HSII

HEIDRICK & STRUGGLES INTERNATIONAL INC

Industrials | Small Cap

$0.74

EPS Forecast

$275.7

Revenue Forecast

Announcing earnings for the quarter ending 2024-12-31 soon
EX-99.1 2 hsii-022420xex991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

logoa01.jpg
FOR IMMEDIATE RELEASE

Heidrick & Struggles Reports Fourth Quarter and 2019 Financial Results

Net Revenue at High End of Guidance for Fourth Quarter
Second Consecutive Full-Year Net Revenue Over $700 Million
Full-Year Diluted EPS of $2.40; Adjusted EPS of $2.59 is Strongest in Eleven Years

CHICAGO, February 24, 2020 -- Heidrick & Struggles International, Inc. (Nasdaq: HSII), today announced financial results for its fourth quarter and fiscal year ended December 31, 2019.

Highlights:
Operating margin in 2019 was 9.0% and adjusted operating margin of 9.6%, in-line with 2018
General and administrative expense as a percent of net revenue in 2019 was 19.4%, the lowest in 12 years and down from 19.7% in 2018
2019 average revenue per executive search of $132,000, a record high, up 4% from prior year
Fourth quarter net revenue of $180.0 million, at the high end of guidance
Heidrick Consulting delivered $17.0 million of net revenue in the fourth quarter, the third consecutive quarter of sequential growth

“By successfully navigating market volatility, we produced quarterly net revenue at the high end of our guidance and closed the year within one percent of last year’s record net revenue results,” stated Heidrick & Struggles’ President and Chief Executive Officer, Krishnan Rajagopalan. “Our full-year adjusted earnings surpassed a very strong 2018, as our continued focus on operational efficiencies allowed us to deliver consistent adjusted operating margin on slightly lower revenue. Cross-collaboration between Executive Search and Heidrick Consulting also continues to generate synergies as evidenced by Heidrick Consulting’s sequential net revenue growth. Our recent acquisition of 2Get in Brazil expands our growth platform throughout Latin America, where we see compelling opportunities for both Executive Search and Heidrick Consulting. We are particularly excited about innovative and transformational projects such as digital transformation, sustainability and diversity & inclusion, that we are participating in with both our clients and internally.”
Mr. Rajagopalan concluded, “Through our C-suite focus, we’re playing a pivotal role in shaping our clients’ future. We continue to uncover attractive opportunities emerging across the increasingly complex and fast-changing industry landscape. In 2020, we intend to leverage our market position and strong cash flow to make additional disciplined investments in our product teams and provide new innovative offerings to broaden our capabilities and support the foundational changes our clients seek to implement. We take a long-term approach to the business, and believe that investing in innovation and growth is directly correlated with the ultimate creation of shareholder value.”

2019 Fourth Quarter Results

Consolidated net revenue (revenue before reimbursements) of $180.0 million declined 2.8%, or $5.3 million, from $185.3 million in the 2018 fourth quarter. Excluding the impact of exchange rate fluctuations, consolidated net revenue declined 2.3%, or $4.3 million.

Executive Search net revenue of $163.0 million declined 3.3%, or $5.5 million, from $168.5 million in the 2018 fourth quarter. Excluding the impact of exchange rate fluctuations, Executive Search net revenue declined 2.7% or $4.5 million. Net revenue decreased 2.7% in the Americas (a 2.5% decrease on a constant currency basis), decreased 8.9% in Europe (a 7.4% decrease on a constant currency basis) and increased 2.6% in Asia Pacific (a 3.3% increase on a constant currency basis). Growth in the Consumer Markets and Global Technology & Services practices was offset by declines in the other industry practices.

There were 380 Executive Search consultants at December 31, 2019 compared to 353 at December 31, 2018 and 380 at September 30, 2019. Productivity, as measured by annualized Executive Search net revenue per consultant, was $1.7 million compared to $1.9 million in the 2018 fourth quarter. The average revenue per executive search was $149,300 compared to $142,000 in the 2018 fourth quarter.




Exhibit 99.1

Heidrick Consulting net revenue increased 1.4% to $17.0 million from $16.8 million in the 2018 fourth quarter. Excluding the impact of exchange rate fluctuations, Heidrick Consulting net revenue increased 1.7%, or $0.3 million. There were 71 consultants at December 31, 2019 compared to 66 at December 31, 2018 and 71 at September 30, 2019.

Consolidated salaries and benefits expense declined 2.6%, or $3.4 million, to $129.9 million from $133.3 million in the 2018 fourth quarter. Fixed compensation expense increased $6.1 million and variable compensation expense declined $9.6 million, mostly related to lower revenue in the quarter. Included in variable compensation for the 2019 fourth quarter is $0.6 million of contingent compensation for the former owners of 2GET, a leading search firm in Brazil, which the company acquired in the third quarter. This contingent compensation is based on the achievement of certain revenue and EBITDA milestones for the period from acquisition through 2023. Salaries and benefits expense was 72.1% of net revenue for the quarter compared to 72.0% for the 2018 fourth quarter.

General and administrative expenses were $35.8 million compared to $35.3 million in the 2018 fourth quarter. As a percentage of net revenue, general and administrative expenses were 19.9% compared to 19.0% in the 2018 fourth quarter.

Operating income was $14.3 million compared to $16.7 million in the 2018 fourth quarter. Operating margin was 7.9% in the 2019 fourth quarter compared to 9.0% in the 2018 fourth quarter.

Net income in the 2019 fourth quarter was $10.6 million and diluted earnings per share was $0.54 with an effective tax rate of 34.6%. This compares to net income of $11.2 million and diluted earnings per share of $0.58 with an effective tax rate of 30.0% in the 2018 fourth quarter.

Adjusted EBITDA in the 2019 fourth quarter was $20.5 million compared to $22.2 million in the 2018 fourth quarter. Adjusted EBITDA margin was 11.4% compared to 12.0% in the 2018 fourth quarter. The change in adjusted EBITDA and adjusted EBITDA margin were primarily due to lower revenue in the quarter.
 
Net cash provided by operating activities was $114.1 million in the 2019 fourth quarter, compared to $125.8 million in the 2018 fourth quarter. Cash and marketable securities at December 31, 2019 were $332.9 million, compared to $279.9 million at December 31, 2018. The company’s cash position typically builds throughout the year as bonuses are accrued and then mostly paid out in the first quarter.

Fiscal 2019 Results

Consolidated net revenue of $706.9 million decreased 1.3%, or $9.1 million, from $716.0 million in 2018.Excluding the impact of exchange rate fluctuations which negatively impacted results by $11.3 million, or 1.6%, consolidated net revenue increased 0.3%, or $2.2 million.

Executive Search net revenue was $646.4 million compared to $652.9 million in 2018. Excluding the impact of exchange rate fluctuations which negatively impacted results by $10.3 million, or 1.6%, Executive Search net revenue increased 0.6%, or $3.8 million, to $656.6 million. Net revenue grew 2.5% in the Americas (2.7% increase on a constant currency basis), decreased 7.1% in Europe (2.4% decrease on a constant currency basis), and decreased 6.3% in the Asia Pacific region (3.7% decrease on a constant currency basis). Growth in the Global Technology & Services, Consumer Markets and Healthcare & Life Sciences practices was offset by declines in the other industry practices. Productivity was $1.7 million per executive search consultant compared to a record $1.9 million in 2018. The number of confirmed executive searches was down 4.6% and the average revenue per executive search increased to $132,000 compared to $127,300 in 2018.

Heidrick Consulting net revenue was $60.6 million compared to $63.1 million in 2018. Excluding the impact of exchange rate fluctuations, Heidrick Consulting revenue declined 2.4%, or $1.5 million, primarily due to less revenue per consulting engagement.

Consolidated salaries and benefits expense improved 0.9%, or $4.6 million, to $501.8 million from $506.3 million in 2018. Fixed compensation expense increased $12.9 million primarily due to the company’s deferred compensation plan and base salaries and payroll taxes. Variable compensation expense improved $17.5 million, primarily due to lower revenue for the year. Salaries and benefits expense was 71.0% of net revenue in 2019 compared to 70.7% in 2018.

General and administrative expenses in 2019 declined 2.4%, or $3.3 million, to $137.5 million from $140.8 million in 2018.Savings were primarily due to a reduction in professional fees, including audit, IT and legal fees. As a percentage of net revenue, general and administrative expenses were 19.4% compared to 19.7% in 2018.




Exhibit 99.1

During 2019, 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 third quarter of 2019 in connection with related employee, facility and legal costs associated with the transition away from its legacy Brazil operations.

Operating income was $63.5 million and operating margin was 9.0%, including the $4.1 million restructuring charge. This compared to operating income of $68.9 million in 2018 and operating margin of 9.6%. Foreign exchange rate fluctuations negatively impacted operating income by $1.1 million, or 1.7%. Adjusted operating income, which excludes the restructuring charge, decreased $1.2 million to $67.6 million from $68.9 million in 2018. Adjusted operating margin of 9.6% was the same as 2018, despite lower revenue.

Net income in 2019 was $46.9 million and diluted earnings per share was $2.40, with an effective tax rate of 32.4%. This compares to net income of $49.3 million and diluted earnings per share of $2.52 with an effective tax rate of 30.1% in 2018. Adjusted net income, which excludes the restructuring charge net of tax, was $50.6 million and adjusted diluted earnings per share was $2.59.

Adjusted EBITDA decreased $1.6 million to $89.1 million with an adjusted EBITDA margin of 12.6%, compared to adjusted EBITDA of $90.7 million and an adjusted EBITDA margin of 12.7% in 2018.

Net cash provided by operating activities was $78.6 million, compared to $102.9 million in 2018.

Dividend

The Board of Directors has declared a 2020 first quarter cash dividend of $0.15 per share payable on March 20, 2020 to shareholders of record at the close of business on March 6, 2020.

2020 First Quarter Outlook

The company expects 2019 first quarter consolidated net revenue of between $165 million and $175 million. This outlook is based on the average currency rates in December 2019 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. Additionally, the company is proactively monitoring the significant level of uncertainty associated with the Coronavirus and is keeping in close communication with its team and clients in affected regions. While the situation is still fluid and it is too early to quantify, it is reasonable to assume that along with the reported economic pressure, the Coronavirus could have a related impact on first quarter results.

Quarterly Conference Call

Heidrick & Struggles will host a conference call to review its fourth quarter and 2019 results today, February 24 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 (647) 689-6618, conference ID# 3194999. 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.




Exhibit 99.1

The non-GAAP financial measures used within this earnings release are adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted diluted earnings per share 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 refers to operating income excluding restructuring charges.

Adjusted operating 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, net of tax.

Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, equity- settled stock compensation expense, earnout accretion expense related to acquisitions, contingent compensation expense related to acquisitions, 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, 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.
###



Exhibit 99.1

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




Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)

 
Three Months Ended
December 31,
 
 
 
2019
 
2018
 
$ Change
 
% Change
Revenue
 
 
 
 
 
 
 
Revenue before reimbursements (net revenue)
$
180,034

 
$
185,305

 
$
(5,271
)
 
(2.8
)%
Reimbursements
4,615

 
5,662

 
(1,047
)
 
(18.5
)%
Total revenue
184,649

 
190,967

 
(6,318
)
 
(3.3
)%
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Salaries and benefits
129,893

 
133,328

 
(3,435
)
 
(2.6
)%
General and administrative expenses
35,846

 
35,285

 
561

 
1.6
 %
Reimbursed expenses
4,615

 
5,662

 
(1,047
)
 
(18.5
)%
Total operating expenses
170,354

 
174,275

 
(3,921
)
 
(2.2
)%
 
 
 
 
 
 
 
 
Operating income
14,295

 
16,692

 
(2,397
)
 
(14.4
)%
 
 
 
 
 
 
 
 
Non-operating income (expense)
 
 
 
 
 
 
 
Interest, net
841

 
645

 
 
 
 
Other, net
1,011

 
(1,355
)
 
 
 
 
Net non-operating income (expense)
1,852

 
(710
)
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
16,147

 
15,982

 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
5,592

 
4,787

 
 
 
 
 
 
 
 
 
 
 
 
Net income
10,555

 
11,195

 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
774

 
(57
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
11,329

 
$
11,138

 
 
 
 
 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
19,138

 
18,954

 
 
 
 
Diluted weighted average common shares outstanding
19,507

 
19,404

 
 
 
 
 
 
 
 
 
 
 
 
Basic net income per common share
$
0.55

 
$
0.59

 
 
 
 
Diluted net income per common share
$
0.54

 
$
0.58

 
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits as a % of net revenue
72.1%
 
72.0%
 
 
 
 
General and administrative expense as a % of net revenue
19.9%
 
19.0%
 
 
 
 
Operating income as a % of net revenue
7.9%
 
9.0%
 
 
 
 



Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)

 
Three Months Ended December 31,
 
2019
 
2018
 
$ Change
 
% Change
 
2019 Margin*
 
2018 Margin*
Revenue
 
 
 
 
 
 
 
 
 
 
 
Executive Search
 
 
 
 
 
 
 
 
 
 
 
Americas
$
106,755

 
$
109,768

 
$
(3,013
)
 
(2.7
)%
 
 
 
 
Europe
31,826

 
34,929

 
(3,103
)
 
(8.9
)%
 
 
 
 
Asia Pacific
24,433

 
23,816

 
617

 
2.6
 %
 
 
 
 
Total Executive Search
163,014

 
168,513

 
(5,499
)
 
(3.3
)%
 
 
 
 
Heidrick Consulting
17,020

 
16,792

 
228

 
1.4
 %
 
 
 
 
Revenue before reimbursements (net revenue)
180,034

 
185,305

 
(5,271
)
 
(2.8
)%
 
 
 
 
Reimbursements
4,615

 
5,662

 
(1,047
)
 
(18.5
)%
 
 
 
 
Total revenue
$
184,649

 
$
190,967

 
$
(6,318
)
 
(3.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
 
 
 
 
Executive Search
 
 
 
 
 
 
 
 
 
 
 
Americas
$
26,622

 
$
26,892

 
$
(270
)
 
(1.0
)%
 
24.9
 %
 
24.5
 %
Europe
(762
)
 
(604
)
 
(158
)
 
(26.2
)%
 
(2.4
)%
 
(1.7
)%
Asia Pacific
2,948

 
2,391

 
557

 
23.3
 %
 
12.1
 %
 
10.0
 %
Total Executive Search
28,808

 
28,679

 
129

 
0.4
 %
 
17.7
 %
 
17.0
 %
Heidrick Consulting
(5,729
)
 
(2,631
)
 
(3,098
)
 
(117.7
)%
 
(33.7
)%
 
(15.7
)%
Total segment operating income
23,079

 
26,048

 
(2,969
)
 
(11.4
)%
 
12.8
 %
 
14.1
 %
Global Operations Support
(8,784
)
 
(9,356
)
 
572

 
6.1
 %
 
(4.9
)%
 
(5.0
)%
Total operating income
$
14,295

 
$
16,692

 
$
(2,397
)
 
(14.4
)%
 
7.9
 %
 
9.0
 %

* Margin based on revenue before reimbursements (net revenue)




Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)

 
Year Ended
December 31,
 
 
 
2019
 
2018
 
$ Change
 
% Change
Revenue
 
 
 
 
 
 
 
Revenue before reimbursements (net revenue)
$
706,924

 
$
716,023

 
$
(9,099
)
 
(1.3
)%
Reimbursements
18,690

 
19,632

 
(942
)
 
(4.8
)%
Total revenue
725,614

 
735,655

 
(10,041
)
 
(1.4
)%
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Salaries and benefits
501,791

 
506,349

 
(4,558
)
 
(0.9
)%
General and administrative expenses
137,492

 
140,817

 
(3,325
)
 
(2.4
)%
Restructuring charges
4,130

 

 
4,130

 
100.0
 %
Reimbursed expenses
18,690

 
19,632

 
(942
)
 
(4.8
)%
Total operating expenses
662,103

 
666,798

 
(4,695
)
 
(0.7
)%
 
 
 
 
 
 
 
 
Operating income
63,511

 
68,857

 
(5,346
)

(7.8
)%
 
 
 
 
 
 
 
 
Non-operating income
 
 
 
 
 
 
 
Interest, net
2,880

 
1,141

 
 
 
 
Other, net
2,898

 
494

 
 
 
 
Net non-operating income
5,778

 
1,635

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
69,289

 
70,492

 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
22,420

 
21,197

 
 
 
 
 
 
 
 
 
 
 
 
Net income
46,869

 
49,295

 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive loss, net of tax
(238
)
 
(3,164
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
46,631

 
$
46,131

 
 
 
 
 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
19,103

 
18,917

 
 
 
 
Diluted weighted average common shares outstanding
19,551

 
19,532

 
 
 
 
 
 
 
 
 
 
 
 
Basic net income per common share
$
2.45

 
$
2.61

 
 
 
 
Diluted net income per common share
$
2.40

 
$
2.52

 
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits as a % of net revenue
71.0%
 
70.7%
 
 
 
 
General and administrative expense as a % of net revenue
19.4%
 
19.7%
 
 
 
 
Operating income as a % of net revenue
9.0%
 
9.6%
 
 
 
 



Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)

 
Year Ended December 31,
 
2019
 
2018
 
$ Change
 
% Change
 
2019 Margin*
 
2018 Margin*
Revenue
 
 
 
 
 
 
 
 
 
 
 
Executive Search
 
 
 
 
 
 
 
 
 
 
 
Americas
$
415,455

 
$
405,267

 
$
10,188

 
2.5
 %
 
 
 
 
Europe
135,070

 
145,348

 
(10,278
)
 
(7.1
)%
 
 
 
 
Asia Pacific
95,827

 
102,276

 
(6,449
)
 
(6.3
)%
 
 
 
 
Total Executive Search
646,352

 
652,891

 
(6,539
)
 
(1.0
)%
 
 
 
 
Heidrick Consulting
60,572

 
63,132

 
(2,560
)
 
(4.1
)%
 
 
 
 
Revenue before reimbursements (net revenue)
706,924

 
716,023

 
(9,099
)
 
(1.3
)%
 
 
 
 
Reimbursements
18,690

 
19,632

 
(942
)
 
(4.8
)%
 
 
 
 
Total revenue
$
725,614

 
$
735,655

 
$
(10,041
)
 
(1.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
 
 
 
 
Executive Search
 
 
 
 
 
 
 
 
 
 
 
Americas (1)
$
100,833

 
$
96,880

 
$
3,953

 
4.1
 %
 
24.3
 %
 
23.9
 %
Europe
3,026

 
5,849

 
(2,823
)
 
(48.3
)%
 
2.2
 %
 
4.0
 %
Asia Pacific
13,590

 
15,999

 
(2,409
)
 
(15.1
)%
 
14.2
 %
 
15.6
 %
Total Executive Search
117,449

 
118,728

 
(1,279
)
 
(1.1
)%
 
18.2
 %
 
18.2
 %
Heidrick Consulting
(18,499
)
 
(13,619
)
 
(4,880
)
 
(35.8
)%
 
(30.5
)%
 
(21.6
)%
Total segment operating income
98,950

 
105,109

 
(6,159
)
 
(5.9
)%
 
14.0
 %
 
14.7
 %
Global Operations Support (1)
(35,439
)
 
(36,252
)
 
813

 
2.2
 %
 
(5.0
)%
 
(5.1
)%
Total operating income
$
63,511

 
$
68,857

 
$
(5,346
)
 
(7.8
)%
 
9.0
 %
 
9.6
 %

* Margin based on revenue before reimbursements (net revenue)
(1) 2019 includes restructuring charges of $4.1 million in the Americas and less than $0.1 million in Global Operations Support



Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
RECONCILIATION OF OPERATING INCOME AND ADJUSTED OPERATING INCOME (Non-GAAP)
(In thousands)
(Unaudited)

 
Three Months Ended
December 31,
 
Year Ended
December 31,
 
2019
 
2018
 
2019
 
2018
Revenue before reimbursements (net revenue)
$
180,034

 
$
185,305

 
$
706,924

 
$
716,023

 
 
 
 
 
 
 
 
Operating income
14,295

 
16,692

 
63,511

 
68,857

 
 
 
 
 
 
 
 
Adjustments
 
 
 
 
 
 
 
Restructuring charges (1)

 

 
4,130

 

Total adjustments

 

 
4,130

 

 
 
 
 
 
 
 
 
Adjusted operating income
$
14,295

 
$
16,692

 
$
67,641

 
$
68,857

 
 
 
 
 
 
 
 
Operating income as a % of net revenue
7.9%
 
9.0%
 
9.0%
 
9.6%
Adjusted operating income as a % of net revenue
7.9%
 
9.0%
 
9.6%
 
9.6%


HEIDRICK & STRUGGLES INTERNATIONAL, INC.
RECONCILIATION OF NET INCOME AND ADJUSTED NET INCOME (Non-GAAP)
(In thousands)
(Unaudited)

 
Three Months Ended
December 31,
 
Year Ended
December 31,
 
2019
 
2018
 
2019
 
2018
Net income
$
10,555

 
$
11,195

 
$
46,869

 
$
49,295

 
 
 
 
 
 
 
 
Adjustments
 
 
 
 
 
 
 
Restructuring charges, net of tax (1)

 

 
3,768

 

Total adjustments

 

 
3,768

 

 
 
 
 
 
 
 
 
Adjusted net income
$
10,555

 
$
11,195

 
$
50,637

 
$
49,295

 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
19,138

 
18,954

 
19,103

 
18,917

Diluted weighted average common shares outstanding
19,507

 
19,404

 
19,551

 
19,532

 
 
 
 
 
 
 
 
Basic net income per common share
$
0.55

 
$
0.59

 
$
2.45

 
$
2.61

Diluted net income per common share
$
0.54

 
$
0.58

 
$
2.40

 
$
2.52

 
 
 
 
 
 
 
 
Adjusted basic net income per common share
$
0.55

 
$
0.59

 
$
2.65

 
$
2.61

Adjusted diluted net income per common share
$
0.54

 
$
0.58

 
$
2.59

 
$
2.52


(1) For the three months ended September 30, 2019, the Company incurred approximately $4.1 million in restructuring charges related to the closing of the Company's legacy Brazil operations due to the acquisition of 2GET. The restructuring charges consist primarily of employee-related costs for the Company's existing Brazil operations.



Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
December 31,
2019
 
December 31, 2018
 
(Unaudited)
 
 
Current assets
 
 
 
Cash and cash equivalents
$
271,719

 
$
279,906

Marketable securities
61,153

 

Accounts receivable, net
109,163

 
114,977

Prepaid expenses
20,185

 
22,766

Other current assets
27,848

 
29,598

Income taxes recoverable
4,414

 
3,620

Total current assets
494,482

 
450,867

 
 
 
 
Non-current assets
 
 
 
Property and equipment, net
28,650

 
33,871

Operating lease right-of-use assets
99,391

 

Assets designated for retirement and pension plans
13,978

 
15,035

Investments
25,409

 
19,442

Other non-current assets
20,434

 
22,276

Goodwill
126,831

 
122,092

Other intangible assets, net
1,935

 
2,216

Deferred income taxes
33,063

 
34,830

Total non-current assets
349,691

 
249,762

 
 
 
 
Total assets
$
844,173

 
$
700,629

 
 
 
 
Current liabilities
 
 
 
Accounts payable
$
8,633

 
$
9,166

Accrued salaries and benefits
234,306

 
227,653

Deferred revenue
41,267

 
40,673

Operating lease liabilities
30,955

 

Other current liabilities
26,253

 
33,219

Income taxes payable
3,928

 
8,240

Total current liabilities
345,342

 
318,951

 
 
 
 
Non-current liabilities
 
 
 
Accrued salaries and benefits
59,662

 
57,234

Retirement and pension plans
46,032

 
39,865

Operating lease liabilities
79,388

 

Other non-current liabilities
4,634

 
17,423

Total non-current liabilities
189,716

 
114,522

 
 
 
 
Total liabilities
535,058

 
433,473

 
 
 
 
Stockholders’ equity
309,115

 
267,156

 
 
 
 
Total liabilities and stockholders’ equity
$
844,173

 
$
700,629





Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Three Months Ended
December 31,
 
 
2019
 
2018
Cash flows - operating activities
 
 
 
 
Net income
 
$
10,555

 
$
11,195

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
2,388

 
2,964

Deferred income taxes
 
1,668

 
(3,058
)
Stock-based compensation expense
 
3,048

 
2,184

Accretion expense related to earnout payments
 
173

 
322

Gain on marketable securities
 
(242
)
 

Changes in assets and liabilities, net of effects of acquisition:
 
 
 
 
Accounts receivable
 
43,860

 
43,298

Accounts payable
 
(850
)
 
235

Accrued expenses
 
55,121

 
67,692

Restructuring accrual
 
(803
)
 
(784
)
Deferred revenue
 
62

 
(2,084
)
Income taxes payable, net
 
(1,498
)
 
2,760

Retirement and pension plan assets and liabilities
 
1,434

 
(473
)
Prepaid expenses
 
465

 
2,523

Other assets and liabilities, net
 
(1,317
)
 
(987
)
Net cash provided by operating activities
 
114,064

 
125,787

 
 
 
 
 
Cash flows - investing activities
 
 
 
 
Acquisition of businesses
 

 
36

Capital expenditures
 
(711
)
 
(1,021
)
Purchases of available-for-sale investments
 
(47,265
)
 
(155
)
Proceeds from sales of available-for-sale investments
 
28,806

 
105

Net cash used in investing activities
 
(19,170
)
 
(1,035
)
 
 
 
 
 
Cash flows - financing activities
 
 
 
 
Debt issuance costs
 

 
(981
)
Cash dividends paid
 
(2,969
)
 
(2,608
)
Acquisition earnout payments
 

 
(3,592
)
Net cash used in financing activities
 
(2,969
)
 
(7,181
)
 
 
 
 
 
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash
 
3,422

 
(2,123
)
 
 
 
 
 
Net increase in cash, cash equivalents and restricted cash
 
95,347

 
115,448

Cash, cash equivalents and restricted cash at beginning of period
 
176,372

 
164,814

Cash, cash equivalents and restricted cash at end of period
 
$
271,719

 
$
280,262




Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Year Ended
December 31,
 
 
2019
 
2018
Cash flows - operating activities
 
 
 
 
Net income
 
$
46,869

 
$
49,295

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
10,371

 
12,522

Deferred income taxes
 
1,644

 
(3,496
)
Stock-based compensation expense
 
10,298

 
8,947

Accretion expense related to earnout payments
 
668

 
1,285

Gain on marketable securities
 
(595
)
 

Changes in assets and liabilities, net of effects of acquisition:
 
 
 
 
Accounts receivable
 
6,899

 
(16,759
)
Accounts payable
 
(994
)
 
(526
)
Accrued expenses
 
2,441

 
71,526

Restructuring accrual
 
1,959

 
(11,617
)
Deferred revenue
 
175

 
(1,899
)
Income taxes payable, net
 
(5,450
)
 
757

Retirement and pension plan assets and liabilities
 
3,258

 
(1,492
)
Prepaid expenses
 
(455
)
 
(893
)
Other assets and liabilities, net
 
1,557

 
(4,748
)
Net cash provided by operating activities
 
78,645

 
102,902

 
 
 
 
 
Cash flows - investing activities
 
 
 
 
Acquisition of businesses
 
(3,520
)
 
(3,083
)
Capital expenditures
 
(3,352
)
 
(5,960
)
Purchases of available-for-sale investments
 
(130,411
)
 
(2,201
)
Proceeds from sales of available-for-sale investments
 
67,968

 
2,995

Net cash used in investing activities
 
(69,315
)
 
(8,249
)
 
 
 
 
 
Cash flows - financing activities
 
 
 
 
Proceeds from line of credit
 

 
20,000

Payments on line of credit
 

 
(20,000
)
Debt issuance costs
 

 
(981
)
Cash dividends paid
 
(11,835
)
 
(10,181
)
Payment of employee tax withholdings on equity transactions
 
(4,552
)
 
(2,234
)
Acquisition earnout payments
 
(1,853
)
 
(3,592
)
Net cash used in financing activities
 
(18,240
)
 
(16,988
)
 
 
 
 
 
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash
 
367

 
(5,565
)
 
 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
 
(8,543
)
 
72,100

Cash, cash equivalents and restricted cash at beginning of period
 
280,262

 
208,162

Cash, cash equivalents and restricted cash at end of period
 
$
271,719

 
$
280,262




Exhibit 99.1

HEIDRICK & STRUGGLES INTERNATIONAL, INC.
RECONCILIATION OF NET INCOME AND OPERATING INCOME TO ADJUSTED EBITDA (Non-GAAP)
(In thousands)
(Unaudited)

 
Three Months Ended
December 31,
 
Year Ended
December 31,
 
2019
 
2018
 
2019
 
2018
Revenue before reimbursements (net revenue)
$
180,034

 
$
185,305

 
$
706,924

 
$
716,023

 
 
 
 
 
 
 
 
Net income
10,555

 
11,195

 
46,869

 
49,295

Interest, net
(841
)
 
(645
)
 
(2,880
)
 
(1,141
)
Other, net
(1,011
)
 
1,355

 
(2,898
)
 
(494
)
Provision for income taxes
5,592

 
4,787

 
22,420

 
21,197

Operating income
14,295

 
16,692

 
63,511

 
68,857

 
 
 
 
 
 
 
 
Adjustments
 
 
 
 
 
 
 
Salaries and benefits
 
 
 
 
 
 
 
Stock-based compensation expense
3,028

 
2,630

 
9,818

 
8,385

General and administrative expenses
 
 
 
 
 
 
 
Depreciation
2,146

 
2,688

 
9,462

 
11,025

Intangible amortization
242

 
276

 
909

 
1,496

Earnout accretion
173

 
(43
)
 
668

 
920

Acquisition contingent compensation
604

 

 
604

 

Restructuring charges

 

 
4,130

 

Total adjustments
6,193

 
5,551

 
25,591

 
21,826

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
20,488

 
$
22,243

 
$
89,102

 
$
90,683

Adjusted EBITDA Margin
11.4%
 
12.0%
 
12.6%
 
12.7%