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Exhibit 99.1

 

News    FOR IMMEDIATE RELEASE

Heidrick & Struggles Reports Third Quarter 2014 Financial Results

CHICAGO (October 28, 2014) — Heidrick & Struggles, a premier provider of senior-level Executive Search, Culture Shaping and Leadership Consulting services globally, today announced financial results for its third quarter ended September 30, 2014.

Consolidated net revenue (revenue before reimbursements) increased 5.8 percent, or $6.8 million, to $125.8 million from $119.0 million in the 2013 third quarter. The positive impact of exchange rate fluctuations resulted in $1.3 million of the increase, or about 1 percent of the growth.

Executive Search and Leadership Consulting net revenue increased 2.7 percent year over year, or $3.1 million, to $115.5 million. The improvement was driven by performance in Europe, where revenue increased 16.4 percent, or $3.8 million (approximately 12 percent on a constant currency basis). Net revenue declined by $0.5 million in the Americas and by $0.2 million in Asia Pacific. From a global practices perspective, the Financial Services, Industrial, and Global Technology & Services industry practices, three of the firm’s four largest, were the primary drivers of year-over-year growth.

Net revenue from Culture Shaping services increased 57.4 percent, or $3.8 million, to $10.3 million from $6.6 million in the 2013 third quarter. The improvement in net revenue primarily reflects the stage of the project execution for several large clients.

The company ended the third quarter with 311 Executive Search and Leadership Consulting consultants, the same as at June 30, 2014, and compared to 308 at September 30, 2013. Productivity, as measured by annualized net revenue per consultant, increased to $1.5 million compared to $1.4 million in the 2013 third quarter.


LOGO

Specific to Executive Search, the company’s primary business, the number of confirmed searches increased 8.1 percent compared to the 2013 third quarter and the average revenue per executive search was $122,200 compared to $124,500 in the 2013 third quarter.

“Our third quarter results reflect steady progress in stabilizing and rebuilding our business,” said Tracy R. Wolstencroft, Heidrick & Struggles’ President and Chief Executive Officer. “During the quarter, we advanced several initiatives that support our vision to provide integrated leadership solutions to the world’s leading organizations. We began working on our largest integrated Search, Leadership Consulting and Culture Shaping services assignment to date and we rolled out two recently developed tools that add to our data and analytical capabilities and enhance the judgment we provide our clients making human capital decisions. Although our results are trending in the right direction, we need to accelerate improvements, with revenue growth being the most important deliverable.”

Salaries and employee benefits expense in the third quarter increased 2.9 percent, or $2.4 million, to $84.0 million from $81.7 million in the 2013 third quarter. Variable compensation expense increased $3.1 million, primarily related to improved performance reflected in higher net revenue. Fixed compensation expense decreased $0.7 million, reflecting the absence of severance expense recognized for an executive departure in the 2013 third quarter, partially offset by an increase in base salaries and employee benefits expense. Salaries and employee benefits expense was 66.8 percent of net revenue for the quarter, compared to 68.6 percent in the 2013 third quarter.

General and administrative expenses increased 11.3 percent, or $3.3 million, to $32.2 million from $29.0 million in the 2013 third quarter. The increase reflects $1.8 million of expenses associated with the global partners’ meeting held in the third quarter, as well as approximately $1.0 million for professional services, hiring and staffing fees. As a percentage of net revenue, general and administrative expenses were 25.6 percent compared to 24.3 percent in the 2013 third quarter.

 

2


LOGO

Adjusted EBITDA(1) in the 2014 third quarter improved to $15.0 million compared to $13.8 million in the 2013 third quarter. The Adjusted EBITDA margin (Adjusted EBITDA as a percentage of net revenue) in the 2014 third quarter was 11.9 percent, compared to 11.6 percent in the 2013 third quarter. The year-over-year improvement in Adjusted EBITDA mostly reflects higher net revenue, partially offset by the increase in salaries and employee benefits expense and general and administrative expenses.

Operating income in the third quarter increased by $1.2 million to $9.6 million and operating margin (operating income as a percentage of net revenue) improved to 7.6 percent, compared to operating income of $8.4 million and operating margin of 7.0 percent in the 2013 third quarter.

Net income in the 2014 third quarter was $3.0 million and diluted earnings per share were $0.16, based on an effective tax rate of 66.4 percent in the quarter and a full-year projected tax rate of approximately 75 percent. The third quarter tax rate reflects a valuation allowance established in Asia Pacific as well as the current forecasted mix of income by country. Net income in the 2013 third quarter was $4.1 million and diluted earnings per share were $0.23, based on an effective quarterly tax rate of 45.4 percent. In addition to the valuation allowance established in the 2014 third quarter, the effective tax rates in both years are higher than the statutory rate because of losses incurred that could not be benefitted for tax purposes due to valuation allowances in certain jurisdictions.

Net cash provided by operating activities in the 2014 third quarter was $43.0 million, compared to $36.6 million in the 2013 third quarter. Cash and cash equivalents at September 30, 2014 were $159.5 million ($128.5 million net of debt), compared to $132.8 million at September 30, 2013 ($95.8 million net of debt) and $123.4 million at June 30, 2014 ($90.9 million net of debt).

 

(1) Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, stock-based compensation expense, compensation expense associated with Senn Delaney retention awards, earnout accretion expense related to acquisitions, restructuring charges, and other non-operating income (expense). Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures which the company believes are useful to management and meaningful to investors because they provide insight into the ongoing operating results of the company’s core business. A reconciliation to the most directly comparable GAAP measures are provided on the last page of the financial statements in this release.

 

3


LOGO

Nine Months Results

For the nine months ended September 30, 2014 consolidated net revenue of $373.0 million increased 8.4 percent from $344.0 million in the first nine months of 2013. The impact of exchange rate fluctuations was less than 1 percent.

Executive Search and Leadership Consulting net revenue increased 6.3 percent year over year, or $20.4 million, to $346.8 million, driven by a 30.1 percent increase in Europe (approximately 24 percent on a constant currency basis). Compared to the first nine months of 2013, revenue in the Americas was essentially the same and revenue in Asia Pacific increased 1.0 percent (approximately 3 percent on a constant currency basis). From a global practices perspective, the Consumer Markets, Financial Services and Global Technology & Services industry groups were the drivers of year-over-year growth.

Net revenue from Culture Shaping services increased 49.0 percent, or $8.6 million, to $26.2 million from $17.6 million in the first nine months of 2013. Reported results in the first nine months of 2013 excluded $3.9 million of pre-acquisition deferred revenue related to Senn Delaney that the company was unable to recognize as a result of purchase accounting.

Productivity, as measured by annualized Executive Search and Leadership Consulting net revenue per consultant, was $1.5 million for the first nine months of 2014 compared to $1.4 million for the same period of 2013. Specific to Executive Search, the company’s primary business, the number of confirmed searches in the first nine months of 2014 increased 6.6 percent and the average revenue per executive search was $113,400 compared to $111,700 for the same period in 2013.

Adjusted EBITDA(1) for the first nine months of 2014 improved to $39.4 million and Adjusted EBITDA margin was 10.6 percent, compared to Adjusted EBITDA of $32.3 million and Adjusted EBITDA margin of 9.4 percent for the same period of 2013. Operating income for the first nine months of 2014 improved to $22.8 million and operating margin was 6.1 percent compared to operating income of $14.5 million and operating margin of 4.2 percent for the first nine months of 2013.

 

4


LOGO

Net income for the first nine months of 2014 was $6.0 million and diluted earnings per share were $0.33, reflecting an effective tax rate of 72.8 percent. Net income for the first nine months of 2013 was $4.8 million and diluted earnings per share were $0.27, reflecting an effective tax rate of 61.8 percent. In addition to valuation allowances established in the 2014 second and third quarters, the effective tax rates in both years are higher than the statutory rate because of losses incurred that could not be benefitted for tax purposes due to valuation allowances in certain jurisdictions.

2014 Fourth Quarter Outlook

The company is forecasting 2014 fourth quarter consolidated net revenue of between $112 million and $123 million. Among other factors, this forecast reflects assumptions for the anticipated volume of new Executive Search confirmations, Leadership Consulting assignments, expectations for Culture Shaping services, the current backlog, consultant productivity, consultant retention, the seasonality of its business, the global economic climate and for no change in future currency rates.

Wolstencroft added, “Our year-to-date results reflect improvement in many of our operating and business metrics. We have also made good progress in advancing our growth strategy as a fully integrated leadership solutions provider. By leveraging the foundation that we have established this year, focusing on collaboration and innovation to help our clients address their leadership needs, and investing in our people and service offerings we can deliver the long-term value our shareholders expect.”

Quarterly Conference Call

Executives of Heidrick & Struggles will host a conference call to review the 2014 third quarter results today, October 28, at 9 a.m. 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.

 

5


LOGO

About Heidrick & Struggles International, Inc.

Heidrick & Struggles (Nasdaq: HSII) is a premier provider of senior-level Executive Search, Culture Shaping and Leadership Consulting services. For more than 60 years, we have helped our clients build strong leadership teams through quality service, deep insights and our relationships with talented individuals worldwide. Today, Heidrick & Struggles’ leadership experts operate from principal business centers in North America, Latin America, Europe, Asia Pacific, Africa and the Middle East. For more information about Heidrick & Struggles, please visit www.heidrick.com.

Non-GAAP Financial Measures

This earnings release contains 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 EBITDA and Adjusted EBITDA margin. Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, stock-based compensation expense, compensation expense associated with Senn Delaney retention awards, earnout accretion expense related to acquisitions, restructuring charges, and other non-operating income (expense). Adjusted EBITDA margin refers to Adjusted EBITDA (as explained above) as a percentage of net revenue in the same period. A reconciliation of Adjusted EBITDA to Net Income is provided on the last page of this release.

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.

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, integrate, manage and retain qualified executive search consultants; our ability to develop and maintain strong, long-term relationships with our clients; 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; unfavorable tax law changes and tax authority rulings; 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; our reliance on information management systems; any impairment of our goodwill and other intangible assets; and the ability to align our cost structure and headcount with net revenue. For more information on the factors that could affect the outcome of forward-looking statements, refer to our

 

6


LOGO

Annual Report on Form 10-K for the year ended December 31, 2013, 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:

Julie Creed, Vice President, Investor Relations & Real Estate:

+1 312 496 1774 or jcreed@heidrick.com

Media:

Jon Harmon, Vice President, Corporate Communications:

+1 312 496 1593 or jharmon@heidrick.com

 

7


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended              
     September 30,              
     2014     2013     $ Change     % Change  

Revenue:

        

Revenue before reimbursements (net revenue)

   $ 125,829      $ 118,981      $ 6,848        5.8

Reimbursements

     4,432        4,523        (91     -2.0
  

 

 

   

 

 

   

 

 

   

Total revenue

     130,261        123,504        6,757        5.5

Operating expenses:

        

Salaries and employee benefits

     84,046        81,671        2,375        2.9

General and administrative expenses

     32,226        28,957        3,269        11.3

Reimbursed expenses

     4,432        4,523        (91     -2.0
  

 

 

   

 

 

   

 

 

   

Total operating expenses

     120,704        115,151        5,553        4.8
  

 

 

   

 

 

   

 

 

   

Operating income

     9,557        8,353        1,204        14.4

Non-operating expense:

        

Interest, net

     (152     (91    

Other, net

     (488     (709    
  

 

 

   

 

 

     

Net non-operating expense

     (640     (800    
  

 

 

   

 

 

     

Income before income taxes

     8,917        7,553       

Provision for income taxes

     5,925        3,429       
  

 

 

   

 

 

     

Net income

     2,992        4,124       

Other comprehensive income (loss), net of tax

     (2,587     594       
  

 

 

   

 

 

     

Comprehensive income

   $ 405      $ 4,718       
  

 

 

   

 

 

     

Basic weighted average common shares outstanding

     18,233        18,104       

Dilutive common shares

     233        119       
  

 

 

   

 

 

     

Diluted weighted average common shares outstanding

     18,466        18,223       
  

 

 

   

 

 

     

Basic net income per common share

   $ 0.16      $ 0.23       

Diluted net income per common share

   $ 0.16      $ 0.23       

Salaries and employee benefits as a percentage of net revenue

     66.8     68.6    

General and administrative expense as a percentage of net revenue

     25.6     24.3    

Operating income as a percentage of net revenue

     7.6     7.0    

 

8


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 

     Three Months Ended September 30,  
                             2014     2013  
     2014     2013     $ Change     % Change     Margin *     Margin *  

Revenue:

            

Executive Search and Leadership Consulting

            

Americas

   $ 64,982      $ 65,522      $ (540     -0.8    

Europe

     27,207        23,366        3,841        16.4    

Asia Pacific

     23,305        23,528        (223     -0.9    
  

 

 

   

 

 

   

 

 

       

Total Executive Search and Leadership Consulting

     115,494        112,416        3,078        2.7    

Culture Shaping

     10,335        6,565        3,770        57.4    
  

 

 

   

 

 

   

 

 

       

Revenue before reimbursements (net revenue)

     125,829        118,981        6,848        5.8    

Reimbursements

     4,432        4,523        (91     -2.0    
  

 

 

   

 

 

   

 

 

       

Total revenue

   $ 130,261      $ 123,504      $ 6,757        5.5    
  

 

 

   

 

 

   

 

 

       

Operating income (loss): ^

            

Executive Search and Leadership Consulting

            

Americas

   $ 14,257      $ 17,604      $ (3,347     -19.0     21.9     26.9

Europe

     1,946        342      $ 1,604        469.0     7.2     1.5

Asia Pacific

     2,228        1,737        491        28.3     9.6     7.4
  

 

 

   

 

 

   

 

 

       

Total Executive Search and Leadership Consulting

     18,431        19,683        (1,252     -6.4     16.0     17.5

Culture Shaping

     2,866        (708     3,574        504.8     27.7     -10.8
  

 

 

   

 

 

   

 

 

       

Total segments

     21,297        18,975        2,322        12.2     16.9     15.9

Global Operations Support

     (11,740     (10,622     (1,118     -10.5     -9.3     -8.9
  

 

 

   

 

 

   

 

 

       

Operating income

   $ 9,557      $ 8,353      $ 1,204        14.4     7.6     7.0
  

 

 

   

 

 

   

 

 

       

 

* Margin based on revenue before reimbursements (net revenue).
^ During 2014, consistent with the Company’s practice to periodically review its reporting structure and segments, the Company evaluated its allocation of corporate and support costs to each of its regions. In conjunction with that review, to better align our cost and reporting structure, additional costs were allocated to the regions reflecting the Company’s current view of the costs necessary to support the regional operations. The prior period results have been recast to reflect these changes and present comparative year-over-year results.

 

9


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share data)

(Unaudited)

 

     Nine Months Ended              
     September 30,              
     2014     2013     $ Change     % Change  

Revenue:

        

Revenue before reimbursements (net revenue)

   $ 373,030      $ 343,992      $ 29,038        8.4

Reimbursements

     13,721        14,148        (427     -3.0
  

 

 

   

 

 

   

 

 

   

Total revenue

     386,751        358,140        28,611        8.0

Operating expenses:

        

Salaries and employee benefits

     252,089        236,216        15,873        6.7

General and administrative expenses

     98,092        93,292        4,800        5.1

Reimbursed expenses

     13,721        14,148        (427     -3.0
  

 

 

   

 

 

   

 

 

   

Total operating expenses

     363,902        343,656        20,246        5.9
  

 

 

   

 

 

   

 

 

   

Operating income

     22,849        14,484        8,365        57.8

Non-operating expense:

        

Interest, net

     (232     (120    

Other, net

     (444     (1,675    
  

 

 

   

 

 

     

Net non-operating expense

     (676     (1,795    
  

 

 

   

 

 

     

Income before income taxes

     22,173        12,689       

Provision for income taxes

     16,138        7,844       
  

 

 

   

 

 

     

Net income

     6,035        4,845       

Other comprehensive loss, net of tax

     (899     (910    
  

 

 

   

 

 

     

Comprehensive income

   $ 5,136      $ 3,935       
  

 

 

   

 

 

     

Basic weighted average common shares outstanding

     18,200        18,064       

Dilutive common shares

     197        143       
  

 

 

   

 

 

     

Diluted weighted average common shares outstanding

     18,397        18,207       
  

 

 

   

 

 

     

Basic net income per common share

   $ 0.33      $ 0.27       

Diluted net income per common share

   $ 0.33      $ 0.27       

Salaries and employee benefits as a percentage of net revenue

     67.6     68.7    

General and administrative expense as a percentage of net revenue

     26.3     27.1    

Operating income as a percentage of net revenue

     6.1     4.2    

 

10


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 

     Nine Months Ended September 30,  
                             2014     2013  
     2014     2013     $ Change     % Change     Margin *     Margin *  

Revenue:

            

Executive Search and Leadership Consulting

            

Americas

   $ 193,034      $ 192,906      $ 128        0.1    

Europe

     84,632        65,042        19,590        30.1    

Asia Pacific

     69,162        68,464        698        1.0    
  

 

 

   

 

 

   

 

 

       

Total Executive Search and Leadership Consulting

     346,828        326,412        20,416        6.3    

Culture Shaping

     26,202        17,580        8,622        49.0    
  

 

 

   

 

 

   

 

 

       

Revenue before reimbursements (net revenue)

     373,030        343,992        29,038        8.4    

Reimbursements

     13,721        14,148        (427     -3.0    
  

 

 

   

 

 

   

 

 

       

Total revenue

   $ 386,751      $ 358,140      $ 28,611        8.0    
  

 

 

   

 

 

   

 

 

       

Operating income (loss): ^

            

Executive Search and Leadership Consulting

            

Americas

   $ 43,266      $ 47,028      $ (3,762     -8.0     22.4     24.4

Europe

     4,373        (4,740     9,113        192.3     5.2     -7.3

Asia Pacific

     4,790        4,797        (7     -0.1     6.9     7.0
  

 

 

   

 

 

   

 

 

       

Total Executive Search and Leadership Consulting

     52,429        47,085        5,344        11.3     15.1     14.4

Culture Shaping

     3,643        (3,691     7,334        198.7     13.9     -21.0
  

 

 

   

 

 

   

 

 

       

Total segments

     56,072        43,394        12,678        29.2     15.0     12.6

Global Operations Support

     (33,223     (28,910     (4,313     -14.9     -8.9     -8.4
  

 

 

   

 

 

   

 

 

       

Operating income

   $ 22,849      $ 14,484        8,365        57.8     6.1     4.2
  

 

 

   

 

 

   

 

 

       

 

* Margin based on revenue before reimbursements (net revenue).
^ During 2014, consistent with the Company’s practice to periodically review its reporting structure and segments, the Company evaluated its allocation of corporate and support costs to each of its regions. In conjunction with that review, to better align our cost and reporting structure, additional costs were allocated to the regions reflecting the Company’s current view of the costs necessary to support the regional operations. The prior period results have been recast to reflect these changes and present comparative year-over-year results.

 

11


Heidrick & Struggles International, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

     September 30,      December 31,  
     2014      2013  
     (Unaudited)         

Current assets:

     

Cash and cash equivalents

   $ 159,537       $ 181,646   

Accounts receivable, net

     94,130         71,666   

Other receivables

     9,762         6,906   

Prepaid expenses

     15,153         14,786   

Other current assets

     1,757         1,937   

Income taxes recoverable

     7,098         5,772   

Deferred income taxes

     6,949         8,061   
  

 

 

    

 

 

 

Total current assets

     294,386         290,774   
  

 

 

    

 

 

 

Non-current assets:

     

Property and equipment, net

     30,070         34,961   

Restricted cash

     7,998         7,878   

Assets designated for retirement and pension plans

     20,850         22,685   

Operating income (loss) Investments

     14,276         13,848   

Other non-current assets

     6,649         5,693   

Goodwill

     122,657         123,274   

Other intangible assets, net

     22,432         26,637   

Deferred income taxes

     22,258         27,474   
  

 

 

    

 

 

 

Total non-current assets

     247,190         262,450   
  

 

 

    

 

 

 

Total assets

   $ 541,576       $ 553,224   
  

 

 

    

 

 

 

Current liabilities:

     

Current portion of debt

   $ 6,000       $ 6,000   

Accounts payable

     5,532         7,791   

Accrued salaries and employee benefits

     104,803         109,943   

Deferred revenue, net

     31,848         27,714   

Other current liabilities

     24,797         18,938   

Income taxes payable

     4,655         5,401   
  

 

 

    

 

 

 

Total current liabilities

     177,635         175,787   
  

 

 

    

 

 

 

Non-current liabilities:

     

Non-current debt, less current maturities

     25,000         29,500   

Retirement and pension plans

     37,044         38,735   

Other non-current liabilities

     53,341         61,329   
  

 

 

    

 

 

 

Total non-current liabilities

     115,385         129,564   
  

 

 

    

 

 

 

Stockholders’ equity

     248,556         247,873   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 541,576       $ 553,224   
  

 

 

    

 

 

 

 

12


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Three Month Ended  
     September 30,  
     2014     2013  

Cash flows—operating activities:

    

Net income

   $ 2,992      $ 4,124   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     3,711        4,019   

Deferred income taxes

     1,071        (1,926

Stock-based compensation expense

     1,044        303   

Accretion expense related to earnout payments

     409        518   

Cash paid for restructuring charges

     (35     (302

Changes in assets and liabilities, net of effects of acquisitions:

    

Accounts and other receivables

     6,827        2,434   

Accounts payable

     289        (1,840

Accrued expenses

     28,236        31,373   

Deferred revenue

     (3,586     (798

Income taxes payable, net

     (1,160     3,338   

Retirement and pension assets and liabilities

     270        34   

Prepaid expenses

     1,128        (2,901

Other assets and liabilities, net

     1,798        (1,741
  

 

 

   

 

 

 

Net cash provided by operating activities

     42,994        36,635   
  

 

 

   

 

 

 

Cash flows—investing activities:

    

Restricted cash

     (1     (24

Capital expenditures

     (742     (562

Purchases of available for sale investments

     (68     (90

Proceeds from sales of available for sale investments

     374        91   
  

 

 

   

 

 

 

Net cash used in investing activities

     (437     (585
  

 

 

   

 

 

 

Cash flows—financing activities:

    

Debt repayment

     (1,500     (1,500

Cash dividends paid

     (2,515     (2,356

Payment of employee tax withholdings on equity transactions

     —          (71
  

 

 

   

 

 

 

Net cash used in financing activities

     (4,015     (3,927
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

     (2,355     972   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     36,187        33,095   

Cash and cash equivalents at beginning of period

     123,350        99,695   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 159,537      $ 132,790   
  

 

 

   

 

 

 

 

13


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Nine Months Ended  
     September 30,  
     2014     2013  

Cash flows—operating activities:

    

Net income

   $ 6,035      $ 4,845   

Adjustments to reconcile net income to net cash used in operating activities:

    

Depreciation and amortization

     11,359        12,046   

Deferred income taxes

     5,633        (500

Stock-based compensation expense

     2,885        2,775   

Accretion expense related to earnout payments

     1,308        1,551   

Cash paid for restructuring charges

     (108     (918

Changes in assets and liabilities, net of effects of acquisitions:

    

Accounts and other receivables

     (27,196     (21,607

Accounts payable

     (2,177     (2,381

Accrued expenses

     (1,774     (12,073

Deferred revenue

     4,486        1,964   

Income taxes payable, net

     (2,220     4,826   

Retirement and pension assets and liabilities

     100        574   

Prepaid expenses

     (557     (3,207

Other assets and liabilities, net

     178        240   
  

 

 

   

 

 

 

Net cash used in operating activities

     (2,048     (11,865
  

 

 

   

 

 

 

Cash flows—investing activities:

    

Restricted cash

     (103     (50

Capital expenditures

     (2,609     (1,920

Purchases of available for sale investments

     (896     (661

Proceeds from sales of available for sale investments

     966        155   
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,642     (2,476
  

 

 

   

 

 

 

Cash flows—financing activities:

    

Proceeds from debt issuance

     —          40,000   

Debt repayment

     (4,500     (3,000

Cash dividends paid

     (7,364     (4,875

Payment of employee tax withholdings on equity transactions

     (406     (647

Acquisition earnout payments

     (3,390     (357
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (15,660     31,121   
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

     (1,759     (1,595
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (22,109     15,185   

Cash and cash equivalents at beginning of period

     181,646        117,605   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 159,537      $ 132,790   
  

 

 

   

 

 

 

 

14


Heidrick & Struggles International, Inc.

Reconciliation of Net Income and Operating Income (GAAP) to

Adjusted EBITDA (Non-GAAP)

(In thousands)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2014     2013     2014     2013  

Revenue before reimbursements (net revenue)

   $ 125,829      $ 118,981      $ 373,030      $ 343,992   

Net income

   $ 2,992      $ 4,124      $ 6,035      $ 4,845   

Interest, net

     (152     (91     (232     (120

Other, net

     (488     (709     (444     (1,675

Provision for income taxes

     5,925        3,429        16,138        7,844   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     9,557        8,353        22,849        14,484   

Adjustments

        

Salaries and employee benefits

        

Stock-based compensation expense

     1,044        302        2,434        2,475   

Senn Delaney retention awards

     291        584        1,458        1,750   

General and administrative expenses

        

Depreciation

     2,329        2,568        7,213        7,690   

Intangible amortization

     1,400        1,451        4,146        4,356   

Earnout accretion

     409        517        1,308        1,551   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

     5,473        5,422        16,559        17,822   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 15,030      $ 13,775      $ 39,408      $ 32,306   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

     11.9     11.6     10.6     9.4

 

15