October 25, 2022 – Executive search, leadership consulting, and culture shaping services provider Heidrick & Struggles / (NASDAQ:HSII) has posted third quarter revenues of $255.2 million, an increase of 0.7 percent vs. the prior year period. “We are pleased with the performance we delivered in the third quarter, which was near historic highs,” said Krishnan Rajagopalan, president and CEO. “Our strong profitability was realized even as we continue to make investments for the long-term in digital product innovation and despite unfavorable foreign exchange fluctuations. We are proud of our results as they were achieved in a slowing global market that is being impacted by looming recessionary concerns given rampant inflation and rising interest rates. On a constant currency basis, revenue for the quarter exceeded our record year-ago levels. Further, even with the current market slowdown and the strength of the U.S. dollar, we still expect to see our performance to be above the record years we delivered pre-pandemic in 2018 and 2019.”
“We continue on our ambitious path, with a goal to transform Heidrick & Struggles into the world’s leading leadership advisory firm that will provide a new generation of business services that will enable companies to achieve higher performance from their executive-level talent in a fast-changing world,” said Mr. Rajagopalan. “Across Executive Search, On-Demand talent, and Heidrick Consulting, we’re leveraging our assets while developing complementary digital products to strategically differentiate our firm and address vital leadership needs along with commitments to DE&I, purpose, and sustainability. Together with our powerful One Heidrick go-to-market approach, we expect our diversification strategy will meet increasingly complex client demands, while further enhancing long-term shareholder value.”
Executive Search net revenue of $212.8 million compared to net revenue of $221.6 million in the 2021 third quarter. Net revenue decreased 3.4 percent in the Americas (down 3.3 percent on a constant currency basis), decreased 3.6 percent in Europe (up 12.7 percent on a constant currency basis), and decreased 7.3 percent in Asia-Pacific (down 0.6 percent on a constant currency basis) when compared to the prior year third quarter. The industrial and social impact practice groups exhibited growth over the prior year.
Heidrick had 389 executive search consultants at Sept. 30, 2022, compared to 368 at Sept. 30, 2021. Productivity, as measured by annualized executive search net revenue per consultant, was $2.2 million compared to $2.4 million in the 2021 third quarter. Average revenue per executive search was approximately $155,000, up from $134,000 a year earlier. The number of confirmed searches decreased 17.1 percent compared to the year-ago period.
On-Demand Talent net revenue of $23.2 million compared to net revenue of $24.3 million in the 2021 third quarter. This reflects an anticipated seasonal slowdown partially offset by increases in average project size, reflecting strategic initiatives to expand and penetrate key accounts, along with increases in project extensions.
Heidrick Consulting net revenue of $19.1 million compared to net revenue of $17.9 million in the 2021 third quarter. Excluding the impact of exchange rate fluctuations, Heidrick Consulting revenue increased 14.4 percent, or $2.6 million, compared to the prior year period. The firm had 72 Heidrick Consulting consultants at Sept. 30, 2022, compared to 66 at Sept. 30, 2021.
The Chicago-headquartered recruiter — the fifth largest global firm as ranked by Hunt Scanlon Media — recorded net income and adjusted net income of $20.8 million; diluted and adjusted diluted earnings per share of $1.02. This compares to record net income of $24.5 million and record diluted earnings per share of $1.21, in the 2021 third quarter.
New Diversity Leaders
In September, Heidrick & Struggles named Jonathan McBride as global managing partner of the firm’s global diversity, equity & inclusion (DEI) practice. “Under Jonathan’s leadership, our diversity, equity, and inclusion practice will work with more of our clients to support their efforts in bringing on board extraordinary talent from all backgrounds, and creating organizations with thriving cultures where their teams can do their best work,” said Mr. Rajagopalan. “For decades, our firm has been dedicated to making DEI part of the leadership conversation – starting at the top – catalyzing change and helping our clients find solutions for their unique needs. Jonathan’s deep expertise and broad-based experience will be valuable assets as our clients seek new ways to achieve their DEI objectives and measure their progress over time.”
Mr. McBride is a former head of the Presidential Personnel Office in the Obama White House, and he also served as global head of inclusion and diversity at BlackRock where he oversaw the operating committee and held other leadership roles. He joined Heidrick & Struggles in 2021 as a partner in the DEI practice and chief human resources officers practice, based in Los Angeles. In his new, expanded role leading the global DEI practice, Mr. McBride and his team will focus on advising boards, CEOs and leadership teams on various areas related to strengthening organizations’ focus on their DEI programs and enhancing workplace culture.
Heidrick & Struggles also recently named Cecilia Nelson-Hurt as its new chief diversity officer. Ms. Nelson-Hurt joins the firm from L’Oréal USA, where she served as vice president, diversity, equity, and inclusion. She was responsible for shaping the company’s diversity and inclusion efforts that underscore its commitment to building an inclusive beauty brand and as an equal opportunity workplace. She also developed and facilitated its diversity and inclusion programs and worked with the company’s employee-led Think Tanks to create and implement strategies and initiatives that positively impacted employee engagement, consumer insights and community outreach. She takes the place of Kamau Coar, who shifted from a role as the organization’s chief legal officer to chief inclusion officer, overseeing its diversity and inclusion efforts, including talent development, employee resources, and culture.
“At Heidrick & Struggles, we are committed to building diverse leadership teams and organizations and creating inclusive workplace cultures, both for our employees and our clients,” said Mr. Rajagopalan. “We are delighted to welcome Cecilia who brings her deep passion, experience and commitment to advancing diversity, equity and inclusion to our firm. We look forward to further strengthening our focus and efforts on increasing representation and fostering an equitable and inclusive environment where all of our employees can thrive and achieve success.”
“It is an incredibly exciting time to join Heidrick & Struggles as the firm looks to accelerate its transformation and growth journey globally,” said Ms. Nelson-Hurt. “I am honored to have this opportunity to lead the company’s diversity, equity, and inclusion strategy and deliver long-term, sustainable programs and initiatives that build on its values and commitment to creating the most diverse and inclusive executive talent and leadership advisory firm in the industry.”
Heidrick expects 2022 fourth quarter consolidated net revenue between $215 million and $235 million, while acknowledging that continued fluidity in external factors such as the foreign exchange and interest rate environments, foreign conflicts, and inflation may impact quarterly results.
In addition, Heidrick notes that this outlook is based on the average currency rates in September 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 seasonality of the business, along with the current backlog.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media