Korn Ferry International Announces Third Quarter Fiscal 2016 Results of Operations

LOS ANGELES, March 9, 2016

"Despite the threat of economic contagion at the beginning of this calendar year, I am pleased to report 14% year over year growth in fee revenue at constant currency in our third fiscal quarter – excluding the legacy Hay Group business. Combined, adjusted fee revenue for the quarter was $350 million," said Gary D. Burnison, CEO, Korn Ferry.

"We have successfully completed the initial synergy phase of our combination with Hay Group, which is partially reflected in the new combined Hay Group segment Adjusted EBITDA margin of 15.6% in the quarter.  Over the last few weeks, we have launched phase two of our Hay Group unification, which incorporates growth areas such as the expansion of our intellectual property, solutions and offerings.  Our intent is to substantially complete the last phase of our integration activities by July 31, 2016, which will be eight months from the closing date of the transaction. 

"After a short 90 days with Hay Group, I am more confident than ever that we are creating the preeminent global people and organizational advisory firm," Burnison added.

Hay Group Integration

The acquisition of Hay Group was completed on December 1, 2015.  In the seasonally weaker months of December and January, legacy Hay Group generated approximately $77.8 million of adjusted fee revenue, or $71.9 million, excluding the deferred revenue adjustment of $5.9 million related to the acquisition.  Also, in the third quarter, we completed a number of restructuring actions targeted at improving the Hay Group's cost base through the elimination of redundant positions and, to a lesser extent, the consolidation of a number of offices.  These actions resulted in charges of $30.6 million and due to the timing, savings were only partially realized in the quarter and resulted in an Adjusted EBITDA margin of 11% for legacy Hay Group.  When combined with the legacy Leadership & Talent Consulting segment, Adjusted EBITDA margin was 15.6%.

In the fourth quarter of FY'16, we estimate that legacy Hay Group will generate approximately $115 million to $119 million of adjusted fee revenue with an Adjusted EBITDA margin of 12% to 13%⁽¹⁾ as the business continues to benefit from the third quarter restructuring actions.  When combined with our legacy Leadership & Talent Consulting business, the FY'16 fourth quarter Adjusted EBITDA margin for the new Hay Group segment is expected to range from 15.5% to 16%.  Exiting the fourth quarter of FY'16, we expect the new Hay Group segment to realize the full benefit of the third quarter restructuring actions at which point, the Adjusted EBITDA margin is estimated to be 16% to 17%. These estimates are subject to the assumptions set forth in the "Outlook" section below.