April 27, 2021 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles (NASDAQ:HSII) posted first quarter revenues of $193.7 million, up 12.9 percent from $171.5 million in the 2020 first quarter. Net revenue was driven by growth across all regions in executive search, partially offset by Heidrick Consulting. “Our results reflect a strong rebound from the global downturn,” said Krishnan Rajagopalan, Heidrick’s president and CEO. “Record net revenue in the first quarter marked a double-digit improvement both sequentially and year over year, driven by broad-based strength across all businesses and geographies. This strong growth coupled with savings in general and administrative expenses resulted in significant improvements in overall profitability with adjusted operating margin of 12.1 percent, the highest since 2008.”
Executive Search net revenue increased 15.5 percent, or $24.2 million, to $179.6 million compared to $155.5 million in the 2020 first quarter. Net revenue increased 16.2 percent in the Americas (increased 16.5 percent on a constant currency basis), increased 13.8 percent in Europe (increased 4.8 percent on a constant currency basis) and increased 15.4 percent in Asia Pacific (increased 8.2 percent on a constant currency basis). Growth in the healthcare and life sciences, industrial, financial services and global technology services practices was offset by reductions in the other industry practices. Heidrick Consulting net revenue was $14.0 million compared to $16.0 million in the 2020 first quarter, a decrease of $2.0 million.
During the first quarter, Heidrick & Struggles recorded net income of $14.8 million and diluted earnings per share of $0.74 includes restructuring charge. In the 2020 first quarter, net income was $8.7 million and diluted earnings per share was $0.44.
There were 373 executive search consultants at firm as of March 31, compared to 396 at March 31, 2020 and 361 at Dec. 31, 2020. Productivity, as measured by annualized executive search net revenue per consultant, was $1.9 million compared to $1.6 million in the 2020 first quarter. The average revenue per executive search was $112,900 compared to $118,600 in the 2020 first quarter, while the number of confirmed searches reached a new record for the search firm and increased 21.4 percent compared to the year-ago period.
Acquisition of Business Talent Group
Earlier this April, Heidrick & Struggles closed the acquisition of Business Talent Group (BTG), a marketplace for high-end independent talent on demand. Financial terms of the deal were not disclosed. The addition of BTG complements Heidrick’s strategic growth initiative to expand its suite of executive talent solutions to address new and ongoing client demands. BTG will continue to be led by co-founders and co-CEOs, Jody Greenstone Miller and Amelia Tyagi, and operate as a wholly owned subsidiary of Heidrick.
“We are also very excited to welcome BTG to Heidrick & Struggles and to offer our clients a full spectrum of executive and high-end on-demand talent solutions – a key strategy we set out to achieve – as we make the future of work a reality today,” Mr. Rajagopalan said. “We look to build on our momentum as we execute our 2021 initiatives to grow our scale and impact with clients, expand our suite of leadership solutions and capabilities, and invest in new innovative, tech-driven offerings to drive future growth and shareholder value.”
The acquisition builds on a two-year exclusive collaboration with BTG that began in 2019. BTG, which generated revenue of approximately $50 million in 2020, was acquired for an initial consideration of $32.6 million paid in the 2021 second quarter with an anticipated future payment in 2023, subject to the achievement of certain agreed upon financial performance targets.
Heidrick & Struggles recently named Jaimee Eddington as Americas regional leader. “We are excited to have Jaimee take up the Americas leadership role as we continue to bring our clients an integrated suite of executive search, consulting and on-demand talent solutions to help them navigate the many complex talent and human capital issues they face,” said Michael Cullen, chief operating officer. “Jaimee is a proven business leader who possesses the vision and depth and breadth of experience needed to drive the next phase of growth for the Americas, our firm’s largest region.” In her new position, Ms. Eddington will work closely with the firm’s management committee and the Americas leadership team, focusing on increasing revenue, expanding into new growth areas and delivering long-term stakeholder value. She also will be responsible for driving cross-collaboration across business lines and the region to deliver the full range of the firm’s leadership advisory solutions.
Heidrick & Struggles also recently appointed Kamau Coar to the newly created role of chief inclusion officer and Jenni Hibbert as global managing partner, head of executive search go-to-market. This is part of the Heidrick’s long-term strategic plans to accelerate business growth and strengthen its focus on diversity and the firm’s workplace culture, said the search firm. “We continue to transform our business and build for the future,” said Mr. Rajagopalan. “As we progress on this journey, our leadership and workplace culture remain foundational to our success. We have a longstanding commitment to developing talent from within our firm, and these new roles and leadership changes put us in an even stronger position to support our employees while delivering world-class advisory services to our clients.”
Heidrick expects 2021 second quarter consolidated net revenue of between $215 million and $225 million, while acknowledging the continued fluidity of the COVID-19 pandemic that may impact quarterly results. In addition, this outlook is based on the average currency rates in March 2021 and reflects, among other factors, management’s assumptions for the anticipated volume of new executive search confirmations, Heidrick Consulting assignments, BTG projects and the current backlog, consultant productivity, consultant retention, and the seasonality of its business.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media