Daily News
View All NewsWorld – Heidrick and Struggles net revenue up 10% in constant currency; settles HMRC dispute
First-quarter net revenue rose 9.6% in constant currency at Heidrick & Struggles International Inc. (NASD: HSII).
| (USD thousands) | Q1 2017 | Q1 2016 | % change | % change constant currency | (Euro 000s) |
| Net revenue | 140,006 | 130,189 | 7.5% | 9.6% | 130,396 |
| Reimbursements | 4,171 | 4,098 | 1.8% | N/A | 3,885 |
| Total revenue | 144,177 | 134,287 | 7.4% | N/A | 134,281 |
| Net income | 650 | 1,325 | -50.9% | N/A | 605 |
Leadership consulting revenue rose 59.6% in the first quarter, mostly reflecting the 2016 acquisitions of Decision Strategies International and Philosophy IB. However, revenue fell in the firm’s culture shaping business on lower consulting revenue and a decline in enterprise agreements as a result of a slower than expected start to the year.
Revenue by segment and geography is as follows:
| (USD thousands) | Q1 2017 | Q1 2016 | % change | % growth in constant currency | (Euro 000s) |
| Executive search | |||||
| Americas | 77,098 | 73,390 | 5.1% | N/A | 71,806 |
| Europe | 26,205 | 23,401 | 12.0% | 21.0% | 24,406 |
| Asia Pacific | 21,182 | 18,937 | 11.9% | 11.0% | 19,728 |
| Total executive search and leadership consulting | 124,485 | 115,728 | 7.6% | N/A | 115,940 |
Net income fell, largely reflecting a net $3.7 million settlement with Her Majesty’s Revenue & Customs in the UK regarding HMRC’s challenge of the tax treatment of certain contributions made to Employee Benefits Trusts between 2002 and 2008, as well as other discrete items in the first quarter. HMRC had challenged that the contributions made to the Trusts should have been subject to Pay As You Earn Tax and Class 1 National Insurance Contributions in the UK. Heidrick & Struggles, among other companies, was first notified by HMRC of its challenge in 2010 and had been appealing since.
Also, CEO, Tracy Wolstencroft, began a three-month leave of absence on 3 April for treatment of a benign lung condition. Krishnan Rajagopalan, executive VP and managing partner – executive search, is acting as acting CEO and interim principal executive officer in Wolstencroft’s absence.
“We are pleased with first quarter growth in revenue and profitability,” Rajagopalan said. “Our executive search business showed solid results and has an improved backlog going into the second quarter. We continue to invest in consultant talent to drive future growth. Leadership consulting continues to grow in size and significance, though it will show quarter to quarter variability in results as it continues to scale. Culture shaping started off the year slower than we had expected, but our team remains confident in the growth potential for culture-related offerings.”
The company forecasts consolidated second-quarter net revenue of between $153 million and $163 million.
In trading yesterday Heidrick & Struggles International shares closed at $26.75, up 2.29% on the day. Based on its current share price the company has a market value of $499.45 million.