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

LOS ANGELES, Sept. 9 /PRNewswire-FirstCall/ -- Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced Q1 FY'11 diluted earnings per share of $0.24 compared to diluted loss per share of $0.33 in Q1 FY'10.  Excluding restructuring charges of $18.2 million, diluted loss per share in Q1 FY'10 was $0.05.

"With our fifth consecutive sequential fee revenue increase and a year-over-year improvement of fifty percent, I am enormously proud of our organization and pleased with the results of the quarter," said Gary D. Burnison, CEO of Korn/Ferry International.  "We have outperformed a seemingly directionless economy.  For Korn/Ferry, the whole is truly stronger than the sum of our parts.  It is our differentiation which has enabled us to outperform the industry.  Our outsourcing and leadership businesses now comprise over 25% of our overall business.  The combination of our complementary new offerings to our flagship executive recruiting business and our relentless focus on clients is providing the fortitude necessary for our continued success."

Fee revenue was $175.1 million in Q1 FY'11 compared to $116.8 million in Q1 FY'10, an increase of 50% (or an increase of 51%, or $59.7 million, on a constant currency basis), which reflects the positive traction that local and global economies have gained during the quarter, as well as our strong performance.  Fee revenue improved globally due to an increase in revenue from all segments of the business driven primarily by a 43% increase in the number of executive recruitment engagements billed as well as a 7% (8% 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 4% increase in fee revenue compared to Q4 FY'10 as a result of the improving economic conditions.

Compensation and benefits were $120.2 million in Q1 FY'11, an increase of $29.8 million, or 33%, compared to $90.4 million in Q1 FY'10.  This increase is attributable mainly to an increase in the variable component of compensation when compared to the year-ago fiscal quarter, which was lower in Q1 FY'10 due to the challenging economic conditions.  Changes in exchange rates impacted compensation and benefits in Q1 FY'11 favorably by $1.2 million compared to Q1 FY'10.

General and administrative expenses were $28.6 million in Q1 FY'11, an increase of $0.5 million, or 2% from $28.1 million in Q1 FY'10.  This increase is attributable to an increase in bad debt provisions, in line with the increase in account receivable balances and an increase in business development expense, partially offset by a decrease in unrealized foreign exchange losses. Changes in exchange rates impacted general and administrative expenses in Q1 FY'11 favorably by $0.3 million compared to Q1 FY'10.

Operating income was $19.3 million in Q1 FY'11 compared to operating loss of $25.0 million in Q1 FY'10, an increase of $44.3 million.  Excluding restructuring charges of $18.2 million in Q1 FY'10, operating loss was $6.8 million.

Balance Sheet and Liquidity

Cash and marketable securities were $232.2 million at July 31, 2010 compared to $296.5 million at April 30, 2010.  Cash and marketable securities include $62.4 million and $69.0 million, held in trust for deferred compensation plans, at July 31, 2010 and April 30, 2010, respectively.  Cash and marketable securities decreased by $64.3 million from April 30, 2010, mainly due to payment of FY'10 annual bonuses in Q1 FY'11.

Fee revenue was $154.9 million in Q1 FY'11, an increase of $53.6 million, or 53%, when compared to fee revenue of $101.3 million in Q1 FY'10.  On a constant currency basis, fee revenue increased by $54.9 million or 54%, when compared to the same quarter a year ago.  Fee revenue increased in all regions due to a 43% increase in the overall number of engagements billed and a 7% (8% excluding the impact of exchange rates) increase in the weighted-average fee per engagement billed when compared to Q1 FY'10.  

Operating income was $27.7 million in Q1 FY'11 compared to operating loss of $13.1 million in Q1 FY'10.  Excluding restructuring charges of $18.2 million incurred in Q1 FY'10, operating income would have been $5.1 million in Q1 FY'10.

The total number of consultants at July 31, 2010 was 478, a decrease of 23 from July 31, 2009.

Fee revenue was $20.2 million in Q1 FY'11, an increase of $4.7 million, or 30%, from $15.5 million in Q1 FY'10.  On a constant currency basis, fee revenue increased by $4.8 million, or 31%, in Q1 FY'11, compared to the same quarter a year ago.  The improvement in fee revenue was driven by a 30% increase in the overall number of engagements billed.

Operating income was $1.0 million in Q1 FY'11 compared to an operating loss of $0.8 million in Q1 FY'10.

Outlook

Assuming constant foreign exchange rates and stable economic conditions, Q2 FY'11 fee revenue is likely to be in the range of $165 million to $185 million and diluted earnings per share is likely to be in the range of $0.20 to $0.27.

Earnings Conference Call Webcast

The earnings conference call will be held today at 10:00 AM (EDT) and hosted by CEO Gary Burnison, CFO Mike DiGregorio and SVP Finance Gregg Kvochak.  The conference call will be webcast and available online at www.kornferry.com, accessible through the Investor Relations section.

Korn/Ferry International (NYSE: KFY), with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, develop, retain and sustain their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute.com for thought leadership, intellectual property and research.

Forward-Looking Statements

Statements in this press release and our conference call that relate to future results and events ("forward-looking statements") are based on Korn/Ferry's current expectations.  Readers are cautioned not to place undue reliance on such statements.  Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn/Ferry.  The potential risks and uncertainties include those relating to competition, the dependence on attracting and retaining qualified and experienced consultants, the portability of client relationships, local political or economic developments in or affecting countries where we have operations, including fluctuations in exchange rates, risks related to the growth and results of Futurestep, global economic developments, restrictions imposed by off-limits agreements, reliance on information systems, the successful integration of acquired businesses and employment liability risk.  For a detailed description of risks and uncertainties that could cause differences, please refer to Korn/Ferry's periodic filings with the Securities and Exchange Commission.  Korn/Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").  These non-GAAP financial measures include the following (each of which has been adjusted to exclude restructuring charges):

• adjusted operating income (loss) and operating margin;
• adjusted net income (loss);
• adjusted basic and diluted earnings (loss) per share; and
• constant currency amounts that represent the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior year period.

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn/Ferry's performance by excluding certain charges that may not be indicative of Korn/Ferry's ongoing operating results.  The use of these non-GAAP financial measures facilitate comparisons to Korn/Ferry's historical performance.  Korn/Ferry includes these non-GAAP financial measures because management believes it is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn/Ferry's ongoing operations and financial and operational decision-making.

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SOURCE Korn/Ferry International