Heidrick & Struggles Posts 14 Percent Q1 Revenue Increase

One of the nation's top executive search firms delivers its first quarter revenue report to Wall Street. Let’s go inside the latest numbers.

April 24, 2018 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles International/(NASDAQ:HSII) posted first quarter revenues of $160.1 million, a 14.3 percent increase from revenues of $140 million during the same period a year ago.

Executive search revenue increased 17.1 percent year over year, or $21.3 million, to $145.8 million from $124.5 million last year. All three regions contributed to growth in search: Revenue increased 11.9 percent in the Americas region, 36.2 percent in Europe, and 12.6 percent in Asia Pacific. The financial services, global technology & services and consumer markets search practices were key drivers of growth with billings up 29 percent, 28 percent and 17 percent respectively, compared to the 2017 first quarter.

During the quarter, the leadership consulting and culture shaping businesses were combined into one business, Heidrick Consulting, which saw revenues decline 8.3 percent during Q1, or $1.3 million, to $14.2 million from $15.5 million last year.

The Chicago-headquartered recruiting concern recorded net income of $10.2 million and diluted earnings per share was $0.53, this compares to earnings of $0.7 million, or three cents per share, last year.

“We are very pleased with our firm’s accomplishments in the first quarter, continuing on our momentum from year-end,” said Krishnan Rajagopalan, president and CEO. “All three regions achieved strong, double-digit net revenue growth and contributed to the year-over-year increase in executive search.”

“With the formal launch of Heidrick Consulting in the first quarter, we are now turning our focus to scaling the business to enhance our impact with clients by expanding our consultant expertise, service offerings, and scalable tools and methodologies,” said Mr. Rajagopalan. “We delivered significant improvements in operating income, operating margin and earnings per share in the first quarter and will remain vigilant in making strategic investments and managing costs.”

During the quarter, the board of directors has declared the second quarter cash dividend of $0.13 per share payable on May 18th to shareholders of record at the close of business on May 4th.

Hedge Fund Investing Activity

Several hedge funds and other institutional investors have modified their holdings of Heidrick stock in recent months. Assenagon Asset Management has acquired a new position in shares of the firm. It took on 59,682 shares of Heidrick’s stock, valued at approximately $1,465,000. Assenagon owned about 0.32 percent of the search firm as of its most recent filing with the Securities & Exchange Commission. Royce & Associates recently rose its position in Heidrick by four percent and now owns 1,612,356 shares of the firm’s stock valued at $34,101,000 after purchasing an additional 62,556 shares. Dimensional Fund Advisors also raised its position in shares of Heidrick by 3.5 percent and now owns 1,427,277 shares of the firm’s stock worth $30,187,000 after purchasing an additional 48,761 shares.

Executive Recruiters Report Solid Gains in Latest Rankings
The executive search industry’s leading 50 players in the Americas once again surpassed $3 billion in revenues last year, according to industry newsletter ESR, in a market report to be released later this month by Hunt Scanlon Media.

Renaissance Technologies recently raised its position in shares of Heidrick by 1.3 percent and now owns 1,175,200 shares of the search firm’s stock worth $25,561,000 after purchasing an additional 15,298 shares. Vanguard Group raised its position in shares of Heidrick by 1.9 percent and currently owns 1,012,574 shares of the firm’s stock worth $22,024,000 after purchasing an additional 19,260 shares. And Paradice Investment Management raised its position in shares of Heidrick by 5.7 percent and now owns 946,828 shares of the recruiter’s stock worth $20,025,000 after purchasing an additional 51,138 shares. 83.19 percent of the stock is currently owned by institutional investors.

Zacks Investment Research recently raised shares of Heidrick from a “hold” rating to a “strong-buy” rating and set a $28 target price for the company. One investment analyst has rated the stock with a sell rating, four have issued a hold rating and one has given a strong buy rating to the stock. The stock presently had an average rating of “hold” and a consensus target price of $25.33. Rival Korn Ferry has seen its stock hit fresh highs recently – that firm has a market cap eclipsing $3 billion.


In January, a restructuring plan was revealed by Heidrick to reduce overall costs and improve efficiencies in its operations. The expected annual cost savings from the restructuring is expected to range from $11 million to $13 million. The firm also recently announced a series of changes to its leadership team. Mark R. Harris joined Heidrick as CFO, succeeding Richard W. Pehlke who retired in March. Mr. Harris had been CFO at Hercules Capital, a publicly traded business development company, with responsibility for the finance, accounting, operations, treasury, legal and investor relations.

Related: Korn Ferry Posts 17 Percent Revenue Increase

Stephen Beard, Heidrick’s executive vice president, general counsel and chief administrative officer, also left the firm to pursue other opportunities. The chief administrative officer role will be eliminated. Kamau A. Coar, vice president, associate general counsel, has been promoted to general counsel. In this role, Mr. Coar will be responsible for the firm’s legal and regulatory matters globally.

Three Quarters of Recruiting Firms Expect Revenues to Rise in 2018
Seventy five percent of recruiting firms anticipated an increase in 2018 revenue versus 2017 revenue, according to Bullhorn’s “2018 North American Staffing & Recruiting Trends Report: The Industry’s Outlook for 2018.”

During the first quarter, Heidrick also appointed Amy Goldfinger and Mike Theilmann as co-leaders of its global human resources officers (CHRO) practice, based in New York City and Dallas. This follows the departure of Dan Kaplan who left the firm to lead Korn Ferry’s CHRO practice.

Related: Caldwell Partners Posts 8.7 Percent Q2 Revenue Increase

Ms. Goldfinger has been with the firm for 11 years advising clients in HR transformation, accelerated leadership, talent management strategy and execution, leadership assessment and development, and onboarding. She leads senior level HR searches including CHRO, heads of talent management, heads of organizational development, chief learning officers, heads of rewards and heads of recruiting for companies in every industry.

2018 Outlook 

Heidrick is forecasting second quarter consolidated net revenue of between $160 million and $170 million. This forecast is based on the average currency rates in March 2018 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.

“Our outlook for the market demand for executive search and leadership advisory services remains positive,” said Mr. Rajagopalan. “The strategic actions that we took at the end of 2017 are enabling us to execute our plan to drive profitable growth and operating excellence,” he said. “Our digital transformation – driving and leveraging our propriety IP-based solutions and data – will continue to distinguish Heidrick & Struggles in the market.”

Related: ManpowerGroup Posts 16 Percent Q1 Revenue Increase, But U.S. Business Falters

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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