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CHICAGO, Jul 26, 2011 (GlobeNewswire via COMTEX) --
Heidrick & Struggles International, Inc. (Nasdaq:HSII), the leadership advisory firm providing executive search and leadership consulting services worldwide, today announced financial results for its second quarter ended June 30, 2011.
Consolidated net revenue of $142.8 million increased 13.3 percent (approximately 7 percent on a constant currency basis) from $126.1 million in the 2010 second quarter. Exchange rate fluctuations positively impacted net revenue by $7.5 million. Year over year, net revenue increased 18.0 percent in the Americas, 8.8 percent in Europe (a decline of approximately 3 percent on a constant currency basis), and 7.7 percent in Asia Pacific (a decline of approximately 3 percent on a constant currency basis). Net revenue from Leadership Consulting Services increased 50.0 percent to $12.3 million and represented 8.6 percent of consolidated net revenue in the quarter.
The number of executive search and leadership consulting consultants at June 30, 2011 was 386, compared to 343 at June 30, 2010, and 372 at March 31, 2011. The number of executive search confirmations in the quarter increased 12.4 percent compared to the 2010 second quarter, and increased 14.8 percent compared to the 2011 first quarter. Productivity, as measured by annualized net revenue per consultant, was $1.5 million, compared to $1.4 million in the 2010 second quarter and $1.3 million in the 2011 first quarter. The average revenue per executive search was $107,400 compared to $108,600 in the 2010 second quarter and $101,200 in the 2011 first quarter.
Consolidated salaries and employee benefits increased 15.4 percent to $99.2 million, from $86.0 million in the comparable quarter of 2010. The increase primarily reflects an increase in the variable component of compensation associated with the increase in net revenue as well as higher base compensation and payroll taxes associated with a 12.8 percent increase in employee headcount. Salaries and employee benefits were 69.5 percent of net revenue for the quarter, compared to 68.2 percent in the 2010 second quarter.
Consolidated general and administrative expenses increased 1.3 percent to $33.3 million from $32.9 million in the 2010 second quarter. As a percentage of net revenue, consolidated general and administrative expenses were 23.3 percent, compared to 26.1 percent in the 2010 second quarter.
Operating income in the quarter improved to $10.3 million and the operating margin was 7.2 percent compared to operating income of $7.6 million and an operating margin of 6.0 percent in the 2010 second quarter.
Net income was $7.4 million and diluted earnings per share $0.41, based upon an effective tax rate in the quarter of 32.5 percent. In the 2010 second quarter, net income was $2.7 million and diluted earnings per share were $0.15, which reflected an effective tax rate of 49.9 percent.
Net cash provided by operating activities in the quarter was $17.6 million, compared to $23.8 million in the 2010 second quarter. Cash and cash equivalents at June 30, 2011 were $103.1 million compared to $92.6 million at June 30, 2010, and $92.2 million at March 31, 2011.
Regional Review
$ in millions 2Q 11 2Q 10 Change 1Q 11 Change
--------- --------- -------- --------- --------
Americas
Net revenue $ 76.7 $ 65.1 $ 11.6 $ 63.5 $ 13.3
Operating income $ 18.7 $ 13.8 $ 4.9 $ 7.6 $ 11.1
Consultants 178 160 18 170 8
Europe
Net revenue $ 34.5 $ 31.7 $ 2.8 $ 27.6 $ 6.9
Operating income
(loss) $ (2.4) $ 0.5 $ (2.9) $ (2.1) $ (0.3)
Consultants 128 110 18 125 3
Asia Pacific
Net revenue $ 31.5 $ 29.3 $ 2.2 $ 24.6 $ 7.0
Operating income $ 4.9 $ 7.1 $ (2.2) $ 2.5 $ 2.3
Consultants 80 73 7 77 3
Global Operations
Support $ (10.9) $ (14.1) $ 3.2 $ (12.2) $ 1.3
--------- --------- -------- --------- --------
Total operating
income (loss) $ 10.3 $ 7.6 $ 2.7 $ (4.1) $ 14.4
========= ========= ======== ========= ========
Totals and subtotals may not equal the sum of individual line items due to rounding.
Net revenue in the Americas increased 18.0 percent year over year and 20.9 percent compared to the 2011 first quarter. The Industrial, Consumer, and Leadership Consulting practices were the largest drivers of year-over-year growth and also key drivers of sequential growth, along with the Financial Services Practice. Second quarter operating income increased 35.5 percent year-over-year, and the operating margin was 24.4 percent.
Net revenue in Europe increased 8.8 percent year over year (declined approximately 3 percent on a constant currency basis) and increased 25.2 percent sequentially (approximately 22 percent on a constant currency basis). Exchange rate fluctuations positively impacted year-over-year net revenue by $3.8 million. The Industrial Practice was a key driver of the reported year-over-year and sequential growth in this region. The Financial Services Practice experienced a year-over-year decline but was the largest driver of growth sequentially. The operating loss was $2.4 million compared to operating income of $0.5 million in the 2010 second quarter primarily reflecting an increase in fixed compensation expense.
The Asia Pacific region reported a 7.7 percent year-over-year increase in second quarter net revenue (a decline of approximately 3 percent on a constant currency basis) and 28.3 percent growth sequentially (approximately 25 percent on a constant currency basis). Exchange rate fluctuations positively impacted year-over-year net revenue by $3.1 million. The Consumer and Industrial practices drove the reported year-over-year growth as well as sequential growth. The Financial Services Practice was also key to sequential growth. Operating income declined 31.0 percent compared to the 2010 second quarter and the operating margin was 15.4 percent primarily reflecting higher base compensation and payroll taxes associated with an 18.9 percent increase in employee headcount, including newer consultants who are not yet fully productive.
Expenses related to Global Operations Support declined 22.8 percent compared to the 2010 second quarter. The largest component of the decline related to the absence of a worldwide partners' meeting in the 2011 second quarter.
Chief Executive Officer L. Kevin Kelly said, "We were pleased with how confirmation trends improved in the second quarter and helped drive double digit sequential revenue growth in each region. The improving productivity is also encouraging given the number of new hires and promotions we've made in the last year. With consultant and employee hiring essentially complete for the year, we are focused on leveraging productivity and lowering operating costs in order to achieve and sustain higher operating margins."
Six Months Results
For the six months ended June 30, 2011 consolidated net revenue of $258.4 million increased 7.8 percent (approximately 4 percent on a constant currency basis) from $239.7 million in the first six months of 2010. Exchange rate fluctuations positively impacted net revenue by $10.1 million. Productivity, as measured by annualized net revenue per consultant, was $1.4 million compared to $1.3 million for the first six months of 2010. The number of executive searches confirmed in the first six months of 2011 increased 5.4 percent compared to the first six months of 2010. The average revenue per executive search was $104,500 compared to $103,500 for the same period in 2010. Operating income for the first six months was $6.2 million and the operating margin was 2.4 percent, compared to operating income of $3.8 million for the first six months of 2010 and an operating margin of 1.6 percent. Net income for the first six months of 2011 was $2.8 million and diluted earnings per share were $0.15, reflecting an effective tax rate of 45.7 percent. The reported net income for the first six months of 2010 was $1.1 million and diluted earnings per share were $0.06, reflecting an effective tax rate of 38.8 percent.
2011 Outlook
The company expects that third quarter 2011 net revenue will be between $134 million and $144 million and that the operating margin will be between 6 percent and 8 percent. The company is forecasting that 2011 net revenue will be within its previously disclosed range of $515 million to $545 million and that the operating margin will likely be at the lower end of the range it had provided earlier, or between 6 percent and 8 percent. Net income and earnings per share in 2011 are expected to reflect a full-year effective tax rate of between 42 percent and 50 percent, but will be impacted by country-level results and tax planning initiatives.
Quarterly Conference Call
Executives of Heidrick & Struggles will host a conference call to review the second quarter 2011 results today, July 26, at 9:00 am Central Time. Participants may access the company's call and supporting slides through the internet at www.heidrick.com. For those unable to participate on the live call, a webcast and copy of the slides will be archived at www.heidrick.com and available for up to 30 days following the investor call.
About Heidrick & Struggles International, Inc.
Heidrick & Struggles International, Inc., (Nasdaq:HSII) is the leadership advisory firm providing executive search and leadership consulting services, including succession planning, executive assessment, talent retention management, executive development, transition consulting for newly appointed executives, and M&A human capital integration consulting. For almost 60 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide. Today, Heidrick & Struggles leadership experts operate from principal business centers around the world. For more information about Heidrick & Struggles, please visit www.heidrick.com.
Safe Harbor Statement
This press release contains forward-looking statements. The forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management's beliefs and assumptions. Forward-looking statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. Factors that may affect the outcome of the forward-looking statements include, among other things: our ability to attract and retain qualified executive search consultants; our ability to develop and maintain strong, long-term relationships with our clients; further declines in the global economy and our ability to execute successfully through business cycles; the timing, speed or robustness of any future economic recovery; social or political instability in markets where we operate; the impact of foreign currency exchange rate fluctuations; price competition; the ability to forecast, on a quarterly basis, variable compensation accruals that ultimately are determined based on the achievement of annual results; our ability to realize our tax losses; the timing of the establishment or reversal of valuation allowance on deferred tax assets; the mix of profit and loss by country; an impairment of our goodwill and other intangible assets; delays in the development and/or implementation of new or improved technology and systems; and the ability to align our cost structure and headcount with net revenue. Our reports filed with the U.S. Securities and Exchange Commission also include information on factors that may affect the outcome of forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Heidrick & Struggles International, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
----------------------
%
2011 2010 $ Change Change
---------- ---------- --------- -------
Revenue:
Revenue before reimbursements (net
revenue) $ 142,799 $ 126,071 $ 16,728 13.3%
Reimbursements 6,815 4,589 2,226
---------- ---------- --------- 48.5%
Total revenue 149,614 130,660 18,954 14.5%
Operating expenses:
Salaries and employee benefits 99,219 85,995 13,224 15.4%
General and administrative expenses 33,270 32,854 416 1.3%
Reimbursed expenses 6,815 4,589 2,226 48.5%
Restructuring charges -- 701 (701) -100.0%
Other operating income -- (1,072) 1,072
---------- ---------- ---------
Total operating expenses 139,304 123,067 16,237
---------- ---------- --------- 13.2%
Operating income 10,310 7,593 2,717 35.8%
Non-operating income (expense):
Interest income, net 258 188
Other, net 441 (2,448)
---------- ----------
Net non-operating income
(expense) 699 (2,260)
Income before income taxes 11,009 5,333
Provision for income taxes 3,580 2,661
Net income $ 7,429 $ 2,672
========== ==========
Basic weighted average common shares
outstanding 17,803 17,487
Diluted weighted average common
shares outstanding 17,955 17,859
Basic earnings per common share $ 0.42 $ 0.15
Diluted earnings per common share $ 0.41 $ 0.15
Salaries and employee benefits as a
percentage of net revenue 69.5% 68.2%
General and administrative expense as
a percentage of net revenue 23.3% 26.1%
Operating income as a percentage of
net revenue 7.2% 6.0%
Effective income tax rate 32.5% 49.9%
Heidrick & Struggles International, Inc.
Segment Information
(In thousands)
(Unaudited)
Three Months Ended June 30,
----------------------------------------------------------
2011 2010
% Margin Margin
2011 2010 $ Change Change * *
---------- ---------- --------- ------- ------ ------
Revenue:
Americas $ 76,745 $ 65,062 $ 11,683 18.0%
Europe 34,512 31,721 2,791 8.8%
Asia Pacific 31,542 29,288 2,254
---------- ---------- --------- 7.7%
Revenue before
reimbursements
(net revenue) 142,799 126,071 16,728 13.3%
Reimbursements 6,815 4,589 2,226
---------- ---------- --------- 48.5%
Total revenue $ 149,614 $ 130,660 $ 18,954
========== ========== ========= 14.5%
Operating income
(loss):
Americas $ 18,729 $ 13,822 $ 4,907 35.5% 24.4% 21.2%
Europe (2,365) 486 (2,851) -586.6% 1.5%
Asia Pacific 4,863 7,051 (2,188)
---------- ---------- --------- -31.0% 15.4% 24.1%
Total regions 21,227 21,359 (132) -0.6% 14.9% 16.9%
Global Operations
Support (10,917) (14,137) 3,220
---------- ---------- --------- 22.8%
Operating
income before
restructuring
charges and
other
operating
income 10,310 7,222 3,088 42.8% 7.2% 5.7%
Restructuring
charges -- (701) 701
Other operating
income -- 1,072 (1,072)
---------- ---------- ---------
Operating
income: $ 10,310 $ 7,593 $ 2,717
========== ========== ========= 35.8% 7.2% 6.0%
* Margin based on revenue before reimbursements (net revenue).
Heidrick & Struggles International, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Six Months Ended
June 30,
----------------------
%
2011 2010 $ Change Change
---------- ---------- --------- -------
Revenue:
Revenue before reimbursements
(net revenue) $ 258,421 $ 239,739 $ 18,682 7.8%
Reimbursements 12,072 9,275 2,797
---------- ---------- --------- 30.2%
Total revenue 270,493 249,014 21,479 8.6%
Operating expenses:
Salaries and employee benefits 187,600 169,125 18,475 10.9%
General and administrative
expenses 64,599 62,950 1,649 2.6%
Other charges -- 4,218 (4,218) -100.0%
Reimbursed expenses 12,072 9,275 2,797 30.2%
Restructuring charges -- 701 (701)
Other operating income -- (1,072) 1,072
Total operating expenses 264,271 245,197 19,074
---------- ---------- --------- 7.8%
Operating income 6,222 3,817 2,405 63.0%
Non-operating income (expense):
Interest income, net 553 416
Other, net (1,674) (2,394)
---------- ----------
Net non-operating expense (1,121) (1,978)
Income before income taxes 5,101 1,839
Provision for income taxes 2,333 713
---------- ----------
Net income $ 2,768 $ 1,126
========== ==========
Basic weighted average common
shares outstanding 17,714 17,337
Diluted weighted average common
shares outstanding 17,995 17,896
Basic earnings per common share $ 0.16 $ 0.06
Diluted earnings per common share $ 0.15 $ 0.06
Salaries and employee benefits as
a percentage of net revenue 72.6% 70.5%
General and administrative
expense as a percentage of net
revenue 25.0% 26.3%
Operating income as a percentage
of net revenue 2.4% 1.6%
Effective income tax rate 45.7% 38.8%
Heidrick & Struggles International, Inc.
Segment Information
(In thousands)
(Unaudited)
Six Months Ended June 30,
---------------------------------------------------------
2011 2010
% Margin Margin
2011 2010 $ Change Change * *
---------- ---------- --------- ------ ------ ------
Revenue:
Americas $ 140,222 $ 122,576 $ 17,646 14.4%
Europe 62,078 64,524 (2,446) -3.8%
Asia Pacific 56,121 52,639 3,482
---------- ---------- --------- 6.6%
Revenue before
reimbursements
(net revenue) 258,421 239,739 18,682 7.8%
Reimbursements 12,072 9,275 2,797
---------- ---------- --------- 30.2%
Total revenue $ 270,493 $ 249,014 $ 21,479
========== ========== ========= 8.6%
Operating income
(loss):
Americas $ 26,377 $ 18,222 $ 8,155 44.8% 18.8% 14.9%
Europe (4,422) (3,504) (918) -26.2%
Asia Pacific 7,405 10,372 (2,967)
---------- ---------- --------- -28.6% 13.2% 19.7%
Total regions 29,360 25,090 4,270 17.0% 11.4% 10.5%
Global Operations
Support (23,138) (21,644) (1,494)
---------- ---------- --------- -6.9%
Operating
income before
restructuring
charges and
other
operating
income 6,222 3,446 2,776 80.6% 1.4%
Restructuring
charges -- (701) 701
Other operating
income -- 1,072 (1,072)
---------- ---------- ---------
Operating
income $ 6,222 $ 3,817 $ 2,405
========== ========== ========= 63.0% 2.4% 1.6%
`
* Margin based on
revenue before
reimbursements (net
revenue).
Heidrick & Struggles International, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
December
June 30, 31,
2011 2010
----------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 103,078 $ 181,124
Restricted cash 952 393
Accounts receivable, net 109,710 83,360
Other receivables 9,641 7,724
Prepaid expenses 19,485 15,323
Other current assets 1,520 1,871
Income taxes recoverable 14,062 11,912
Deferred income taxes 11,916 10,759
----------- ----------
Total current assets 270,364 312,466
----------- ----------
Non-current assets:
Property and equipment,
net 42,338 34,406
Restricted cash 1,904 1,609
Assets designated for
retirement and pension
plans 25,649 23,647
Investments 10,189 11,021
Other non-current assets 9,486 8,593
Goodwill 115,979 109,888
Other intangible assets,
net 6,065 6,480
Deferred income taxes 36,509 36,917
----------- ----------
Total non-current
assets 248,119 232,561
----------- ----------
Total assets $ 518,483 $ 545,027
----------- ----------
Current liabilities:
Accounts payable $ 11,818 $ 8,408
Accrued salaries and
employee benefits 87,421 124,969
Other current liabilities 41,013 34,064
Income taxes payable 2,015 3,208
Deferred income taxes 1,694 1,807
----------- ----------
Total current
liabilities 143,961 172,456
----------- ----------
Non-current liabilities:
Retirement and pension
plans 34,147 30,907
Other non-current
liabilities 41,455 47,015
Deferred income taxes 109 107
----------- ----------
Total non-current
liabilities 75,711 78,029
----------- ----------
Stockholders' equity 298,811 294,542
----------- ----------
Total liabilities and
stockholders' equity $ 518,483 $ 545,027
----------- ----------
Heidrick & Struggles International, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
June 30,
---------------------
2011 2010
---------- ---------
Cash flows from operating activities:
Net income $ 7,429 $ 2,672
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,206 2,902
Deferred income taxes (1,907) 444
Net realized gains on investments (2) (187)
Stock-based compensation expense 1,410 1,095
Other operating income -- (1,072)
Allowance for doubtful accounts 315 272
Restructuring charges -- 701
Cash paid for restructuring charges (79) (565)
Changes in assets and liabilities:
Trade and other receivables (16,671) (16,590)
Accounts payable (650) 3,399
Accrued expenses 24,215 29,716
Income taxes recoverable, net 1,440 1,152
Retirement and pension assets and
liabilities 182 224
Prepayments (891) (964)
Other assets and liabilities, net 617 626
---------- ---------
Net cash provided by operating
activities 17,614 23,825
---------- ---------
Cash flows from investing activities:
Restricted cash 180 2,622
Capital expenditures (5,360) (8,542)
Purchases of available for sale
investments (193) (110)
Proceeds from sale of available for
sale investments 15 11
---------- ---------
Net cash used in investing
activities (5,358) (6,019)
---------- ---------
Cash flows from financing activities:
Cash dividends paid (2,484) (2,379)
Payment of employee tax withholdings
on equity transactions (531) (418)
---------- ---------
Net cash used in financing
activities (3,015) (2,797)
---------- ---------
Effect of exchange rate fluctuations on
cash and cash equivalents 1,667 (3,587)
---------- ---------
Net increase in cash and cash
equivalents 10,908 11,422
Cash and cash equivalents at beginning
of period 92,170 81,171
---------- ---------
Cash and cash equivalents at end of
period $ 103,078 $ 92,593
========== =========
Heidrick & Struggles International, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
---------------------
2011 2010
---------- ---------
Cash flows from operating activities:
Net income $ 2,768 $ 1,126
Adjustments to reconcile net income to
net cash used in operating
activities:
Depreciation and amortization 4,311 7,195
Write-off of investment 2,810 --
Deferred income taxes (1,250) 1,055
Net realized losses on investments 255 233
Stock-based compensation expense 3,148 4,509
Other operating income -- (1,072)
Allowance for doubtful accounts (259) 993
Restructuring charges -- 701
Cash paid for restructuring charges (560) (1,820)
Changes in assets and liabilities:
Trade and other receivables (25,597) (37,147)
Accounts payable 2,046 3,193
Accrued expenses (41,738) 16,743
Income taxes payable, net (3,253) (2,352)
Retirement and pension plan assets
and liabilities 582 351
Prepayments (3,579) (2,289)
Other assets and liabilities, net (1,333) 309
---------- ---------
Net cash used in operating
activities (61,649) (8,272)
---------- ---------
Cash flows from investing activities:
Restricted cash (692) 2,762
Acquisition of businesses, net of cash
acquired -- (554)
Capital expenditures (9,787) (11,409)
Purchases of available for sale
investments (607) (434)
Proceeds from sale of available for
sale investments 30 208
Loan to equity method investment (1,008) --
---------- ---------
Net cash used in investing
activities (12,064) (9,427)
---------- ---------
Cash flows from financing activities:
Cash dividends paid (5,056) (5,085)
Payment of employee tax withholdings
on equity transactions (2,749) (4,546)
---------- ---------
Net cash used in financing
activities (7,805) (9,631)
---------- ---------
Effect of exchange rate fluctuations on
cash and cash equivalents 3,472 (3,107)
---------- ---------
Net decrease in cash and cash
equivalents (78,046) (30,437)
Cash and cash equivalents at beginning
of period 181,124 123,030
---------- ---------
Cash and cash equivalents at end of
period $ 103,078 $ 92,593
========== =========
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Heidrick & Struggles International, Inc.
CONTACT: Investors & Analysts:
Julie Creed, Vice President, Investor Relations & Real Estate:
+1 312 496 1774 or jcreed@heidrick.com
Media:
Jennifer Nelson, Director, Global Marketing:
+1 404 682 7373 or jnelson@heidrick.com