July 26, 2016 – Executive search firm Heidrick & Struggles International / (NASDAQ:HSII) has posted second quarter net revenues of $148.9 million, an 11.9 percent increase from revenues of $133 million during the same period a year ago, topping Wall Street forecasts.
Executive search and leadership consulting net revenue at Heidrick increased 11.6 percent year-over-year, to $139.2 million from $124.7 million in the 2015 second quarter. The impact of exchange rate fluctuations was less than one percent. The Americas and Europe regions drove second quarter revenue growth with Americas up 11 percent and Europe up 30.3 percent (32.6 percent on a constant currency basis). Asia Pacific revenue declined 4.6 percent (3.2 percent on a constant currency basis). Every industry practice at the firm contributed to growth in the second quarter, except education and social enterprise.
The Chicago-based search firm recorded net income of $6.7 million, or 35 cents per share, compared to earnings of $5 million, or 27 cents per share, a year ago.
“Our strong second quarter results were driven by revenue growth in the Americas and Europe, as well as in culture shaping,” said Tracy Wolstencroft, Heidrick & Struggles’ president and chief executive officer. “Our continued focus on attracting and retaining the highest caliber consultants in the industry contributed to increases in all our key metrics and revenue growth in almost every practice. The solid revenue growth achieved in the second quarter helped drive good improvements in operating income and margin and adjusted EBITDA and margin.”
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During the quarter, Heidrick strengthened its healthcare and life sciences practices with the addition of healthcare leader Alan Milinazzo as a partner. He is based out of the firm’s Boston office. Mr. Milinazzo previously served as president and CEO of InspireMD, a global leader in embolic prevention systems (EPS), neurovascular devices and thrombus management technologies.
The firm also expanded its industrial expertise by naming Patrick Gray as a partner and head of its aviation, aerospace, and defense sectors in the Americas. He joined the firm’s Washington, D.C. office. Mr. Gray provides talent and leadership consulting solutions to clients spanning aerospace, defense, industrials, & government services (technology, professional services, technical services, and cyber). He was previously with boutique firm Northwind Partners, where he helped establish its Washington, D.C. office.
Overseas during the quarter, Heidrick appointed Sylvain Dhenin as head of Continental Europe for its global CEO and board practice. He is based in the firm’s Zurich office and reports to Bonnie Gwin and Jeff Sanders, CEO practice group co-managing partners. Mr. Dhenin will continue in his leadership role as managing partner of Western Europe. He joined Heidrick last year.
Heidrick‘s culture shaping firm Senn Delaney also added five new principals during the quarter to expand its capability and meet increasing demand for its organizational culture transformation services. The newly appointed leaders will serve clients globally from home bases in Chicago, Huntington Beach, Boston, Los Angeles and Dallas. Senn Delaney’s new culture consultants bring backgrounds in strategy consulting, human capital management, business transformation strategy, leader engagement, talent optimization, organizational development, HR transformation, and leadership & talent management, beckoning from Deloitte, Capgemini Consulting, Ernst & Young and Gagen MacDonald.
“Culture shaping is important to clients and will become even more so,” said Jon Harmon, Heidrick’s vice president of corporate communications. “We are confident that culture will be an increasingly larger part of our revenue and are determined to invest in its growth.” Mr. Harmon said the five new consultant hires will “ramp up on our platform, and contribute to the growth of this important business.”
The company ended the second quarter with 336 executive search and leadership consulting consultants compared to 325 at June 30, 2015.
Looking ahead, Heidrick is forecasting third quarter consolidated net revenue of between $140 million and $150 million. This forecast is based on the average currency rates in and reflects, among other factors, management’s assumptions for the anticipated volume of new executive search confirmations, leadership consulting assignments and culture shaping services, the current backlog, consultant productivity, consultant retention, and the seasonality of its business.
“Our second quarter revenue growth and third quarter revenue guidance reflect the strength of our consultant teams and our business in general,” said a bullish Mr. Wolstencroft, adding: “There continues to be uncertainty relative to the impact of economic, market and political changes, with new inputs regularly.”
What remains constant, he said, “is our clients’ needs for talent, leadership and culture shaping services that ensure they have the very best leaders” in their organizations. “We are making important investments in our non-search businesses, and will continue to do so selectively, in order to provide added value and service to our clients, and improve operating performance and shareholder value going forward.”
Heidrick & Struggles shares have dropped 36 percent since the beginning of the year. In the final minutes of trading on Monday, shares hit $17.43, a drop of 28 percent in the last 12 months.
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media