Heidrick & Struggles Posts 2.7 Percent Revenue Increase for Q2
July 30, 2024 – Executive search, leadership consulting, and culture shaping services provider Heidrick & Struggles / (NASDAQ:HSII) has posted second quarter revenues of $278.6 million, a 2.7 percent increase compared to revenues of $271.2 million a year ago. The firm experienced revenue growth in On-Demand Talent, Heidrick Consulting, and Executive Search in the Americas and Asia Pacific, partially offset by a decrease in Executive Search in Europe. “Our team delivered a strong second quarter,” said Tom Monahan, CEO. “In a very complex operating environment, clients continue to need help engaging, assessing and enabling critical leadership talent – and our world-class colleagues met those needs with energy and creativity. This work helped propel our second quarter revenue beyond the high end of our outlook range while generating a double-digit EBITDA margin.”
“Even as we continued to deliver value to clients, we also made important changes to our leadership team and staffing levels,” Mr. Monahan said. “As a result, we enter the second half of the year with more targeted solutions and better alignment of our organization with client needs. Going forward, we are tightly focused on accelerating returns from our recent investment cycle and on creating unmatched value for clients, colleagues and investors.”
Executive Search net revenue of $210.0 million increased 1.5 percent compared to net revenue of $206.8 million in the 2023 second quarter. Excluding the impact of exchange rate fluctuations, which negatively impacted results by 0.4 percent, or $0.9 million, net revenue increased 2.0 percent, or $4.1 million from the 2023 second quarter. Net revenue increased 6.1 percent in the Americas (up 6.3 percent on a constant currency basis), decreased 12 percent in Europe (down 11.7 percent on a constant currency basis), and increased 0.7 percent in Asia Pacific (up 3.3 percent on a constant currency basis) when compared to the prior year second quarter. All practice groups, except for consumer and industrial, exhibited growth over the prior year period.
Heidrick had 415 executive search consultants at June 30, 2024, compared to 423 at June 30, 2023. Productivity, as measured by annualized executive search net revenue per consultant, was $2.0 million compared to $1.9 million in the 2023 second quarter, reflecting a lower number of consultants combined with higher revenue. Average revenue per executive search was approximately $151,000 compared to $146,000 in the prior year period. The number of search confirmations decreased 1.6 percent compared to the year-ago period.
On-Demand Talent net revenue of $41.9 million increased 6.8 percent compared to net revenue of $39.2 million in the 2023 second quarter. Excluding the impact of exchange rate fluctuations, which negatively impacted results by $0.2 million, or 0.5 percent, net revenue increased 7.3 percent, or $2.9 million from the 2023 second quarter.
Heidrick Consulting net revenue of $26.8 million increased 6.2 percent compared to net revenue of $25.2 million in the 2023 second quarter. The firm had 85 Heidrick Consulting consultants at June 30, 2024, compared to 89 at June 30, 2023.
Heidrick & Struggles Names Global Sector Leader, Luxury
Heidrick & Struggles has named Caroline Pill as global sector leader, luxury, where she will have oversight across different sectors and practices, including product, retail and hospitality. The firm said Ms. Pill will continue to lead global accounts while “coaching and advising” colleagues in viewing executive recruitment from a cross-sector, and cross-cultural perspective. “Pill’s focus on executional excellence, and near-constant intensity in calling on the market, has driven much of our growth in the luxury sector,” said Amanda Worthington, global practice managing partner for the consumer markets at Heidrick. “Strategically, she will help us connect dots across sectors and practices, including where luxury touches products, retail, hospitality and beyond.”
During the quarter, the board of directors declared a 2024 second quarter cash dividend of $0.15 per share payable on August 22, 2024, to shareholders of record at the close of business on August 9, 2024.
CFO Search
In June, Heidrick announced that CFO Mark Harris has elected to depart the firm to pursue other opportunities. Heidrick has commenced a formal search for a new CFO, and Mr. Harris, who assumed the role in 2018, will remain with the firm until August 2024 to ensure continuity and a successful transition. “Mark has been a valued member of our executive team over the past six years and made significant contributions during his tenure. He helped lead transformative financial management and discipline, while advancing our strategic direction and the overall growth of the company,” said Mr. Monahan. “I am immensely appreciative of Mark for his partnership and wish him the very best in his next professional endeavor. Our internal team is exceptional, and as premier leaders in executive search, I am confident that we will identify the next world-class CFO to help create unmatched value for clients, colleagues, and investors.”
Based in Heidrick’s Stamford, CT, office, Mr. Harris joined the firm in 2018. A member of the firm’s executive committee, he is responsible for the company’s finance and accounting functions, including financial reporting, business development and strategy, investor relations, risk management, treasury, real estate, and financial planning and analysis.
Newly Appointed CEO and President
Earlier this year, Heidrick announced that Krishnan Rajagopalan has decided to retire, after more than 23 years with the firm. Following a planned succession process, the board has appointed Mr. Monahan to succeed Mr. Rajagopalan as CEO and member of the board, which was effective March 4. Mr. Monahan was managing partner of Norton Street Holdings and was previously president and CEO of DeVry University. “Search firms are highly focused on trying to leverage data, innovative technology, analytics, and IT to not only lift their client’s performance, but also their own,” said Scott Scanlon, CEO of Hunt Scanlon Media. “Bringing in this outsider at this time makes a whole lot of sense.”
“The board of directors, including Krishnan, have thoughtfully and deliberately developed this succession plan, and we are confident these leadership announcements position Heidrick & Struggles for continued success well into the future,” said Adam Warby, chairman of the board of Heidrick & Struggles. “Tom Monahan is a proven and innovative executive with a deep passion for the leadership arena and a unique view into what matters – and what works – when driving corporate performance. Tom’s decades of experience in growing technology-enabled services firms focused on delivering C-suite advice makes him the right person to build on our strengths in leadership advisory and to unlock transformative growth through our strategy of innovative diversification.
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“Anyone who knows me, understands that I am passionate about the work of finding, developing, and supporting great leaders,” said Mr. Monahan. “Heidrick & Struggles has shaped the leadership advisory industry for decades. As a longtime client, I can see endless possibilities to extend our strength in search, which will continue to be the cornerstone of our strategy, and leverage our diverse assets — including our On-Demand, Consulting and Digital solutions — to deliver value for our clients and our shareholders, and I look forward to leading the company’s talented team as we help clients put the right leadership teams and strategies in place to change the world.”
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Heidrick also announced that Mr. Murray, global managing partner of Executive Search, has become president, reporting to Mr. Monahan. In addition to continuing to lead Executive Search, he will have operational responsibility for On-Demand Talent, Heidrick Consulting and go-to-market in his new role. Based in Heidrick’s Boston office, Mr. Murray is a member of the global management committee and is responsible for leading the firm’s global executive search business and client operations.
Outlook
Heidrick expects 2024 third 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 June 2024 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.
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Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor – Hunt Scanlon Media