Exhibit 99.1
For Immediate Release
CONTACTS
Investor Relations: Stephen Giusto, (310) 843-4144
Gregg Kvochak, (310) 556-8550
For Media: Anneli Ballard, (212) 984-9350
Investor Relations: Stephen Giusto, (310) 843-4144
Gregg Kvochak, (310) 556-8550
For Media: Anneli Ballard, (212) 984-9350
Korn/Ferry International Announces a 22% Increase in Fee
Revenue in the Third Quarter of Fiscal 2008
Revenue in the Third Quarter of Fiscal 2008
Highlights
| • | Third quarter fiscal 2008 fee revenue was $201.2 million, an increase of $36.0 million, or 22%, from $165.2 million in the same quarter last year. | ||
| • | Third quarter fiscal 2008 diluted earnings per share was $0.37, an increase of 12% over Q3’07 diluted earnings per share of $0.33. |
Los Angeles, CA, March 6, 2008- Korn/Ferry International (NYSE:KFY), a premier global provider of talent management solutions, announced third quarter earnings today.
“As the world has flattened demand for talent worldwide has intensified,” said Gary D. Burnison, Chief Executive Officer, Korn/Ferry. “Our performance this quarter has set a new industry record and is indicative of the ongoing need for organizations to recruit and develop their people. We are focused on using our global scale, our diversified services, and our strong brand to help our clients identify, hire and develop the best leaders in the world.”
Financial Results
(dollars in millions, except per share amounts)
(dollars in millions, except per share amounts)
| Third Quarter | Year to date | |||||||||||||||
| Q3’08 | Q3’07 | Q3’08 | Q3’07 | |||||||||||||
| Fee Revenue | $ | 201.2 | $ | 165.2 | $ | 582.4 | $ | 473.7 | ||||||||
| Revenue | $ | 212.1 | $ | 173.5 | $ | 615.2 | $ | 499.4 | ||||||||
| Operating Income | $ | 21.2 | $ | 21.4 | $ | 71.7 | $ | 62.9 | ||||||||
| Operating Margin | 10.5 | % | 13.0 | % | 12.3 | % | 13.3 | % | ||||||||
| Net Income | $ | 16.3 | $ | 14.7 | $ | 50.5 | $ | 42.0 | ||||||||
| Basic Earnings Per Share | $ | 0.38 | $ | 0.37 | $ | 1.14 | $ | 1.07 | ||||||||
| Diluted Earnings Per Share | $ | 0.37 | $ | 0.33 | $ | 1.10 | $ | 0.95 | ||||||||
Fee revenue of $201.2 million in Q3’08 increased $36.0 million, or 22% (16% excluding the impact of exchange rates), from $165.2 million in Q3’07. Fee revenue improved globally due to an increase in revenues from all segments of the business. In Executive Recruitment, our largest segment, we experienced a 21% increase in fee revenue driven by an increase in the number of search engagements opened as well as a 14% increase in the average fee billed per search engagement compared to the prior year. In addition, Futurestep fee revenue increased 26%, compared to Q3’07 due to a 12% increase in average fee billed per engagement. Exchange rates impacted fee revenue in Q3’08 favorably by $10.0 million compared to Q3’07.
Compensation and benefits of $138.6 million in Q3’08 increased $26.3 million, or 23% (18% excluding the impact of exchange rates), from $112.3 million in Q3’07. The increase is attributable to revenue-based compensation and higher headcount in all segments of the Company. Exchange rates impacted compensation and benefits in Q3’08 unfavorably by $6.5 million compared to Q3’07.
General and administrative expenses of $35.3 million in Q3’08 increased by $8.5 million, or 32% (25% excluding the impact of exchange rates), from $26.8 million in Q3’07 as a result of an increase in business volume across all regions and segments. Exchange rates had an unfavorable impact of $1.9 million on general and administrative expenses compared to Q3’07.
Operating income was $21.2 million in Q3’08 compared to $21.4 million in Q3’07. Our financial results in the quarter include a modest amount of reserves and accruals that are aimed at reducing our cost structure to be more efficient in how we serve clients. While we may have further such amounts in the future, the intent is to lay the foundation for improved operating margins.
Balance Sheet and Liquidity
Cash, cash equivalents and marketable securities were $298.3 million at January 31, 2008 compared to $282.6 million at January 31, 2007. The increase was due primarily to improved operating cash flows offset by $56.7 million used to repurchase the Company’s common shares in open market purchases during the nine months ended January 31, 2008.
Through October 31, 2007, the Company had used all of the $125 million of share repurchase funds authorized by the Board of Directors in December 2005, June 2006 and March 2007 to buy back approximately 6.1 million shares. Through March 3, 2008, the Company has used $6.5 million of the $50 million of share repurchase funds authorized in November 2007 to buy back approximately 0.4 million shares. Under this program, shares may be repurchased from time to time in open market transactions or privately negotiated transactions at the Company’s discretion, subject to market conditions and other factors.
Interest expense was $1.2 million in Q3’08 compared to $2.5 million in the same period last year. Interest expense in the prior year related primarily to borrowings under Korn/Ferry’s convertible securities and COLI policies. The decrease in interest expense is primarily due to the conversion of all of the Company’s convertible securities to common shares during Q4’07. At January 31, 2008, Korn/Ferry had no outstanding borrowings under its credit facility.
Results by Segment
Selected Executive Recruitment Data
(dollars in millions)
(dollars in millions)
| Third Quarter | Year to date | |||||||||||||||
| Q3’08 | Q3’07 | Q3’08 | Q3’07 | |||||||||||||
| Fee Revenue | $ | 173.0 | $ | 142.9 | $ | 501.9 | $ | 410.5 | ||||||||
| Revenue | $ | 179.9 | $ | 149.2 | $ | 523.1 | $ | 430.7 | ||||||||
| Operating Income | $ | 29.0 | $ | 27.3 | $ | 94.7 | $ | 80.6 | ||||||||
| Operating Margin | 16.8 | % | 19.1 | % | 18.9 | % | 19.6 | % | ||||||||
| Average number of consultants | 521 | 482 | 512 | 469 | ||||||||||||
| Engagements (a) | 1,830 | 1,722 | 5,483 | 5,097 | ||||||||||||
| (a) | Represents new engagements opened in the respective period. |
Fee revenue was $173.0 million in Q3’08, an increase of $30.1 million, or 21%, from $142.9 million in Q3’07. Fee revenue improved in all regions due to an increase in the overall number of engagements and average fee per engagement. Exchange rates impacted fee revenue in Q3’08 favorably by $7.8 million compared to Q3’07.
Operating income improved $1.7 million in Q3’08, or 6%, to $29.0 million compared to $27.3 million in Q3’07.
The total number of consultants at January 31, 2008 was 518, an increase of 33 from January 31, 2007.
Selected Futurestep Data
(dollars in millions)
(dollars in millions)
| Third Quarter | Year to date | |||||||||||||||
| Q3’08 | Q3’07 | Q3’08 | Q3’07 | |||||||||||||
| Fee Revenue | $ | 28.2 | $ | 22.3 | $ | 80.5 | $ | 63.2 | ||||||||
| Revenue | $ | 32.2 | $ | 24.3 | $ | 92.1 | $ | 68.7 | ||||||||
| Operating Income | $ | 2.0 | $ | 2.3 | $ | 5.6 | $ | 5.1 | ||||||||
| Operating Margin | 7.1 | % | 10.3 | % | 7.0 | % | 8.1 | % | ||||||||
Fee revenue was $28.2 million in Q3’08, an increase of $5.9 million, or 26%, from $22.3 million in Q3’07. Improvements in fee revenue were driven by an increase in the average fee per engagement. Exchange rates impacted fee revenue in Q3’08 favorably by $2.2 million compared to Q3’07.
Operating income was $2.0 million in Q3’08 compared to $2.3 million in Q3’07.
Outlook
Assuming constant foreign exchange rates, Korn/Ferry estimates that fourth quarter fiscal 2008 fee revenue is likely to be in the range of $195 million to $210 million and diluted earnings per share is likely to be in the range of $0.34 to $0.38.
Earnings Conference Call Webcast
The earnings conference call will be held today at 9:00 AM (EST) and hosted by Gary Burnison, Chief Executive Officer, and Stephen Giusto, Chief Financial Officer. The conference call will be webcast and available online at www.kornferry.com, accessible through the Investor Relations section.
Korn/Ferry International (NYSE:KFY), with more than 80 offices in 39 countries, is a premier global provider of talent management solutions. Based in Los Angeles, the firm delivers an array of solutions that help clients to identify, deploy, develop, retain and reward their talent. For more information on the Korn/Ferry International family of companies, visit www.kornferry.com.
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. Readers are cautioned not to place undue reliance on such forward-looking statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties which are beyond the control of Korn/Ferry. The potential risks and uncertainties relate to competition, the dependence on attracting and retaining qualified and experienced consultants, the portability of client relationships, local political or economic developments in or affecting countries where we have operations, currency fluctuations in our international operations, risks related to the growth and results of Futurestep, restrictions imposed by off-limits agreements, reliance on information systems 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.
[Tables attached]
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 31 | January 31 | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Fee revenue | $ | 201,156 | $ | 165,239 | $ | 582,366 | $ | 473,720 | ||||||||
| Reimbursed out-of-pocket engagement expenses | 10,935 | 8,269 | 32,826 | 25,721 | ||||||||||||
| Total revenue | 212,091 | 173,508 | 615,192 | 499,441 | ||||||||||||
| Compensation and benefits | 138,594 | 112,343 | 391,984 | 318,852 | ||||||||||||
| General and administrative expenses | 35,255 | 26,806 | 101,168 | 79,431 | ||||||||||||
| Out-of-pocket engagement expenses | 14,250 | 10,394 | 42,664 | 31,040 | ||||||||||||
| Depreciation and amortization | 2,812 | 2,557 | 7,701 | 7,214 | ||||||||||||
| Total operating expenses | 190,911 | 152,100 | 543,517 | 436,537 | ||||||||||||
| Operating income | 21,180 | 21,408 | 71,675 | 62,904 | ||||||||||||
| Interest and other income (expense), net | 3,777 | 664 | 6,074 | (289 | ) | |||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries | 24,957 | 22,072 | 77,749 | 62,615 | ||||||||||||
| Provision for income taxes | 9,353 | 8,100 | 29,753 | 23,184 | ||||||||||||
| Equity in earnings of unconsolidated subsidiaries | 652 | 758 | 2,469 | 2,528 | ||||||||||||
| Net income | $ | 16,256 | $ | 14,730 | $ | 50,465 | $ | 41,959 | ||||||||
| Interest expense on convertible securities, net of taxes | 36 | 785 | 109 | 2,354 | ||||||||||||
| Net income adjusted for computation of diluted EPS | $ | 16,292 | $ | 15,515 | $ | 50,574 | $ | 44,313 | ||||||||
| Basic earnings per common share | $ | 0.38 | $ | 0.37 | $ | 1.14 | $ | 1.07 | ||||||||
| Basic weighted average common shares outstanding | 43,247 | 39,650 | 44,273 | 39,229 | ||||||||||||
| Diluted earnings per common share | $ | 0.37 | $ | 0.33 | $ | 1.10 | $ | 0.95 | ||||||||
| Diluted weighted average common shares outstanding | 44,303 | 47,449 | 45,839 | 46,860 | ||||||||||||
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| January 31 | January 31 | |||||||||||||||||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||||||
Fee Revenue: | ||||||||||||||||||||||||||||||||
| Executive recruitment: | ||||||||||||||||||||||||||||||||
| North America | $ | 94,812 | $ | 82,177 | $ | 276,988 | $ | 237,667 | ||||||||||||||||||||||||
| Europe | 46,292 | 37,872 | 133,072 | 104,878 | ||||||||||||||||||||||||||||
| Asia Pacific | 25,322 | 18,608 | 72,639 | 55,169 | ||||||||||||||||||||||||||||
| South America | 6,617 | 4,311 | 19,184 | 12,777 | ||||||||||||||||||||||||||||
| Total executive recruitment | 173,043 | 142,968 | 501,883 | 410,491 | ||||||||||||||||||||||||||||
| Futurestep | 28,113 | 22,271 | 80,483 | 63,229 | ||||||||||||||||||||||||||||
| Total fee revenue | 201,156 | 165,239 | 582,366 | 473,720 | ||||||||||||||||||||||||||||
| Reimbursed out-of-pocket engagement expenses | 10,935 | 8,269 | 32,826 | 25,721 | ||||||||||||||||||||||||||||
| Total revenue | $ | 212,091 | $ | 173,508 | $ | 615,192 | $ | 499,441 | ||||||||||||||||||||||||
| Operating Income (Loss): | Margin | Margin | Margin | Margin | ||||||||||||||||||||||||||||
| Executive recruitment: | ||||||||||||||||||||||||||||||||
| North America | $ | 16,167 | 17.1 | % | $ | 17,428 | 21.2 | % | $ | 57,346 | 20.7 | % | $ | 51,286 | 21.6 | % | ||||||||||||||||
| Europe | 7,116 | 15.4 | % | 5,996 | 15.8 | % | 20,871 | 15.7 | % | 17,391 | 16.6 | % | ||||||||||||||||||||
| Asia Pacific | 5,444 | 21.5 | % | 3,622 | 19.5 | % | 14,595 | 20.1 | % | 10,609 | 19.2 | % | ||||||||||||||||||||
| South America | 291 | 4.4 | % | 231 | 5.4 | % | 1,836 | 9.6 | % | 1,329 | 10.4 | % | ||||||||||||||||||||
| Total executive recruitment | 29,018 | 16.8 | % | 27,277 | 19.1 | % | 94,648 | 18.9 | % | 80,615 | 19.6 | % | ||||||||||||||||||||
| Futurestep | 2,026 | 7.2 | % | 2,252 | 10.1 | % | 5,642 | 7.0 | % | 5,141 | 8.1 | % | ||||||||||||||||||||
| Corporate | (9,864 | ) | (8,121 | ) | (28,615 | ) | (22,852 | ) | ||||||||||||||||||||||||
| Total operating income | $ | 21,180 | 10.5 | % | $ | 21,408 | 13.0 | % | $ | 71,675 | 12.3 | % | $ | 62,904 | 13.3 | % | ||||||||||||||||
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
| As of | As of | |||||||
| January 31, 2008 | April 30, 2007 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 223,654 | $ | 232,531 | ||||
| Marketable securities | 74,691 | 91,736 | ||||||
| Receivables due from clients, net of allowance for doubtful accounts of $14,062 and $9,822, respectively | 139,965 | 107,751 | ||||||
| Income taxes and other receivables | 5,987 | 6,357 | ||||||
| Deferred income taxes | 10,074 | 9,524 | ||||||
| Prepaid expenses | 18,864 | 16,861 | ||||||
| Total current assets | 473,235 | 464,760 | ||||||
| Property and equipment, net | 31,138 | 25,999 | ||||||
| Cash surrender value of company owned life insurance policies, net of loans | 79,458 | 76,478 | ||||||
| Deferred income taxes | 46,065 | 42,013 | ||||||
| Goodwill | 139,392 | 124,268 | ||||||
| Intangible assets, net | 15,638 | 18,040 | ||||||
| Investments and other | 10,736 | 9,933 | ||||||
| Total assets | $ | 795,662 | $ | 761,491 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable | $ | 12,104 | $ | 10,383 | ||||
| Income taxes payable | 24,468 | 22,432 | ||||||
| Compensation and benefits payable | 148,387 | 158,145 | ||||||
| Other accrued liabilities | 35,385 | 38,529 | ||||||
| Total current liabilities | 220,344 | 229,489 | ||||||
| Deferred compensation and other retirement plans | 104,144 | 91,360 | ||||||
| Other liabilities | 5,831 | 7,687 | ||||||
| Total liabilities | 330,319 | 328,536 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock: $0.01 par value, 150,000 shares authorized, 54,226 and 52,323 shares issued and 46,374 and 47,174 shares outstanding, respectively | 388,370 | 400,126 | ||||||
| Retained earnings | 79,268 | 32,344 | ||||||
| Unearned restricted stock compensation | (34,675 | ) | (19,567 | ) | ||||
| Accumulated other comprehensive income | 32,927 | 20,605 | ||||||
| Stockholders’ equity | 465,890 | 433,508 | ||||||
| Less: Notes receivable from stockholders | (547 | ) | (553 | ) | ||||
| Total stockholders’ equity | 465,343 | 432,955 | ||||||
| Total liabilities and stockholders’ equity | $ | 795,662 | $ | 761,491 | ||||