Heidrick & Struggles Posts Seven Percent Revenue Gain
February 28, 2023 – Executive search, leadership consulting, and culture shaping services provider Heidrick & Struggles / (NASDAQ:HSII) has posted global revenues of $1.07 billion, an increase of seven percent, compared to $1 billion in 2021. The Chicago-headquartered recruiter — the fifth largest global firm as ranked by Hunt Scanlon Media — reported net income was $79.5 million and diluted earnings per share was $3.86. This compares to a net income of 72.6 million and diluted earnings per share was $3.58 in 2021. Executive Search revenue increased 3.8 percent, or $33.2 million, to $901.9 million from $868.8 million in 2021. Net revenue increased 5.4 percent in the Americas, increased 3.5 percent in Europe (increased 15.5 percent on a constant currency basis), and decreased 3.6 percent in Asia-Pacific (increased 1.9 percent on a constant currency basis).
All industry practices exhibited growth over the prior year, except for healthcare and life sciences and financial services. productivity was $2.3 million, in-line with productivity reported in 2021. The average revenue per executive search was approximately $144,000 compared to $131,000 in 2021, while confirmations decreased 5.3 percent.
On-Demand Talent recorded net revenue of $91.3 million compared to $66.6 million in 2021. The increase in net revenue was primarily due to the timing of the acquisition of Business Talent Group in the prior year and an increase in the average project size.
Heidrick Consulting net revenue increased 18.6 percent, or $12.6 million, to $80.2 million from $67.6 million in 2021. Excluding the impact of exchange rate fluctuations, which negatively impacted results by 5.7 percent, or $3.8 million, Heidrick Consulting revenue increased 24.3 percent, or $16.4 million.
Fourth Quarter Results
For the fourth quarter, Heidrick recorded revenues of $235.7 million, down by 14.6 percent from $285.5 million in the 2021 fourth quarter. Executive Search net revenue of $192.7 million compared to net revenue of $243.4 million in the 2021 fourth quarter due to an anticipated market slowdown. Net revenue decreased 22.6 percent in the Americas (down 22.5 percent on a constant currency basis), decreased 17.4 percent in Europe (down 6.4 percent on a constant currency basis), and decreased 16 percent in Asia-Pacific (down 9.6 percent on a constant currency basis) when compared to the prior year fourth quarter.
Heidrick had 390 executive search consultants at Dec. 31, 2022, compared to 365 at Dec. 31, 2021. Productivity, as measured by annualized executive search net revenue per consultant, was $2.0 million compared to $2.7 million in the 2021 fourth quarter reflecting a higher number of consultants combined with lower revenue. Average revenue per executive search was approximately $150,000, up from $144,000 a year earlier. The number of confirmed searches decreased 24.1 percent compared to the year-ago period.
Heidrick & Struggles Closes Atreus Acquisition
Heidrick & Struggles has closed the acquisition of Atreus, one of the leading players for executive interim management in Germany. Together, Atreus and Heidrick & Struggles’ wholly owned, U.S.-based Business Talent Group (BTG), which was acquired in 2021, constitute the company’s on-demand talent segment and build on its strong market position in this space. The brand name Atreus, well-known in the German market, will be retained, and the Atreus management team, led by Dr. Harald Linné and Rainer Nagel, will remain in place.
“Heidrick & Struggles is on an exciting transformation journey to broaden and diversify our suite of executive talent and leadership advisory services,” said Krishnan Rajagopalan, president and CEO, Heidrick & Struggles. “Our on-demand talent business is core to our overall growth strategy and a key client imperative that will only accelerate as companies continue to seek alternative ways to approach talent management with speed, agility and flexibility – whether it’s through on-demand access to executive leaders for interim roles or strategic project work.”
On-Demand Talent net revenue of $22.4 million compared to net revenue of $23.6 million in the 2021. Heidrick Consulting net revenue of $20.7 million compared to net revenue of $18.5 million in the 2021 fourth quarter. Heidrick Consulting net revenue increased 17.5 percent, or $3.2 million, compared to the prior year period. The company had 70 Heidrick Consulting consultants at Dec. 31, 2022, compared to 69 at December 31, 2021.
“We are pleased with the financial, operational, and strategic progress achieved during fiscal 2022 as we reported record net revenue on top of the historic billion-dollar milestone we achieved last year,” said Krishnan Rajagopalan, president and CEO of Heidrick. “Our strong top- and bottom-line results are a testament to our ongoing efforts to further diversify our business, as we continue to make investments for the long-term in digital product innovation and aim to set the stage for prolonged, profitable growth. The year was highlighted by our dedicated efforts to further solidify Heidrick as a leader in providing diversified solutions to our clients while advancing our strategy, with a goal to achieve a more balanced revenue profile between our search and non-search businesses.”
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“During the year, we expanded our core executive search business and its geographic presence; On-Demand Talent continued to grow; Heidrick Consulting improved operations and efficiencies; and, we began beta testing a new digital product, Heidrick Navigator, which is receiving positive feedback from initial client usage,” Mr. Rajagopalan said. “Additionally, our recent acquisition of Atreus, a leading player for executive interim management in Germany, meaningfully adds to our On-Demand Talent segment.”
Outlook
Heidrick expects 2023 first quarter consolidated net revenue of between $235 million and $255 million, while acknowledging that continued fluidity in external factors such as the foreign exchange and interest rate environments, foreign conflicts, inflation and macroeconomic constraints on pricing actions may impact quarterly results. In addition, this outlook is based on the average currency rates in December 2022 and reflects, among other factors, management’s assumptions for the anticipated volume of new executive search confirmations, On-Demand Talent projects, and Heidrick Consulting assignments, consultant productivity, consultant retention, and the current backlog.
“Looking ahead to 2023, we are excited to continue advancing our differentiated strategy as we expand and evolve our business,” said Mr. Rajagopalan. “Despite the current market slowdown and the strength of the U.S. dollar, our business in January remained on pace with the fourth quarter of 2022, and we expect to continue to operate above the heightened levels achieved during the pre-pandemic years of 2018 and 2019.”
“We remain steadfast in our vision to transform Heidrick & Struggles into the world’s premier leadership advisory firm that we believe will provide a new generation of business services, enabling companies to achieve higher performance from their executive-level talent in a fast-changing world,” Mr. Rajagopalan said. “We believe execution of our strategy will allow us to even more fully satisfy our clients’ needs while further enhancing long-term value for our stakeholders.”
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Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
