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Korn/Ferry Q1 2015 EPS $0.43

Staff writer |
Korn/Ferry International announced first quarter fee revenue of $251.2 million and adjusted diluted earnings per share of $0.43, excluding restructuring charges of $9.9 million.

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Including such costs, diluted earnings per share was $0.29 in the three months ended July 31, 2014.

Fee revenue was $251.2 million in Q1 FY'15, an increase of $22.8 million, or 10% (8.9% on a constant currency basis), compared to Q1 FY'14, primarily driven by an $11.8 million, $7.5 million, and a $3.5 million increase in fee revenue in Executive Recruitment, Futurestep and Leadership & Talent Consulting, respectively.

The overall fee revenue increase was driven by fee revenue growth in all markets - industrial, life science/healthcare, technology, financial services, and consumer.

Compensation and benefit expenses were $169.1 million in Q1 FY'15, an increase of $16.3 million, or 10.7%, compared to the year-ago quarter. The increase was due to an increase in performance related bonus expense resulting from the increase in fee revenue and profitability, as well as an increase in salaries and related payroll taxes.

These increases were partially offset by $2.5 million in management separation charges recorded in Q1 FY'14 with no such charge in Q1 FY'15. The increase in salaries and related payroll taxes was due to an increase in the average headcount in Executive Recruitment and Futurestep in Q1 FY'15 compared to Q1 FY'14, reflecting our continued growth-related investments back into our business.

General and administrative expenses were $37.4 million in Q1 FY'15, a decrease of $2.5 million, or 6.3%, from Q1 FY'14, primarily due to a decrease of $2.5 million in legal and other professional fees, a decrease in marketing and business development expenses of $1.5 million, and a decrease in integration/acquisition costs of $0.4 million, partially offset by an increase of $0.8 million in foreign exchange loss in Q1 FY'15 compared to the year-ago quarter.

As previously disclosed, during Q1 FY'15, the company took actions to rationalize its cost structure as a result of efficiencies obtained from prior year technology investments that enabled further integration of our legacy business and our recent acquisitions as well as other cost saving initiatives.

As a result, the company recorded net restructuring charges of $9.9 million in Q1 FY'15 compared to restructuring charges of $3.7 million in Q1 FY'14. Adjusted EBITDA was $37.9 million in Q1 FY'15, an increase of $6.0 million, or 18.8%, compared to Q1 FY'14. Adjusted EBITDA margin was 15.1% and 14.0% in Q1 FY'15 and Q1 FY'14, respectively.

On a GAAP basis, operating income was $18.6 million in Q1 FY'15 and $16.6 million in Q1 FY'14 resulting in an operating margin of 7.4% in the current quarter compared to 7.3% in the year-ago quarter. Operating income was impacted by all of the above items, including an increase in depreciation and amortization of $0.9 million in Q1 FY'15 compared to Q1 FY'14.

Cash and marketable securities were $371.6 million at July 31, 2014, compared to $468.3 million at April 30, 2014. Cash and marketable securities include $116.7 million held in trust for deferred compensation plans at July 31, 2014, compared to $116.2 million at April 30, 2014.

Cash and marketable securities decreased by $96.7 million from April 30, 2014, primarily due to the payment of bonuses earned in fiscal 2014 and paid during the first quarter of fiscal 2015, partially offset by cash provided by operating activities.


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