBITDA margin; - Consolidated adjusted fee revenue, which includes revenue that
Hay Group would have realized over the ensuing year if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue; and
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
[Tables attached]
KORN FERRY AND SUBSIDIARIES |
|||||||
CONSOLIDATED STATEMENTS OF INCOME |
|||||||
(in thousands, except per share amounts) |
|||||||
Three Months Ended |
Year Ended |
||||||
April 30, |
April 30, |
||||||
2016 |
2015 |
2016 |
2015 |
||||
(unaudited) |
|||||||
Fee revenue |
\\$ 399,960 |
\\$ 271,717 |
\\$1,292,112 |
\\$1,028,152 |
|||
Reimbursed out-of-pocket engagement expenses |
17,201 |
10,436 |
54,602 |
37,914 |
|||
Total revenue |
417,161 |
282,153 |
1,346,714 |
1,066,066 |
|||
Compensation and benefits |
286,852 |
182,886 |
897,345 |
691,450 |
|||
General and administrative expenses |
73,569 |
41,637 |
213,018 |
145,917 |
|||
Reimbursed expenses |
17,201 |
10,436 |
54,602 |
37,914 |
|||
Cost of services |
20,974 |
11,868 |
59,824 |
39,692 |
|||
Depreciation and amortization |
11,287 |
7,234 |
36,220 |
27,597 |
|||
Restructuring charges, net |
2,436 |
- |
33,013 |
9,468 |
|||
Total operating expenses |
412,319 |
254,061 |
1,294,022 |
952,038 |
|||
Operating income |
4,842 |
28,092 |
52,692 |
114,028 |
|||
Other income (loss), net |
5,645 |
4,397 |
(4,167) |
7,458 |
|||
Interest income (expense), net |
1,452 |
(358) |
237 |
(1,784) |
|||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
11,939 |
32,131 |
48,762 |
119,702 |
|||
Equity in earnings of unconsolidated subsidiaries |
185 |
485 |
1,631 |
2,181 |
|||
Income tax provision |
5,749 |
7,134 |
18,960 |
33,526 |
|||
Net income |
6,375 |
25,482 |
31,433 |
88,357 |
|||
Net income attributable to noncontrolling interest |
(520) |
- |
(520) |
- |
|||
Net income attributable to Korn/Ferry International |
\\$ 5,855 |
\\$ 25,482 |
\\$ 30,913 |
\\$ 88,357 |
|||
Earnings per common share attributable to Korn/Ferry International: |
|||||||
Basic |
\\$ 0.10 |
\\$ 0.51 |
\\$ 0.58 |
\\$ 1.78 |
|||
Diluted |
\\$ 0.10 |
\\$ 0.51 |
\\$ 0.58 |
\\$ 1.76 |
|||
Weighted-average common shares outstanding: |
|||||||
Basic |
56,012 |
49,288 |
52,372 |
49,052 |
|||
Diluted |
56,574 |
49,890 |
52,929 |
49,766 |
|||
Cash dividends declared per share: |
\\$ 0.10 |
\\$ 0.10 |
\\$ 0.40 |
\\$ 0.10 |
KORN FERRY AND SUBSIDIARIES |
||||||||||||||||
FINANCIAL SUMMARY BY SEGMENT |
||||||||||||||||
(in thousands) |
||||||||||||||||
(unaudited) |
||||||||||||||||
Three Months Ended April 30, |
Year Ended April 30, |
|||||||||||||||
2016 |
2015 |
% Change |
2016 |
2015 |
% Change |
|||||||||||
Fee Revenue: |
||||||||||||||||
Executive search: |
||||||||||||||||
North America |
\\$ 94,678 |
\\$ 87,579 |
8% |
\\$ 371,345 |
\\$ 330,634 |
12% |
||||||||||
EMEA |
36,161 |
39,677 |
(9%) |
144,319 |
153,465 |
(6%) |
||||||||||
Asia Pacific |
21,199 |
22,533 |
(6%) |
80,506 |
84,148 |
(4%) |
||||||||||
Latin America |
7,661 |
6,794 |
13% |
26,744 |
29,160 |
(8%) |
||||||||||
Total executive search |
159,699 |
156,583 |
2% |
622,914 |
597,407 |
4% |
||||||||||
Hay Group |
187,795 |
72,749 |
158% |
471,145 |
267,018 |
76% |
||||||||||
Futurestep |
52,466 |
42,385 |
24% |
198,053 |
163,727 |
21% |
||||||||||
Total fee revenue |
399,960 |
271,717 |
47% |
1,292,112 |
1,028,152 |
26% |
||||||||||
Reimbursed out-of-pocket engagement expenses |
17,201 |
10,436 |
65% |
54,602 |
37,914 |
44% |
||||||||||
Total revenue |
\\$ 417,161 |
\\$ 282,153 |
48% |
\\$ 1,346,714 |
\\$ 1,066,066 |
26% |
||||||||||
Operating Income (Loss): |
Margin |
Margin |
Margin |
Margin |
||||||||||||
Executive search: |
||||||||||||||||
North America |
\\$ 19,857 |
21.0% |
\\$ 20,030 |
22.9% |
\\$ 100,381 |
27.0% |
\\$ 80,818 |
24.4% |
||||||||
EMEA |
5,695 |
15.7% |
5,530 |
13.9% |
20,607 |
14.3% |
18,867 |
12.3% |
||||||||
Asia Pacific |
2,904 |
13.7% |
4,589 |
20.4% |
12,572 |
15.6% |
14,631 |
17.4% |
||||||||
Latin America |
(5,498) |
(71.8%) |
1,191 |
17.5% |
(1,854) |
(6.9%) |
4,704 |
16.1% |
||||||||
Total executive search |
22,958 |
14.4% |
31,340 |
20.0% |
131,706 |
21.1% |
119,020 |
19.9% |
||||||||
Hay Group |
2,871 |
1.5% |
8,376 |
11.5% |
(3,415) |
(0.7%) |
28,175 |
10.6% |
||||||||
Futurestep |
6,987 |
13.3% |
5,573 |
13.1% |
26,702 |
13.5% |
19,940 |
12.2% |
||||||||
Corporate |
(27,974) |
(17,197) |
(102,301) |
(53,107) |
||||||||||||
Total operating (loss) income |
\\$ 4,842 |
1.2% |
\\$ 28,092 |
10.3% |
\\$ 52,692 |
4.1% |
\\$ 114,028 |
11.1% |
KORN FERRY AND SUBSIDIARIES |
||||
CONSOLIDATED BALANCE SHEETS |
||||
(in thousands, except per share amounts) |
||||
April 30, |
||||
2016 |
2015 |
|||
ASSETS |
||||
Cash and cash equivalents |
\\$ 273,252 |
\\$ 380,838 |
||
Marketable securities |
11,338 |
25,757 |
||
Receivables due from clients, net of allowance for doubtful accounts of \\$11,292 and \\$9,958 respectively |
315,975 |
188,543 |
||
Income taxes and other receivables |
20,579 |
10,966 |
||
Prepaid expenses and other assets |
43,130 |
31,054 |
||
Total current assets |
664,274 |
637,158 |
||
Marketable securities, non-current |
130,092 |
118,819 |
||
Property and equipment, net |
95,436 |
62,088 |
||
Cash surrender value of company owned life insurance policies, net of loans |
107,296 |
102,691 |
||
Deferred income taxes |
83,715 |
59,841 |
||
Goodwill |
590,072 |
254,440 |
||
Intangible assets, net |
233,027 |
47,901 |
||
Investments and other assets |
51,240 |
34,863 |
||
Total assets |
\\$ 1,955,152 |
\\$ 1,317,801 |
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||
Accounts payable |
\\$ 26,634 |
\\$ 19,238 |
||
Income taxes payable |
8,396 |
3,813 |
||
Compensation and benefits payable |
266,211 |
219,364 |
||
Term loan |
30,000 |
- |
||
Other accrued liabilities |
145,023 |
63,595 |
||
Total current liabilities |
476,264 |
306,010 |
||
Deferred compensation and other retirement plans |
216,113 |
173,432 |
||
Term loan, non-current |
110,000 |
- |
||
Deferred tax liabilities |
61,640 |
- |
||
Other liabilities |
43,834 |
23,110 |
||
Total liabilities |
907,851 |
502,552 |
||
Stockholders' equity |
||||
Common stock: \\$0.01 par value, 150,000 shares authorized, 69,723 and 62,863 shares issued and 57,272 and 50,573 shares outstanding, respectively |
702,098 |
463,839 |
||
Retained earnings |
401,113 |
392,033 |
||
Accumulated other comprehensive loss, net |
(57,911) |
(40,623) |
||
Noncontrolling interest |
2,001 |
- |
||
Total stockholders' equity |
1,047,301 |
815,249 |
||
Total liabilities and stockholders' equity |
\\$ 1,955,152 |
\\$ 1,317,801 |
KORN FERRY AND SUBSIDIARIES |
||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
||||||||
(in thousands, except per share amounts) |
||||||||
Three Months Ended |
Year Ended |
|||||||
April 30, |
April 30, |
|||||||
2016 |
2015 |
2016 |
2015 |
|||||
(unaudited) |
||||||||
Fee revenue |
\\$ 399,960 |
\\$ 271,717 |
\\$ 1,292,112 |
\\$ 1,028,152 |
||||
Deferred revenue adjustment due to acquisition (1) |
5,096 |
- |
10,967 |
- |
||||
Adjusted fee revenue |
\\$ 405,056 |
\\$ 271,717 |
\\$ 1,303,079 |
\\$ 1,028,152 |
||||
Operating income |
\\$ 4,842 |
\\$ 28,092 |
\\$ 52,692 |
\\$ 114,028 |
||||
Depreciation and amortization |
11,287 |
7,234 |
36,220 |
27,597 |
||||
Other income (loss), net |
5,645 |
4,397 |
(4,167) |
7,458 |
||||
Equity in earnings of unconsolidated subsidiaries, net |
185 |
485 |
1,631 |
2,181 |
||||
Net income attributable to noncontrolling interest |
(520) |
- |
(520) |
- |
||||
EBITDA |
21,439 |
40,208 |
85,856 |
151,264 |
||||
Deferred revenue adjustment due to acquisition (1) |
5,096 |
- |
10,967 |
- |
||||
Restructuring charges, net (2) |
2,436 |
- |
33,013 |
9,468 |
||||
Integration/acquisition costs (3) |
11,594 |
514 |
45,409 |
959 |
||||
Venezuelan foreign currency loss (4) |
13,720 |
- |
13,720 |
- |
||||
Separation costs (5) |
- |
- |
744 |
- |
||||
Adjusted EBITDA |
\\$ 54,285 |
\\$ 40,722 |
\\$ 189,709 |
\\$ 161,691 |
||||
Operating margin |
1.2% |
10.3% |
4.1% |
11.1% |
||||
Depreciation and amortization |
2.8% |
2.7% |
2.8% |
2.7% |
||||
Other income (loss), net |
1.4% |
1.6% |
(0.3%) |
0.7% |
||||
Equity in earnings of unconsolidated subsidiaries, net |
0.1% |
0.2% |
0.1% |
0.2% |
||||
Net income attributable to noncontrolling interest |
(0.1%) |
- |
(0.1%) |
- |
||||
EBITDA margin |
5.4% |
14.8% |
6.6% |
14.7% |
||||
Deferred revenue adjustment due to acquisition (1) |
1.2% |
- |
0.8% |
- |
||||
Restructuring charges, net (2) |
0.6% |
- |
2.5% |
0.9% |
||||
Integration/acquisition costs (3) |
2.8% |
0.2% |
3.5% |
0.1% |
||||
Venezuelan foreign currency loss (4) |
3.4% |
- |
1.1% |
- |
||||
Separation costs (5) |
- |
- |
0.1% |
- |
||||
Adjusted EBITDA margin |
13.4% |
15.0% |
14.6% |
15.7% |
||||
Net income attributable to Korn/Ferry International |
\\$ 5,855 |
\\$ 25,482 |
\\$ 30,913 |
\\$ 88,357 |
||||
Deferred revenue adjustment due to acquisition (1) |
5,096 |
- |
10,967 |
- |
||||
Restructuring charges, net (2) |
2,436 |
- |
33,013 |
9,468 |
||||
Integration/acquisition costs (3) |
11,594 |
514 |
45,409 |
959 |
||||
Venezuelan foreign currency loss (4) |
13,720 |
- |
13,720 |
- |
||||
Separation costs (5) |
- |
- |
744 |
- |
||||
Tax effect on the above items (6) |
(5,846) |
(332) |
(23,819) |
(3,282) |
||||
Adjusted net income attributable to Korn/Ferry International |
\\$ 32,855 |
\\$ 25,664 |
\\$ 110,947 |
\\$ 95,502 |
||||
Basic earnings per common share |
\\$ 0.10 |
\\$ 0.51 |
\\$ 0.58 |
\\$ 1.78 |
||||
Deferred revenue adjustment due to acquisition (1) |
0.09 |
- |
0.20 |
- |
||||
Restructuring charges, net (2) |
0.04 |
- |
0.63 |
0.19 |
||||
Integration/acquisition costs (3) |
0.21 |
0.01 |
0.87 |
0.02 |
||||
Venezuelan foreign currency loss (4) |
0.24 |
- |
0.26 |
- |
||||
Separation costs (5) |
- |
- |
0.01 |
- |
||||
Tax effect on the above items (6) |
(0.10) |
- |
(0.45) |
(0.06) |
||||
Adjusted basic earnings per share |
\\$ 0.58 |
\\$ 0.52 |
\\$ 2.10 |
\\$ 1.93 |
||||
Diluted earnings per common share |
\\$ 0.10 |
\\$ 0.51 |
\\$ 0.58 |
\\$ 1.76 |
||||
Deferred revenue adjustment due to acquisition (1) |
0.09 |
- |
0.20 |
- |
||||
Restructuring charges, net (2) |
0.04 |
- |
0.62 |
0.19 |
||||
Integration/acquisition costs (3) |
0.21 |
- |
0.86 |
0.02 |
||||
Venezuelan foreign currency loss (4) |
0.24 |
- |
0.26 |
- |
||||
Separation costs (5) |
- |
- |
0.01 |
- |
||||
Tax effect on the above items (6) |
(0.10) |
- |
(0.45) |
(0.07) |
||||
Adjusted diluted earnings per share |
\\$ 0.58 |
\\$ 0.51 |
\\$ 2.08 |
\\$ 1.90 |
Explanation of Non-GAAP Adjustments |
||||||||||
(1) |
Increase in fee revenue relating to the deferred revenue recorded on the opening balance sheet of Hay Group, required by fair value accounting. The adjustment is included in the Hay Group segment. On a GAAP basis, Hay Group fee revenue was \\$187.7 million and \\$471.1 million during the three months and year ended April 30, 2016, respectively. On an adjusted basis, Hay Group fee revenue was \\$192.8 million and \\$482.1 million during the three months and year ended April 30, 2016, respectively. |
|||||||||
(2) |
Restructuring plan implemented in order to rationalize our cost structure by eliminating redundant positions and consolidating office space due to the acquisition of Legacy Hay on December 1, 2015. |
|||||||||
(3) |
Cost associated with completing the acquisition of Hay Group, such as legal and professional fees, and the on-going integration expenses to combine the companies. |
|||||||||
(4) |
Foreign currency loss associated with the devaluation of the Venezuelan currency. |
|||||||||
(5) |
Certain senior management separation charges. |
|||||||||
(6) |
Tax effect on deferred revenue adjustment associated with the acquisition of Hay Group, restructuring charges, net, integration/acquisition costs, foreign currency loss associated with the devaluation of the Venezuelan currency and separation costs. |
KORN FERRY AND SUBSIDIARIES |
||||||||||||||||||
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO |
||||||||||||||||||
EBITDA AND ADJUSTED EBITDA (NON-GAAP) |
||||||||||||||||||
(in thousands) |
||||||||||||||||||
(unaudited) |
||||||||||||||||||
Three Months Ended April 30, 2016 |
||||||||||||||||||
Executive Search |
||||||||||||||||||
North America |
EMEA |
Asia Pacific |
Latin America |
Subtotal |
Hay Group |
Futurestep |
Corporate |
Consolidated |
||||||||||
Fee revenue |
\\$ 94,678 |
\\$ 36,161 |
\\$ 21,199 |
\\$ 7,661 |
\\$ 159,699 |
\\$ 187,795 |
\\$ 52,466 |
\\$ - |
\\$ 399,960 |
|||||||||
Net income |
\\$ 6,375 |
|||||||||||||||||
Other income, net |
(5,645) |
|||||||||||||||||
Interest income, net |
(1,452) |
|||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
(185) |
|||||||||||||||||
Income tax provision |
5,749 |
|||||||||||||||||
Operating income (loss) |
\\$ 19,857 |
\\$ 5,695 |
\\$ 2,904 |
\\$ (5,498) |
\\$ 22,958 |
\\$ 2,871 |
\\$ 6,987 |
\\$ (27,974) |
4,842 |
|||||||||
Depreciation and amortization |
796 |
219 |
237 |
88 |
1,340 |
7,796 |
614 |
1,537 |
11,287 |
|||||||||
Other income (loss), net |
278 |
206 |
123 |
31 |
638 |
(131) |
277 |
4,861 |
5,645 |
|||||||||
Equity in earnings of unconsolidated subsidiaries, net |
185 |
- |
- |
- |
185 |
- |
- |
- |
185 |
|||||||||
Net income attributable to noncontrolling interest |
- |
- |
- |
(491) |
(491) |
(29) |
- |
- |
(520) |
|||||||||
EBITDA |
21,116 |
6,120 |
3,264 |
(5,870) |
24,630 |
10,507 |
7,878 |
(21,576) |
21,439 |
|||||||||
EBITDA margin |
22.3% |
16.9% |
15.4% |
(76.6%) |
15.4% |
5.6% |
15.0% |
5.4% |
||||||||||
Restructuring charges, net |
15 |
(59) |
- |
(6) |
(50) |
2,441 |
49 |
(4) |
2,436 |
|||||||||
Integration/acquisition costs |
- |
- |
- |
- |
- |
5,555 |
- |
6,039 |
11,594 |
|||||||||
Venezuelan foreign currency loss |
- |
- |
- |
6,635 |
6,635 |
7,085 |
- |
- |
13,720 |
|||||||||
Deferred revenue adjustment due to acquisition |
- |
- |
- |
- |
- |
5,096 |
- |
- |
5,096 |
|||||||||
Adjusted EBITDA |
\\$ 21,131 |
\\$ 6,061 |
\\$ 3,264 |
\\$ 759 |
\\$ 31,215 |
\\$ 30,684 |
\\$ 7,927 |
\\$ (15,541) |
\\$ 54,285 |
|||||||||
Adjusted EBITDA margin |
22.3% |
16.8% |
15.4% |
9.9% |
19.5% |
15.9% |
15.0% |
13.4% |
||||||||||
Three Months Ended April 30, 2015 |
||||||||||||||||||
Executive Search |
||||||||||||||||||
North America |
EMEA |
Asia Pacific |
Latin America |
Subtotal |
Hay Group |
Futurestep |
Corporate |
Consolidated |
||||||||||
Fee revenue |
\\$ 87,579 |
\\$ 39,677 |
\\$ 22,533 |
\\$ 6,794 |
\\$ 156,583 |
\\$ 72,749 |
\\$ 42,385 |
\\$ - |
\\$ 271,717 |
|||||||||
Net income |
\\$ 25,482 |
|||||||||||||||||
Other income, net |
(4,397) |
|||||||||||||||||
Interest expense, net |
358 |
|||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
(485) |
|||||||||||||||||
Income tax provision |
7,134 |
|||||||||||||||||
Operating income (loss) |
\\$ 20,030 |
\\$ 5,530 |
\\$ 4,589 |
\\$ 1,191 |
\\$ 31,340 |
\\$ 8,376 |
\\$ 5,573 |
\\$ (17,197) |
28,092 |
|||||||||
Depreciation and amortization |
853 |
398 |
274 |
101 |
1,626 |
3,579 |
508 |
1,521 |
7,234 |
|||||||||
Other income, net |
190 |
14 |
86 |
22 |
312 |
89 |
27 |
3,969 |
4,397 |
|||||||||
Equity in earnings of unconsolidated subsidiaries, net |
145 |
- |
- |
- |
145 |
- |
- |
340 |
485 |
|||||||||
EBITDA |
21,218 |
5,942 |
4,949 |
1,314 |
33,423 |
12,044 |
6,108 |
(11,367) |
40,208 |
|||||||||
EBITDA margin |
24.2% |
15.0% |
22.0% |
19.3% |
21.3% |
16.6% |
14.4% |
14.8% |
||||||||||
Acquisition costs |
- |
- |
- |
- |
- |
- |
- |
514 |
514 |
|||||||||
Adjusted EBITDA |
\\$ 21,218 |
\\$ 5,942 |
\\$ 4,949 |
\\$ 1,314 |
\\$ 33,423 |
\\$ 12,044 |
\\$ 6,108 |
\\$ (10,853) |
\\$ 40,722 |
|||||||||
Adjusted EBITDA margin |
24.2% |
15.0% |
22.0% |
19.3% |
21.3% |
16.6% |
14.4% |
15.0% |
KORN FERRY AND SUBSIDIARIES |
||||||||||||||||||
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO |
||||||||||||||||||
EBITDA AND ADJUSTED EBITDA (NON-GAAP) |
||||||||||||||||||
(in thousands) |
||||||||||||||||||
(unaudited) |
||||||||||||||||||
Year Ended April 30, 2016 |
||||||||||||||||||
Executive Search |
||||||||||||||||||
North America |
EMEA |
Asia Pacific |
Latin America |
Subtotal |
Hay Group |
Futurestep |
Corporate |
Consolidated |
||||||||||
Fee revenue |
\\$ 371,345 |
\\$ 144,319 |
\\$ 80,506 |
\\$ 26,744 |
\\$ 622,914 |
\\$ 471,145 |
\\$ 198,053 |
\\$ - |
\\$ 1,292,112 |
|||||||||
Net income |
\\$ 31,433 |
|||||||||||||||||
Other loss, net |
4,167 |
|||||||||||||||||
Interest income, net |
(237) |
|||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
(1,631) |
|||||||||||||||||
Income tax provision |
18,960 |
|||||||||||||||||
Operating income (loss) |
\\$ 100,381 |
\\$ 20,607 |
\\$ 12,572 |
\\$ (1,854) |
\\$ 131,706 |
\\$ (3,415) |
\\$ 26,702 |
\\$ (102,301) |
52,692 |
|||||||||
Depreciation and amortization |
3,267 |
1,029 |
941 |
312 |
5,549 |
21,854 |
2,386 |
6,431 |
36,220 |
|||||||||
Other (loss) income, net |
(147) |
433 |
21 |
312 |
619 |
(868) |
364 |
(4,282) |
(4,167) |
|||||||||
Equity in earnings of unconsolidated subsidiaries, net |
437 |
- |
- |
- |
437 |
- |
- |
1,194 |
1,631 |
|||||||||
Net income attributable to noncontrolling interest |
- |
- |
- |
(491) |
(491) |
(29) |
- |
- |
(520) |
|||||||||
EBITDA |
103,938 |
22,069 |
13,534 |
(1,721) |
137,820 |
17,542 |
29,452 |
(98,958) |
85,856 |
|||||||||
EBITDA margin |
28.0% |
15.3% |
16.8% |
(6.4%) |
22.1% |
3.7% |
14.9% |
6.6% |
||||||||||
Restructuring charges, net |
499 |
5,807 |
577 |
322 |
7,205 |
25,682 |
49 |
77 |
33,013 |
|||||||||
Integration/acquisition costs |
- |
- |
- |
- |
- |
17,607 |
- |
27,802 |
45,409 |
|||||||||
Venezuelan foreign currency loss |
- |
- |
- |
6,635 |
6,635 |
7,085 |
- |
- |
13,720 |
|||||||||
Deferred revenue adjustment due to acquisition |
- |
- |
- |
- |
- |
10,967 |
- |
- |
10,967 |
|||||||||
Separation costs |
- |
- |
- |
- |
- |
- |
- |
744 |
744 |
|||||||||
Adjusted EBITDA |
\\$ 104,437 |
\\$ 27,876 |
\\$ 14,111 |
\\$ 5,236 |
\\$ 151,660 |
\\$ 78,883 |
\\$ 29,501 |
\\$ (70,335) |
\\$ 189,709 |
|||||||||
Adjusted EBITDA margin |
28.1% |
19.3% |
17.5% |
19.6% |
24.3% |
16.4% |
14.9% |
14.6% |
||||||||||
Year Ended April 30, 2015 |
||||||||||||||||||
Executive Search |
||||||||||||||||||
North America |
EMEA |
Asia Pacific |
Latin America |
Subtotal |
Hay Group |
Futurestep |
Corporate |
Consolidated |
||||||||||
Fee revenue |
\\$ 330,634 |
\\$ 153,465 |
\\$ 84,148 |
\\$ 29,160 |
\\$ 597,407 |
\\$ 267,018 |
\\$ 163,727 |
\\$ - |
\\$ 1,028,152 |
|||||||||
Net income |
\\$ 88,357 |
|||||||||||||||||
Other income, net |
(7,458) |
|||||||||||||||||
Interest expense, net |
1,784 |
|||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net |
(2,181) |
|||||||||||||||||
Income tax provision |
33,526 |
|||||||||||||||||
Operating income (loss) |
\\$ 80,818 |
\\$ 18,867 |
\\$ 14,631 |
\\$ 4,704 |
\\$ 119,020 |
\\$ 28,175 |
\\$ 19,940 |
\\$ (53,107) |
114,028 |
|||||||||
Depreciation and amortization |
3,515 |
1,764 |
1,045 |
350 |
6,674 |
13,427 |
1,882 |
5,614 |
27,597 |
|||||||||
Other income (loss), net |
288 |
83 |
369 |
109 |
849 |
(22) |
54 |
6,577 |
7,458 |
|||||||||
Equity in earnings of unconsolidated subsidiaries, net |
426 |
- |
- |
- |
426 |
- |
- |
1,755 |
2,181 |
|||||||||
EBITDA |
85,047 |
20,714 |
16,045 |
5,163 |
126,969 |
41,580 |
21,876 |
(39,161) |
151,264 |
|||||||||
EBITDA margin |
25.7% |
13.5% |
19.1% |
17.7% |
21.3% |
15.6% |
13.4% |
14.7% |
||||||||||
Restructuring charges, net |
1,151 |
3,987 |
17 |
229 |
5,384 |
2,758 |
1,154 |
172 |
9,468 |
|||||||||
Acquisition costs |
- |
- |
- |
- |
- |
- |
- |
959 |
959 |
|||||||||
Adjusted EBITDA |
\\$ 86,198 |
\\$ 24,701 |
\\$ 16,062 |
\\$ 5,392 |
\\$ 132,353 |
\\$ 44,338 |
\\$ 23,030 |
\\$ (38,030) |
\\$ 161,691 |
|||||||||
Adjusted EBITDA margin |
26.1% |
16.1% |
19.1% |
18.5% |
22.2% |
16.6% |
14.1% |
15.7% |
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/korn-ferry-international-announces-fourth-quarter-and-fiscal-2016-results-of-operations-300285227.html
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