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Business Segments

9 Months Ended

Jan. 31, 2018

Business Segments

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, net, 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 nine months ended January 31, 2017, 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 January 31, 2018
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
		(in thousands)
Fee revenue		$	102,716			$	46,782			$	24,493			$	6,425			$	180,416			$	198,056			$	69,109			$	—			$	447,581
Total revenue		$	106,332			$	47,763			$	24,942			$	6,456			$	185,493			$	201,961			$	73,316			$	—			$	460,770
Net income attributable to Korn/Ferry International																																		$	27,247
Net income attributable to noncontrolling interest																																			180
Other income, net																																			(7,689	)
Interest expense, net																																			2,665
Equity in earnings of unconsolidated subsidiaries, net																																			(97	)
Income tax provision																																			26,316
Operating income (loss)		$	21,313			$	7,329			$	5,289			$	408			$	34,339			$	27,079			$	10,056			$	(22,852	)			48,622
Depreciation and amortization			990				458				361				113				1,922				7,882				733				1,688				12,225
Other income, net			585				37				185				40				847				370				2				6,470				7,689
Equity in earnings of unconsolidated subsidiaries, net			97				—				—				—				97				—				—				—				97
EBITDA			22,985				7,824				5,835				561				37,205				35,331				10,791				(14,694	)			68,633
Integration/acquisition costs			—				—				—				—				—				1,593				—				80				1,673
Adjusted EBITDA		$	22,985			$	7,824			$	5,835			$	561			$	37,205			$	36,924			$	10,791			$	(14,614	)		$	70,306
		Three Months Ended January 31, 2017
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
		(in thousands)
Fee revenue		$	84,827			$	39,147			$	21,012			$	7,835			$	152,821			$	175,662			$	53,435			$	—			$	381,918
Total revenue		$	87,975			$	39,965			$	21,336			$	7,856			$	157,132			$	178,962			$	58,101			$	—			$	394,195
Net income attributable to Korn/Ferry International																																		$	23,897
Net income attributable to noncontrolling interest																																			481
Other income, net																																			(4,200	)
Interest expense, net																																			2,402
Equity in earnings of unconsolidated subsidiaries, net																																			(113	)
Income tax provision																																			8,075
Operating income (loss)		$	17,718			$	8,175			$	2,086			$	1,352			$	29,331			$	15,988			$	6,549			$	(21,326	)			30,542
Depreciation and amortization			996				226				268				(21	)			1,469				8,061				789				1,455				11,774
Other income (loss), net			316				19				60				61				456				122				(2	)			3,624				4,200
Equity in earnings of unconsolidated subsidiaries, net			113				—				—				—				113				—				—				—				113
EBITDA			19,143				8,420				2,414				1,392				31,369				24,171				7,336				(16,247	)			46,629
Restructuring charges, net			—				—				893				309				1,202				2,519				80				—				3,801
Integration/acquisition costs			—				—				—				—				—				3,364				—				1,466				4,830
Adjusted EBITDA		$	19,143			$	8,420			$	3,307			$	1,701			$	32,571			$	30,054			$	7,416			$	(14,781	)		$	55,260
		Nine Months Ended January 31, 2018
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
		(in thousands)
Fee revenue		$	296,093			$	128,249			$	71,983			$	22,048			$	518,373			$	577,462			$	196,018			$	—			$	1,291,853
Total revenue		$	305,866			$	130,894			$	73,009			$	22,114			$	531,883			$	589,093			$	210,179			$	—			$	1,331,155
Net income attributable to Korn/Ferry International																																		$	92,619
Net income attributable to noncontrolling interest																																			969
Other income, net																																			(14,847	)
Interest expense, net																																			7,904
Equity in earnings of unconsolidated subsidiaries, net																																			(187	)
Income tax provision																																			54,145
Operating income (loss)		$	66,253			$	20,349			$	12,811			$	2,961			$	102,374			$	72,532			$	27,702			$	(62,005	)			140,603
Depreciation and amortization			2,923				1,345				1,052				331				5,651				24,110				2,313				4,807				36,881
Other income, net			1,157				136				384				99				1,776				459				10				12,602				14,847
Equity in earnings of unconsolidated subsidiaries, net			187				—				—				—				187				—				—				—				187
EBITDA			70,520				21,830				14,247				3,391				109,988				97,101				30,025				(44,596	)			192,518
Restructuring charges (recoveries), net			—				—				313				—				313				(241	)			6				—				78
Integration/acquisition costs			—				—				—				—				—				6,455				—				199				6,654
Adjusted EBITDA		$	70,520			$	21,830			$	14,560			$	3,391			$	110,301			$	103,315			$	30,031			$	(44,397	)		$	199,250
		Nine Months Ended January 31, 2017
		Executive Search
		North America				EMEA				Asia Pacific				Latin America				Subtotal				Hay Group				Futurestep				Corporate				Consolidated
		(in thousands)
Fee revenue		$	259,361			$	109,296			$	60,108			$	26,645			$	455,410			$	539,086			$	164,960			$	—			$	1,159,456
Deferred revenue adjustment due to acquisition			—				—				—				—				—				3,535				—				—				3,535
Adjusted fee revenue		$	259,361			$	109,296			$	60,108			$	26,645			$	455,410			$	542,621			$	164,960				—			$	1,162,991
Total revenue		$	269,302			$	111,721			$	61,445			$	26,766			$	469,234			$	552,822			$	180,026			$	—			$	1,202,082
Net income attributable to Korn/Ferry International																																		$	57,257
Net income attributable to noncontrolling interest																																			2,245
Other income, net																																			(7,580	)
Interest expense, net																																			8,199
Equity in earnings of unconsolidated subsidiaries, net																																			(221	)
Income tax provision																																			21,706
Operating income (loss)		$	60,458			$	21,049			$	6,216			$	5,966			$	93,689			$	31,188			$	21,849			$	(65,120	)			81,606
Depreciation and amortization			2,816				666				757				267				4,506				24,102				2,081				4,281				34,970
Other income (loss), net			512				(37	)			171				158				804				346				(4	)			6,434				7,580
Equity in earnings of unconsolidated subsidiaries, net			221				—				—				—				221				—				—				—				221
EBITDA			64,007				21,678				7,144				6,391				99,220				55,636				23,926				(54,405	)			124,377
Restructuring charges, net			1,706				128				1,515				669				4,018				24,007				80				216				28,321
Integration/acquisition costs			—				—				—				—				—				11,993				—				6,684				18,677
Deferred revenue adjustment due to acquisition			—				—				—				—				—				3,535				—				—				3,535
Adjusted EBITDA		$	65,713			$	21,806			$	8,659			$	7,060			$	103,238			$	95,171			$	24,006			$	(47,505	)		$	174,910

X

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

+ Details

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