This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Korn&Ferry International (KFY: chart) on June 11, 2008.
Management:
CEO: Gary Burnison
CFO: Stephen Giusto
Key Investors Issues
- EPS were 36 cents a share compared to 30 cents a share last year.
- Net income rose to $15.7 million from $13.5 million a year earlier.
- Revenue rose to $220.5 million from $189.8 million a year earlier.
Fourth Quarter Highlights
Revenue rose to $220.5 million from $189.8 million a year earlier.
- Fee revenue of $208.2 million increased $28.5 million, or 16%, from $179.7 million in the fourth quarter 2007. Fee revenue improved globally due to an increase in revenue from all segments of the business resulting from an increase in the number of search engagements opened as well as a 7% increase in the average fee billed per executive search engagement compared to the prior year.
- Exchange rates impacted fee revenue favorably by $11.3 million compared to the fourth quarter 2007 and excluding these favorable impact revenues increased 10% over the prior year''s fourth quarter.
- Compensation and benefits, excluding the $6.8 million unfavorable impact of exchanges rates, were $141.3 million, an increase of $17.7 million, or 14%, compared to $123.6 million in the fourth quarter 2007 which excludes a $5.2 million charge for executive employment contract changes. The increase is primarily attributable to productivity based compensation and, to a lesser extent, higher headcount in all segments of the company.
- Actual compensation and benefits was $148.1 million compared to $128.8 million in the fourth quarter 2007, an increase of 15%.
- General and administrative expenses, excluding the $2.4 million unfavorable impact of exchange rates, were $31 million and increased by $5.1 million, or 20%, from $25.9 million in the fourth quarter 2007. The increase is primarily attributable to costs associated with business growth such as rent and utilities, higher bad debt provisions in line with increased accounts receivable balances, advertising and promotion costs to elevate market-leading brand.
- Actual general and administrative expenses were $33.4 million compared to $25.9 million in the fourth quarter 2007 resulting in a 29% increase.
- Operating income was $20.2 million compared to $19.4 million in the fourth quarter 2007 resulting an increase of $0.8 million or 4% over the fourth quarter 2007. The company''s results include a modest amount of severance and related costs aimed at maintaining record consultant productivity in the face of an uncertain macroeconomic environment.
- Cash, cash equivalents and marketable securities were $389.3 million at April 30, 2008 compared to $324.3 million at April 30, 2007. The increase was due primarily to improved operating cash flows.
- Through April 30, 2008, the company has used $6.5 million of the $50 million of share repurchase funds authorized in November 2007 to buy back approximately 0.4 million shares. Under this program, shares may be repurchased from time to time in open market transactions or privately negotiated transactions at the company''s discretion, subject to market conditions and other factors.
- Interest expense was $1.1 million compared to $2.5 million in the same period last year. Interest expense in both years related primarily to borrowings under Korn/Ferry''s convertible securities and COLI policies. The decrease in interest expense is primarily due to the conversion of the company''s convertible preferred stock and subordinates notes to common shares during the fourth quarter 2007. At April 30, 2008, Korn/Ferry had no outstanding borrowings under its credit facility.
Executive Recruitment fee revenue was $177.5 million, an increase of $20.4 million, or 13%, from $157.1 million in the fourth quarter 2007.
- Fee revenue improved in all regions due to an increase in the overall number of engagements billed and average fee per engagement.
- Exchange rates impacted fee revenue favorably by $8.6 million compared to the fourth quarter 2007.
- North America fee revenue was $97.9 million, up $6.5 million or 7% year-over-year and 3.3% sequentially.
- Europe fee revenue grew 21% or $8.7 million versus the fourth quarter of fiscal year 2007 reaching $50 million. On a sequential basis, Europe grew 8%. Year-over-year 16 of 20 local country markets have improved with all major specialty markets growing led by industrial at 61% year-over-year, consumer goods at 23%, technology at 20%, and financial services at 6%.
- The Asia Pacific revenues were $23.3 million, an increase of 17% over the prior year’s fourth quarter and off sequentially by about $2 million driven by weaker demand in India, Japan and Korea.
- In Latin America fee revenue improved by 37% year-over-year.
- Operating income was $27.3 million compared to $31.3 million in the fourth quarter 2007 resulting in a decrease of $4 million or 13% from the prior year.
- The total number of consultants at April 30, 2008 was 514, an increase of 24 from April 30, 2007.
Futurestep fee revenue was $30.7 million, an increase of $8.1 million, or 36%, from $22.6 million in the fourth quarter 2007.
- Improvements in fee revenue were driven by an increase in the average fee for engagements.
- Exchange rates impacted fee revenue favorably by $2.6 million compared to the fourth quarter 2007.
- Operating income was $2.9 million compared to $2.7 million in the fourth quarter 2007.
- Sequential fee revenue growth in North America, Europe and Asia Pacific were 15.5%, 5.7% and 5.5% respectively. Operating margin was 9.5%.
Fiscal 2008 Highlights
- The North America financial services practice was off less then 5% and was flat sequentially in the last quarter primarily due to year-end engagement upticks that are not expected to recur.
- Asia Pac revenues totaled $95.9 million, up more then $20 million over the prior year. Greater China up 45% year-over-year, India up 61% year-over-year and Australia up 37% year-over-year continue to be key growth markets for the Asia Pacific region.
- Latin American revenues reached $25.6 million, an improvement of 47%.
