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Korn Ferry Announces Third Quarter Fiscal 2020 Results of Operations

Cision

LOS ANGELES , March 10, 2020 /PRNewswire/ --

Highlights

  • Korn Ferry reports fee revenue of $515.3 million in Q3 FY'20.
  • Net income attributable to Korn Ferry was $20.0 million in Q3 FY'20.
  • Operating income was $31.6 million in Q3 FY'20 with an operating margin of 6.1%. Adjusted EBITDA was $78.1 million with an Adjusted EBITDA margin of 15.2%.
  • Q3 FY'20 diluted earnings per share and adjusted diluted earnings per share was $0.36 and $0.75 , respectively.
  • During the third quarter, the Company completed the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution ("acquired companies") that are part of a newly branded reporting segment­ Korn Ferry Digital (formerly the Products Group).
  • During the third quarter, the Company renegotiated its existing revolving line of credit on more favorable terms and conditions and repaid the outstanding balance using proceeds from the issuance of $400 million , 4.625% Senior Notes.
  • The Company continued with its balanced approach to capital allocation, buying back 0.2 million shares or $6.1 million of stock during the quarter and declaring a quarterly dividend of $0.10 per share on March 10, 2020 payable on April 15, 2020 to stockholders of record on March 26, 2020 .

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

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

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

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


Third Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

Fee revenue

$

515.3


$

474.5


$

1,492.3


$

1,435.3

Total revenue

$

528.0


$

486.2


$

1,528.4


$

1,471.3

Operating income

$

31.6


$

62.7


$

153.8


$

78.6

Operating margin


6.1%



13.2%



10.3%



5.5%

Net income attributable to Korn Ferry

$

20.0


$

45.0


$

105.7


$

52.4

Basic earnings per share

$

0.37


$

0.81


$

1.92


$

0.94

Diluted earnings per share

$

0.36


$

0.80


$

1.90


$

0.92

























EBITDA Results (b):

Third Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

EBITDA

$

51.5


$

76.9


$

202.2


$

115.5

EBITDA margin


10.0%



16.2%



13.5%



8.0%

























Adjusted Results (c):

Third Quarter


Year to Date







FY'20


FY'19


FY'20


FY'19

Adjusted EBITDA (b)

$

78.1


$

77.7


$

231.4


$

228.8

Adjusted EBITDA margin (b)


15.2%



16.4%



15.5%



15.9%

Adjusted net income attributable to Korn Ferry

$

41.0


$

45.8


$

128.7


$

138.2

Adjusted basic earnings per share

$

0.75


$

0.82


$

2.33


$

2.47

Adjusted diluted earnings per share

$

0.75


$

0.81


$

2.31


$

2.43

___________

(a)

Numbers may not total due to rounding.

(b)

EBITDA refers to earnings before interest, taxes, depreciation and amortization.  Adjusted EBITDA further adjusts EBITDA to exclude integration/acquisition costs, restructuring charges, net, separation costs and tradename write-offs. EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).

(c)

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











Third Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

Integration/acquisition costs

$

6.7


$

0.8


$

9.3


$

6.7

Restructuring charges, net

$

18.1


$


$

18.1


$

Separation costs

$

1.8


$


$

1.8


$

Tradename write-offs

$


$


$


$

106.6

Debt refinancing costs

$

0.8


$


$

0.8


$

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

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

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

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

Results by Segment

Selected Consulting Data (a)
(dollars in millions) (b)

...

Third Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

Fee revenue

$

140.5


$

139.0


$

422.1


$

424.0

Total revenue

$

144.3


$

143.2


$

433.8


$

437.2

Operating income (loss)

$

2.7


$

11.8


$

24.3


$

(47.4)

Operating margin


1.9%



8.5%



5.8%



(11.2%)













Ending number of consultants and execution staff (c)


1,792



1,832



1,792



1,832

Hours worked in thousands (d)


428



406



1,344



1,263

Average billed rate (e)

$

328


$

342


$

314


$

336

























EBITDA Results (f):

Third Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

EBITDA

$

7.6


$

16.4


$

38.9


$

(34.1)

EBITDA margin


5.4%



11.8%



9.2%



(8.0%)






























Adjusted Results (g):

Third Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

Adjusted EBITDA (f)

$

18.7


$

17.0


$

50.0


$

48.2

Adjusted EBITDA margin (f)


13.3%



12.2%



11.8%



11.4%

 ___________

(a)

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

(b)

Numbers may not total due to rounding.

(c)

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

(d)

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

(e)

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

(f)

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

(g)

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











Third Quarter


Year to Date


FY'20


FY'19


FY'20


FY'19

Integration/acquisition costs

$


$

0.7


$


$

5.3

Restructuring charges, net

$

11.1


$


$

11.1


$

Tradename write-offs

$


$


$