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Korn/Ferry International Announces Second Quarter Fiscal 2011 Results of Operations

Korn/Ferry International Announces Second Quarter Fiscal 2011 Results of Operations

Highlights

Second quarter fiscal 2011 fee revenue increased 32% to $185.4 million, compared to $140.1 million in the same quarter last year.

Q2 FY11 diluted earnings per share, excluding net adjustments to previously recorded restructuring charges was $0.33, compared to diluted earnings per share of $0.09 in Q2 FY10. Including net restructuring charges, Q2 FY11 diluted earnings per share was $0.30 compared to $0.06 in Q2 FY10.

Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced Q2 FY11 diluted earnings per share of
$0.33 compared to $0.09 in Q2 FY10 (excluding net adjustments to previously recorded restructuring charges of $2.1 million and $2.8 million, respectively). Diluted earnings per share was $0.30 and $0.06 in Q2 FY11 and Q2 FY10, respectively.

As evidenced by our sixth consecutive sequential fee revenue increase, our clients are increasingly turning to Korn/Ferry for a variety of their most important human capital needs, said Gary D. Burnison, CEO of Korn/Ferry International. After meeting with many of our clients CEOs over the last several months, its evident that we are experiencing a two-speed labor recovery global vs. local. Global enterprises are investing, hiring and expanding, while organizations more reliant on Western economies for growth have remained more cautious.

Overall, Im very pleased with our organizations results this quarter, which validate our strategy of helping clients achieve extraordinary performance through people.

Fee revenue was $185.4 million in Q2 FY11 compared to $140.1 million in Q2 FY10, an increase of 32% (or an increase of 33%, or $45.7 million, on a constant currency basis), which reflects increases in revenue from all segments of the business driven primarily by a 28% increase in the number of executive recruitment engagements billed as well as a 4% (5% excluding the impact of exchange rates) increase in the weighted-average fee billed per executive recruitment engagement compared to the year-ago fiscal quarter. Furthermore, the Company experienced a
6% increase in fee revenue compared to Q1 FY11.

Compensation and benefits were $127.6 million in Q2 FY11, an increase of $25.5 million, or 25%, compared to $102.1 million in Q2 FY10. This increase is attributable mainly to an increase in the variable component of compensation when compared to the year-ago fiscal quarter. Compensation and benefits were lower in Q2 FY10 compared to Q2 FY11 due to the challenging economic conditions in Q2 FY10.

General and administrative expenses were $27.4 million in Q2 FY11, an increase of $0.2 million, or 1% from $27.2 million in Q2 FY10. This increase is due primarily to an increase in bad debt provisions as a result of higher revenues and accounts receivable, a decrease in unrealized net foreign exchange gains, partially offset by a fair value contingent consideration adjustment from a prior acquisition. Changes in exchange rates impacted general and administrative expenses in Q2 FY11 favorably by $0.4 million compared to Q2 FY10.

Operating income was $19.8 million in Q2 FY11 compared to $2.3 million in Q2 FY10, an increase of $17.5 million. Excluding restructuring charges of $2.1 million in Q2 FY11 and $2.8 million in Q2 FY10, operating income was $21.9 million in Q2 FY11 and $5.0 million in Q2 FY10, an increase of $16.9 million.

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