Heidrick & Struggles Posts Flat Revenues as COVID-19 Impact Continues

April 28, 2020 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles (NASDAQ:HSII) posted first quarter revenues of $171.5 million, flat from revenues during the same period a year ago surpassing the Zacks Consensus Estimate by 2.32 percent. The firm has topped consensus revenue estimates three times over the last four quarters.

“We generated revenue in the upper half of our guidance range and effectively managed expenses, driving strong operating income growth of 11 percent,” said Krishnan Rajagopalan, Heidrick’s president and CEO. “Our team continued to deliver solid results, despite the onset of the COVID-19 pandemic and typical seasonality at the end of the prior quarter.” He said the firm expects to “successfully navigate” through current adverse global market conditions.

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“Specifically, our teams continue to leverage our proven and distinctive, data-driven and technology-enabled talent and leadership solutions to proactively and seamlessly address our clients’ needs,” he said. “Our focus on the top leaders of organizations yields many positive underlying demand characteristics, particularly during times of stress. In today’s operating environment of constant change and uncertainty, leaders have the ability to accelerate their business performance and transform with agility.”

Inside the Numbers

Executive search net revenue decreased 1.8 percent year-over-year, to $155.5 million from $158.3 million in the 2019 first quarter. Net revenue increased one percent in the Americas (or 1.4 percent on a constant currency basis) while net revenue decreased 1.4 percent in Europe (increased 0.8 percent on a constant currency basis) and 13.3 percent in Asia Pacific (decreased 10.5 percent on a constant currency basis). Growth in the firm’s consumer markets industry practice was offset by declines in the other industry practices. Heidrick Consulting net revenue increased 20.6 percent, or $2.7 million, to $16.0 million from $13.3 million in the 2019 first quarter.

The Chicago-headquartered recruiter — the fifth largest according to a new ranking by Hunt Scanlon Media set for release next week — recorded net income of $8.7 million, or 44 cents per share, compared to net income $12.1 million, or 62 cents per share, last year.

The firm had 396 executive search consultants at March 31, 2020 compared to 370 at March 31, 2019 and 380 at December 31, 2019. Productivity, as measured by annualized executive search net revenue per consultant, was $1.6 million compared to $1.7 million in the 2019 first quarter. The number of confirmed searches increased 2.4 percent compared to the 2019 first quarter, and the average revenue per executive search was $118,600 compared to $123,700 in the 2019 first quarter, primarily reflecting a decrease in the Americas region, including the firm’s expanded presence in Brazil.

2020 Second Quarter Outlook

Given the continued uncertainty due to the COVID-19 pandemic, Heidrick & Struggles – like many other public companies – is refraining from providing financial guidance for the 2020 second quarter at this time.

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Mr. Rajagopalan said that “in these uncertain times we are squarely focused on four key objectives: First, ensuring the safety and well-being of our employees; second, continuing to align and emerge through this crisis as one firm; third, doing everything we can to help our clients during this difficult period; and fourth, emerging from this global pandemic even stronger as a firm.”

Heidrick & Struggles shares have decreased 23 percent since the beginning of the year. In the final minutes of trading on Monday, shares hit $24.87, a decline of 35 percent in the last 12 months.

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media