July 27, 2021 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles (NASDAQ:HSII) posted second quarter revenues of $260.0 million, up 78.6 percent from the 2020 second quarter. Net revenue growth was driven by all regions in executive search, Heidrick Consulting and on-demand talent. “We are proud of our accomplishments and the breadth of our rebound as evidenced by our record second quarter performance, delivering robust revenue and profitability growth both sequentially and over the prior year,” said Krishnan Rajagopalan, Heidrick’s president and CEO. “Results were driven by strong contributions from all regions and lines of business. While we see a number of positive market trends underway, we recognize that many of our clients and communities around the world continue to navigate through the pandemic. We remain vigilant and are closely monitoring the situation as we advise our clients through the difficult challenges while positioning them to meet the new opportunities of a post-pandemic world.”
Part of that positioning has been re-positioning parts of the firm’s offerings. Heidrick’s recently completed acquisition of Business Talent Group catapults the firm into the high growth, on-demand talent segment of the market and, according to Mr. Rajagopalan, “allows us to bring another talent solution to our clients, which strongly complements our portfolio of leadership advisory and talent services.” He said the firm will continue to make targeted investments in tech-driven offerings to support future growth and shareholder value.
Executive search net revenue increased 67.1 percent, or $90.0 million, to $224.1 million compared to $134.2 million in the 2020 second quarter. Net revenue increased 73.7 percent in the Americas (73.1 percent on a constant currency basis), 49.1 percent in Europe (35.0 percent on a constant currency basis) and 65.9 percent in Asia-Pacific (56.3 percent on a constant currency basis). All industry practices exhibited growth over the prior year. Heidrick Consulting net revenue grew $5.7 million or 49.6 percent to $17.1 million compared to $11.4 million in the 2020 second quarter.
During the quarter, Heidrick recorded net income in the 2021 second quarter was $20.8 million and diluted earnings per share was $1.03 with an effective tax rate of 34.6 percent. This compares to net loss of $25.7 million and diluted loss per share of $1.33 with an effective tax rate of (21.1) percent in last year’s second quarter
Heidrick had 369 executive search consultants at June 30, 2021 compared to 394 at June 30, 2020 and 373 at March 31, 2021. Productivity, as measured by annualized executive search net revenue per consultant, was $2.4 million compared to $1.4 million in the 2020 second quarter. The average revenue per executive search was $132,700 compared to $141,500 a year earlier, while the number of confirmed searches reached a new record for the firm and increased 78.0 percent compared to the year-ago period.
Acquisition of Business Talent Group
Earlier this April, Heidrick & Struggles closed the acquisition of Business Talent Group (BTG), a marketplace for high-end independent talent on demand. Financial terms of the deal were not disclosed. The addition of BTG complements Heidrick’s strategic growth initiative to expand its suite of executive talent solutions to address new and ongoing client demands. BTG will continue to be led by co-founders and co-CEOs, Jody Greenstone Miller, and Amelia Tyagi, and operate as a wholly owned subsidiary of Heidrick.
“We are also very excited to welcome BTG to Heidrick & Struggles and to offer our clients a full spectrum of executive and high-end on-demand talent solutions – a key strategy we set out to achieve – as we make the future of work a reality today,” Mr. Rajagopalan said. “We look to build on our momentum as we execute our 2021 initiatives to grow our scale and impact with clients, expand our suite of leadership solutions and capabilities, and invest in new innovative, tech-driven offerings to drive future growth and shareholder value.”
The acquisition builds on a two-year exclusive collaboration with BTG that began in 2019. BTG, which generated revenue of approximately $50 million in 2020, was acquired for an initial consideration of $32.6 million paid in the 2021 second quarter with an anticipated future payment in 2023, subject to the achievement of certain agreed upon financial performance targets.
Heidrick & Struggles recently named Jaimee Eddington as Americas regional leader. “We are excited to have Jaimee take up the Americas leadership role as we continue to bring our clients an integrated suite of executive search, consulting and on-demand talent solutions to help them navigate the many complex talent and human capital issues they face,” said Michael Cullen, chief operating officer. “Jaimee is a proven business leader who possesses the vision and depth and breadth of experience needed to drive the next phase of growth for the Americas, our firm’s largest region.” In her new position, Ms. Eddington will work closely with the firm’s management committee and the Americas leadership team, focusing on increasing revenue, expanding into new growth areas and delivering long-term stakeholder value. She also will be responsible for driving cross-collaboration across business lines and the region to deliver the full range of the firm’s leadership advisory solutions.
Heidrick & Struggles also recently appointed Kamau Coar to the newly created role of chief inclusion officer and Jenni Hibbert as global managing partner, head of executive search go-to-market. This is part of the Heidrick’s long-term strategic plans to accelerate business growth and strengthen its focus on diversity and the firm’s workplace culture, said the search firm. “We continue to transform our business and build for the future,” said Mr. Rajagopalan. “As we progress on this journey, our leadership and workplace culture remain foundational to our success. We have a longstanding commitment to developing talent from within our firm, and these new roles and leadership changes put us in an even stronger position to support our employees while delivering world-class advisory services to our clients.”
Heidrick & Struggles expects 2021 third quarter consolidated net revenue of between $245 million and $255 million, while acknowledging the continued fluidity of the COVID-19 pandemic that may impact quarterly results.
In addition, this outlook is based on the average currency rates in June 2021 and reflects, among other factors, management’s assumptions for the anticipated volume of new executive search confirmations, Heidrick Consulting assignments, on-demand talent projects and 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; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media