April 26, 2022 – Executive search, leadership consulting, and culture shaping services provider Heidrick & Struggles / (NASDAQ:HSII) has posted first quarter revenues of $283.9 million, an increase of 46.6 percent vs. the prior year period. Revenue growth was driven by all regions in executive search, by Heidrick Consulting, and by the addition of on-demand talent.
Executive search revenue of $242.5 million increased by $62.9 million, or 35 percent, compared to net revenue of $179.6 million in the 2021 first quarter. Revenue increased 39.5 percent in the Americas, 32.1 percent in Europe, and 18.8 percent in Asia-Pacific. All industry practices exhibited growth compared to the prior year.
“We are pleased with yet another quarter of record financial performance that builds on our solid foundation of ongoing and deliberate shareholder value creation,” said Krishnan Rajagopalan, president and CEO of Heidrick. “Today’s announcement marks five consecutive quarters of record year-over-year net revenue results for Heidrick achieved by strong productivity in executive search, growth from our on-demand talent business, and the expanding impact of Heidrick Consulting’s advisory work, all while we continue partnership incubation for future digital innovation.”
“Companies across all industries and regions know that top talent, whether permanent, interim or project-based, quality work environments, and data-driven actionable insights are business imperatives now more than ever, contributing to demand for our products and services,” said Mr. Rajagopalan. “Heidrick’s differentiated strategy is working, and we look to the future to continue to benefit from an increasingly diversified mix of businesses, with cross collaboration opportunities expected to amplify our long-term business success.”
Heidrick had 394 executive search consultants on March 31, compared to 373 on March 31, 2021. Productivity, as measured by annualized executive search net revenue per consultant, was $2.5 million compared to $1.9 million in the 2021 first quarter. Average revenue per executive search was approximately $124,000 compared to $113,000 a year earlier. The number of confirmed searches increased 23.1 percent compared to the year-ago period.
On-demand talent, a new business segment which the firm acquired on April 1, 2021, generated net revenue of $23.4 million, exceeding the company’s expectations.
Heidrick Consulting net revenue of $17.9 million increased by $3.9 million, or 27.7 percent, compared to net revenue of $14.0 million in the 2021 first quarter. The company had 70 Heidrick Consulting consultants on March 31, compared to 64 on March 31, 2021.
The Chicago-headquartered recruiter — the fifth largest global firm as ranked by Hunt Scanlon Media — recorded net income $18.5 million and diluted earnings per share was $0.90 with an effective tax rate of 33.7 percent. This compares to net income of $14.8 million and diluted earnings per share of $0.74, with an effective tax rate of 34.9 percent, in the 2021 first quarter. Excluding the restructuring charge in the 2021 first quarter, adjusted net income was $17.4 million and adjusted diluted earnings per share was $0.86.
During the quarter, Heidrick’s board of directors declared a 2022 first quarter cash dividend of $0.15 per share payable on May 20, to shareholders of record at the close of business on May 6.
New Chief Diversity Officer
Heidrick & Struggles recently named Cecilia Nelson-Hurt as its new chief diversity officer. Ms. Nelson-Hurt joins the firm from L’Oréal USA, where she served as vice president, diversity, equity, and inclusion. She was responsible for shaping the company’s diversity and inclusion efforts that underscore its commitment to building an inclusive beauty brand and as an equal opportunity workplace. She also developed and facilitated its diversity and inclusion programs and worked with the company’s employee-led Think Tanks to create and implement strategies and initiatives that positively impacted employee engagement, consumer insights and community outreach. She takes the place of Kamau Coar, who shifted from a role as the organization’s chief legal officer to chief inclusion officer, overseeing its diversity and inclusion efforts, including talent development, employee resources and culture.
“At Heidrick & Struggles, we are committed to building diverse leadership teams and organizations and creating inclusive workplace cultures, both for our employees and our clients,” said Mr. Rajagopalan. “We are delighted to welcome Cecilia who brings her deep passion, experience and commitment to advancing diversity, equity and inclusion to our firm. We look forward to further strengthening our focus and efforts on increasing representation and fostering an equitable and inclusive environment where all of our employees can thrive and achieve success.”
“It is an incredibly exciting time to join Heidrick & Struggles as the firm looks to accelerate its transformation and growth journey globally,” said Ms. Nelson-Hurt. “I am honored to have this opportunity to lead the company’s diversity, equity and inclusion strategy and deliver long-term, sustainable programs and initiatives that build on its values and commitment to creating the most diverse and inclusive executive talent and leadership advisory firm in the industry.”
Heidrick recently added two partners to executive search and a partner to its Heidrick Consulting business in Asia-Pacific and the Middle East in February and March. “In this challenging corporate and economic landscape, companies are looking to develop high-performing, agile leadership teams able to operate in a constantly changing environment,” said Stephen McAlinden, regional leader, Asia-Pacific and the Middle East. “Elsie and Aki’s combined wealth of experience will help our clients build leadership teams to facilitate success in driving business objectives.”
Yoshiaki Ito joined the firm as a partner in the Tokyo office and as a member of the global technology and services practice. Previously, he founded and led a management consulting firm, X-TANK Consulting, that specializes in turnaround and business transformation initiatives.
Elsie Zhang joined Heidrick as a partner in the Tokyo office and as a member of the healthcare and life sciences practice. She specializes in recruiting C-suite leaders in all functions for multinational corporations, especially manufacturers, across Japan and other countries.
Jan Hendrik Kraus joined the firm as a partner in the Dubai office. Bringing 23 years’ experience in financial services and consulting, he focuses on strategy development and implementation, working with boards, CEOs, and global functional and regional teams across multiple industries on organizational alignment, leadership engagement, team effectiveness, and change management.
Heidrick expects 2022 second quarter consolidated net revenue of between $290 million and $300 million, while acknowledging that some continued fluidity in external factors such as foreign conflicts, the interest rate environment, and the COVID-19 pandemic may impact quarterly results. In addition, this outlook is based on the average currency rates in March 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, and the current backlog, consultant productivity, consultant retention, and the seasonality of the business.
Shares in Heidrick were down 14.27 percent to $33.99 today. The firm set a new 52-week low today. The company had a market cap of $782.0 million.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media