Heidrick & Struggles Posts 5.4 Percent Revenue Decline
July 30, 2019 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles (NASDAQ:HSII) posted second quarter revenues of $173.1 million, a 5.4 percent decrease from revenues of $183.1 million the same period a year ago.
Executive search revenue declined 4.8 percent year over year, or $8 million, from $158.5 million to $145.8 million last year. Revenue decreased 2.1 percent in the Americas region, 6.5 percent in Europe and 12.7 percent in Asia Pacific. All industry practice groups experienced a reduction in billings with the exception of healthcare & life sciences. Heidrick Consulting net revenue decreased 12 percent, or $2 million, to $14.6 million from $16.6 million in the 2018 second quarter.
The Chicago-headquartered recruiter — the fourth largest global firm as ranked by Hunt Scanlon Media — recorded net income of $14.3 million and diluted earnings per share of 73 cents, this compares to net income of $11.5 million and diluted earnings per share was 59 cents, last year.
There were 371 executive search consultants at June 30 compared to 349 at June 30, 2018 and 370 at March 31, 2019. Productivity, as measured by annualized executive search net revenue per consultant, was $1.7 million compared to $1.9 million in the 2018 second quarter. The average revenue per executive search increased to $124,200 compared to $119,400 in the 2018 second quarter, while the number of confirmed searches was off 8.5 percent compared to the 2018 second quarter.
Recruiting Sector Jumps 13.9 Percent
A constricting labor market with low unemployment means companies are struggling to find qualified talent. When the right people are found, the costs associated with hiring them are rising, making a lengthy onboarding process now the rule, not the exception.
Upon release of its numbers, Heidrick’s board of directors declared a 2019 third quarter cash dividend of $0.15per share payable on August 23, 2019 to shareholders of record at the close of business on August 9, 2019.
New Chairman
Heidrick recently elected Adam Warby, CEO of Avanade, as chairman of its board of directors. Mr. Warby joined Heidrick’s board in 2018 to sharpen the firm’s focus on its digital transformation. As CEO of Avanade, a joint venture founded between Accenture LLP and Microsoft Corp., he has a proven track record.
“Adam’s insights and contributions to our board have been invaluable as we have expanded our data-driven, tech-enabled capabilities,” said Krishnan Rajagopalan, president and CEO of Heidrick & Struggles. “As chairman, his deep knowledge of both the technology and consulting space will be hugely beneficial as we continue to enhance our client experience, tailor our service offerings and accelerate our growth.”
Vast Majority of Recruiting Firms Expect Increases in 2019
A brand new report by Bullhorn has found that 79 percent of recruiting firms expect to bring in more revenue this year than last. Optimism reigns across the sector despite growing concerns and emerging challenges related to automation, macroeconomics and politics.
“Clients are looking for a trusted advisor in this fast-evolving, digital world, and I’m delighted to be taking up the chairmanship of Heidrick & Struggles at this exciting time,” said Mr. Warby. “There is tremendous opportunity in the talent and human capital solutions market, and I’m looking forward to helping the team develop its strategy and execution to provide superior innovative services, outperform its competition and grow the business.”
During the quarter, Heidrick also opened a new office in Ireland and named Stafford Bagot as the partner in charge of the Dublin office. “For more than 65 years, we have been providing our clients with diversified solutions to help them build strong leadership teams globally,” said Mr. Rajagopalan. “We are delighted to add the Dublin office to our global operations given the growing prominence of the professional services sector and the increasing demand for innovative talent and leadership solutions in Ireland.”
Spencer Stuart Acquires Ireland-Based MERC Partners
Spencer Stuart has acquired MERC Partners, a leading executive search and leadership consulting firm based in Ireland. Financial terms of deal were not disclosed. The addition of MERC Partners marks Spencer Stuart’s first client-facing team in Ireland and represents an important addition for its EMEA and global business.
“We are excited to expand our presence in Ireland by welcoming the team at MERC Partners to the Spencer Stuart family,” said Henrik Maartensson, who co-leads the EMEA region for Spencer Stuart. “By formally establishing a client-facing presence in Ireland, we will be better able to serve our clients around the world in this significant and dynamic European market.”
Looking Ahead
Heidrick expects third quarter consolidated net revenue of between $175 million and $185 million. The outlook is based on the average currency rates in June 2019 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.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media
