Heidrick & Struggles Posts 7.2 Percent 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 30, 2019 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles International/(NASDAQ:HSII) posted first quarter revenues of $171.6 million, a 7.2 percent increase from revenues of $160.1 million the same period a year ago. The results surpassed Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for revenues $170.6 million.

Executive search revenue increased 8.6 percent year over year, or $12.5 million, to $158.3 million from $145.8 million last year. Revenue increased 15.1 percent in the Americas region and 6.7 percent in the Asia Pacific, but declined six percent in Europe. Every industry practice contributed to the growth, except financial services which declined four percent. Heidrick Consulting net revenue also decreased 6.7 percent, or $1 million, to $13.3 million from $14.2 million in the 2018 first quarter.

The Chicago-headquartered recruiter — the fourth largest global firm as ranked by Hunt Scanlon Media — recorded net income of $12.1 million and diluted earnings per share of 62 cents, this compares to net income of $10.2 million and diluted earnings per share of 53 cents, last year.

“We are pleased to report our 15th quarter in a row of year-over-year growth in net revenue and continued improvement in profitability,” said Krishnan Rajagopalan, president and CEO. “Market demand for the executive search and leadership advisory services continues to be positive, despite the usual quarter-to-quarter and geographic variability.”

“We are pleased with the progress we are making to differentiate our human capital solutions through our own digital transformation by utilizing more data-driven, tech-enabled platforms to help our clients accelerate their performance,” he said. “We are off to a good start in 2019 and see continued opportunity to gain market share and increase shareholder value.”

Heidrick’s board of directors has declared a 2019 second quarter cash dividend of 15 cents per share payable on May 24 to shareholders of record at the close of business on May 10.

Leadership Appointments

Heidrick recently announced three new leadership appointments to support the firm’s long-term growth strategy. Jenni Hibbert assumes the role of global practice managing partner of the financial services practice. Dan Ryan becomes regional leader for the Americas. And Stephen Schwanhausser was named global practice managing partner of the consumer markets practice.

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Ms. Hibbert has been regional practice managing partner for financial services in Europe and Africa since 2017 and previously led the U.K. financial services practice. Mr. Ryan continues to work with the firm’s senior management and office leaders to continue driving profitable growth in the Americas. Mr. Schwanhausser was previously co-managing partner for the global consumer products sector and earlier led that sector in the Americas.

“Succession planning is a core service we provide our clients to help them effectively manage change and the future growth of their companies,” said Mr. Rajagopalan. “We also have a strong focus on succession planning within our firm, and we work closely with our leaders to help them grow and take on new challenges. The leaders that have been appointed into their new positions have proven track records of managing with agility and delivering results, and they will play key leadership roles as we continue to expand our search and consulting offerings.”

Spencer Stuart Acquires Several Business Units of Aon

Business for recruiters has been heating up. With culture shaping now seen as one of the most important drivers to achieve competitive advantage among companies, many search firms – including the global leaders as well as the boutiques – now offer some variation of it.

It includes human capital management, business transformation strategy, leader engagement, talent optimization, organizational development, HR transformation, and leadership and talent management.

To bolster its leadership in the space, executive search firm Spencer Stuart just reached a definitive agreement with global professional services firm Aon to acquire certain businesses within its talent practice, specifically its culture and engagement, leadership development and advisory, and related products and services. It is anticipated that this business will operate as a distinct and important new entity within the Spencer Stuart organization and will involve some 550 employees in 26 countries.

Hedge Fund Investing Activity 

Publicly-held search outfits, namely Heidrick & Struggles and rival Korn Ferry, have recently seen a flurry of investor activity. Hedge funds, in particular, have been acquiring new stakes in both companies, while others have been reducing positions and moving on to other investments throughout the talent management sector.

A number of institutional investors have recently added to or reduced their stakes in Heidrick’s stock: Legal & General Group recently cut its holdings in Heidrick by 1.4 percent, according to the firm’s most recent filing with the Securities and Exchange Commission. The institutional investor owned 40,290 shares of the search firm’s stock after selling 585 shares during the period. Legal & General Group owned approximately 0.21 percent of Heidrick’s worth $1,254,000.

Several other hedge funds have also bought and sold shares of the company. BlackRock recently raised its position in shares of Heidrick by 2.7 percent. BlackRock Inc. now owns 2,806,908 shares of the firm’s stock worth $87,548,000 after acquiring an additional 73,458 shares this past quarter. Dimensional Fund Advisors also raised its position in shares of Heidrick by 0.5 percent. It now owns 1,510,362 shares of the firm’s stock worth $51,126,000 after acquiring an additional 7,960 shares in the last quarter. Vanguard Group recently raised its position in shares of Heidrick by 1.8 percent. It now owns 1,130,445 shares of the firm’s stock worth $38,266,000 after acquiring an additional 19,505 shares. Vanguard Group also raised its position in shares of Heidrick by 1.8 percent. It now owns 1,130,445 shares of the firm’s stock worth $38,266,000 after acquiring an additional 19,505 shares in the last quarter. Lastly, Royce & Associates raised its position in shares of Heidrick by 28.4 percent. It now owns 657,195 shares of the firm’s stock worth $20,498,000 after acquiring an additional 145,433 shares this past quarter. Hedge funds and other institutional investors own 92.34 percent of Heidrick’s stock.

Analysts Weigh In

 A number of analysts have recently weighed in on the company: Zacks Investment Research raised Heidrick from a “hold” rating to a “buy” rating and set a $37 price objective for the company in a research report. TheStreet the firm from a “c+” rating to a “b-” rating in a separate research report. BidaskClub also raised Heidrick from a “strong sell” rating to a “sell” rating.

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In addition, Barrington Research boosted their target price on the search firm to $51 and gave the company an “outperform” rating in a research report. Lastly, ValuEngine raised Heidrick from a “hold” rating to a “buy” rating. One analyst has rated the stock with a sell rating, three have issued a hold rating, one has assigned a buy rating and one has assigned a strong buy rating to the company.


Heidrick expects 2019 second quarter consolidated net revenue of between $172 million and $182 million. In the 2018 second quarter, the firm experienced an unusually high number of upticks that resulted in net revenue of $183.1 million, $18 million higher than the midpoint of company’s guidance of $165 million.

Heidrick shares have risen 28 percent since the beginning of the year. In the final minutes of trading on Monday, shares hit $39.92, a climb of slightly more than five percent in the last 12 months.

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

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