Korn Ferry International reports Q4 fee revenue of $399.9m
Korn/Ferry International has announced record fourth quarter and annual fee revenue of $399.9m and $1.3 billion, or $405.0m and $1.3 billion on an adjusted basis, respectively.
For the fourth quarter, fee revenue was $399.9m and adjusted fee revenue was $405.0m (including $5.1m in deferred revenue adjustment related to the Hay Group acquisition).
Operating margin was 1.2% in Q4 FY'16 compared to 10.3% in the year-ago quarter. The decrease in operating margin was due to an increase in integration/acquisition costs as well as restructuring charges, net, a foreign currency loss relating to the devaluation of the Venezuelan currency and the deferred revenue adjustment referenced above.
EBITDA margin was 5.4% and Adjusted EBITDA margin was 13.4%. The year-over-year decline in Adjusted EBITDA margin (160 bps) was primarily due to an increase in compensation and benefits expense in the Futurestep segment and North America region of Executive Search to support the growth in revenue and an increased bonus expense associated with better than budgeted performance.
For the full year, fee revenue was $1,292.1m and adjusted fee revenue was $1,303.1m (including $11.0m in deferred revenue adjustment related to the Hay Group acquisition).
Operating income was $52.7m in FY'16, resulting in an operating margin of 4.1% in FY'16 compared to 11.1% in FY'15. The decrease in operating income and margin was due to an increase in integration/acquisition and restructuring costs as well as a foreign currency loss relating to the devaluation of the Venezuelan currency and the deferred revenue adjustment referenced above.
In FY'16, the company's EBITDA margin was 6.6% and Adjusted EBITDA margin was 14.6%. The year-over-year decline (110 bps) in Adjusted EBITDA margin was caused by the net impact of adverse market movements on the assets and liabilities associated with our deferred compensation programs, foreign currency losses, and the effect of a non-recurring gain in FY'15 relating to an insurance reimbursement for expenses incurred in prior years. The EBITDA margin for the combined Hay Group business was 3.7% and on an adjusted basis, the EBITDA margin was 16.4%, which is consistent with the prior year.
Fourth quarter diluted earnings per share and adjusted diluted earnings per share were $0.10 and $0.58, respectively. FY'16 diluted earnings per share were $0.58 and adjusted diluted earnings per share were $2.08. The adjusted diluted earnings per share for the fourth quarter and the full year excluded $32.9 million and $103.9 million, respectively, of restructuring charges, net, integration/acquisition and separation costs, a deferred revenue adjustment related to the Hay Group acquisition (which also impacted adjusted fee revenue) and a non-cash loss relating to the Venezuelan currency devaluation.
Gary D. Burnison, CEO Korn Ferry, stated, "Korn Ferry closed strong in the final quarter of its fiscal year with fee revenue of $399.9 million representing 47% growth, or adjusted fee revenue of $405.0 million representing 49% growth, and diluted earnings per share of $0.10, or adjusted diluted earnings per share of $0.58.
"I am enormously proud of our company and the results we have achieved during the quarter, and at the same time, continuing to deliver on the Hay Group integration at a scope and pace that has exceeded our initial expectations.
"We are in the midst of creating a new firm – with 65% of our colleagues new to the organization in the last three years, due to expansion and growth. We are a company that accelerates our clients' business performance through solutions and productized services that span from strategy implementation and organizational design to recruitment and leadership development to compensation and reward strategies. Our advisory business, now bolstered by our Hay Group combination, has given us more reasons to engage with clients. Also, our recruiting businesses, Executive Search and Futurestep, have never been stronger than they were in the fourth quarter. We are indeed creating the preeminent organizational and people advisory firm.”