Heidrick & Struggles Posts 13.7 Percent Q1 Revenue Decrease

Showing an expected slowdown, net revenue from executive search dipped from $242.5 million in the first quarter last year to $239.3 million for the Chicago-based firm. Volatility is expected to continue, says CEO Krishnan Rajagopalan, but the firm’s diversification strategy will stay on course.

April 25, 2023 – Executive search, leadership consulting, and culture shaping services provider Heidrick & Struggles / (NASDAQ:HSII) has posted first quarter revenues of $239.3 million, a decrease of 13.7 percent, compared to the first quarter of last year. The Chicago-headquartered recruiter — the fifth largest global firm as ranked by Hunt Scanlon Media — reported net income of $15.6 million and diluted earnings per share was $0.76; this compares to net income of $18.5 million and diluted earnings per share of $0.90 in the 2022 first quarter.

Executive search net revenue of $190.5 million compared to net revenue of $242.5 million in the 2022 first quarter reflecting an anticipated market slowdown. Excluding the impact of exchange rate fluctuations, which negatively impacted results by 1.8 percent, or $4.3 million, net revenue decreased 19.7 percent, or $47.8 million from the 2022 first quarter. Net revenue decreased 21.7 percent in the Americas (down 21.5 percent on a constant currency basis), decreased 21.7 percent in Europe (down 16.3 percent on a constant currency basis), and decreased 19.9 percent in Asia-Pacific (down 15.6 percent on a constant currency basis) when compared to the prior year first quarter.

Heidrick had 432 executive search consultants as of March 31, compared to 394 on March 31, 2022. Productivity, as measured by annualized executive search net revenue per consultant, was $1.8 million compared to $2.5 million in the 2022 first quarter, reflecting a higher number of consultants combined with lower revenue. Average revenue per executive search was approximately $124,000, flat with the prior year period. The number of search confirmations decreased 21.8 percent compared to the year-ago period.

Heidrick Consulting net revenue of $17.7 million compared to net revenue of $17.9 million in the 2022 first quarter. Excluding the impact of exchange rate fluctuations, which negatively impacted results by 3.8 percent, or $0.7 million, Heidrick Consulting net revenue increased 2.5 percent, or $0.5 million, compared to the prior year period. The company had 78 Heidrick Consulting consultants on March 31, compared to 70 at March 31, 2022.

“As we anticipated, we saw a slowdown in first quarter revenue from a year ago and adjusted our costs accordingly, as demonstrated by our adjusted EBITDA margin of nearly 12 percent,” said Krishnan Rajagopalan, president and CEO of Heidrick. “While we expect to see some continued volatility in our markets, which is reflected in our guidance, we will continue to navigate through these complexities prudently. Importantly, we continued to advance our diversification strategy with the acquisition of businessfourzero to augment our Heidrick Consulting offering, as well as the ongoing integration of Atreus into our on-demand talent platform.”

During the quarter, the board of directors declared a 2023 first quarter cash dividend of $0.15 per share payable on May 19, to shareholders of record at the close of business on May 5.

Q1 Acquisitions

In February, Heidrick & Struggles closed the acquisition of Atreus, one of the leading players for executive interim management in Germany. Together, Atreus and Heidrick & Struggles’ wholly owned, U.S.-based Business Talent Group (BTG), which was acquired in 2021, constitute the company’s on-demand talent segment and build on its strong market position in this space. The brand name Atreus, well-known in the German market, will be retained, and the Atreus management team, led by Harald Linné and Rainer Nagel, will remain in place.

Related: Heidrick & Struggles Enters Agreement to Acquire RosExpert in Russia and WE Partners in Ukraine and Kazakhstan

“Heidrick & Struggles is on an exciting transformation journey to broaden and diversify our suite of executive talent and leadership advisory services,” said Mr. Rajagopalan. “Our on-demand talent business is core to our overall growth strategy and a key client imperative that will only accelerate as companies continue to seek alternative ways to approach talent management with speed, agility, and flexibility – whether it’s through on-demand access to executive leaders for interim roles or strategic project work.”


Heidrick & Struggles Acquires Business Talent Group
Heidrick & Struggles has 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 & Struggles’ strategic growth initiative to expand its suite of executive talent solutions to address new and ongoing client demands and builds on a two-year exclusive collaboration with BTG that began in 2019. 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.

Heidrick & Struggles was a forerunner of the executive search industry when the firm was founded more than 65 years ago,” said CEO Krishnan Rajagopalan. “The seismic changes over the past year have accelerated the future of work and underscored the importance of agile leaders and workforces. We are excited to be the first global leadership advisory firm to enter the on-demand, independent talent space and partner with BTG, a leader and pioneer of the high-end independent talent marketplace.”


“The acquisition of Atreus is a highly complementary investment for Heidrick & Struggles,” said Mr. Rajagopalan. “The addition of Germany, a strategically important market for the firm, along with our existing on-demand talent businesses in the United States and the United Kingdom, gives us a strong springboard to scale this powerful platform across Europe and globally.”

Demand trends demonstrate that executives are beginning to understand the benefits that on-demand talent can offer given the attractive economics for project-based work. According to recent Heidrick & Struggles market research, more than 60 percent of executives surveyed in Europe have used some form of on-demand talent in the past, and 85 percent believe they will start to use on-demand talent services more in the future.

In March, Heidrick entered into an agreement to acquire businessfourzero, a London-headquartered consultancy specializing in developing and implementing purpose-driven change. “This acquisition will not only deepen Heidrick & Struggles’ existing set of leadership advisory and industry-leading culture and organization solutions, but also accelerate the company’s ability to help clients drive successful business transformations by linking purpose and strategy to leadership and culture,” said the firm.

“Powerful, purpose-driven cultures and inspired and engaged workforces are critical drivers of successful business transformations and long-term, sustainable performance,” said Mr. Rajagopalan. “businessfourzero will form an integral part of Heidrick Consulting’s offering, strengthening our ability to work with clients who are focused on developing future-ready cultures and organizations with pragmatic, actionable strategies. We look forward to welcoming Atif Sheikh and the entire team.”

Looking Ahead

Heidrick expects 2023 second quarter consolidated net revenue of between $260 million and $280 million, while acknowledging that continued fluidity in external factors, such as the foreign exchange and interest rate environments, foreign conflicts, inflation and macroeconomic constraints on pricing actions, may impact quarterly results. In addition, this outlook is based on the average currency rates in March 2023 and reflects, among other factors, management’s assumptions for the anticipated volume of new executive search confirmations, on-demand talent projects, and Heidrick Consulting assignments, consultant productivity, consultant retention, and the seasonality of the business along with the current backlog.

Heidrick & Struggles shares have lost about 0.4 percent since the beginning of the year vs. the S&P 500’s gain of 7.7 percent.

Related: Heidrick & Struggles Opens New Office in Colombia

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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