9. Business Segments

The Company currently operates in three global businesses: Executive Search, Hay Group and Futurestep. The Executive Search segment focuses on recruiting Board of Director and C-level positions, in addition to research-based interviewing and onboarding solutions, for clients predominantly in the consumer, financial services, industrial, life sciences/healthcare and technology industries. Hay Group assists clients with ongoing assessment, compensation and development of their senior executives and management teams, and addresses three fundamental needs: Talent Strategy, Succession Management, and Leadership Development, all underpinned by a comprehensive array of world-leading IP, products and tools. Futurestep is a global industry leader in high-impact talent acquisition solutions. Its portfolio of services includes global and regional RPO, project recruitment, individual professional search and consulting. The Executive Search business segment is managed by geographic regional leaders and Hay Group and Futurestep worldwide operations are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Hay Group and Futurestep report directly to the Chief Executive Officer of the Company. The Company also operates a Corporate segment to record global expenses of the Company.

The Company evaluates performance and allocates resources based on the Company’s chief operating decision maker’s (“CODM”) review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other than temporary impairment). For the six months ended October 31, 2016, Adjusted EBITDA includes a deferred revenue adjustment related to the Legacy Hay acquisition, reflecting revenue that Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to earn that revenue. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA.

Financial highlights by business segment are as follows:


	Three Months Ended October 31, 2016
	Executive Search
	North America			EMEA			Asia Pacific			Latin America		Subtotal			Hay Group			Futurestep		Corporate			Consolidated
	(in thousands)
Fee revenue	$	92,732		$	34,779		$	19,470		$	9,247	$	156,228		$	188,842		$	56,847	$	—		$	401,917
Total revenue	$	95,902		$	35,507		$	19,929		$	9,296	$	160,634		$	192,352		$	61,968	$	—		$	414,954
Net income attributable to Korn/Ferry International																							$	30,152
Net income attributable to noncontrolling interest																								904
Other loss, net																								879
Interest expense, net																								2,736
Equity in earnings of unconsolidated subsidiaries, net																								(29	)
Income tax provision																								11,906

Operating income (loss)	$	26,272		$	6,847		$	2,028		$	2,284	$	37,431		$	22,943		$	7,787	$	(21,613	)	$	46,548
Depreciation and amortization		990			229			264			174		1,657			8,025			669		1,401			11,752
Other (loss) income, net		(92	)		(80	)		24			24		(124	)		(11	)		—		(744	)		(879	)
Equity in earnings of unconsolidated subsidiaries, net		29			—			—			—		29			—			—		—			29

EBITDA		27,199			6,996			2,316			2,482		38,993			30,957			8,456		(20,956	)		57,450
Integration/acquisition cost		—			—			—			—		—			4,365			—		1,455			5,820

Adjusted EBITDA	$	27,199		$	6,996		$	2,316		$	2,482	$	38,993		$	35,322		$	8,456	$	(19,501	)	$	63,270


	Three Months Ended October 31, 2015
	Executive Search
	North America			EMEA			Asia Pacific			Latin America		Subtotal			Hay Group			Futurestep		Corporate			Consolidated
	(in thousands)
Fee revenue	$	92,788		$	36,570		$	20,998		$	6,116	$	156,472		$	73,602		$	50,526	$	—		$	280,600
Total revenue	$	96,198		$	37,509		$	21,617		$	6,118	$	161,442		$	75,991		$	53,906	$	—		$	291,339
Net income attributable to Korn/Ferry International																							$	17,971
Net income attributable to noncontrolling interest																								—
Other loss, net																								2,646
Interest expense, net																								544
Equity in earnings of unconsolidated subsidiaries, net																								(540	)
Income tax provision																								8,392

Operating income (loss)	$	27,422		$	6,929		$	3,907		$	970	$	39,228		$	7,778		$	6,896	$	(24,889	)	$	29,013
Depreciation and amortization		832			232			223			73		1,360			3,588			578		1,654			7,180
Other (loss) income, net		(127	)		7			(6	)		33		(93	)		(17	)		8		(2,544	)		(2,646	)
Equity in earnings of unconsolidated subsidiaries, net		140			—			—			—		140			—			—		400			540

EBITDA		28,267			7,168			4,124			1,076		40,635			11,349			7,482		(25,379	)		34,087
Integration/acquisition cost		—			—			—			—		—			3,310			—		8,684			11,994

Adjusted EBITDA	$	28,267		$	7,168		$	4,124		$	1,076	$	40,635		$	14,659		$	7,482	$	(16,695	)	$	46,081


	Six Months Ended October 31, 2016
	Executive Search
	North America			EMEA			Asia Pacific		Latin America		Subtotal		Hay Group			Futurestep			Corporate			Consolidated
	(in thousands)
Fee revenue	$	174,534		$	70,149		$	39,096	$	18,810	$	302,589	$	363,424		$	111,525		$	—		$	777,538
Deferred revenue adjustment due to acquisition		—			—			—		—		—		3,535			—			—			3,535

Adjusted fee revenue	$	174,534		$	70,149		$	39,096	$	18,810	$	302,589	$	366,959		$	111,525		$	—		$	781,073

Total revenue	$	181,327		$	71,756		$	40,109	$	18,910	$	312,102	$	373,860		$	121,925		$	—		$	807,887
Net income attributable to Korn/Ferry International																							33,360
Net income attributable to noncontrolling interest																							1,764
Other income, net																							(3,380	)
Interest expense, net																							5,797
Equity in earnings of unconsolidated subsidiaries, net																							(108	)
Income tax provision																							13,631

Operating income (loss)	$	42,740		$	12,874		$	4,130	$	4,614	$	64,358	$	15,200		$	15,300		$	(43,794	)	$	51,064
Depreciation and amortization		1,820			440			489		288		3,037		16,041			1,292			2,826			23,196
Other income (loss), net		196			(56	)		111		97		348		224			(2	)		2,810			3,380
Equity in earnings of unconsolidated subsidiaries, net		108			—			—		—		108		—			—			—			108

EBITDA		44,864			13,258			4,730		4,999		67,851		31,465			16,590			(38,158	)		77,748
Restructuring charges, net		1,706			128			622		360		2,816		21,488			—			216			24,520
Integration/acquisition cost		—			—			—		—		—		8,629			—			5,218			13,847
Deferred revenue adjustment due to acquisition		—			—			—		—		—		3,535			—			—			3,535

Adjusted EBITDA	$	46,570		$	13,386		$	5,352	$	5,359	$	70,667	$	65,117		$	16,590		$	(32,724	)	$	119,650


	Six Months Ended October 31, 2015
	Executive Search
	North America			EMEA			Asia Pacific		Latin America		Subtotal		Hay Group			Futurestep			Corporate			Consolidated
	(in thousands)
Fee revenue	$	183,147		$	72,660		$	40,213	$	12,542	$	308,562	$	142,842		$	96,590		$	—		$	547,994
Total revenue	$	190,597		$	74,680		$	41,607	$	12,550	$	319,434	$	147,432		$	103,808		$	—		$	570,674
Net income attributable to Korn/Ferry International																						$	41,053
Net income attributable to noncontrolling interest																							—
Other loss, net																							2,720
Interest expense, net																							843
Equity in earnings of unconsolidated subsidiaries, net																							(1,265	)
Income tax provision																							18,566

Operating income (loss)	$	51,567		$	13,205		$	6,893	$	2,478	$	74,143	$	15,273		$	13,085		$	(40,584	)	$	61,917
Depreciation and amortization		1,659			597			469		151		2,876		7,336			1,163			3,228			14,603
Other (loss) income, net		(95	)		150			12		272		339		(880	)		8			(2,187	)		(2,720	)
Equity in earnings of unconsolidated subsidiaries, net		226			—			—		—		226		—			—			1,039			1,265

EBITDA		53,357			13,952			7,374		2,901		77,584		21,729			14,256			(38,504	)		75,065
Integration/acquisition cost		—			—			—		—		—		3,639			—			9,029			12,668

Adjusted EBITDA	$	53,357		$	13,952		$	7,374	$	2,901	$	77,584	$	25,368		$	14,256		$	(29,475	)	$	87,733