PR Newswire | Nov 23, 2020 06:45AM EST

11/23 05:45 CST

Korn Ferry Announces Second Quarter Fiscal 2021 Results of Operations LOS ANGELES, Nov. 23, 2020

LOS ANGELES, Nov. 23, 2020 /PRNewswire/ --

FY'21 Second Quarter Performance

* Korn Ferry reports fee revenue of $435.4 million in Q2 FY'21, a decrease of 12% (decrease of 12% on a constant currency basis) from Q2 FY'20. On a quarter sequential basis, Q2 FY'21 fee revenue increased 27% from Q1 FY'21. * Net income attributable to Korn Ferry was $27.8 million in Q2 FY'21. * Operating income was $48.2 million in Q2 FY'21 with an operating margin of 11.1%. Adjusted EBITDA was $66.2 million with an Adjusted EBITDA margin of 15.2%. * Q2 FY'21 diluted earnings per share and adjusted diluted earnings per share was $0.51 and $0.54, respectively.

Korn Ferry (NYSE: KFY), a global organizational consulting firm, today announced second quarter fee revenue of $435.4 million. Second quarter diluted earnings per share was $0.51 and adjusted diluted earnings per share was $0.54. Adjusted diluted earnings per share for the second quarter excludes an aggregate of $1.7 million, net of tax or $0.03 per share, of restructuring charges, net, due to the coronavirus pandemic ("COVID-19").

"During the recently completed second quarter, I'm pleased that Korn Ferry's revenue was up 27% sequentially to $435 million. We had a sharp improvement in earnings and profitability with net income attributable to Korn Ferry of $28 million with an operating margin of 11.1% and $66 million of adjusted EBITDA and a 15.2% adjusted EBITDA margin," said Gary D. Burnison, CEO, Korn Ferry. "I'm not only encouraged by the financial results, but extremely proud of all that has been accomplished by our Korn Ferry colleagues to help our business rebound so dramatically. The actions, strategy, solutions and messages we've taken to the marketplace have resonated. Our clients have responded, and our colleagues have been resilient through a year that none of us have experienced in our lifetimes.

"As we look to the calendar year ahead, almost every company on the planet is and will have to re-imagine their business. So forget the new normal, this is normal," Burnison added. "Companies are rethinking their organizational structure, roles and responsibilities. How they compensate, engage and develop their workforce, along with the type of agile talent they hire and how they hire talent in a virtual world. That's real, tangible opportunity for Korn Ferry."

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

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Fee revenue $ 435.4 $ 492.4 $ 779.5 $ 976.9

Total revenue $ 437.8 $ 504.2 $ 784.7 $ 1,000.4

Operating income $ 48.2 $ 61.9 $ 4.4 $ 122.2

Operating margin 11.1% 12.6% 0.6% 12.5%

Net income (loss)attributable to Korn $ 27.8 $ 42.8 $ (3.1) $ 85.8Ferry

Basic earnings (loss) $ 0.51 $ 0.78 $ (0.06) $ 1.54per share

Diluted earnings (loss) $ 0.51 $ 0.77 $ (0.06) $ 1.54per share

EBITDA Results (b): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

EBITDA $ 63.7 $ 75.7 $ 46.1 $ 150.7

EBITDA margin 14.6% 15.4% 5.9% 15.4%

Adjusted Results (c): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Adjusted EBITDA (b) $ 66.2 $ 78.3 $ 76.8 $ 153.3

Adjusted EBITDA margin 15.2% 15.9% 9.8% 15.7%(b)

Adjusted net incomeattributable to Korn $ 29.5 $ 44.8 $ 19.3 $ 87.7Ferry

Adjusted basic earnings $ 0.54 $ 0.81 $ 0.35 $ 1.58per share

Adjusted diluted $ 0.54 $ 0.81 $ 0.35 $ 1.57earnings per share

_________________

(a) Numbers may not total due to rounding.

EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude integration(b) /acquisition costs and restructuring charges, net. 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'21 FY'20 FY'21 FY'20

Integration/ $ - $ 2.6 $ 0.7 $ 2.6acquisition costs

Restructuring charges, $ 2.4 $ - $ 29.9 $ -net

Fee revenue was $435.4 million in Q2 FY'21, a decrease of 12% (down 12% on a constant currency basis) compared to Q2 FY'20. The decrease in fee revenue across Executive Search, Consulting, and RPO and Professional Search, was primarily due to a decline in demand for our products and services due to the impact of COVID-19 on economies around the world. This decline in fee revenue was partially offset by an increase in Digital fee revenue when compared to Q2 FY'20, which was primarily due to the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution (the "acquired companies") in the third quarter of fiscal 2020.

Actions taken by various government and other authoritative bodies in response to the COVID-19 caused a contraction in economic activity which translated into the decrease in fee revenue compared to the year-ago quarter. This decline in fee revenue was partially offset by savings associated with actions taken to align our cost structure with the lower level of business demand, and resulted in a net income attributable to Korn Ferry of $27.8 million in Q2 FY'21 as compared to net income attributable to Korn Ferry of $42.8 million in Q2 FY'20.

Operating margin was 11.1% in Q2 FY'21 compared to 12.6% in the year-ago quarter. The decrease in operating margin was primarily due to the decline in fee revenue in Q2 FY'21 associated with the impact of COVID-19.

Adjusted EBITDA margin was 15.2%, compared to 15.9% in the year-ago quarter.

Results by Segment

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

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Fee revenue $ 126.7 $ 144.0 $ 226.0 $ 281.6

Total revenue $ 127.1 $ 148.2 $ 226.6 $ 289.5

Operating income $ 14.6 $ 9.8 $ 3.7 $ 21.6

Operating margin 11.5% 6.8% 1.6% 7.7%

Ending number of consultants and execution staff (c) 1,491 1,886 1,491 1,886

Hours worked in thousands (d) 399 463 766 915

Average billed rate (e) $ 318 $ 311 $ 295 $ 308

EBITDA Results (f): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

EBITDA $ 19.0 $ 14.6 $ 12.9 $ 31.3

EBITDA margin 15.0% 10.1% 5.7% 11.1%

Adjusted Results (g): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Adjusted EBITDA (f) $ 20.2 $ 14.6 $ 26.8 $ 31.3

Adjusted EBITDA margin (f) 15.9% 10.1% 11.8% 11.1%

_____________________

In the third quarter of fiscal 2020, the Company changed the composition of its global segments. Consulting segment represents the consulting business that(a) was previously included in the Advisory segment. Segment data for Q2 FY'20 has 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):

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Restructuring charges, net $ 1.1 $ - $ 13.9 $ -

Fee revenue was $126.7 million in Q2 FY'21 compared to $144.0 million in Q2 FY'20, a decrease of $17.3 million or 12% (down 13% on a constant currency basis). This change was due to the decline in demand for our products and services due to the contraction in economic activity as a result of COVID-19.

Operating income was $14.6 million in Q2 FY'21 with an operating margin of 11.5% compared to operating income of $9.8 million and an operating margin of 6.8% in the year-ago quarter. This change resulted from 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, partially offset by the decline in fee revenue outlined above and an increase in restructuring charges, net incurred in Q2 FY'21.

Adjusted EBITDA was $20.2 million in Q2 FY'21 with an Adjusted EBITDA margin of 15.9% compared to $14.6 million and 10.1%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the same factors impacting operating income outlined above except for restructuring charges.

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

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.

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Fee revenue $ 75.0 $ 65.7 $ 131.0 $ 123.7

Total revenue $ 75.0 $ 65.7 $ 131.1 $ 123.7

Operating income $ 15.8 $ 18.6 $ 13.2 $ 32.6

Operating margin 21.1% 28.2% 10.1% 26.3%

Ending number of 299 348 299 348consultants

Subscription & License $ 22.7 $ 15.9 $ 43.8 $ 31.3fee revenue

EBITDA Results (c): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

EBITDA $ 23.0 $ 22.4 $ 27.5 $ 40.2

EBITDA margin 30.7% 34.1% 21.0% 32.5%

Adjusted Results (d): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Adjusted EBITDA (c) $ 23.1 $ 22.4 $ 31.0 $ 40.2

Adjusted EBITDA margin 30.8% 34.1% 23.7% 32.5%(c)

_____________________

In the third quarter of fiscal 2020, the Company changed the composition of its global segments. Digital segment represents the products business(a) that was previously included in the Advisory segment. Segment data for Q2 FY'20 has 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) 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):

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Integration/ $ - $ - $ 0.6 $ -acquisition costs

Restructuring charges, $ 0.1 $ - $ 2.9 $ -net

Fee revenue was $75.0 million in Q2 FY'21 compared to $65.7 million in Q2 FY'20, an increase of $9.3 million or 14% (13% on a constant currency basis). The increase in fee revenue was primarily due to fee revenue generated by the acquired companies.

Operating income was $15.8 million in Q2 FY'21 with an operating margin of 21.1% compared to operating income of $18.6 million and an operating margin of 28.2% in the year-ago quarter. Contributing to the change was an increase in compensation and benefits expense, cost of services expense and depreciation and amortization expense, relating to the acquired companies, which was partially offset by the cost saving initiatives that were put in place and an increase in fee revenue outlined above.

Adjusted EBITDA was $23.1 million in Q2 FY'21 with an Adjusted EBITDA margin of 30.8% compared to $22.4 million and 34.1%, respectively, in the year-ago quarter. The increase in Adjusted EBITDA was due to the same factors impacting operating income described above except for depreciation and amortization expense.

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

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Fee revenue $ 148.1 $ 187.9 $ 268.2 $ 381.1

Total revenue $ 148.6 $ 192.0 $ 269.5 $ 390.0

Operating $ 25.6 $ 41.2 $ 13.3 $ 86.9income

Operating 17.3% 21.9% 5.0% 22.8%margin

Ending number 512 585 512 585of consultants

Average number 511 577 534 575of consultants

Engagements 3,082 3,848 4,618 6,086billed

New engagements 1,331 1,575 2,446 3,270(b)

EBITDA Results Second Quarter Year to Date(c):

FY'21 FY'20 FY'21 FY'20

EBITDA $ 27.3 $ 44.0 $ 26.2 $ 92.9

EBITDA margin 18.5% 23.4% 9.8% 24.4%

Adjusted Second Quarter Year to DateResults (d):

FY'21 FY'20 FY'21 FY'20

Adjusted EBITDA $ 28.2 $ 44.0 $ 36.3 $ 92.9(c)

Adjusted EBITDA 19.1% 23.4% 13.5% 24.4%margin (c)

____________________

(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):

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Restructuring $ 0.9 $ - $ 10.0 $ -charges, net

Fee revenue was $148.1 million and $187.9 million in Q2 FY'21 and Q2 FY'20, respectively, a decrease of $39.8 million or 21% (down 22% on a constant currency basis). The decrease in fee revenue was attributable to a decline in fee revenue in all regions due to the decrease in demand for our products and services because of the worldwide economic downturn associated with COVID-19.

Operating income was $25.6 million in Q2 FY'21 compared to operating income of $41.2 million in Q2 FY'20. Operating margin was 17.3% in Q2 FY'21 compared to 21.9% in the year-ago quarter. The change was mainly due to a decrease in fee revenue in Q2 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 $28.2 million in Q2 FY'21 with an Adjusted EBITDA margin of 19.1% compared to $44.0 million and 23.4%, respectively, in the year-ago quarter. The decrease in Adjusted EBITDA was due to the same factors impacting operating income described above.

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

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Fee revenue $ 85.7 $ 94.8 $ 154.3 $ 190.6

Total revenue $ 87.1 $ 98.3 $ 157.5 $ 197.2

Operating income $ 12.5 $ 15.1 $ 14.7 $ 30.1

Operating margin 14.6% 15.9% 9.5% 15.8%

Engagements billed (b) 1,173 1,441 1,778 2,274

New engagements (c) 657 693 1,221 1,460

EBITDA Results (d): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

EBITDA $ 13.5 $ 16.1 $ 16.8 $ 32.2

EBITDA margin 15.7% 17.0% 10.9% 16.9%

Adjusted Results (e): Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Adjusted EBITDA (d) $ 13.8 $ 16.1 $ 19.8 $ 32.2

Adjusted EBITDA margin 16.1% 17.0% 12.8% 16.9%(d)

____________________

(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):

Second Quarter Year to Date

FY'21 FY'20 FY'21 FY'20

Restructuring charges, $ 0.3 $ - $ 3.1 $ -net

Fee revenue was $85.7 million in Q2 FY'21, a decrease of $9.1 million or 10% (decrease of 11% on a constant currency basis), compared to the year-ago quarter. The lower fee revenue was driven by a decrease in professional search and recruitment process outsourcing of $7.7 million and $1.4 million, respectively, due to of the worldwide economic downturn associated with COVID-19. For the quarter, professional search was down 21% (22% on a constant currency) and RPO was down 3% (4% at constant currency), both compared to the year-ago quarter.

Operating income was $12.5 million in Q2 FY'21, a decrease of $2.6 million compared to operating income of $15.1 million in Q2 FY'20. Operating margin was 14.6% in the current quarter compared to 15.9% in the year-ago quarter. Adjusted EBITDA was $13.8 million in Q2 FY'21 with an Adjusted EBITDA margin of 16.1% in Q2 FY'21 compared to $16.1 million and 17.0%, respectively, in the year-ago quarter. The decrease in operating income and Adjusted EBITDA was due to the lower fee revenue discussed above, partially offset by a decrease in compensation and benefits expense driven by a reduction in headcount and a decline in general and administrative expenses, both of which resulted from the cost saving initiatives that were put in place.

Outlook

Approximately three months have passed since our last earnings call and, while advances have been made in the science and societal and economic consequences of COVID-19, there remains significant uncertainty about the ultimate impact of COVID-19. On the positive side, there have been several announcements around vaccines that have greater than 90% effectiveness. In addition, the world has adopted new ways of working and interacting with substantial acceptance of business being conducted in a virtual world. On the negative side, there are a number of unanswered questions regarding the capacity to manufacture the vaccines at scale as well as how they will be distributed and administered to the population at large. In addition, we are seeing governments putting lockdowns back in place as the number of COVID-19 cases and hospitalizations reach all-time highs.

The constantly evolving and unprecedented nature of what we are currently experiencing, combined with all the unanswered questions and ever-changing datapoints, continues to cloud the near-term predictability of our business. Consequently, and consistent with our approach to the fourth quarter of FY'20 and first and second quarters of FY'21, we will not issue any specific revenue or earnings guidance for the third quarter of FY'21. We plan to reassess the suspension of our guidance once we are comfortable that the coronavirus uncertainties have largely passed.

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 future results and events ("forward-looking statements") are based on Korn Ferry's current expectations. These statements, which include words such as "believes", "expects", "anticipates:" or "likely", include references to our outlook as well as 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. 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 and restructuring charges, net of income tax effect; * Adjusted basic and diluted earnings per share, adjusted to exclude integration/acquisition costs and restructuring charges, 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 and restructuring charges, 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 and 2) charges we incurred to restructure the Company as a result of COVID-19. 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 OPERATIONS

(in thousands, except per share amounts)

Three Months Ended Six Months Ended

October 31, October 31,

2020 2019 2020 2019

(unaudited)

Fee revenue $ 435,439 $ 492,389 $ 779,536 $ 976,938

Reimbursed out-of-pocket engagement expenses 2,350 11,788 5,136 23,437

Total revenue 437,789 504,177 784,672 1,000,375

Compensation and benefits 307,185 337,382 591,197 665,878

General and administrative expenses 46,476 62,009 93,565 127,816

Reimbursed expenses 2,350 11,788 5,136 23,437

Cost of services 15,901 18,414 30,170 35,549

Depreciation and amortization 15,298 12,715 30,333 25,492

Restructuring charges, net 2,407 - 29,894 -

Total operating expenses 389,617 442,308 780,295 878,172

Operating income 48,172 61,869 4,377 122,203

Other income, net 277 1,133 11,439 2,959

Interest expense, net (7,494) (4,210) (14,388) (8,267)

Income before provision for income taxes 40,955 58,792 1,428 116,895

Income tax provision 12,877 15,760 4,205 30,213

Net income (loss) 28,078 43,032 (2,777) 86,682

Net income attributable to noncontrolling interest (300) (228) (278) (927)

Net income (loss) attributable to Korn Ferry $ 27,778 $ 42,804 $ (3,055) $ 85,755

Earnings (loss) per common share attributable to Korn Ferry:

Basic $ 0.51 $ 0.78 $ (0.06) $ 1.54

Diluted $ 0.51 $ 0.77 $ (0.06) $ 1.54

Weighted-average common shares outstanding:

Basic 53,229 54,568 53,246 54,917

Diluted 53,390 54,716 53,246 55,170

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,

2020 2019 % Change 2020 2019 % Change

Fee revenue:

Consulting $ 126,685 $ 144,036 (12.0%) $ 226,003 $ 281,578 (19.7%)

Digital 75,043 65,724 14.2% 131,016 123,708 5.9%

Executive Search:

North America 91,168 113,818 (19.9%) 160,483 225,540 (28.8%)

EMEA 31,629 39,821 (20.6%) 61,710 86,351 (28.5%)

Asia Pacific 20,807 25,944 (19.8%) 38,059 53,306 (28.6%)

Latin America 4,456 8,272 (46.1%) 7,951 15,857 (49.9%)

Total Executive Search 148,060 187,855 (21.2%) 268,203 381,054 (29.6%)

RPO and Professional Search 85,651 94,774 (9.6%) 154,314 190,598 (19.0%)

Total fee revenue 435,439 492,389 (11.6%) 779,536 976,938 (20.2%)

Reimbursed out-of-pocket engagement expenses 2,350 11,788 (80.1%) 5,136 23,437 (78.1%)

Total revenue $ 437,789 $ 504,177 (13.2%) $ 784,672 $ 1,000,375 (21.6%)

Operating income (loss): Margin Margin Margin Margin

Consulting $ 14,621 11.5% $ 9,826 6.8% $ 3,694 1.6% $ 21,609 7.7%

Digital 15,823 21.1% 18,565 28.2% 13,196 10.1% 32,573 26.3%

Executive Search:

North America 20,491 22.5% 28,124 24.7% 14,756 9.2% 58,446 25.9%

EMEA 1,509 4.8% 6,511 16.4% (4,710) (7.6%) 13,822 16.0%

Asia Pacific 3,253 15.6% 5,803 22.4% 4,114 10.8% 12,796 24.0%

Latin America 375 8.4% 791 9.6% (842) (10.6%) 1,801 11.4%

Total Executive Search 25,628 17.3% 41,229 21.9% 13,318 5.0% 86,865 22.8%

RPO and Professional Search 12,502 14.6% 15,094 15.9% 14,667 9.5% 30,135 15.8%

Corporate (20,402) (22,845) (40,498) (48,979)

Total operating income $ 48,172 11.1% $ 61,869 12.6% $ 4,377 0.6% $ 122,203 12.5%

KORN FERRY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

October 31, April 30,

2020 2020

(unaudited)

ASSETS

Cash and cash equivalents $ 553,109 $ 689,244

Marketable securities 47,719 41,951

Receivables due from clients, net of allowance fordoubtful accounts of $27,853 and $23,795 at October 435,393 397,16531, 2020 and April 30, 2020, respectively

Income taxes and other receivables 52,995 38,755

Unearned compensation 50,688 43,117

Prepaid expenses and other assets 30,984 26,851

Total current assets 1,170,888 1,237,083

Marketable securities, non-current 146,625 132,134

Property and equipment, net 136,035 142,728

Operating lease right-of-use assets, net 183,926 195,077

Cash surrender value of company-owned life 150,190 146,408insurance policies, net of loans

Deferred income taxes 49,908 55,479

Goodwill 621,560 613,943

Intangible assets, net 102,351 111,926

Unearned compensation, non-current 105,569 79,510

Investments and other assets 25,590 29,540

Total assets $ 2,692,642 $ 2,743,828

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable $ 37,639 $ 45,684

Income taxes payable 10,591 21,158

Compensation and benefits payable 247,016 280,911

Operating lease liability, current 51,961 54,851

Other accrued liabilities 211,704 221,603

Total current liabilities 558,911 624,207

Deferred compensation and other retirement plans 312,187 289,136

Operating lease liability, non-current 167,116 180,766

Long-term debt 394,465 394,144

Deferred tax liabilities 556 1,056

Other liabilities 37,885 30,828

Total liabilities 1,471,120 1,520,137

Stockholders' equity

Common stock: $0.01 par value, 150,000 sharesauthorized, 74,845 and 73,205 shares issued and 575,103 585,56054,153 and 54,450 shares outstanding at October 31,2020 and April 30, 2020, respectively

Retained earnings 728,524 742,993

Accumulated other comprehensive loss, net (83,655) (107,172)

Total Korn Ferry stockholders' equity 1,219,972 1,221,381

Noncontrolling interest 1,550 2,310

Total stockholders' equity 1,221,522 1,223,691

Total liabilities and stockholders' equity $ 2,692,642 $ 2,743,828

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,

2020 2019 2020 2019

(unaudited)

Net income (loss) attributable to Korn Ferry $ 27,778 $ 42,804 $ (3,055) $ 85,755

Net 300 228 278 927 income attributable to non-controlling interest

Net income (loss) 28,078 43,032 (2,777) 86,682

Income tax provision 12,877 15,760 4,205 30,213

Income before provision for income taxes 40,955 58,792 1,428 116,895

Other income, net (277) (1,133) (11,439) (2,959)

Interest expense, net 7,494 4,210 14,388 8,267

Operating income 48,172 61,869 4,377 122,203

Depreciation and amortization 15,298 12,715 30,333 25,492

Other income, net 277 1,133 11,439 2,959

EBITDA 63,747 75,717 46,149 150,654

Integration/acquisition costs (1) - 2,615 737 2,615

Restructuring charges, net (2) 2,407 - 29,894 -

Adjusted EBITDA $ 66,154 $ 78,332 $ 76,780 $ 153,269

Operating margin 11.1% 12.6% 0.6% 12.5%

Depreciation and amortization 3.4% 2.6% 3.9% 2.6%

Other income, net 0.1% 0.2% 1.4% 0.3%

EBITDA margin 14.6% 15.4% 5.9% 15.4%

Integration/acquisition costs (1) - 0.5% 0.1% 0.3%

Restructuring charges, net (2) 0.6% - 3.8% -

Adjusted EBITDA margin 15.2% 15.9% 9.8% 15.7%

Net income (loss) attributable to Korn Ferry $ 27,778 $ 42,804 $ (3,055) $ 85,755

Integration/acquisition costs (1) - 2,615 737 2,615

Restructuring charges, net (2) 2,407 - 29,894 -

Tax effect on the adjusted items (3) (717) (668) (8,321) (668)

$ 29,468 $ 44,751 $ 19,255 $ 87,702 Adjusted net income attributable to Korn Ferry

Basic earnings (loss) per common share $ 0.51 $ 0.78 $ (0.06) $ 1.54

Integration/acquisition costs (1) - 0.05 0.01 0.05

Restructuring charges, net (2) 0.04 - 0.56 -

Tax effect on the adjusted items (3) (0.01) (0.02) (0.16) (0.01)

Adjusted basic earnings per share $ 0.54 $ 0.81 $ 0.35 $ 1.58

Diluted earnings (loss) per common share $ 0.51 $ 0.77 $ (0.06) $ 1.54

Integration/acquisition costs (1) - 0.05 0.01 0.04

Restructuring charges, net (2) 0.04 - 0.56 -

Tax effect on the adjusted items (3) (0.01) (0.01) (0.16) (0.01)

Adjusted diluted earnings per share $ 0.54 $ 0.81 $ 0.35 $ 1.57

Explanation of Non-GAAP Adjustments

Costs associated with previous acquisitions, such as legal and professional(1) 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.

(3) Tax effect on integration/acquisition costs and restructuring charges, net.

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, 2020

Executive Search

North Asia Latin RPO and Consulting Digital America EMEA Pacific America Subtotal Professional Corporate Consolidated Search

Fee revenue $ 126,685 $ 75,043 $ 91,168 $ 31,629 $ 20,807 $ 4,456 $ 148,060 $ 85,651 $ - $ 435,439

Total revenue $ 127,051 $ 75,038 $ 91,609 $ 31,714 $ 20,820 $ 4,456 $ 148,599 $ 87,101 $ - $ 437,789

Net income attributable to Korn Ferry $ 27,778

Net income attributable to 300noncontrolling interest

Other income net (277)

Interest expense, net 7,494

Income tax provision 12,877

Operating income (loss) $ 14,621 $ 15,823 $ 20,491 $ 1,509 $ 3,253 $ 375 $ 25,628 $ 12,502 $ (20,402) 48,172

Depreciation and amortization 4,063 7,005 716 355 250 202 1,523 945 1,762 15,298

Other income (loss), net 336 202 (9) 31 166 7 195 24 (480) 277

EBITDA 19,020 23,030 21,198 1,895 3,669 584 27,346 13,471 (19,120) 63,747

EBITDA margin 15.0% 30.7% 23.3% 6.0% 17.6% 13.1% 18.5% 15.7% 14.6%

Restructuring, charges, net 1,143 54 (12) 922 (28) - 882 328 - 2,407

Adjusted EBITDA $ 20,163 $ 23,084 $ 21,186 $ 2,817 $ 3,641 $ 584 $ 28,228 $ 13,799 $ (19,120) $ 66,154

Adjusted EBITDA margin 15.9% 30.8% 23.2% 8.9% 17.5% 13.1% 19.1% 16.1% 15.2%

Three Months Ended October 31, 2019

Executive Search

North Asia Latin RPO and Consulting Digital America EMEA Pacific America Subtotal Professional Corporate Consolidated Search

Fee revenue $ 144,036 $ 65,724 $ 113,818 $ 39,821 $ 25,944 $ 8,272 $ 187,855 $ 94,774 $ - $ 492,389

Total revenue $ 148,198 $ 65,724 $ 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 228noncontrolling interest

Other income, net (1,133)

Interest expense, net 4,210

Income tax provision 15,760

Operating income (loss) $ 9,826 $ 18,565 $ 28,124 $ 6,511 $ 5,803 $ 791 $ 41,229 $ 15,094 $ (22,845) 61,869

Depreciation and amortization 4,357 3,685 869 450 329 315 1,963 990 1,720 12,715

Other income (loss), net 386 134 637 107 72 30 846 54 (287) 1,133

EBITDA 14,569 22,384 29,630 7,068 6,204 1,136 44,038 16,138 $ (21,412) 75,717

EBITDA margin 10.1% 34.1% 26.0% 17.7% 23.9% 13.7% 23.4% 17.0% 15.4%

Integration/acquisition costs - - - - - - - - 2,615 2,615

Adjusted EBITDA $ 14,569 $ 22,384 $ 29,630 $ 7,068 $ 6,204 $ 1,136 $ 44,038 $ 16,138 $ (18,797) $ 78,332

Adjusted EBITDA margin 10.1% 34.1% 26.0% 17.7% 23.9% 13.7% 23.4% 17.0% 15.9%

KORN FERRY AND SUBSIDIARIES

RECONCILIATION OF NET (LOSS) INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)

Six Months Ended October 31, 2020

Executive Search

North Asia Latin RPO and Consulting Digital America EMEA Pacific Subtotal Professional Corporate Consolidated America Search

Fee revenue $ 226,003 $ 131,016 $ 160,483 $ 61,710 $ 38,059 $ 7,951 $ 268,203 $ 154,314 $ - $ 779,536

Total revenue $ 226,641 $ 131,060 $ 161,465 $ 61,909 $ 38,160 $ 7,951 $ 269,485 $ 157,486 $ - $ 784,672

Net loss attributable to Korn Ferry $ (3,055)

Net income attributable to 278noncontrolling interest

Other income, net (11,439)

Interest expense, net 14,388

Income tax provision 4,205

Operating income (loss) $ 3,694 $ 13,196 $ 14,756 $ (4,710) $ 4,114 $ (842) $ 13,318 $ 14,667 $ (40,498) 4,377

Depreciation and amortization 8,072 13,731 1,446 717 525 404 3,092 1,885 3,553 30,333

Other income (loss), net 1,124 620 9,333 50 392 55 9,830 220 (355) 11,439

EBITDA 12,890 27,547 25,535 (3,943) 5,031 (383) 26,240 16,772 (37,300) 46,149

EBITDA margin 5.7% 21.0% 15.9% (6.4)% 13.2% (4.8%) 9.8% 10.9% 5.9%

Integration/acquisition costs - 556 - - - - - - 181 737

Restructuring charges, net 13,877 2,924 963 8,470 204 405 10,042 3,051 - 29,894

Adjusted EBITDA $ 26,767 $ 31,027 $ 26,498 $ 4,527 $ 5,235 $ 22 $ 36,282 $ 19,823 $ (37,119) $ 76,780

Adjusted EBITDA margin 11.8% 23.7% 16.5% 7.3% 13.8% 0.3% 13.5% 12.8% 9.8%

Six Months Ended October 31, 2019

Executive Search

North Asia Latin RPO and Consulting Digital EMEA Pacific America Subtotal Professional Corporate Consolidated America Search

Fee revenue $ 281,578 $ 123,708 $ 225,540 $ 86,351 $ 53,306 $ 15,857 $ 381,054 $ 190,598 $ - $ 976,938

Total revenue $ 289,534 $ 123,708 $ 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 927noncontrolling interest

Other income, net (2,959)

Interest expense, net 8,267

Income tax provision 30,213

Operating income (loss) $ 21,609 $ 32,573 $ 58,446 $ 13,822 $ 12,796 $ 1,801 $ 86,865 $ 30,135 $ (48,979) 122,203

Depreciation and amortization 8,771 7,324 1,770 906 675 643 3,994 1,982 3,421 25,492

Other income (loss), net 911 335 1,777 119 87 87 2,070 128 (485) 2,959

EBITDA 31,291 40,232 61,993 14,847 13,558 2,531 92,929 32,245 (46,043) 150,654

EBITDA margin 11.1% 32.5% 27.5% 17.2% 25.4% 16.0% 24.4% 16.9% 15.4%

Integration/acquisition costs - - - - - - - - 2,615 2,615

Adjusted EBITDA $ 31,291 $ 40,232 $ 61,993 $ 14,847 $ 13,558 $ 2,531 $ 92,929 $ 32,245 $ (43,428) $ 153,269

Adjusted EBITDA margin 11.1% 32.5% 27.5% 17.2% 25.4% 16.0% 24.4% 16.9% 15.7%

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SOURCE Korn Ferry