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 four fundamental needs: Talent Strategy, Succession Management, Leadership Development, and Rewards, Motivation and Engagement, all underpinned by a comprehensive array of world-leading intellectual property, 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 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). 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. For the three months ended July 31, 2016, Adjusted EBITDA includes deferred revenue adjustment related to the Legacy Hay acquisition, reflecting revenue that the 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.

Financial highlights by business segment are as follows:


	Three Months Ended July 31, 2017
	Executive Search
	North America		EMEA		Asia Pacific		Latin America		Subtotal		Hay Group		Futurestep		Corporate			Consolidated
	(in thousands)
Fee revenue	$	91,833	$	40,121	$	21,578	$	7,659	$	161,191	$	179,453	$	60,610	$	—		$	401,254
Total revenue	$	95,205	$	41,058	$	21,880	$	7,664	$	165,807	$	183,296	$	65,814	$	—		$	414,917

Net income attributable to Korn/Ferry International																		$	29,041
Net income attributable to noncontrolling interest																			388
Other income, net																			(3,532	)
Interest expense, net																			2,660
Equity in earnings of unconsolidated subsidiaries, net																			(30	)
Income tax provision																			12,210

Operating income (loss)	$	21,995	$	6,675	$	3,141	$	1,026	$	32,837	$	19,083	$	8,237	$	(19,420	)		40,737
Depreciation and amortization		949		428		320		107		1,804		8,085		796		1,524			12,209
Other income (loss), net		282		56		105		20		463		32		8		3,029			3,532
Equity in earnings of unconsolidated subsidiaries, net		30		—		—		—		30		—		—		—			30

EBITDA		23,256		7,159		3,566		1,153		35,134		27,200		9,041		(14,867	)		56,508
Restructuring charges, net		—		—		40		—		40		240		—		—			280
Integration/acquisition cost		—		—		—		—		—		2,549		—		39			2,588

Adjusted EBITDA	$	23,256	$	7,159	$	3,606	$	1,153	$	35,174	$	29,989	$	9,041	$	(14,828	)	$	59,376


	Three Months Ended July 31, 2016
	Executive Search
	North America		EMEA		Asia Pacific		Latin America		Subtotal		Hay Group			Futurestep			Corporate			Consolidated
	(in thousands)
Fee revenue	$	81,802	$	35,370	$	19,626	$	9,563	$	146,361	$	174,582		$	54,678		$	—		$	375,621
Deferred revenue adjustment due to acquisition		—		—		—		—		—		3,535			—			—			3,535

Adjusted fee revenue	$	81,802	$	35,370	$	19,626	$	9,563	$	146,361	$	178,117		$	54,678		$	—		$	379,156

Total revenue	$	85,425	$	36,249	$	20,180	$	9,614	$	151,468	$	181,508		$	59,957		$	—		$	392,933

Net income attributable to Korn/Ferry International																				$	3,208
Net income attributable to noncontrolling interest																					860
Other income, net																					(4,259	)
Interest expense, net																					3,061
Equity in earnings of unconsolidated subsidiaries, net																					(79	)
Income tax provision																					1,725

Operating income (loss)	$	16,468	$	6,027	$	2,102	$	2,330	$	26,927	$	(7,743	)	$	7,513		$	(22,181	)		4,516
Depreciation and amortization		830		211		225		114		1,380		8,016			623			1,425			11,444
Other income (loss), net		288		24		87		73		472		235			(2	)		3,554			4,259
Equity in earnings of unconsolidated subsidiaries, net		79		—		—		—		79		—			—			—			79

EBITDA		17,665		6,262		2,414		2,517		28,858		508			8,134			(17,202	)		20,298
Restructuring charges, net		1,706		128		622		360		2,816		21,488			—			216			24,520
Integration/acquisition costs		—		—		—		—		—		4,264			—			3,763			8,027
Deferred revenue adjustment due to acquisition		—		—		—		—		—		3,535			—			—			3,535

Adjusted EBITDA	$	19,371	$	6,390	$	3,036	$	2,877	$	31,674	$	29,795		$	8,134		$	(13,223	)	$	56,380