CHICAGO, Oct. 26, 2020 /PRNewswire/ -- Heidrick &
Struggles International, Inc. (Nasdaq: HSII), today announced
financial results for its third quarter ended September 30, 2020.
Highlights:
- Anticipated restructuring charge of $48.1 million generated operating loss of
$38.2 million and operating margin of
(26.6%); expect annual cost savings of $30
million to $40 million
- Adjusted operating income of $9.9
million and adjusted operating margin of 6.9%, up 70 basis
points sequentially
- Net revenue of $143.5 million
compares to $145.6 million in the
2020 second quarter
- Net loss of $26.2 million
includes restructuring charge; adjusted net income of $7.7 million and adjusted diluted earnings per
share of $0.39
- Maintains $0.15 per share cash
dividend
"Our team did an excellent job delivering results in what
continues to be a dynamic demand environment," stated Heidrick
& Struggles' President and Chief Executive Officer,
Krishnan Rajagopalan. "We remain
focused on gaining market share and business trends continue to
strengthen. We are especially pleased with the sequential growth
generated by Heidrick Consulting, particularly in digital delivery
related to leadership development and our diversity & inclusion
initiatives. While economic visibility remains limited, we
currently see an acceleration in our business and stronger business
trends coming into focus. Importantly, we have the financial
strength to continue making strategic investments to create
long-term shareholder value, and our digital transformation is
among multiple opportunities to fortify our position as a trusted
global advisor."
2020 Third Quarter Results
Consolidated net revenue (revenue before reimbursements) was
$143.5 million in the quarter
compared to $182.2 million in the
2019 third quarter. Excluding the impact of exchange rate
fluctuations, which positively impacted results by 1.0%,
consolidated net revenue declined $40.1
million. The reduction in net revenue was primarily due to
the impact of the pandemic on a global basis.
Executive Search net revenue was $129.2 million compared to $166.5 million in the 2019 third quarter.
Excluding the impact of exchange rate fluctuations of $1.2 million, or 1.0%, Executive Search net
revenue declined $38.5 million.
Net revenue decreased 26.6% in the Americas (decreased 26.3% on a
constant currency basis), decreased 17.0% in Europe (decreased 20.9% on a constant currency
basis) and decreased 10.5% in Asia
Pacific (decreased 11.5% on a constant currency
basis). Growth in the Healthcare & Life Sciences industry
practice was offset by reductions in the other industry
practices.
There were 362 Executive Search consultants at September 30, 2020 compared to 380 at
September 30, 2019 and 394 at
June 30, 2020. Consultant
productivity, as measured by annualized Executive Search net
revenue per consultant, was $1.4
million compared to $1.8
million in the 2019 third quarter. The number of confirmed
searches decreased 6.4% compared to the year-ago period.
Heidrick Consulting net revenue was $14.3 million compared to $15.7 million in the 2019 third quarter.
Excluding the impact from exchange rate fluctuations, which
positively impacted results by 1.4%, Heidrick Consulting net
revenue decreased $1.6 million.
There were 63 Heidrick Consulting consultants at September 30, 2020 compared to 71 at September 30, 2019 and 68 at June 30, 2020.
Consolidated salaries and benefits expense decreased by 20.4%,
or $26.6 million, to $103.9 million from $130.5
million in the 2019 third quarter. Fixed compensation
expense decreased by $2.2 million
primarily due to lower talent acquisition and retention costs,
along with other benefit expenses, such as retirement, partially
offset by increases in the deferred compensation plan and base
salaries and payroll taxes. Variable compensation decreased
$24.4 million due to lower revenue in
the quarter. Salaries and benefits expense was 72.4% of net revenue
for the quarter compared to 71.6% in the 2019 third
quarter.
General and administrative expenses decreased by 10.0%, or
$3.3 million, to $29.8 million from $33.1
million in the 2019 third quarter, primarily due to travel
and entertainment, office occupancy and bad debt offset by an
increase professional fees. As a percentage of net revenue, general
and administrative expenses were 20.7% compared to 18.2% in the
2019 third quarter.
The Company recorded a restructuring charge of $48.1 million in the 2020 third quarter related
to strategic actions to optimize future growth and profitability.
The expected annual cost savings from the restructuring ranges from
$30 million to $40 million. The primary components of the
restructuring included a workforce reduction; a reduction of the
firm's real estate expenses, professional fees and the future
elimination of certain deferred compensation programs. The Company
anticipates future restructuring charges of $10 million to $15
million related to further real estate optimization with
annual cost savings of $5 million to
$8 million.
In the 2019 third quarter, the Company acquired 2GET, one of the
leading search firms in Brazil. This transaction provides the
Company with a strong platform for Latin
America growth. As a result, the Company recorded a
restructuring charge of $4.1 million
in the quarter.
Including the restructuring charges recorded in both periods,
operating loss was $38.2 million
compared to operating income of $14.5
million in the 2019 third quarter. Operating margin was
(26.6)% in the 2020 third quarter compared to 7.9% in the 2019
third quarter. Excluding the restructuring charges in both periods,
adjusted operating income was $9.9
million and adjusted operating margin was 6.9%. This
compares to adjusted operating income of $18.6 million and adjusted operating margin of
10.2% in the 2019 third quarter. Adjusted EBITDA in the 2020 third
quarter was $15.9 million compared to
$23.9 million in the 2019 third
quarter. Adjusted EBITDA margin was 11.0% compared to 13.1% in the
2019 third quarter.
Including the restructuring charges recorded in both periods,
net loss was $26.2 million and
diluted loss per share was $1.35 with
an effective tax rate of 28.5% in the 2020 third quarter. This
compares to net income of $9.9
million and diluted earnings per share of $0.51 with an effective tax rate of 32.9% in last
year's third quarter. Excluding the restructuring charges in both
periods, adjusted net income was $7.7
million and adjusted diluted earnings per share was
$0.39 with an adjusted effective tax
rate of 33.3%. This compares to adjusted net income of $13.7 million and diluted earnings per share of
$0.70 with an adjusted effective tax
rate of 27.9% in the 2019 third quarter.
Net cash provided by operating activities was $51.9 million in the 2020 third quarter compared
to $86.5 million in the 2019 third
quarter. Cash, cash equivalents and marketable securities at
September 30, 2020 were $237.6 million, compared to $332.9 million at December
31, 2019, and $218.9 million
at September 30, 2019. During
the 2020 third quarter, the company repaid $100.0 million of borrowings under its credit
facility, resulting in no outstanding borrowings as of September 20, 2020. The company's cash position
typically builds throughout the year as bonuses are accrued, mostly
to be paid out in the first quarter.
2020 Nine Months Results
For the nine months ended September 30,
2020 consolidated net revenue was $460.6 million compared to $526.9 million in the first nine months of
2019. Excluding the impact of exchange rate fluctuations,
which negatively impacted results by 0.5%, consolidated net revenue
decreased $63.7 million.
Executive Search net revenue in the first nine months of
2020 was $418.9 million from
$483.3 million in the first nine
months of 2019. Excluding the impact of exchange rate
fluctuations which negatively impacted results by 0.6%, or
$2.5 million, net revenue decreased
$62.0 million. Net revenue
decreased 14.1% in the Americas (or 13.7% on a constant currency
basis), decreased 10.8% in Europe
(decreased 10.7% on a constant currency basis), and was down 13.6%
in Asia Pacific (decreased 12.2%
on a constant currency basis). Growth in the Healthcare &
Life Sciences practice was offset by reductions in the other
industry practices. Consultant productivity was $1.4 million for the first nine months of 2020
compared to $1.7 million in the first
nine months of 2019.
Heidrick Consulting net revenue in the first nine months of
2020 was $41.8 million from
$43.6 million in the first nine
months of 2019, a decline of 4.1%, or $1.8
million. Exchange rate fluctuations did not materially
impact Heidrick Consulting net revenue.
Operating loss for the first nine months of 2020 was
$44.1 million compared to operating
income of $49.2 million in the same
period of 2019. The operating margin was (9.6)% compared to
9.3% in the first nine months of 2019. Excluding the non-cash
impairment charge recorded in the 2020 second quarter and the
restructuring charges recorded in both the 2020 and 2019 third
quarters, adjusted operating income for the first nine months of
2020 was $37.0 million and the
adjusted operating margin was 8.0%. This compares to adjusted
operating income for the first nine months of 2019 of $53.3 million and adjusted operating margin of
10.1%. Adjusted EBITDA for the first nine months of 2020 was
$51.9 million and adjusted EBITDA
margin was 11.3%, compared to adjusted EBITDA of $68.6 million and adjusted EBITDA margin of 13.0%
for the same period in 2019.
Net loss for the first nine months of 2020 was $43.2 million and diluted loss per share was
$2.24, with an effective tax rate of
0.5%. This compares to net income of $36.3
million and diluted earnings per share of $1.86 in the first nine months of 2019, with an
effective tax rate of 31.7%. Excluding the non-cash impairment
charge recorded in the 2020 second quarter and the restructuring
charges recorded in both the 2020 and 2019 nine-month periods,
adjusted net income was $23.6 million
and adjusted diluted earnings per share was $1.19 with an adjusted effective tax rate of
37.3%. This compares to adjusted net income of $40.0 million and adjusted diluted earnings per
share of $2.05 with an adjusted
effective tax rate of 30.1%.
2020 Fourth Quarter Outlook
The Company expects 2020 fourth quarter consolidated net revenue
of between $140 million and
$150 million, while acknowledging the
continued fluidity of the COVID-19 pandemic that will continue to
impact quarterly results. In addition, this outlook is based on the
average currency rates in September
2020 and reflects, among other factors, management's
assumptions for the anticipated volume of new Executive Search
confirmations, Heidrick Consulting assignments, the current
backlog, consultant productivity, consultant retention, and the
seasonality of its business.
Dividend
The Board of Directors has declared a 2020 fourth quarter cash
dividend of $0.15 per share payable
on November 20, 2020 to shareholders
of record at the close of business on November 6, 2020.
Quarterly Conference Call
Heidrick & Struggles will host a conference call to review
its 2020 third quarter results today, October 26 at 5:00 pm
Eastern Time. Participants may access the company's call and
supporting slides through its website at www.heidrick.com or by
dialing (866) 211-4120, conference ID# 3692464. 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 (Nasdaq: HSII) serves the senior-level
talent and leadership needs of the world's top organizations as a
trusted advisor across executive search, leadership assessment and
development, organization and team effectiveness, and culture
shaping services. Heidrick & Struggles pioneered the profession
of executive search more than 65 years ago. Today, the firm
provides integrated leadership solutions to help our clients change
the world, one leadership team at a time.® www.heidrick.com
Non-GAAP Financial Measures
To supplement the financial results presented in accordance with
generally accepted accounting principles in the United States ("GAAP"), Heidrick &
Struggles presents certain non-GAAP financial measures. A "non-GAAP
financial measure" is defined as a numerical measure of a company's
financial performance that excludes or includes amounts different
than the most directly comparable measure calculated and presented
in accordance with GAAP in the statements of comprehensive income,
balance sheets or statements of cash flow of the company. Pursuant
to the requirements of Regulation G, this earnings release contains
the most directly comparable GAAP financial measure to the non-GAAP
financial measure.
The non-GAAP financial measures used within this earnings
release are adjusted operating income, adjusted operating income
margin, adjusted net income, adjusted basic and diluted earnings
per share, adjusted effective tax rate, adjusted EBITDA, adjusted
EBITDA margin and impacts of foreign currency on current period
results using prior period translation rates. These measures
are presented because management uses this information to monitor
and evaluate financial results and trends. Management believes this
information is also useful for investors. Reconciliations of these
non-GAAP financial measures with the most directly comparable
measures calculated and presented in accordance with GAAP are
provided as schedules attached to this release.
Adjusted operating income reflects the exclusion of
restructuring charges for the three months ended September 30, 2020 and 2019, and impairment and
restructuring charges for the nine months ended September 30, 2020 and 2019.
Adjusted operating income margin refers to adjusted operating
income as a percentage of net revenue in the same period.
Adjusted net income and adjusted diluted earnings per share
reflect the exclusion of restructuring charges for the three months
ended September 30, 2020 and 2019,
and impairment and restructuring charges for the nine months ended
September 30, 2020 and 2019.
Adjusted effective tax rate reflects the exclusion of
restructuring charges for the three months ended September 30, 2020 and 2019, and impairment and
restructuring charges for the nine months ended September 30, 2020 and 2019.
A reconciliation of adjusted operating income, adjusted
operating margin, adjusted net income, adjusted basic and diluted
earnings per share and adjusted effective tax rate with the most
directly comparable measure calculated and presented in accordance
with GAAP is provided in this release.
Adjusted EBITDA refers to earnings before interest, taxes,
depreciation, intangible amortization, equity-settled stock
compensation expense, earnout accretion expense related to
acquisitions, contingent compensation related to acquisitions,
impairment charges, restructuring charges, and other non-operating
income (expense).
Adjusted EBITDA margin refers to adjusted EBITDA as a percentage
of net revenue in the same period.
The company evaluates its results of operations on both an as
reported and a constant currency basis. The constant currency
presentation is a non-GAAP financial measure, which excludes the
impact of fluctuations in foreign currency exchange rates. The
company believes providing constant currency information provides
valuable supplemental information regarding its results of
operations, consistent with how it evaluates its performance.
The company calculates constant currency percentages by converting
its financial results in a local currency for a period using the
average exchange rate for the prior period to which it is
comparing. This calculation may differ from similarly-titled
measures used by other companies.
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, the impacts, direct and indirect, of the COVID–19 pandemic
on our business, our consultants and employees, and the overall
economy; leadership changes, our ability to attract, integrate,
develop, manage and retain qualified consultants and senior
leaders; our ability to prevent our consultants from taking our
clients with them to another firm; our ability to maintain our
professional reputation and brand name; the fact that our net
revenue may be affected by adverse economic conditions; our
clients' ability to restrict us from recruiting their employees;
the aggressive competition we face; our heavy reliance on
information management systems; the fact that we face the risk of
liability in the services we perform; the fact that data security,
data privacy and data protection laws and other evolving
regulations and cross-border data transfer restrictions may limit
the use of our services and adversely affect our business; social,
political, regulatory and legal risks in markets where we operate;
the impact of foreign currency exchange rate fluctuations; the fact
that we may not be able to align our cost structure with net
revenue; unfavorable tax law changes and tax authority rulings; our
ability to realize our tax losses; the timing of the establishment
or reversal of valuation allowance on deferred tax assets; any
impairment of our goodwill, other intangible assets and other
long-lived assets; our ability to execute and integrate future
acquisitions; the fact that we have anti-takeover provisions that
make an acquisition of us difficult and expensive; our ability to
access additional credit; and the increased cybersecurity
requirements, vulnerabilities, threats and more sophisticated and
targeted cyber-related attacks that could pose a risk to our
systems, networks, solutions, services and data. We undertake no
obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or
otherwise. For more information on the factors that could
affect the outcome of forward-looking statements, refer to our
Annual Report on Form 10-K under "Risk Factors" in Item 1A and our
quarterly filings with the SEC. We caution the reader that the list
of factors may not be exhaustive. We undertake no obligation to
update publicly any forward-looking statements, whether as a result
of new information, future events or otherwise.
Contacts:
Investors & Analysts:
Suzanne Rosenberg - Vice President, Investor
Relations
+1 212 551 0554, srosenberg@heidrick.com
Media:
Nina Chang –
Vice President, Corporate Communications
+1 212 551 1634, nchang@heidrick.com
Heidrick &
Struggles
Condensed
Consolidated Statements of Comprehensive Income
(Loss)
(In thousands, except
per share amounts)
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
|
|
2020
|
|
2019
|
|
$
Change
|
|
%
Change
|
Revenue
|
|
|
|
|
|
|
|
Revenue before
reimbursements (net revenue)
|
$
|
143,544
|
|
|
$
|
182,174
|
|
|
$
|
(38,630)
|
|
|
(21.2)
|
%
|
Reimbursements
|
957
|
|
|
4,344
|
|
|
(3,387)
|
|
|
(78.0)
|
%
|
Total
revenue
|
144,501
|
|
|
186,518
|
|
|
(42,017)
|
|
|
(22.5)
|
%
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Salaries and
benefits
|
103,893
|
|
|
130,479
|
|
|
(26,586)
|
|
|
(20.4)
|
%
|
General and
administrative expenses
|
29,769
|
|
|
33,093
|
|
|
(3,324)
|
|
|
(10.0)
|
%
|
Restructuring
charges
|
48,115
|
|
|
4,130
|
|
|
43,985
|
|
|
NM
|
|
Reimbursed
expenses
|
957
|
|
|
4,344
|
|
|
(3,387)
|
|
|
(78.0)
|
%
|
Total operating
expenses
|
182,734
|
|
|
172,046
|
|
|
10,688
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(38,233)
|
|
|
14,472
|
|
|
(52,705)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
Non-operating
income (expense)
|
|
|
|
|
|
|
|
Interest,
net
|
(180)
|
|
|
819
|
|
|
|
|
|
Other, net
|
1,819
|
|
|
(464)
|
|
|
|
|
|
Net non-operating
income
|
1,639
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
(36,594)
|
|
|
14,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit
from) income taxes
|
(10,416)
|
|
|
4,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(26,178)
|
|
|
9,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss), net of tax
|
850
|
|
|
(1,337)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
$
|
(25,328)
|
|
|
$
|
8,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
19,351
|
|
|
19,127
|
|
|
|
|
|
Diluted
|
19,351
|
|
|
19,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per common share
|
|
|
|
|
|
|
|
Basic
|
$
|
(1.35)
|
|
|
$
|
0.52
|
|
|
|
|
|
Diluted
|
$
|
(1.35)
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
as a % of net revenue
|
72.4
|
%
|
|
71.6
|
%
|
|
|
|
|
General and
administrative expenses as a % of net revenue
|
20.7
|
%
|
|
18.2
|
%
|
|
|
|
|
Operating
margin
|
(26.6)
|
%
|
|
7.9
|
%
|
|
|
|
|
Heidrick &
Struggles International Inc.
Segment Information (In thousands)
(Unaudited)
|
|
|
Three Months Ended
September 30,
|
|
2020
|
|
2019
|
|
$
Change
|
|
%
Change
|
|
2020
Margin1
|
|
2019
Margin1
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Search
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
79,947
|
|
|
$
|
108,878
|
|
|
$
|
(28,931)
|
|
|
(26.6)
|
%
|
|
|
|
|
Europe
|
28,902
|
|
|
34,827
|
|
|
(5,925)
|
|
|
(17.0)
|
%
|
|
|
|
|
Asia
Pacific
|
20,394
|
|
|
22,784
|
|
|
(2,390)
|
|
|
(10.5)
|
%
|
|
|
|
|
Total Executive
Search
|
129,243
|
|
|
166,489
|
|
|
(37,246)
|
|
|
(22.4)
|
%
|
|
|
|
|
Heidrick
Consulting
|
14,301
|
|
|
15,685
|
|
|
(1,384)
|
|
|
(8.8)
|
%
|
|
|
|
|
Revenue before
reimbursements (net revenue)
|
143,544
|
|
|
182,174
|
|
|
(38,630)
|
|
|
(21.2)
|
%
|
|
|
|
|
Reimbursements
|
957
|
|
|
4,344
|
|
|
(3,387)
|
|
|
(78.0)
|
%
|
|
|
|
|
Total
revenue
|
$
|
144,501
|
|
|
$
|
186,518
|
|
|
$
|
(42,017)
|
|
|
(22.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Search
|
|
|
|
|
|
|
|
|
|
|
|
Americas²
|
$
|
(7,934)
|
|
|
$
|
23,211
|
|
|
$
|
(31,145)
|
|
|
(134.2)
|
%
|
|
(9.9)
|
%
|
|
21.3
|
%
|
Europe³
|
(6,856)
|
|
|
466
|
|
|
(7,322)
|
|
|
NM
|
|
|
(23.7)
|
%
|
|
1.3
|
%
|
Asia
Pacific4
|
(1,726)
|
|
|
2,421
|
|
|
(4,147)
|
|
|
(171.3)
|
%
|
|
(8.5)
|
%
|
|
10.6
|
%
|
Total Executive
Search
|
(16,516)
|
|
|
26,098
|
|
|
(42,614)
|
|
|
(163.3)
|
%
|
|
(12.8)
|
%
|
|
15.7
|
%
|
Heidrick
Consulting5
|
(9,286)
|
|
|
(3,150)
|
|
|
(6,136)
|
|
|
(194.8)
|
%
|
|
(64.9)
|
%
|
|
(20.1)
|
%
|
Total
segments
|
(25,802)
|
|
|
22,948
|
|
|
(48,750)
|
|
|
(212.4)
|
%
|
|
(18.0)
|
%
|
|
12.6
|
%
|
Global Operations
Support6
|
(12,431)
|
|
|
(8,476)
|
|
|
(3,955)
|
|
|
(46.7)
|
%
|
|
(8.7)
|
%
|
|
(4.7)
|
%
|
Total operating income
(loss)
|
$
|
(38,233)
|
|
|
$
|
14,472
|
|
|
$
|
(52,705)
|
|
|
(364.2)
|
%
|
|
(26.6)
|
%
|
|
7.9
|
%
|
|
1 Margin based on revenue before
reimbursements (net revenue)
|
2 Includes restructuring charges of
$27.6 million and $4.1 million for the three months ended September
30, 2020 and 2019, respectively.
|
3 Includes restructuring charges of
$9.6 million for the three months ended September 30,
2020.
|
4 Includes restructuring charges of
$4.6 million for the three months ended September 30,
2020.
|
5 Includes restructuring charges of
$4.5 million for the three months ended September 30,
2020.
|
6 Includes restructuring charges of
$1.9 million and less than $0.1 million for the three months ended
September 30, 2020 and 2019, respectively.
|
Heidrick &
Struggles
Condensed Consolidated Statements of Comprehensive Income
(Loss) (In thousands, except per share amounts)
(Unaudited)
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2020
|
|
2019
|
|
$
Change
|
|
%
Change
|
Revenue
|
|
|
|
|
|
|
|
Revenue before
reimbursements (net revenue)
|
$
|
460,628
|
|
|
$
|
526,890
|
|
|
$
|
(66,262)
|
|
|
(12.6)
|
%
|
Reimbursements
|
6,555
|
|
|
14,075
|
|
|
(7,520)
|
|
|
(53.4)
|
%
|
Total
revenue
|
467,183
|
|
|
540,965
|
|
|
(73,782)
|
|
|
(13.6)
|
%
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Salaries and
benefits
|
329,640
|
|
|
371,898
|
|
|
(42,258)
|
|
|
(11.4)
|
%
|
General and
administrative expenses
|
93,970
|
|
|
101,646
|
|
|
(7,676)
|
|
|
(7.6)
|
%
|
Restructuring
charges
|
48,115
|
|
|
4,130
|
|
|
43,985
|
|
|
NM
|
|
Impairment
charges
|
32,970
|
|
|
—
|
|
|
32,970
|
|
|
NM
|
|
Reimbursed
expenses
|
6,555
|
|
|
14,075
|
|
|
(7,520)
|
|
|
(53.4)
|
%
|
Total operating
expenses
|
511,250
|
|
|
491,749
|
|
|
19,501
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(44,067)
|
|
|
49,216
|
|
|
(93,283)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
Non-operating
income
|
|
|
|
|
|
|
|
Interest,
net
|
160
|
|
|
2,039
|
|
|
|
|
|
Other, net
|
460
|
|
|
1,887
|
|
|
|
|
|
Net non-operating
income
|
620
|
|
|
3,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
(43,447)
|
|
|
53,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit
from) income taxes
|
(202)
|
|
|
16,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(43,245)
|
|
|
36,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss, net of tax
|
(1,395)
|
|
|
(1,012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
$
|
(44,640)
|
|
|
$
|
35,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
19,281
|
|
|
19,084
|
|
|
|
|
|
Diluted
|
19,281
|
|
|
19,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per common share
|
|
|
|
|
|
|
|
Basic
|
$
|
(2.24)
|
|
|
$
|
1.90
|
|
|
|
|
|
Diluted
|
$
|
(2.24)
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
as a % of net revenue
|
71.6
|
%
|
|
70.6
|
%
|
|
|
|
|
General and
administrative expenses as a % of net revenue
|
20.4
|
%
|
|
19.3
|
%
|
|
|
|
|
Operating
margin
|
(9.6)
|
%
|
|
9.3
|
%
|
|
|
|
|
Heidrick &
Struggles International Inc.
Segment Information (In thousands)
(Unaudited)
|
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
$
Change
|
|
%
Change
|
|
2020
Margin1
|
|
2019
Margin1
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Search
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
265,088
|
|
|
$
|
308,700
|
|
|
$
|
(43,612)
|
|
|
(14.1)
|
%
|
|
|
|
|
Europe
|
92,108
|
|
|
103,244
|
|
|
(11,136)
|
|
|
(10.8)
|
%
|
|
|
|
|
Asia
Pacific
|
61,654
|
|
|
71,394
|
|
|
(9,740)
|
|
|
(13.6)
|
%
|
|
|
|
|
Total Executive
Search
|
418,850
|
|
|
483,338
|
|
|
(64,488)
|
|
|
(13.3)
|
%
|
|
|
|
|
Heidrick
Consulting
|
41,778
|
|
|
43,552
|
|
|
(1,774)
|
|
|
(4.1)
|
%
|
|
|
|
|
Revenue before
reimbursements (net revenue)
|
460,628
|
|
|
526,890
|
|
|
(66,262)
|
|
|
(12.6)
|
%
|
|
|
|
|
Reimbursements
|
6,555
|
|
|
14,075
|
|
|
(7,520)
|
|
|
(53.4)
|
%
|
|
|
|
|
Total
revenue
|
$
|
467,183
|
|
|
$
|
540,965
|
|
|
$
|
(73,782)
|
|
|
(13.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Search
|
|
|
|
|
|
|
|
|
|
|
|
Americas2
|
$
|
40,900
|
|
|
$
|
74,211
|
|
|
$
|
(33,311)
|
|
|
(44.9)
|
%
|
|
15.4
|
%
|
|
24.0
|
%
|
Europe3
|
(26,874)
|
|
|
3,788
|
|
|
(30,662)
|
|
|
NM
|
|
|
(29.2)
|
%
|
|
3.7
|
%
|
Asia
Pacific4
|
(6,553)
|
|
|
10,642
|
|
|
(17,195)
|
|
|
(161.6)
|
%
|
|
(10.6)
|
%
|
|
14.9
|
%
|
Total Executive
Search
|
7,473
|
|
|
88,641
|
|
|
(81,168)
|
|
|
(91.6)
|
%
|
|
1.8
|
%
|
|
18.3
|
%
|
Heidrick
Consulting5
|
(21,699)
|
|
|
(12,770)
|
|
|
(8,929)
|
|
|
(69.9)
|
%
|
|
(51.9)
|
%
|
|
(29.3)
|
%
|
Total
segments
|
(14,226)
|
|
|
75,871
|
|
|
(90,097)
|
|
|
(118.8)
|
%
|
|
(3.1)
|
%
|
|
14.4
|
%
|
Global Operations
Support6
|
(29,841)
|
|
|
(26,655)
|
|
|
(3,186)
|
|
|
(12.0)
|
%
|
|
(6.5)
|
%
|
|
(5.1)
|
%
|
Total operating income
(loss)
|
$
|
(44,067)
|
|
|
$
|
49,216
|
|
|
$
|
(93,283)
|
|
|
(189.5)
|
%
|
|
(9.6)
|
%
|
|
9.3
|
%
|
|
1 Margin
based on revenue before reimbursements (net revenue).
|
2 Includes restructuring charges of
$27.6 million and 4.1 million for the nine months ended September
30, 2020 and 2019, respectively.
|
3 Includes restructuring charges of
$9.6 million and goodwill impairment charges of $24.5 million for
the nine months ended September 30, 2020.
|
4 Includes restructuring charges of
$4.6 million and goodwill impairment charges of $8.5 for the nine
months ended September 30, 2020.
|
5 Includes restructuring charges of
$4.5 million for the nine months ended September 30,
2020.
|
6 Includes
restructuring charges of $1.9 million and less than $0.1 million
for the nine months ended September 30, 2020 and 2019,
respectively.
|
Heidrick &
Struggles International Inc.
Reconciliation of Operating Income (Loss) and Adjusted Operating
Income (Non-GAAP)
(In thousands)
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue before
reimbursements (net revenue)
|
$
|
143,544
|
|
|
$
|
182,174
|
|
|
$
|
460,628
|
|
|
$
|
526,890
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(38,233)
|
|
|
14,472
|
|
|
(44,067)
|
|
|
49,216
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
Impairment
charges1
|
—
|
|
|
—
|
|
|
32,970
|
|
|
—
|
|
Restructuring
charges2
|
48,115
|
|
|
4,130
|
|
|
48,115
|
|
|
4,130
|
|
Total
adjustments
|
48,115
|
|
|
4,130
|
|
|
81,085
|
|
|
4,130
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income
|
$
|
9,882
|
|
|
$
|
18,602
|
|
|
$
|
37,018
|
|
|
$
|
53,346
|
|
|
|
|
|
|
|
|
|
Operating
margin
|
(26.6)
|
%
|
|
7.9
|
%
|
|
(9.6)
|
%
|
|
9.3
|
%
|
Adjusted operating
margin
|
6.9
|
%
|
|
10.2
|
%
|
|
8.0
|
%
|
|
10.1
|
%
|
|
1 The
Company incurred impairment charges of approximately $33.0 million
related to the Europe and Asia Pacific operating segments for the
nine months ended September 30, 2020.
|
2 The
Company incurred restructuring charges of approximately $48.1
million and $4.1 million across all operating segments for the
three and nine months ended September 30, 2020 and 2019,
respectively.
|
Heidrick &
Struggles International Inc.
Reconciliation of Net Income (Loss) and Adjusted Net Income
(Non-GAAP)
(In thousands)
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
(loss)
|
$
|
(26,178)
|
|
|
$
|
9,947
|
|
|
$
|
(43,245)
|
|
|
$
|
36,314
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
Impairment charges, net
of tax1
|
—
|
|
|
—
|
|
|
32,970
|
|
|
—
|
|
Restructuring charges,
net of tax2
|
33,863
|
|
|
3,717
|
|
|
33,863
|
|
|
3,717
|
|
Total
adjustments
|
33,863
|
|
|
3,717
|
|
|
66,833
|
|
|
3,717
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
$
|
7,685
|
|
|
$
|
13,664
|
|
|
$
|
23,588
|
|
|
$
|
40,031
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
19,351
|
|
|
19,127
|
|
|
19,281
|
|
|
19,084
|
|
Diluted
|
19,730
|
|
|
19,428
|
|
|
19,833
|
|
|
19,518
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per common share
|
|
|
|
|
|
|
|
Basic
|
$
|
(1.35)
|
|
|
$
|
0.52
|
|
|
$
|
(2.24)
|
|
|
$
|
1.90
|
|
Diluted
|
$
|
(1.35)
|
|
|
$
|
0.51
|
|
|
$
|
(2.24)
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
per common share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.40
|
|
|
$
|
0.71
|
|
|
$
|
1.22
|
|
|
$
|
2.10
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
0.70
|
|
|
$
|
1.19
|
|
|
$
|
2.05
|
|
|
1 The
Company incurred impairment charges of approximately $33.0 million
related to the Europe and Asia Pacific operating segments for the
nine months ended September 30, 2020.
|
2 The
Company incurred restructuring charges of approximately $48.1
million and $4.1 million across all operating segments for the
three and nine months ended September 30, 2020 and 2019,
respectively.
|
Heidrick &
Struggles International Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|
|
|
September
30,
2020
|
|
December
31,
2019
|
|
(Unaudited)
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
170,577
|
|
|
$
|
271,719
|
|
Marketable
securities
|
67,028
|
|
|
61,153
|
|
Accounts
receivable
|
119,102
|
|
|
109,163
|
|
Prepaid
expenses
|
21,513
|
|
|
20,185
|
|
Other current
assets
|
23,817
|
|
|
27,848
|
|
Income taxes
recoverable
|
13,014
|
|
|
4,414
|
|
Total current
assets
|
415,051
|
|
|
494,482
|
|
|
|
|
|
Non-current
assets
|
|
|
|
Property and equipment,
net
|
26,740
|
|
|
28,650
|
|
Operating lease
right-of-use assets
|
80,091
|
|
|
99,391
|
|
Assets designated for
retirement and pension plans
|
14,608
|
|
|
13,978
|
|
Investments
|
27,836
|
|
|
25,409
|
|
Other non-current
assets
|
23,682
|
|
|
20,434
|
|
Goodwill
|
91,264
|
|
|
126,831
|
|
Other intangible
assets, net
|
1,218
|
|
|
1,935
|
|
Deferred income
taxes
|
32,819
|
|
|
33,063
|
|
Total non-current
assets
|
298,258
|
|
|
349,691
|
|
|
|
|
|
Total
assets
|
$
|
713,309
|
|
|
$
|
844,173
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
|
11,050
|
|
|
$
|
8,633
|
|
Accrued salaries and
benefits
|
161,002
|
|
|
234,306
|
|
Deferred
revenue
|
37,268
|
|
|
41,267
|
|
Operating lease
liabilities
|
30,569
|
|
|
30,955
|
|
Other current
liabilities
|
26,691
|
|
|
26,253
|
|
Income taxes
payable
|
1,086
|
|
|
3,928
|
|
Total current
liabilities
|
267,666
|
|
|
345,342
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
Accrued salaries and
benefits
|
56,998
|
|
|
59,662
|
|
Retirement and pension
plans
|
49,389
|
|
|
46,032
|
|
Operating lease
liabilities
|
73,565
|
|
|
79,388
|
|
Other non-current
liabilities
|
4,625
|
|
|
4,634
|
|
Total non-current
liabilities
|
184,577
|
|
|
189,716
|
|
|
|
|
|
Total
liabilities
|
452,243
|
|
|
535,058
|
|
|
|
|
|
Stockholders'
equity
|
261,066
|
|
|
309,115
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
$
|
713,309
|
|
|
$
|
844,173
|
|
Heidrick &
Struggles International Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
2020
|
|
2019
|
Cash flows -
operating activities
|
|
|
|
Net income
(loss)
|
$
|
(26,178)
|
|
|
$
|
9,947
|
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
Depreciation and
amortization
|
16,171
|
|
|
2,635
|
|
Deferred income
taxes
|
320
|
|
|
(536)
|
|
Stock-based
compensation expense
|
3,212
|
|
|
2,539
|
|
Accretion expense
related to earnout payments
|
—
|
|
|
168
|
|
Gain on marketable
securities
|
(22)
|
|
|
(237)
|
|
Loss on disposal of
property and equipment
|
14
|
|
|
—
|
|
Changes in assets and
liabilities:
|
|
|
|
Accounts
receivable
|
7,397
|
|
|
(4,868)
|
|
Accounts
payable
|
664
|
|
|
834
|
|
Accrued
expenses
|
52,066
|
|
|
62,820
|
|
Restructuring
accrual
|
7,769
|
|
|
3,951
|
|
Deferred
revenue
|
(1,219)
|
|
|
3,353
|
|
Income taxes payable,
net
|
(18,215)
|
|
|
83
|
|
Retirement and pension
plan assets and liabilities
|
29
|
|
|
138
|
|
Prepaid
expenses
|
3,312
|
|
|
2,587
|
|
Other assets and
liabilities, net
|
6,540
|
|
|
3,050
|
|
Net cash used in
operating activities
|
51,860
|
|
|
86,464
|
|
|
|
|
|
Cash flows -
investing activities
|
|
|
|
Acquisition of
business
|
—
|
|
|
(3,520)
|
|
Capital
expenditures
|
(2,565)
|
|
|
(848)
|
|
Purchases of
available-for-sale investments
|
(47,249)
|
|
|
(42,669)
|
|
Proceeds from sales of
available-for-sale investments
|
49,166
|
|
|
38,930
|
|
Net cash provided by
(used in) investing activities
|
(648)
|
|
|
(8,107)
|
|
|
|
|
|
Cash flows -
financing activities
|
|
|
|
Payments on line of
credit
|
(100,000)
|
|
|
—
|
|
Cash dividends
paid
|
(3,022)
|
|
|
(2,963)
|
|
Acquisition earnout
payments
|
—
|
|
|
(1,446)
|
|
Net cash provided by
(used in) financing activities
|
(103,022)
|
|
|
(4,409)
|
|
|
|
|
|
Effect of exchange
rate fluctuations on cash, cash equivalents and restricted
cash
|
3,627
|
|
|
(2,890)
|
|
|
|
|
|
Net decrease in cash,
cash equivalents and restricted cash
|
(48,183)
|
|
|
71,058
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
218,760
|
|
|
105,314
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
170,577
|
|
|
$
|
176,372
|
|
Heidrick &
Struggles International Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
2020
|
|
2019
|
Cash flows -
operating activities
|
|
|
|
|
Net income
(loss)
|
|
$
|
(43,245)
|
|
|
$
|
36,314
|
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
20,638
|
|
|
7,983
|
|
Deferred income
taxes
|
|
700
|
|
|
(24)
|
|
Stock-based
compensation expense
|
|
7,146
|
|
|
7,250
|
|
Accretion expense
related to earnout payments
|
|
—
|
|
|
495
|
|
Gain on marketable
securities
|
|
(144)
|
|
|
(353)
|
|
Loss on disposal of
property and equipment
|
|
289
|
|
|
—
|
|
Impairment
charges
|
|
32,970
|
|
|
—
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
(9,616)
|
|
|
(36,961)
|
|
Accounts
payable
|
|
2,809
|
|
|
(144)
|
|
Accrued
expenses
|
|
(77,776)
|
|
|
(52,680)
|
|
Restructuring
accrual
|
|
6,289
|
|
|
2,762
|
|
Deferred
revenue
|
|
(3,892)
|
|
|
113
|
|
Income taxes
recoverable and payable, net
|
|
(11,460)
|
|
|
(3,952)
|
|
Retirement and pension
plan assets and liabilities
|
|
1,304
|
|
|
1,824
|
|
Prepaid
expenses
|
|
(1,229)
|
|
|
(920)
|
|
Other assets and
liabilities, net
|
|
2,312
|
|
|
2,874
|
|
Net cash used in
operating activities
|
|
(72,905)
|
|
|
(35,419)
|
|
|
|
|
|
|
Cash flows -
investing activities
|
|
|
|
|
Acquisition of
business
|
|
—
|
|
|
(3,520)
|
|
Capital
expenditures
|
|
(7,121)
|
|
|
(2,641)
|
|
Purchases of
available-for-sale investments
|
|
(118,668)
|
|
|
(83,146)
|
|
Proceeds from sales of
available-for-sale investments
|
|
111,633
|
|
|
39,162
|
|
Net cash used in
investing activities
|
|
(14,156)
|
|
|
(50,145)
|
|
|
|
|
|
|
Cash flows -
financing activities
|
|
|
|
|
Proceeds from line of
credit
|
|
100,000
|
|
|
—
|
|
Payments on line of
credit
|
|
(100,000)
|
|
|
—
|
|
Cash dividends
paid
|
|
(9,019)
|
|
|
(8,866)
|
|
Payment of employee tax
withholdings on equity transactions
|
|
(1,550)
|
|
|
(4,552)
|
|
Acquisition earnout
payments
|
|
(2,789)
|
|
|
(1,853)
|
|
Net cash used in
financing activities
|
|
(13,358)
|
|
|
(15,271)
|
|
|
|
|
|
|
Effect of exchange
rate fluctuations on cash, cash equivalents and restricted
cash
|
|
(723)
|
|
|
(3,055)
|
|
|
|
|
|
|
Net decrease in cash,
cash equivalents and restricted cash
|
|
(101,142)
|
|
|
(103,890)
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
271,719
|
|
|
280,262
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
170,577
|
|
|
$
|
176,372
|
|
Heidrick &
Struggles International Inc.
Reconciliation of Net Income (Loss) and Operating Income (Loss) to
Adjusted EBITDA (Non-GAAP)
(In thousands)
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue before
reimbursements (net revenue)
|
$
|
143,544
|
|
|
$
|
182,174
|
|
|
$
|
460,628
|
|
|
$
|
526,890
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(26,178)
|
|
|
9,947
|
|
|
(43,245)
|
|
|
36,314
|
|
Interest,
net
|
180
|
|
|
(819)
|
|
|
(160)
|
|
|
(2,039)
|
|
Other, net
|
(1,819)
|
|
|
464
|
|
|
(460)
|
|
|
(1,887)
|
|
Provision for (benefit
from) income taxes
|
(10,416)
|
|
|
4,880
|
|
|
(202)
|
|
|
16,828
|
|
Operating income
(loss)
|
(38,233)
|
|
|
14,472
|
|
|
(44,067)
|
|
|
49,216
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
3,195
|
|
|
2,539
|
|
|
6,641
|
|
|
6,790
|
|
Depreciation
|
2,129
|
|
|
2,444
|
|
|
6,194
|
|
|
7,316
|
|
Intangible
amortization
|
183
|
|
|
192
|
|
|
585
|
|
|
667
|
|
Earnout
accretion
|
—
|
|
|
168
|
|
|
—
|
|
|
495
|
|
Acquisition contingent
consideration
|
462
|
|
|
—
|
|
|
1,482
|
|
|
—
|
|
Restructuring
charges
|
48,115
|
|
|
4,130
|
|
|
48,115
|
|
|
4,130
|
|
Impairment
charges
|
—
|
|
|
—
|
|
|
32,970
|
|
|
—
|
|
Total
adjustments
|
54,084
|
|
|
9,473
|
|
|
95,987
|
|
|
19,398
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
15,851
|
|
|
$
|
23,945
|
|
|
$
|
51,920
|
|
|
$
|
68,614
|
|
Adjusted EBITDA
margin
|
11.0
|
%
|
|
13.1
|
%
|
|
11.3
|
%
|
|
13.0
|
%
|
View original
content:http://www.prnewswire.com/news-releases/heidrick--struggles-announces-2020-third-quarter-results-and-provides-fourth-quarter-guidance-301159800.html
SOURCE Heidrick & Struggles