Korn ferry announces third quarter fiscal 2021 results of operations
Los angeles--(business wire)--korn ferry (nyse: kfy), a global organizational consulting firm, today announced third quarter fee revenue of $475.4 million. third quarter diluted earnings per share was $0.94 and adjusted diluted earnings per share was $0.95, both are all-time highs. adjusted diluted earnings per share for the third quarter excludes an aggregate of $0.6 million, or $0.01 per share, of restructuring charges net of tax, due to the coronavirus pandemic (“covid-19”). “our performance for the fiscal third quarter demonstrates the resilience of our business and continued extension of our brand, with strong sequential fee revenue growth of 9% and our earnings and profitability reaching record highs,” said gary d. burnison, ceo, korn ferry. “i am incredibly proud of the tireless commitment that all our korn ferry colleagues have shown in helping our clients re-imagine their organizational structures, recruit and retain talent and develop their people in the face of extraordinary challenges.” “in a post-pandemic world, there will continue to be heightened demand for transformational consulting skills and expertise,” burnison continued. “the steps we have taken to evolve our business into a more efficient, profitable, growth-oriented organization have positioned korn ferry to provide our clients with unparalleled expertise, data, and innovation support. with people at the center of our strategy, we are achieving our growth objectives, delivering long-term value creation to shareholders and establishing korn ferry as the preeminent global organizational consultancy.” selected financial results (dollars in millions, except per share amounts) (a) third quarter year to date fy’21 fy’20 fy’21 fy’20 fee revenue $ 475.4 $ 515.3 $ 1,254.9 $ 1,492.3 total revenue $ 477.9 $ 528.0 $ 1,262.6 $ 1,528.4 operating income $ 65.2 $ 31.6 $ 69.5 $ 153.8 operating margin 13.7 % 6.1 % 5.5 % 10.3 % net income attributable to korn ferry $ 51.3 $ 20.0 $ 48.3 $ 105.7 basic earnings per share $ 0.95 $ 0.37 $ 0.89 $ 1.92 diluted earnings per share $ 0.94 $ 0.36 $ 0.88 $ 1.90 ebitda results (b): third quarter year to date fy’21 fy’20 fy’21 fy’20 ebitda $ 95.8 $ 51.5 $ 142.0 $ 202.2 ebitda margin 20.2 % 10.0 % 11.3 % 13.5 % adjusted results (c): third quarter year to date fy’21 fy’20 fy’21 fy’20 adjusted ebitda (b) $ 96.7 $ 78.1 $ 173.4 $ 231.4 adjusted ebitda margin (b) 20.3 % 15.2 % 13.8 % 15.5 % adjusted net income attributable to korn ferry $ 51.9 $ 41.0 $ 71.1 $ 128.7 adjusted basic earnings per share $ 0.96 $ 0.75 $ 1.31 $ 2.33 adjusted diluted earnings per share $ 0.95 $ 0.75 $ 1.30 $ 2.31 ___________ (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, net restructuring charges and separation 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): third quarter year to date fy’21 fy’20 fy’21 fy’20 integration/acquisition costs $ — $ 6.7 $ 0.7 $ 9.3 restructuring charges, net $ 0.8 $ 18.1 $ 30.7 $ 18.1 separation costs $ — $ 1.8 $ — $ 1.8 debt refinancing costs $ — $ 0.8 $ — $ 0.8 fee revenue was $475.4 million in q3 fy’21, a decrease of 8% (down 9% on a constant currency basis) compared to q3 fy’20. while rpo and professional search saw a year-over-year increase of almost 4%, digital and executive search declined year-over-year as those businesses continued on the path to full recovery from the impact of covid-19 on economies around the world. operating margin was 13.7% in q3 fy’21 compared to 6.1% in the year-ago quarter. adjusted ebitda margin was 20.3%, compared to 15.2% in the year-ago quarter. net income attributable to korn ferry was $51.3 million in q3 fy’21 compared to $20.0 million in q3 fy’20. the year-over-year improvement in each of the above measures of profitability was due to the cost saving actions the company took in response to the impact of covid-19 as well as the fact that the company recorded $18 million in restructuring charges in q3 fy’20 in connection with the acquisitions of miller heiman group, achieve forum and strategy execution (collectively, the “acquired companies”). these positive factors were partially offset by the decline in revenues described above. results by segment selected consulting data (dollars in millions) (a) third quarter year to date fy’21 fy’20 fy’21 fy’20 fee revenue $ 136.3 $ 140.5 $ 362.3 $ 422.1 total revenue $ 136.6 $ 144.3 $ 363.2 $ 433.8 operating income $ 22.2 $ 2.7 $ 25.9 $ 24.3 operating margin 16.3 % 1.9 % 7.1 % 5.8 % ending number of consultants and execution staff (b) 1,528 1,792 1,528 1,792 hours worked in thousands (c) 372 428 1,137 1,344 average billed rate (d) $ 367 $ 328 $ 319 $ 314 ebitda results (e): third quarter year to date fy’21 fy’20 fy’21 fy’20 ebitda $ 27.2 $ 7.6 $ 40.1 $ 38.9 ebitda margin 19.9 % 5.4 % 11.1 % 9.2 % adjusted results (f): third quarter year to date fy’21 fy’20 fy’21 fy’20 adjusted ebitda (e) $ 27.5 $ 18.7 $ 54.3 $ 50.0 adjusted ebitda margin (e) 20.2 % 13.3 % 15.0 % 11.8 % ___________ (a) numbers may not total due to rounding. (b) represents number of employees originating, delivering and executing consulting services. (c) the number of hours worked by consultant and execution staff during the period. (d) the amount of fee revenue divided by the number of hours worked by consultants and execution staff. (e) ebitda, ebitda margin, adjusted ebitda and adjusted ebitda margin are non-gaap financial measures (see attached reconciliations). (f) adjusted results are non-gaap financial measures that adjust for the following (see attached reconciliations): third quarter year to date fy’21 fy’20 fy’21 fy’20 restructuring charges, net $ 0.3 $ 11.1 $ 14.2 $ 11.1 fee revenue was $136.3 million in q3 fy’21 compared to $140.5 million in q3 fy’20, a decrease of $4.2 million or 3% (down 4% on a constant currency basis). while covid-19 has had an impact on consulting fee revenue when compared to the year-ago quarter, the diversity of our consulting services and our ability to adapt to delivering the services in a virtual world has led to an increase in fee revenue of 37% over the past two fiscal quarters. operating income was $22.2 million in q3 fy’21 with an operating margin of 16.3% compared to operating income of $2.7 million and an operating margin of 1.9% in the year-ago quarter. this change resulted from a decrease in net restructuring charges, a decrease in compensation and benefits expense driven by a reduction in headcount and decreases in both general and administrative expenses and cost of services expense, all of which resulted from the cost saving initiatives that were put in place. these expense reductions were partially offset by the decline in fee revenue as outlined above. adjusted ebitda was $27.5 million in q3 fy’21 with an adjusted ebitda margin of 20.2% compared to $18.7 million and 13.3%, respectively, in the year-ago quarter. the increase in adjusted ebitda was due to the same factors impacting operating income outlined above except for net restructuring charges. selected digital data (dollars in millions) (a) digital is an integrated platform that gives clients direct access to people and organizational data, insights, analytics, and digital assets that when used together, give clients a common language for all talent matters. third quarter year to date fy’21 fy’20 fy’21 fy’20 fee revenue $ 75.8 $ 99.4 $ 206.8 $ 223.1 total revenue $ 76.0 $ 100.7 $ 207.0 $ 224.4 operating income $ 19.2 $ 8.5 $ 32.4 $ 41.0 operating margin 25.4 % 8.5 % 15.7 % 18.4 % ending number of consultants 302 464 302 464 subscription & license fee revenue $ 22.6 $ 21.3 $ 66.3 $ 52.7 ebitda results (b): third quarter year to date fy’21 fy’20 fy’21 fy’20 ebitda $ 27.1 $ 14.5 $ 54.7 $ 54.7 ebitda margin 35.8 % 14.6 % 26.4 % 24.5 % adjusted results (c): third quarter year to date fy’21 fy’20 fy’21 fy’20 adjusted ebitda (b) $ 27.1 $ 25.9 $ 58.2 $ 66.1 adjusted ebitda margin (b) 35.8 % 26.0 % 28.1 % 29.6 % ___________ (a) numbers may not total due to rounding. (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 adjust for the following (see attached reconciliations): third quarter year to date fy’21 fy’20 fy’21 fy’20 integration/acquisition costs $ — $ 4.3 $ 0.6 $ 4.3 restructuring charges, net $ — $ 7.0 $ 2.9 $ 7.0 fee revenue was $75.8 million in q3 fy’21 compared to $99.4 million in q3 fy’20, a decrease of $23.6 million or 24% (down 25% on a constant currency basis). due to covid-19 and the related contraction in economic activity, the company experienced a decline in demand for pay data and professional development products and services. as economies around the world recover and companies pivot from in person to virtual delivery, the company expects demand for these products and services to return to pre-pandemic levels. operating income was $19.2 million in q3 fy’21 with an operating margin of 25.4% compared to operating income of $8.5 million and an operating margin of 8.5% in the year-ago quarter. contributing to the increase were decreases in compensation and benefits expense, general and administrative expenses, net restructuring charges, cost of services expense and integration/acquisition costs relating to the acquired companies, partially offset by a decrease in fee revenue as outlined above. adjusted ebitda was $27.1 million in q3 fy’21 with an adjusted ebitda margin of 35.8% compared to $25.9 million and 26.0%, respectively, in the year-ago quarter. the increase in adjusted ebitda was due to the same factors impacting operating income described above except for restructuring charges and integration/acquisition costs. selected executive search data (dollars in millions) (a) third quarter year to date fy’21 fy’20 fy’21 fy’20 fee revenue $ 168.1 $ 183.6 $ 436.3 $ 564.6 total revenue $ 168.5 $ 188.0 $ 438.0 $ 578.0 operating income $ 26.9 $ 32.7 $ 40.2 $ 119.6 operating margin 16.0 % 17.8 % 9.2 % 21.2 % ending number of consultants 522 582 522 582 average number of consultants 517 583 539 573 engagements billed 3,260 3,767 6,464 8,077 new engagements (b) 1,301 1,565 3,747 4,835 ebitda results (c): third quarter year to date fy’21 fy’20 fy’21 fy’20 ebitda $ 41.3 $ 38.9 $ 67.6 $ 131.8 ebitda margin 24.6 % 21.2 % 15.5 % 23.3 % adjusted results (d): third quarter year to date fy’21 fy’20 fy’21 fy’20 adjusted ebitda (c) $ 41.7 $ 40.7 $ 78.0 $ 133.6 adjusted ebitda margin (c) 24.8 % 22.1 % 17.9 % 23.7 % ________ (a) numbers may not total due to rounding. (b) represents new engagements opened in the respective period. (c) ebitda, ebitda margin, adjusted ebitda and adjusted ebitda margin are non-gaap financial measures (see attached reconciliations). (d) adjusted results are non-gaap financial measures that adjust for the following (see attached reconciliations): third quarter year to date fy’21 fy’20 fy’21 fy’20 restructuring charges, net $ 0.4 $ — $ 10.4 $ — separation costs $ — $ 1.8 $ — $ 1.8 fee revenue was $168.1 million and $183.6 million in q3 fy’21 and q3 fy’20, respectively, a year-over-year decrease of $15.5 million or 8% (down 10% on a constant currency basis). the decrease in fee revenue was attributable to a decline in fee revenue in all regions, except north america which was essentially flat, due to the decrease in demand for our products and services because of the worldwide economic downturn associated with covid-19. operating income was $26.9 million in q3 fy’21 compared to operating income of $32.7 million in q3 fy’20. operating margin was 16.0% in q3 fy’21 compared to 17.8% in the year-ago quarter. the change was mainly due to a decrease in fee revenue in q3 fy’21 as compared to the year-ago quarter, partially offset by a decrease in compensation and benefits expense driven by a reduction in headcount and a decline in general and administrative expenses, all of which resulted from the cost saving initiatives that were put in place. adjusted ebitda was $41.7 million in q3 fy’21 with an adjusted ebitda margin of 24.8% compared to $40.7 million and 22.1%, respectively, in the year-ago quarter. the increase in adjusted ebitda was due to the same factors impacting operating income described above and an increase in other income, net compared to year-ago quarter. selected rpo and professional search data (dollars in millions) (a) third quarter year to date fy’21 fy’20 fy’21 fy’20 fee revenue $ 95.2 $ 91.9 $ 249.5 $ 282.4 total revenue $ 96.8 $ 95.0 $ 254.3 $ 292.2 operating income $ 18.4 $ 14.1 $ 33.0 $ 44.3 operating margin 19.3 % 15.4 % 13.2 % 15.7 % engagements billed (b) 1,430 1,375 2,659 3,030 new engagements (c) 867 711 2,088 2,171 ebitda results (d): third quarter year to date fy’21 fy’20 fy’21 fy’20 ebitda $ 19.5 $ 15.2 $ 36.3 $ 47.5 ebitda margin 20.5 % 16.6 % 14.5 % 16.8 % adjusted results (e): third quarter year to date fy’21 fy’20 fy’21 fy’20 adjusted ebitda (d) $ 19.6 $ 15.2 $ 39.5 $ 47.5 adjusted ebitda margin (d) 20.6 % 16.6 % 15.8 % 16.8 % ___________ (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). (e) adjusted results are non-gaap financial measures that adjust for the following (see attached reconciliations): third quarter year to date fy’21 fy’20 fy’21 fy’20 restructuring charges, net $ 0.1 $ — $ 3.2 $ — fee revenue was $95.2 million in q3 fy’21, an increase of $3.3 million or 4% (1% increase on a constant currency basis), compared to the year-ago quarter. the higher fee revenue was driven by an increase in recruitment process outsourcing (“rpo”) fee revenue of $4.0 million, partially offset by a small decrease in professional search of $0.7 million due to the worldwide economic downturn associated with covid-19. for the quarter, rpo fee revenue was up 7% (5% at constant currency) while professional search was down 2% (4% on a constant currency), both compared to the year-ago quarter. operating income was $18.4 million in q3 fy’21, an increase of $4.3 million compared to operating income of $14.1 million in q3 fy’20. operating margin was 19.3% in the current quarter compared to 15.4% in the year-ago quarter. adjusted ebitda was $19.6 million in q3 fy’21 with an adjusted ebitda margin of 20.6% in q3 fy’21 compared to $15.2 million and 16.6%, respectively, in the year-ago quarter. the increase in operating income and adjusted ebitda was due to the higher fee revenue discussed above and lower general and administrative expenses, partially offset by an increase in compensation and benefits expense. outlook assuming no new major pandemic lockdowns, worldwide economic conditions, financial markets and foreign exchange rates remain steady, on a consolidated basis: q4 fy’21 fee revenue is expected to be in the range of $475 million and $500 million; and q4 fy’21 diluted earnings per share is expected to range between $0.95 to $1.05. earnings conference call webcast the earnings conference call will be held today at 12:00 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 our outlook, projections, goals, strategies, future plans and expectations, and other statements of future events or conditions are forward-looking statements that involve a number of risks and uncertainties. words such as “believes”, “expects”, “anticipates”, “goals”, “estimates”, “guidance”, “may”, “should”, “could”, “will” or “likely”, and variations of such words and similar expressions are intended to identify such forward-looking statements. statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to expected demand for our products and services, the expected benefits of the acquisition of the acquired companies (as defined below), the timing and expected benefits of our restructuring plan, the magnitude and duration of the impact of the covid-19 outbreak on our business, employees, customers and our ability to provide services in affected regions, and the potential opportunities for our business as a result of worldwide changes in how companies conduct business as a result of covid-19. readers are cautioned not to place undue reliance on such statements. such statements are based on current expectations; 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 the magnitude and duration of the negative impact of the covid-19 outbreak on our business, employees, customers and our ability to provide services in affected regions, global and local political or economic developments in or affecting countries where we have operations, 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, 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, treaties, or regulations on our business and our company, 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 acquired companies and employment liability risk. for a detailed description of risks and uncertainties that could cause differences, please refer to korn ferry’s periodic filings with the securities and exchange commission. korn ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. use of non-gaap financial measures this press release contains financial information calculated other than in accordance with u.s. generally accepted accounting principles (“gaap”). in particular, it includes: adjusted net income attributable to korn ferry, adjusted to exclude integration/acquisition costs, restructuring charges, separation costs and debt refinancing costs net of income tax effect; adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs, restructuring charges, separation costs and debt refinancing costs net of income tax effect; constant currency (calculated using a quarterly average) percentages that represent the percentage change that would have resulted had exchange rates in the prior period been the same as those in effect in the current period; ebitda, or earnings before interest, taxes, depreciation and amortization and ebitda margin; and adjusted ebitda, which is ebitda further adjusted to exclude integration/acquisition costs, restructuring charges and separations costs, 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, which are described in the footnotes in the attached reconciliations, represent 1) costs we incurred to acquire and integrate a portion of our digital business, 2) charges we incurred to restructure the company as a result of covid-19 and due to the acquisition of the acquired companies, 3) separation costs and 4) debt refinancing costs. the use of non-gaap financial measures facilitates comparisons to korn ferry’s historical performance. korn ferry includes non-gaap financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of korn ferry’s ongoing operations and financial and operational decision-making. adjusted net income attributable to korn ferry, adjusted basic and diluted earnings per share and adjusted ebitda, exclude certain charges that management does not consider on-going in nature and allows management and investors to make more meaningful period-to-period comparisons of the company’s operating results. management further believes that ebitda is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company. in the case of constant currency percentages, management believes the presentation of such information provides useful supplemental information regarding korn ferry's performance as excluding the impact of exchange rate changes on korn ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the company’s operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of korn ferry's ongoing operations and financial and operational decision-making. [tables attached] korn ferry and subsidiaries consolidated statements of income (in thousands, except per share amounts) three months ended nine months ended january 31, january 31, 2021 2020 2021 2020 (unaudited) fee revenue $ 475,360 $ 515,325 $ 1,254,896 $ 1,492,263 reimbursed out-of-pocket engagement expenses 2,520 12,654 7,656 36,091 total revenue 477,880 527,979 1,262,552 1,528,354 compensation and benefits 326,333 348,597 917,530 1,014,475 general and administrative expenses 47,271 71,355 140,836 199,171 reimbursed expenses 2,520 12,654 7,656 36,091 cost of services 20,028 30,822 50,198 66,371 depreciation and amortization 15,735 14,863 46,068 40,355 restructuring charges, net 838 18,093 30,732 18,093 total operating expenses 412,725 496,384 1,193,020 1,374,556 operating income 65,155 31,595 69,532 153,798 other income, net 14,935 5,055 26,374 8,014 interest expense, net (7,298 ) (6,919 ) (21,686 ) (15,186 ) income before provision for income taxes 72,792 29,731 74,220 146,626 income tax provision 21,204 8,775 25,409 38,988 net income 51,588 20,956 48,811 107,638 net income attributable to noncontrolling interest (269 ) (963 ) (547 ) (1,890 ) net income attributable to korn ferry $ 51,319 $ 19,993 $ 48,264 $ 105,748 earnings per common share attributable to korn ferry: basic $ 0.95 $ 0.37 $ 0.89 $ 1.92 diluted $ 0.94 $ 0.36 $ 0.88 $ 1.90 weighted-average common shares outstanding: basic 52,596 53,999 53,030 54,611 diluted 53,013 54,264 53,396 55,006 cash dividends declared per share: $ 0.10 $ 0.10 $ 0.30 $ 0.30 korn ferry and subsidiaries financial summary by segment (dollars in thousands) (unaudited) three months ended january 31, nine months ended january '31, 2021 2020 % change 2021 2020 % change fee revenue: consulting $ 136,268 $ 140,525 (3.0 %) $ 362,271 $ 422,103 (14.2 %) digital 75,791 99,389 (23.7 %) 206,807 223,097 (7.3 %) executive search: north america 106,002 106,888 (0.8 %) 266,485 332,428 (19.8 %) emea 35,991 44,301 (18.8 %) 97,701 130,652 (25.2 %) asia pacific 21,643 25,089 (13.7 %) 59,702 78,395 (23.8 %) latin america 4,468 7,283 (38.7 %) 12,419 23,140 (46.3 %) total executive search 168,104 183,561 (8.4 %) 436,307 564,615 (22.7 %) rpo and professional search 95,197 91,850 3.6 % 249,511 282,448 (11.7 %) total fee revenue 475,360 515,325 (7.8 %) 1,254,896 1,492,263 (15.9 %) reimbursed out-of-pocket engagement expenses 2,520 12,654 (80.1 %) 7,656 36,091 (78.8 %) total revenue $ 477,880 $ 527,979 (9.5 %) $ 1,262,552 $ 1,528,354 (17.4 %) operating income (loss): margin margin margin margin consulting $ 22,175 16.3 % $ 2,663 1.9 % $ 25,869 7.1 % $ 24,272 5.8 % digital 19,214 25.4 % 8,463 8.5 % 32,410 15.7 % 41,036 18.4 % executive search: north america 17,655 16.7 % 21,808 20.4 % 32,411 12.2 % 80,254 24.1 % emea 3,114 8.7 % 4,644 10.5 % (1,596 ) (1.6 %) 18,466 14.1 % asia pacific 5,844 27.0 % 5,070 20.2 % 9,958 16.7 % 17,866 22.8 % latin america 264 5.9 % 1,198 16.4 % (578 ) (4.7 %) 2,999 13.0 % total executive search 26,877 16.0 % 32,720 17.8 % 40,195 9.2 % 119,585 21.2 % rpo and professional search 18,360 19.3 % 14,144 15.4 % 33,027 13.2 % 44,279 15.7 % corporate (21,471 ) (26,395 ) (61,969 ) (75,374 ) total operating income $ 65,155 13.7 % $ 31,595 6.1 % $ 69,532 5.5 % $ 153,798 10.3 % korn ferry and subsidiaries consolidated balance sheets (in thousands, except per share amounts) january 31, april 30, 2021 2020 (unaudited) assets cash and cash equivalents $ 694,128 $ 689,244 marketable securities 45,931 41,951 receivables due from clients, net of allowance for doubtful accounts of $29,174 and $23,795 at january 31, 2021 and april 30, 2020, respectively 448,448 397,165 income taxes and other receivables 45,154 38,755 unearned compensation 53,188 43,117 prepaid expenses and other assets 28,737 26,851 total current assets 1,315,586 1,237,083 marketable securities, non-current 157,023 132,134 property and equipment, net 134,226 142,728 operating lease right-of-use assets, net 182,675 195,077 cash surrender value of company-owned life insurance policies, net of loans 162,549 146,408 deferred income taxes 57,865 55,479 goodwill 625,549 613,943 intangible assets, net 97,696 111,926 unearned compensation, non-current 104,650 79,510 investments and other assets 25,648 29,540 total assets $ 2,863,467 $ 2,743,828 liabilities and stockholders' equity accounts payable $ 37,858 $ 45,684 income taxes payable 9,664 21,158 compensation and benefits payable 301,147 280,911 operating lease liability, current 48,998 54,851 other accrued liabilities 237,743 221,603 total current liabilities 635,410 624,207 deferred compensation and other retirement plans 333,551 289,136 operating lease liability, non-current 164,656 180,766 long-term debt 394,629 394,144 deferred tax liabilities 380 1,056 other liabilities 39,847 30,828 total liabilities 1,568,473 1,520,137 stockholders' equity common stock: $0.01 par value, 150,000 shares authorized, 74,911 and 73,205 shares issued and 53,997 and 54,450 shares outstanding at january 31, 2021 and april 30, 2020, respectively 576,798 585,560 retained earnings 774,303 742,993 accumulated other comprehensive loss, net (57,914 ) (107,172 ) total korn ferry stockholders' equity 1,293,187 1,221,381 noncontrolling interest 1,807 2,310 total stockholders' equity 1,294,994 1,223,691 total liabilities and stockholders' equity $ 2,863,467 $ 2,743,828 korn ferry and subsidiaries reconciliation of gaap to non-gaap financial measures (dollars in thousands, except per share amounts) three months ended nine months ended january 31, january 31, 2021 2020 2021 2020 (unaudited) net income attributable to korn ferry $ 51,319 $ 19,993 $ 48,264 $ 105,748 net income attributable to non-controlling interest 269 963 547 1,890 net income 51,588 20,956 48,811 107,638 income tax provision 21,204 8,775 25,409 38,988 income before provision for income taxes 72,792 29,731 74,220 146,626 other income, net (14,935 ) (5,055 ) (26,374 ) (8,014 ) interest expense, net 7,298 6,919 21,686 15,186 operating income 65,155 31,595 69,532 153,798 depreciation and amortization 15,735 14,863 46,068 40,355 other income, net 14,935 5,055 26,374 8,014 ebitda 95,825 51,513 141,974 202,167 integration/acquisition costs (1) - 6,704 737 9,319 restructuring charges, net (2) 838 18,093 30,732 18,093 separation costs (3) - 1,783 - 1,783 adjusted ebitda $ 96,663 $ 78,093 $ 173,443 $ 231,362 operating margin 13.7 % 6.1 % 5.5 % 10.3 % depreciation and amortization 3.3 % 2.9 % 3.7 % 2.7 % other income, net 3.2 % 1.0 % 2.1 % 0.5 % ebitda margin 20.2 % 10.0 % 11.3 % 13.5 % integration/acquisition costs (1) - 1.3 % 0.1 % 0.7 % restructuring charges, net (2) 0.1 % 3.5 % 2.4 % 1.2 % separation costs (3) - 0.4 % - 0.1 % adjusted ebitda margin 20.3 % 15.2 % 13.8 % 15.5 % net income attributable to korn ferry $ 51,319 $ 19,993 $ 48,264 $ 105,748 integration/acquisition costs (1) - 6,704 737 9,319 restructuring charges, net (2) 838 18,093 30,732 18,093 separation costs (3) - 1,783 - 1,783 debt refinancing costs (4) - 828 - 828 tax effect on the adjusted items (5) (276 ) (6,451 ) (8,597 ) (7,119 ) adjusted net income attributable to korn ferry $ 51,881 $ 40,950 $ 71,136 $ 128,652 basic earnings per common share $ 0.95 $ 0.37 $ 0.89 $ 1.92 integration/acquisition costs (1) - 0.12 0.01 0.17 restructuring charges, net (2) 0.02 0.34 0.57 0.33 separation costs (3) - 0.03 - 0.03 debt refinancing costs (4) - 0.02 - 0.02 tax effect on the adjusted items (5) (0.01 ) (0.13 ) (0.16 ) (0.14 ) adjusted basic earnings per share $ 0.96 $ 0.75 $ 1.31 $ 2.33 diluted earnings per common share $ 0.94 $ 0.36 $ 0.88 $ 1.90 integration/acquisition costs (1) - 0.12 0.01 0.17 restructuring charges, net (2) 0.02 0.34 0.57 0.33 separation costs (3) - 0.03 - 0.03 debt refinancing costs (4) - 0.02 - 0.02 tax effect on the adjusted items (5) (0.01 ) (0.12 ) (0.16 ) (0.14 ) adjusted diluted earnings per share $ 0.95 $ 0.75 $ 1.30 $ 2.31 explanation of non-gaap adjustments (1) costs associated with previous acquisitions, such as legal and professional fees, retention awards and the on-going integration expenses to combine the companies. (2) restructuring charges we incurred to rationalize our cost structure by eliminating redundant positions because of covid-19 and due to the acquisition of miller heiman group, achieveforum and strategy execution on november 1, 2019. (3) costs associated with certain senior management separation charges. (4) costs to write-off debt issuance costs and interest rate swap as a result of replacing our prior credit agreement with a new senior secured credit agreement. (5) tax effect on integration/acquisition costs, restructuring charges, net, separation costs and write-offs of debt issuance 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 january 31, 2021 executive search consulting digital north america emea asia pacific latin america subtotal rpo and professional search corporate consolidated fee revenue $ 136,268 $ 75,791 $ 106,002 $ 35,991 $ 21,643 $ 4,468 $ 168,104 $ 95,197 $ - $ 475,360 total revenue $ 136,593 $ 75,967 $ 106,325 $ 36,016 $ 21,680 $ 4,468 $ 168,489 $ 96,831 $ - $ 477,880 net income attributable to korn ferry $ 51,319 net income attributable to noncontrolling interest 269 other income, net (14,935 ) interest expense, net 7,298 income tax provision 21,204 operating income (loss) $ 22,175 $ 19,214 $ 17,655 $ 3,114 $ 5,844 $ 264 $ 26,877 $ 18,360 $ (21,471 ) 65,155 depreciation and amortization 4,051 7,403 680 345 231 193 1,449 929 1,903 15,735 other income, net 943 494 12,611 61 323 1 12,996 242 260 14,935 ebitda 27,169 27,111 30,946 3,520 6,398 458 41,322 19,531 (19,308 ) 95,825 ebitda margin 19.9 % 35.8 % 29.2 % 9.8 % 29.6 % 10.3 % 24.6 % 20.5 % 20.2 % restructuring, charges, net 346 23 (5 ) 398 (23 ) - 370 99 - 838 adjusted ebitda $ 27,515 $ 27,134 $ 30,941 $ 3,918 $ 6,375 $ 458 $ 41,692 $ 19,630 $ (19,308 ) $ 96,663 adjusted ebitda margin 20.2 % 35.8 % 29.2 % 10.9 % 29.5 % 10.3 % 24.8 % 20.6 % 20.3 % three months ended january 31, 2020 executive search consulting digital north america emea asia pacific latin america subtotal rpo and professional search corporate consolidated fee revenue $ 140,525 $ 99,389 $ 106,888 $ 44,301 $ 25,089 $ 7,283 $ 183,561 $ 91,850 $ - $ 515,325 total revenue $ 144,298 $ 100,663 $ 110,230 $ 45,077 $ 25,365 $ 7,351 $ 188,023 $ 94,995 $ - $ 527,979 net income attributable to korn ferry $ 19,993 net income attributable to noncontrolling interest 963 other income, net (5,055 ) interest expense, net 6,919 income tax provision 8,775 operating income (loss) $ 2,663 $ 8,463 $ 21,808 $ 4,644 $ 5,070 $ 1,198 $ 32,720 $ 14,144 $ (26,395 ) 31,595 depreciation and amortization 4,417 5,832 847 422 329 295 1,893 979 1,742 14,863 other income (loss), net 558 193 3,963 29 106 162 4,260 88 (44 ) 5,055 ebitda 7,638 14,488 26,618 5,095 5,505 1,655 38,873 15,211 $ (24,697 ) 51,513 ebitda margin 5.4 % 14.6 % 24.9 % 11.5 % 21.9 % 22.7 % 21.2 % 16.6 % 10.0 % integration/acquisition costs - 4,332 - - - - - - 2,372 6,704 restructuring, charges, net 11,061 7,032 - - - - - - - 18,093 separation costs - - - 1,783 - - 1,783 - - 1,783 adjusted ebitda $ 18,699 $ 25,852 $ 26,618 $ 6,878 $ 5,505 $ 1,655 $ 40,656 $ 15,211 $ (22,325 ) $ 78,093 adjusted ebitda margin 13.3 % 26.0 % 24.9 % 15.5 % 21.9 % 22.7 % 22.1 % 16.6 % 15.2 % korn ferry and subsidiaries reconciliation of net income and operating income (gaap) to ebitda and adjusted ebitda (non-gaap) (in thousands) (unaudited) nine months ended january 31, 2021 executive search consulting digital north america emea asia pacific latin america subtotal rpo and professional search corporate consolidated fee revenue $ 362,271 $ 206,807 $ 266,485 $ 97,701 $ 59,702 $ 12,419 $ 436,307 $ 249,511 $ - $ 1,254,896 total revenue $ 363,234 $ 207,027 $ 267,790 $ 97,925 $ 59,840 $ 12,419 $ 437,974 $ 254,317 $ - $ 1,262,552 net income attributable to korn ferry $ 48,264 net income attributable to noncontrolling interest 547 other income, net (26,374 ) interest expense, net 21,686 income tax provision 25,409 operating income (loss) $ 25,869 $ 32,410 $ 32,411 $ (1,596 ) $ 9,958 $ (578 ) $ 40,195 $ 33,027 $ (61,969 ) 69,532 depreciation and amortization 12,123 21,134 2,126 1,062 756 597 4,541 2,814 5,456 46,068 other income (loss), net 2,067 1,114 21,944 111 715 56 22,826 462 (95 ) 26,374 ebitda 40,059 54,658 56,481 (423 ) 11,429 75 67,562 36,303 (56,608 ) 141,974 ebitda margin 11.1 % 26.4 % 21.2 % (0.4 %) 19.1 % 0.6 % 15.5 % 14.5 % 11.3 % integration/acquisition costs - 556 - - - - - - 181 737 restructuring charges, net 14,223 2,947 958 8,868 181 405 10,412 3,150 - 30,732 adjusted ebitda $ 54,282 $ 58,161 $ 57,439 $ 8,445 $ 11,610 $ 480 $ 77,974 $ 39,453 $ (56,427 ) $ 173,443 adjusted ebitda margin 15.0 % 28.1 % 21.6 % 8.6 % 19.4 % 3.9 % 17.9 % 15.8 % 13.8 % nine months ended january 31, 2020 executive search consulting digital north america emea asia pacific latin america subtotal rpo and professional search corporate consolidated fee revenue $ 422,103 $ 223,097 $ 332,428 $ 130,652 $ 78,395 $ 23,140 $ 564,615 $ 282,448 $ - $ 1,492,263 total revenue $ 433,832 $ 224,371 $ 342,753 $ 132,830 $ 79,201 $ 23,211 $ 577,995 $ 292,156 $ - $ 1,528,354 net income attributable to korn ferry $ 105,748 net income attributable to noncontrolling interest 1,890 other income, net (8,014 ) interest expense, net 15,186 income tax provision 38,988 operating income (loss) $ 24,272 $ 41,036 $ 80,254 $ 18,466 $ 17,866 $ 2,999 $ 119,585 $ 44,279 $ (75,374 ) 153,798 depreciation and amortization 13,188 13,156 2,617 1,328 1,004 938 5,887 2,961 5,163 40,355 other income (loss), net 1,469 528 5,740 148 193 249 6,330 216 (529 ) 8,014 ebitda 38,929 54,720 88,611 19,942 19,063 4,186 131,802 47,456 (70,740 ) 202,167 ebitda margin 9.2 % 24.5 % 26.7 % 15.3 % 24.3 % 18.1 % 23.3 % 16.8 % 13.5 % integration/acquisition costs - 4,332 - - - - - - 4,987 9,319 restructuring charges, net 11,061 7,032 - - - - - - - 18,093 separation costs - - - 1,783 - - 1,783 - - 1,783 adjusted ebitda $ 49,990 $ 66,084 $ 88,611 $ 21,725 $ 19,063 $ 4,186 $ 133,585 $ 47,456 $ (65,753 ) $ 231,362 adjusted ebitda margin 11.8 % 29.6 % 26.7 % 16.6 % 24.3 % 18.1 % 23.7 % 16.8 % 15.5 %
