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World – Heidrick & Struggles reports mixed Q3 results

29 October 2013

Chicago-based executive recruitment firm Heidrick & Struggles (HSII: US) reported revenue of USD 123.5 million for the third quarter ending 30 September 2013, an increase of +0.9% from USD 122.3 million compared with the same period last year.

The company reported an operating income of USD 8.4 million, a drop of -18% compared with an operating income of USD 10.2 million a year ago. Net income for Q3 2013 was USD 4.1 million, on par with net income in Q3 2012.

Jory Marino, Heidrick & Struggles Interim CEO, commented: “Our third quarter results showed progress in certain areas but we are capable of more. We are committed to providing clients with unparalleled expertise and service in order to help them build winning leadership teams. As part of this commitment, we will provide our employees with the best platform from which to work and build a career. By staying focused on these initiatives, we believe we can deliver the long-term growth and financial results that all our stakeholders expect.”

Excluding Senn Delany (acquired in January 2013), the company ended the third quarter with 308 Executive Search and Leadership Consulting consultants compared to 332 on 30 September 2012. Partly reflecting lower consultant headcount, the number of executive search confirmations in the quarter decreased -5.3% compared to Q3 2012. The average revenue per executive search increased to USD 124,500 compared with USD 123,700 in Q3 2012. Excluding Senn Delaney, productivity, as measured by annualised net revenue per consultant, was USD 1.4 million unchanged year-on-year.

Across the Americas, Heidrick & Struggles reported revenue during Q3 2013 of USD 71.1 million, a fall of -1.9% compared with USD 72.4 million last year. Operating income for the period also fell, dropping by -9.5% to USD 19.3 million from USD 21.3 million, year-on-year. The number of consultants across the Americas fell from 156 in Q3 2012 to 137 in Q3 2013.

The addition of Senn Delaney, representing USD 5.6 million, improved consultant productivity and increases in the Life Sciences and Global Technology Service Search practices were offset by declines in the other industry Search practices and Leadership Consulting. As a result of the addition of Senn Delaney earning for the quarter were impacted by increased general and administrative expenses.

In Europe, the company reported revenue growth of +13.2% (Approximately +12% in constant currency), rising to USD 24.4 million from USD 21.5 million. The company’s operating income, however, fell by -87.7% to USD 100,000 from USD 500,000, year-on-year. The number of consultants in the region fell slightly from 91 to 87 compared with a year ago.

Exchange rate fluctuations positively impacted year-on-year third quarter net revenue by USD 200,000. Senn Delaney represented USD 1 million of Q3 2013 revenue in Europe. Revenue from Leadership Consulting and all Search practices, with the exception Education & Social Enterprise and Global Technology & Services, increased when compared with last year.

In Asia-Pacific, revenues increased marginally to USD 23.5 million from USD 23.4 million, equating to a rise of +0.8% (approximately +7% in constant currency). The company’s operating income for the region increased by +58.7% to USD 2.3 million from USD 1.5 million, year-on-year.

Exchange rate fluctuations negatively impacted year-on-year third quarter net revenue by USD 1.5 million. Revenue growth in this region was driven by the Consumer Markets and Industrial Search practices, as well as by Leadership Consulting.

Looking forward the company expects fourth quarter consolidated net revenue of between USD 100 million and USD 110 million. Among other factors, this prediction is dependent on among other things the anticipated volumes of new Executive Search confirmations, Leadership Consulting assignments, and expectations for Senn Delaney.

Based on its current share price, the company has a market value of USD 332.6 million.  

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