Korn/Ferry International (KFY)

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Korn/Ferry International (KFY)

F4Q 2013 Earnings Conference Call

June 17, 2013 5:00 pm ET


Gary D. Burnison - Chief Executive Officer

Robert P. Rozek - Chief Financial Officer and Executive Vice President

Gregg Kvochak - Investor Relations


Kevin D. McVeigh - Macquarie Research

Frank Atkins - SunTrust Robinson Humphrey, Inc., Research Division

Timothy McHugh - William Blair & Company L.L.C., Research Division

Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division



Ladies and gentlemen, thank you very much for standing by and welcome to the Korn/Ferry International Fourth Quarter Fiscal Year 2013 Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. [Operator Instructions]

Before I turn the call over to your host, Mr. Gary Burnison, let me first read the cautionary statement to investors. Certain statements made in the call today, such as those relating to future performance, plans and goals, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, which are beyond the company's control.

Additional information concerning such risks and uncertainties can be found in the release relating to this presentation, in the company's annual report for fiscal 2012 and in the other periodic reports filed by the company with the SEC. Also, some of the comments today may reflect non-GAAP financial measures, such as constant currency amounts, EBITDA and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measure, is contained in the release relating to this call, which is posted on the company's website at www.kornferry.com.

With that, I'll turn the call over to Mr. Burnison. Please go ahead, Mr. Burnison.

Gary D. Burnison

Well, thank you. Thank you, everybody, for joining us. I think this is my 45th earnings call, something like that, with this organization. And I'll tell you, that I've never been more proud about Korn/Ferry and what we're doing, particularly when I consider that today, that 1 out of every 5 colleagues is new to Korn/Ferry in the last 8 months. I mean, that's because of investment. I think that, that's absolutely a testament to our transformation and our ongoing efforts to promote and attract the industry's top talent, as well as key acquisitions we've made, such as Global Novations and PDI Ninth House. So again, thank you for joining us.

I'm pleased with our quarterly results, but as I said, I'm as importantly, more importantly, our strategic progress in this most recent quarter. For example, accelerating the integration of our recent acquisitions, our broader talent management offerings that now represent 40% of Korn/Ferry's business, which is an all-time high. Our fee revenue in the quarter was $228 million, that's up 2% constant currency on an organic basis. It's obviously up higher with the acquisitions that we made. Our EBITDA margin was a little over 12% and adjusted EPS was $0.32. Our balance sheet is absolutely pristine and the strategic progress that we're making is truly remarkable. We're differentiating this brand. We're diversifying our business by continuing to invest in solutions that give us reasons to talk to clients throughout the whole year, to broaden the conversation with clients, to make the brand more elastic and really, the opportunity to participate in larger, strategically aligned addressable markets. That really is our goal. To really be the bridge between a CEO's vision, their business strategy and their talent strategy. That's Korn/Ferry. Make the brand synonymous with talent management and be the anchor between business and talent strategy.

So as we closed out this year -- the word transformation, I think, is sometimes overused, but I do believe that here that we've gone from a monoline business to a multi-solutions organization and I think that as I reflect on this last year, we have reached several key milestones, a couple of which I've mentioned already. But you think about the organization and the fact that 40% of the business now comes from outside our flagship heritage business, I can recall when I joined this company; in this quarter we almost did as much revenue, not quite, but almost, that we did an entire year about 12 years ago on a run-rate basis.

Futurestep is continuing to accelerate the brand; it's about 15% of the company today. And more importantly, well over half their business is in the RPO area, major assignments, producing more regular multi-year revenue streams. And we've amassed an array of intellectual property of unique assets, great people, at the same time, while building an infrastructure to really scale this organization. So as I look forward now, we're going to continue to focus on a few key pillars of our strategy. Number one, we're going to drive an integrated solutions-based go-to-market strategy, leveraging our R&D and intellectual property, continuing to move this firm to a knowledge-based organization.

We're going to secondly, not only elevate the brand like we've been doing, but continue to make it more elastic. And I'm certainly very, very proud of our search business and the marquee assignments we've gotten there, the relationships that we have there are incredibly important. They cascade down throughout an organization and really create multiple opportunities along the broad talent management spectrum.

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