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Korn/Ferry International Q2 GAAP diluted EPS $0.35

Staff writer |
Korn/Ferry International announced second quarter fee revenue of $280.6 million and adjusted diluted earnings per share of $0.51, excluding integration/acquisition costs of $12.0 million.

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On a GAAP basis, diluted earnings per share was $0.35 in the three months ended October 31, 2015.

Revenue was $280.6 million in Q2 FY'16, an increase of $24.9 million, or 9.7% ($41.3 million, or 16.2% on a constant currency basis), compared to Q2 FY'15, primarily due to increases of $10.1 million, $7.5 million, and $7.3 million in fee revenue in Futurestep, Executive Recruitment, and Leadership & Talent Consulting, respectively.

The overall fee revenue increase was driven by fee revenue growth in certain of our major markets – financial services, life science/healthcare, technology and education/non-profit, partially offset by a decline in industrial and consumer goods.

Compensation and benefit expenses were $188.6 million in Q2 FY'16, an increase of $13.9 million, or 8.0%, compared to the year-ago quarter.

The increase was driven, in part, by higher salaries (increase of $9.3 million) due to a 19.9% increase in the average consultant headcount in Q2 FY'16 compared to Q2 FY'15 and $3.3 million in integration costs associated with the Hay Group acquisition.

General and administrative expenses were $44.6 million in Q2 FY'16, an increase of $14.5 million compared to Q2 FY'15.

The increase was driven by acquisition costs of $8.6 million that were incurred in Q2 FY'16 related to the Hay Group acquisition and from the fact that in Q2 FY'15, the Company received a $6.2 million insurance reimbursement that reduced legal fees in Q2 FY'15. Neutralizing the effect of these items, general and administrative expenses were essentially flat year-over-year.

Adjusted EBITDA was $46.0 million in Q2 FY'16, an increase of $2.0 million, or 4.5%, compared to Q2 FY'15. Adjusted EBITDA margin was 16.4% in Q2 FY'16 and 17.2% in Q2 FY'15.

Adjusted EBITDA margin for Q2 FY'15 was favorably impacted (by approximately 90 basis points) by the insurance reimbursement discussed above, partially offset by higher other professional fees and additional performance-related bonus expense.

On a GAAP basis, operating income was $29.0 million in Q2 FY'16 and $34.4 million in Q2 FY'15, resulting in an operating margin of 10.3% in Q2 FY'16 compared to 13.5% in the year-ago quarter.

The decrease in operating income was due to the increases in compensation and benefit expenses and general and administrative expenses as discussed above, offset by an increase in fee revenue.


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