Post Earnings Coverage as Korn/Ferry’s Quarterly Fee Revenue Increased 13.3% on Constant Currency Basis

Upcoming AWS Coverage on Engility Holdings Post-Earnings Results

LONDON, UK / ACCESSWIRE / March 21, 2017 / Active Wall St. announces its post-earnings coverage on Korn/Ferry International (NYSE: KFY) as the Company released its third quarter fiscal 2017 financial and operating results on March 06, 2017. The preeminent global people and organizational advisory firm, reported earnings that met market estimates. Register with us now for your free membership at:

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One of Korn/Ferry’s competitors within the Staffing & Outsourcing Services space, Engility Holdings, Inc. (NYSE: EGL), reported on March 09, 2017, its financial results for the fourth quarter and full year ended December 31, 2016. AWS will be initiating a research report on Engility in the coming days.

Today, AWS is promoting its earnings coverage on KFY; touching on EGL. Get our free coverage by signing up to:

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Earnings Reviewed

For the three months ended January 31, 2017, Korn/Ferry reported fee revenue of $381.9 million, an increase of 11.0%, or 13.3% increase on a constant currency basis, compared to Q3 FY16 fee revenue of $344.16 million. The growth in fee revenue was attributed to the acquisition of Legacy Hay that was completed on December 01, 2015, and organic growth in Futurestep fee revenue. The Company’s revenue numbers came in below analysts’ consensus of $382.3 million.

Korn/Ferry’s operating margin was 8.0% in Q3 FY17 compared to negative 4.1% in the year-ago same quarter. The Company’s EBITDA margin was 12.2% in Q3 FY17 compared to negative 3.1% in Q3 FY16. The improvement in operating and EBITDA margin was primarily due to a decrease in both restructuring charges, net and integration/acquisition costs, and higher fee revenues. Korn/Ferry’s adjusted EBITDA margin was 14.5% for the reported quarter compared to 13.6% in the year ago comparable quarter. The increase in adjusted EBITDA margin was primarily due to the improvement in margins in the Hay Group segment due to synergies achieved in connection with the Legacy Hay acquisition.

For Q3 FY17, Korn/Ferry’s diluted earnings per share were $0.42 compared to diluted loss per share of $0.30 in Q3 FY16. The Company’s adjusted diluted earnings per share were $0.53 in Q3 FY17 compared to adjusted diluted earnings per share in Q3 FY16 of $0.52. Adjusted diluted earnings per share excluded $8.6 million, or $0.15 per share, of restructuring charges, net and integration/acquisition costs. Korn/Ferry’s adjusted numbers matched market estimates for earnings of $0.53 per share.

Results by Segment

Korn/Ferry’s Executive Search segment’s fee revenue was $152.8 million in Q3 FY17, a decrease of $1.8 million, or an increase of $1.8 million on a constant currency basis, compared to Q3 FY16 fee revenue of $154.6 million. The segment’s operating income was $29.3 million in Q3 FY17 compared to $34.6 million in Q3 FY16. Operating margin was 19.2% in Q3 FY17 compared to 22.4% in the year earlier comparable quarter. The decrease in operating income and operating margin was due to lower fee revenue, higher compensation and benefits cost associated with recent new hires, the unfavorable impact of an increase in the fair value of amounts owed under certain deferred compensation plans, and the unfavorable impact of foreign exchange rates. Executive Search’s EBITDA was $31.4 million in Q3 FY17 with an EBITDA margin of 20.5% compared to $35.7 million and 23.0%, respectively, in Q3 FY16.

For the Company’s Hay Group, fee revenue was $175.7 million in Q3 FY17 compared to $140.6 million in Q3 FY16, up 25.0% (or 27.2% increase on a constant currency basis). The segment’s operating income was $16.0 million in Q3 FY17, resulting in an operating margin of 9.1%. Operating income increased by $37.6 million from the operating loss of $21.6 million in Q3 FY16. Hay Group’s EBITDA was $24.2 million in Q3 FY17, with a margin of 13.8%, up from an EBITDA loss and margin of $14.7 million and (10.5)%, respectively, in the prior year’s comparable period. The Company’s adjusted EBITDA was $30.1 million in Q3 FY17, an increase of $7.3 million compared to Q3 FY16, resulting in an adjusted EBITDA margin of 17.1% in the reported quarter compared to 15.6% in Q3 FY16.

During Q3 FY17, Korn/Ferry’s Futurestep segment’s fee revenue grew 9.0%, or 11.6% on constant currency basis, to $53.4 million compared to fee revenue of $49.0 million in Q3 FY16. Futurestep’s new business in Q3 FY17 reached a record high of $103.8 million, with a record $83 million in Solutions new business.

The segment’s operating income was $6.5 million in Q3 FY17, essentially flat compared to Q3 FY16. Operating margin was 12.3% in the reported quarter compared to 13.5% in the year earlier same period. The decline in operating margin was attributed to an increase in compensation and benefits expense primarily driven by the need to service an increase in engagements in the recruitment process outsourcing business tied to strong Q2 and Q3 FY17 new engagements. Futurestep’s EBITDA and adjusted EBITDA were $7.3 million and $7.4 million, respectively, during Q3 FY17, essentially flat compared to Q3 FY16.

Share Repurchase

Korn/Ferry reported cumulative share repurchases of 893,000 since October 2016, representing a reduction of approximately 1.6% of outstanding shares of common stock. The Company declared a quarterly dividend of $0.10 per share on March 06, 2017, payable on April 14, 2017, to stockholders of record on March 23, 2017.

Outlook

On a consolidated basis, Korn/Ferry is forecasting Q4 FY17 fee revenue in the range of $398 million and $412 million. The Company expects Q4 FY17 diluted earnings per share to be in the band of $0.41 to $0.49.

Stock Performance

On Monday, March 20, 2017, the stock closed the trading session at $31.89, dropping 1.67% from its previous closing price of $32.43. A total volume of 329.11 thousand shares have exchanged hands. Korn/Ferry’s stock price rallied 8.47% in the last three months, 48.09% in the past six months, and 9.38% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 8.36%. The stock is trading at a PE ratio of 28.94 and has a dividend yield of 1.25%.

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