October 27, 2020 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles (NASDAQ:HSII) has posted $143.5 million third quarter revenues, down from $182.2 million during the same period a year ago. The reduction in net revenue was primarily due to the impact of the pandemic on its global business.
Executive search net revenue was $129.2 million compared to $166.5 million in the 2019 third quarter. Excluding the impact of exchange rate fluctuations of $1.2 million, or one percent, executive search net revenue declined $38.5 million. Net revenue decreased 26.6 percent in the Americas (decreased 26.3 percent on a constant currency basis), decreased 17 percent in Europe (decreased 20.9 percent on a constant currency basis) and decreased 10.5 percent in Asia Pacific (decreased 11.5 percent on a constant currency basis).
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There were 362 executive recruiters at September 30, 2020 compared to 394 at June 30, 2020, the previous reporting period, a decline of 32 search consultants. Consultant productivity, an important yardstick among consulting businesses, was $1.4 million compared to $1.8 million during the 2019 third quarter.
Heidrick Consulting net revenue was $14.3 million compared to $15.7 million in the 2019 third quarter. Excluding the impact from exchange rate fluctuations, which positively impacted results by 1.4 percent, Heidrick Consulting net revenue decreased $1.6 million. There were 63 Heidrick Consulting consultants at September 30, 2020 compared to 71 at September 30, 2019 and 68 at June 30, 2020.
The Chicago-headquartered recruiter — the fourth largest global firm as ranked by Hunt Scanlon Media — recorded a net loss of $26.2 million and diluted earnings per share of $0.39; this compares to net income of $9.9 million and diluted earnings per share was 91 cents, last year.
A Restructuring, With More to Come
Heidrick recorded a restructuring charge of $48.1 million in the 2020 third quarter. The expected annual cost savings from the restructuring ranges from $30 million to $40 million. The main components of the restructuring included workforce reductions, reduced real estate expenses, and the future elimination of certain deferred compensation programs.
Korn Ferry Posts Flat Year-End Revenues; Q4 Down 10.2 Percent
Korn Ferry (NYSE:KFY) has posted 2020 fiscal year-end revenues of $1.92 billion, flat from a year ago. The Los Angeles-headquartered executive recruiter and leadership consultant – the largest globally and in the Americas as ranked by Hunt Scanlon Media – also reported fourth quarter revenue of $490.8 million, a decline of 10.2 percent. The firm reported restricting charges of $40.5 million in its fourth quarter. Net income attributable to Korn Ferry was $104.9 million in the 2020 fiscal year, while the firm reported a net loss on $0.8 million in Q4.
The company anticipates future restructuring charges of $10 to $15 million more in future quarters related to further real estate reductions. In total, the company is reportedly looking to unload more than 250,000 square feet of office space across its global network, as more of its workers work turn to remote options.
For the nine months ending September 30, 2020 consolidated net revenue dropped $67 million, from $527 million to $460 million. During this period, executive search revenue declined roughly $62 million, with the Americas region down 14 percent, Europe down 11 percent, and 14 percent in Asia.
Heidrick’s board of directors has declared a 2020 fourth quarter cash dividend of $0.15 per share payable on November 20, 2020 to shareholders of record at the close of business on November 6, 2020.
Caldwell Records 42 Percent Q3 Revenue Decline
Toronto-based Caldwell posted Q3 revenues of $11.5 million (Canadian), a 42 percent decrease from a year ago. Like many companies, the firm’s performance was impacted by the global COVID-19 pandemic.
“This is a challenging business environment for the executive search industry,” said John Wallace, chief executive officer. “Our third quarter revenue is down 42 percent over last year, which we believe is in line with our industry overall. That said, we remain extremely confident about our ability to manage our business through this pandemic and economic downturn.”
Heidrick expects 2020 fourth quarter consolidated net revenue of between $140 million and $150 million, while acknowledging the continued fluidity of the COVID-19 pandemic that will continue to impact quarterly results.
Heidrick & Struggles shares have dropped 34 percent since the beginning of the year. In the final minutes of trading on Monday, shares hit $21.31, a drop of 23 percent in the last 12 months.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
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