Heidrick & Struggles Records Q2 Revenue Gain; Launches Heidrick Consulting

Europe and the Americas lead growth at the nation's No. 3 search firm as the company consolidates its consulting and cultural shaping business units. Let's go inside the latest figures.
Heidrick & Struggles Records Q2 2017 Revenue Gain

July 26, 2017 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles International / (NASDAQ:HSII) has posted revenues of $152.2 million for the second quarter, an increase of 2.3 percent from the same period last year.

Executive search net revenue increased 2.9 percent year over year, or $3.8 million, to $134.5 million from $130.7 million in the 2016 second quarter. Search revenues increased two percent in the Americas region and 10.2 percent in Europe (16.4 percent on a constant currency basis), but declined 2.6 percent in Asia Pacific (2.2 percent on a constant currency basis). Leadership consulting net revenue increased 35.3 percent, or $3 million, to $11.4 million from $8.5 million in the second quarter last year. Culture shaping net revenue declined 35.7 percent, or $3.5 million, to $6.2 million from $9.7 million in the 2016 second quarter.

For the fourth quarter, the Chicago-headquartered recruiter — the third largest in the Americas as ranked by Hunt Scanlon Media — recorded a net loss of $18.2 million, or 97 cents per share, compared to net income of $6.7 million, or 35 cents per share, last year. The results missed Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 38 cents per share.


Heidrick & Struggles Names President and CEO
Heidrick & Struggles has named Krishnan Rajagopalan as its new president and CEO. Mr. Rajagopalan, who has served as acting CEO since Tracy Wolstencroft took a medical leave of absence in April, will also become board member.


Consolidating Business Units

“Our 2017 second quarter results reflect solid performance in our core business, executive search, and strong growth in leadership consulting,” said Krishnan Rajagopalan, Heidrick’s newly named president and CEO. “Going forward, we will integrate our leadership consulting and culture shaping operations into a single business, Heidrick Consulting, which will provide a comprehensive service offering that will help our clients accelerate their performance. We have built a scalable foundation for Heidrick Consulting through the development and acquisition of relevant tools and intellectual property, and are now in a position to drive operational efficiencies and move to a better trajectory of profitable growth,” he said.


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Heidrick recently formed its new business unit, Heidrick Consulting, bringing together a suite of offerings from its leadership consulting and culture shaping businesses. “We have seen the market for consulting services across talent, leadership and culture continue to evolve and grow rapidly,” said Mr. Rajagopalan. “We will integrate our leadership consulting and culture shaping operations into a single business, Heidrick Consulting, to provide a cohesive suite of service offerings that will enable our clients to accelerate their performance at the leader, team and organizational levels.”

Heidrick Consulting will offer leadership services in leadership assessment & development, organization & team effectiveness, and culture shaping, all as a full complement to its core executive search business. That integration will be co-led by Colin Price, EVP and managing partner of leadership consulting, and Mike Marino, EVP and managing partner of culture shaping.

“In addition to helping our clients around the globe identify and develop top leadership talent, we equip leaders with the skills, tools and insights to inspire and lead transformational change that delivers on their organization’s purpose,” Mr. Rajagopalan said. “Our consultants draw from deep expertise in human behavior and organizational culture combined with data-driven solutions grounded in empirical research.”


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Hunt Scanlon presents the 50 top U.S./Americas search firms — ranging from the largest recruiting and talent leadership solutions providers to the leading boutique specialists that dominate the list this year.

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Hedge Fund Investing Activity

Several hedge funds and other institutional investors have recently modified their holdings of Heidrick stock over the past several quarters. Principal Financial Group recently boosted its stake in the firm by 3.6 percent, according to its most recent disclosure with the Securities and Exchange Commission (SEC). The institutional investor owned 141,244 shares of Heidrick’s stock after buying an additional 4,964 shares. Principal Financial Group owned about .75 percent of the firm worth $3,722,000 as of its most recent filing with the SEC.

A number of other large investors have also recently bought and sold shares of Heidrick: Great West Life Assurance Co. raised its stake by 7.8 percent. Great West now owns 26,903 shares of Heidrick’s stock, valued at $708,000, after buying an additional 1,953 shares. Russell Investments Group Ltd. boosted its ownership in the firm by 35 percent. Russell now owns 58,849 shares of Heidrick’s stock, valued at $1,551,000, after buying an additional 15,253 shares. Acadian Asset Management, for its part, raised its holdings in the firm by 20.6 percent. Acadian now owns 290,500 shares of Heidrick stock, valued at $7,656,000, after purchasing an additional 49,609 shares. Nationwide Fund Advisors raised its holdings by 45.4 percent. Nationwide now owns 51,023 shares of the firm’s stock, valued at $1,344,000, after buying an additional 15,933 shares. And, Louisiana State Employees Retirement System purchased a new stake in Heidrick valued at about $200,000. Institutional investors own 83.25 percent of the firm’s stock.

Outlook

Heidrick is forecasting third quarter consolidated net revenue of between $148 million and $158 million. This forecast is based on the average currency rates in June 2017 and reflects, among other factors, management’s assumptions for the anticipated volume of new executive search confirmations, Heidrick Consulting assignments, the current backlog, consultant productivity, consultant retention and the seasonality of its business.

“As a trusted advisor to our clients, we will increasingly combine distinctive, data-driven talent, leadership and culture solutions to accelerate the performance of the world’s most influential organizations,” Mr. Rajagopalan said. We will continue to develop Heidrick Consulting to deliver exceptional and relevant advisory services as a full complement to our Executive Search business,” Rajagopalan said. “We firmly believe our clients, our employees and our shareholders also will benefit from the operational efficiency of our integrated services. We see great opportunity ahead and are focused on positioning the firm for sustainable, profitable growth.”

Heidrick shares have fallen eight percent since the beginning of the year. In the final minutes upon the release of its second quarter revenues, shares hit $22.20, a rise of 26 percent in the last 12 months.

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Will Schatz, Managing Editor – Hunt Scanlon Media

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