October 26, 2021 – Executive search, leadership consulting and culture shaping services provider Heidrick & Struggles (NASDAQ:HSII) has posted third quarter revenues of $263.8 million, an increase of 83.8 percent from the same period last year. Net revenue growth was driven by all regions in executive search, and by Heidrick Consulting, and On-Demand Talent. Net revenue increased 86.2 percent in the Americas (85.6 percent on a constant currency basis), 47.7 percent in Europe (43.4 percent on a constant currency basis), and 47.7 percent in Asia Pacific (46.1 percent on a constant currency basis). All industry practices exhibited growth over the prior year.
Executive search net revenue of $221.6 million increased by $92.4 million, or 71.5 percent, compared to net revenue of $129.2 million in the 2020 third quarter. Heidrick Consulting net revenue of $17.9 million increased by $3.6 million, or 25.1 percent, compared to net revenue of $14.3 million in the 2020 third quarter. On-Demand Talent, a new business segment, generated net revenue of $24.3 million, which exceeded the firm’s expectations.
“Our strong third quarter and year-to-date results demonstrate the growing market demand for our powerful combination of executive search, on-demand talent and consulting businesses,” said Krishnan Rajagopalan, Heidrick’s president and CEO. “Our team’s remarkable agility to adapt to market changes is evident as we continue to grow our accounts, deepen our client relationships and differentiate ourselves in the marketplace.”
“Strategically, we continue to make significant transformational progress as we invest in innovative, tech-driven offerings to address the future needs of our clients, while driving growth and shareholder value,” Mr. Rajagopalan said. “To this end, we are very excited about our new partnership with Eightfold AI and are equally pleased to welcome chief product officer of SAP SuccessFactors to our board of directors. Her experience and perspective will be invaluable as we continue to focus on leveraging technology to drive our digital journey.”
Net income in the 2021 third quarter was $24.5 million and diluted earnings per share was $1.21, with an effective tax rate of 27 percent. This compares to net loss of $26.2 million and diluted loss per share of $1.35, with an effective tax rate of 28.5 percent, in last year’s third quarter. Heidrick also recorded a restructuring credit of $3.3 million in the 2021 third quarter primarily related to the timing of settlements from office closures associated with the firm’s real estate strategy.
Heidrick had 368 executive search consultants at September 30, 2021, compared to 362 at September 30, 2020. Productivity, as measured by annualized executive search net revenue per consultant, was $2.4 million compared to $1.4 million in the 2020 third quarter. Average revenue per executive search was approximately $134,000 compared to $111,000 a year earlier. The number of confirmed searches reached a near record, increasing 42 percent compared to the year-ago period.
Recent Alliance & Acquisition
Heidrick & Struggles and Eightfold AI, a provider of AI-driven talent development platforms, recently formed a partnership to develop a new digital leadership platform that is intended to offer organizations a new way to understand, assess and make decisions about leadership talent. Anthony Colella, a global managing partner who joined Heidrick & Struggles earlier this year, is responsible for leading the development of the firm’s new digital capabilities and solutions, and he brings expertise in establishing and growing digital products businesses. “The partnership between Heidrick & Struggles and Eightfold AI is the first step in bringing to market a new digital offering that combines leadership advisory and talent development with leading technology and AI,” said the firm.
The alliance is expected to bring a new digital leadership platform that offers real-time leadership insights, data analytics and AI to fragmented leadership development and planning processes. The platform is designed to give companies the ability to optimize talent forecast planning and alignment to business needs through rapid, data-driven technology insights, powered by the combination of Heidrick & Struggles’ experience across executive search, leadership and organization assessment and development, and on-demand talent capabilities, and Eightfold AI’s deep learning artificial intelligence platform.
Heidrick & Struggles also 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.”
Heidrick expects 2021 fourth quarter consolidated net revenue of between $255 million and $265 million, while acknowledging that the continued fluidity of the COVID-19 pandemic may impact quarterly results. In addition, this outlook is based on the average currency rates in September 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