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8-K - FORM 8-K - HEIDRICK & STRUGGLES INTERNATIONAL INCd879421d8k.htm

Exhibit 99.1

 

News FOR IMMEDIATE RELEASE

Heidrick & Struggles Reports Fourth Quarter and 2014 Financial Results

CHICAGO (February 24, 2015) — Heidrick & Struggles, a premier provider of senior-level Executive Search, Leadership Consulting and Culture Shaping services globally, today announced financial results for its fourth quarter and year ended December 31, 2014.

Highlights:

 

    Fourth quarter net revenue (revenue before reimbursements) increased 2.8% (approximately 5% on a constant currency basis) to $121.3 million from $118.0 million in the 2013 fourth quarter.

 

    Adjusted EBITDA(1) in the fourth quarter improved to $9.5 million and Adjusted EBITDA margin(1) was 7.9%, compared to Adjusted EBITDA of $7.4 million and Adjusted EBITDA margin of 6.3% in the 2013 fourth quarter.

 

    For the year, net revenue of $494.3 million increased 7.0% from $462.0 million in 2013. Exchange rate fluctuations had less than a one percent impact on 2014 net revenue.

 

    Adjusted EBITDA improved to $48.9 million in 2014 and Adjusted EBITDA margin was 9.9%, compared to Adjusted EBITDA of $39.7 million and Adjusted EBITDA margin of 8.6% in 2013.

 

    The number of Executive Search and Leadership Consulting consultants was 307 at December 31, 2014 compared to 293 at December 31, 2013.

 

    Specific to Executive Search and Leadership Consulting, consultant productivity, as measured by net revenue per consultant, was $1.4 million in the fourth quarter and $1.5 million for the year.

 

(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.

“Our fourth quarter and full-year results show year-over-year growth in net revenue, profitability, consultant headcount and year-end productivity,” said Tracy Wolstencroft, Heidrick & Struggles’ President and Chief Executive Officer. “The results represent solid

 

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progress toward many of the initial goals we established when I arrived at Heidrick a year ago, namely to attract and retain exceptional consultant talent while fostering collaboration and teamwork across our global platform. We are focused on leveraging what we accomplished in 2014 to deliver unparalleled expertise and service to our clients, accelerate growth and drive shareholder value.”

2014 Fourth Quarter Results

Consolidated net revenue (revenue before reimbursements) increased 2.8 percent, or $3.3 million, to $121.3 million from $118.0 million in the 2014 fourth quarter. Exchange rate fluctuations negatively impacted results by $2.7 million, or approximately 2 percent.

Executive Search and Leadership Consulting net revenue increased 1.7 percent year over year, or $1.9 million, to $112.7 million. The improvement was driven by performance in the Americas, where revenue increased 6.3 percent or $4.0 million, offset by year-over-year declines of $0.7 million in Europe (an increase of $0.8 million on a constant currency basis) and $1.4 million in Asia Pacific ($0.6 million on a constant currency basis). From a global practices perspective, the Financial Services and Consumer Markets industry practices were the drivers of year-over-year growth.

Net revenue from Culture Shaping services increased 18.6 percent, or $1.3 million, to $8.5 million from $7.2 million in the 2014 fourth quarter. The improvement in net revenue primarily reflects a higher volume of business.

The company ended the fourth quarter and 2014 with 307 Executive Search and Leadership Consulting consultants compared to 293 at December 31, 2013 and 311 at September 30, 2014. Productivity, as measured by annualized Executive Search and Leadership Consulting net revenue per consultant, was $1.4 million in the 2014 fourth quarter compared to $1.5 million in the 2013 fourth quarter. Specific to Executive Search, the company’s primary business, the number of confirmed searches in the 2014 fourth quarter was essentially the same as in the 2013 fourth quarter, while the average revenue per executive search was $124,800 compared to $118,800 in the 2013 fourth quarter.

 

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Salaries and employee benefits expense in the fourth quarter increased 2.5 percent, or $2.1 million, to $85.4 million from $83.3 million in the 2013 fourth quarter. Fixed compensation expense increased $1.2 million mostly reflecting an increase salaries and employee benefits expense. Variable compensation expense increased $0.9 million, primarily related to improved company performance. Salaries and employee benefits expense was 70.4 percent of net revenue for the quarter, compared to 70.6 percent in the 2013 fourth quarter.

General and administrative expenses declined 4.6 percent, or $1.5 million, to $32.1 million from $33.6 million in the 2013 fourth quarter. The decrease primarily reflects the timing of professional services fees. As a percentage of net revenue, general and administrative expenses were 26.5 percent compared to 28.5 percent in the 2013 fourth quarter.

Adjusted EBITDA(1) in the 2014 fourth quarter improved to $9.5 million compared to $7.4 million in the 2013 fourth quarter. The Adjusted EBITDA margin (Adjusted EBITDA as a percentage of net revenue) in the 2014 fourth quarter was 7.9 percent, compared to 6.3 percent in the 2013 fourth quarter. The year-over-year improvement in Adjusted EBITDA reflects higher net revenue and a decline in general and administrative expenses, partially offset by the increase in salaries and employee benefits expense.

Operating income in the fourth quarter increased by $2.7 million to $3.8 million and operating margin (operating income as a percentage of net revenue) improved to 3.1 percent, compared to operating income of $1.1 million and operating margin of 0.9 percent in the 2013 fourth quarter.

 

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Net income in the 2014 fourth quarter was $0.8 million and diluted earnings per share were $0.04, based on an effective tax rate of 62.2 percent in the quarter. The effective tax rate was higher than the statutory rate primarily because of losses incurred that could not be benefitted for tax purposes due to valuation allowances in certain jurisdictions. Net income in the 2013 fourth quarter was $1.5 million and diluted earnings per share were $0.08, based on an effective tax benefit rate of 115 percent that primarily reflected the release of a valuation allowance.

Net cash provided by operating activities in the 2014 fourth quarter was $58.8 million, compared to $55.9 million in the 2013 fourth quarter. Cash and cash equivalents at December 31, 2014 were $211.4 million ($181.9 million net of debt), compared to $159.5 million at September 30, 2014 ($128.5 million net of debt), and $181.6 million at December 31, 2013 ($146.1 million net of debt).

2014 Results

For the year ended December 31, 2014 consolidated net revenue of $494.3 million increased 7.0 percent from $462.0 million in 2013. The impact of exchange rate fluctuations was less than 1 percent.

Executive Search and Leadership Consulting net revenue increased 5.1 percent year over year, or $22.3 million, to $459.5 million, driven a 21.0 percent increase in Europe (approximately 18 percent on a constant currency basis). Compared to 2013, revenue in the Americas increased 1.6 percent and revenue in Asia Pacific was essentially flat (increased approximately 2 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 40.2 percent, or $10.0 million, to $34.8 million from $24.8 million in 2013. Reported results in 2013 excluded $4.1 million of pre-acquisition deferred revenue related to Senn Delaney that the company was unable to recognize as a result of purchase accounting, compared to $0.4 million in 2014.

 

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Productivity, as measured by annualized Executive Search and Leadership Consulting net revenue per consultant, increased to $1.5 million in 2014 compared to $1.4 million 2013. Specific to Executive Search, the company’s primary business, the number of confirmed searches was 3,750 in 2014 compared to 3,567 in 2013 and the average revenue per executive search was $116,000 compared to $113,400 in 2013.

Adjusted EBITDA(1) in 2014 improved to $48.9 million and Adjusted EBITDA margin was 9.9 percent, compared to Adjusted EBITDA of $39.7 million and Adjusted EBITDA margin of 8.6 percent in 2013. Operating income in 2014 improved to $26.7 million and operating margin was 5.4 percent compared to operating income of $15.6 million and operating margin of 3.4 percent in 2013.

Net income in 2014 was $6.8 million and diluted earnings per share were $0.37, reflecting an effective tax rate of 71.9 percent. Net income in 2013 was $6.3 million and diluted earnings per share were $0.35, reflecting an effective tax rate of 52.6 percent. In addition to valuation allowances established in 2014 that negatively impacted the 2014 tax rate, the effective tax rates in both years are higher than the statutory rate primarily because of losses incurred that could not be benefitted for tax purposes.

2015 First Quarter Outlook

The company is forecasting 2015 first quarter consolidated net revenue of between $108 million and $118 million. This forecast is based on the average currency rates in January 2015 and reflects, among other factors, assumptions for the anticipated volume of new Executive Search confirmations, Leadership Consulting assignments and Culture Shaping services, the current backlog, consultant productivity, consultant retention, and the seasonality of its business.

 

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Wolstencroft added, “We are optimistic about the outlook for our business in 2015. Our priorities are to deploy capital to attract and retain the best consultants in the world while continuing to invest in service offerings that enable Heidrick & Struggles to provide increasing value to our clients as a fully integrated leadership advisory firm. We believe we are in a stronger position today to drive revenue growth, improve market share, and increase profitability.”

Quarterly Conference Call

Executives of Heidrick & Struggles will host a conference call to review the fourth quarter and 2014 results today, February 24, at 9 a.m. Central Time. Participants may access the company’s call and supporting slides through its website 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.

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.

 

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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 utilize 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 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:

Lia Randazzo, Marketing Manager:

+1 312 496 1788 or lrandazzo@heidrick.com

 

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Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive (Loss) Income

(In thousands, except per share data)

(Unaudited)

 

     Three months ended
December 31,
             
     2014     2013     $ Change     % Change  

Revenue:

        

Revenue before reimbursements (net revenue)

   $ 121,262      $ 118,003      $ 3,259        2.8

Reimbursements

     5,226        4,850        376        7.8
  

 

 

   

 

 

   

 

 

   

Total revenue

  126,488      122,853      3,635      3.0

Operating expenses:

Salaries and employee benefits

  85,359      83,283      2,076      2.5

General and administrative expenses

  32,099      33,639      (1,540   -4.6

Reimbursed expenses

  5,226      4,850      376      7.8
  

 

 

   

 

 

   

 

 

   

Total operating expenses

  122,684      121,772      (912   -0.7
  

 

 

   

 

 

   

 

 

   

Operating income

  3,804      1,081      2,723      251.9

Non-operating expense:

Interest, net

  (126   (55

Other, net

  (1,664   (327
  

 

 

   

 

 

     

Net non-operating expense

  (1,790   (382
  

 

 

   

 

 

     

Income before income taxes

  2,014      699   

Provision for (benefit from) income taxes

  1,252      (803
  

 

 

   

 

 

     

Net income

  762      1,502   

Other comprehensive (loss) income, net of tax

  (2,847   919   
  

 

 

   

 

 

     

Comprehensive income

($ 2,085 $ 2,421   
  

 

 

   

 

 

     

Basic weighted average common shares outstanding

  18,240      18,115   

Dilutive common shares

  293      191   
  

 

 

   

 

 

     

Diluted weighted average common shares outstanding

  18,533      18,306   
  

 

 

   

 

 

     

Basic net income per common share

$ 0.04    $ 0.08   

Diluted net income per common share

$ 0.04    $ 0.08   

Salaries and employee benefits as a % of net revenue

  70.4   70.6

General and administrative expense as a % of net revenue

  26.5   28.5

Operating income as a % of net revenue

  3.1   0.9


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 

     Three Months Ended December 31,  
     2014     2013     $
Change
    %
Change
    2014
Margin *
    2013
Margin *
 

Revenue:

            

Executive Search and Leadership Consulting

            

Americas

   $ 67,796      $ 63,800      $ 3,996        6.3    

Europe

     24,347        25,039        (692     -2.8    

Asia Pacific

     20,570        21,954        (1,384     -6.3    
  

 

 

   

 

 

   

 

 

       

Total Executive Search and Leadership Consulting

  112,713      110,793      1,920      1.7

Culture Shaping

  8,549      7,210      1,339      18.6
  

 

 

   

 

 

   

 

 

       

Revenue before reimbursements (net revenue)

  121,262      118,003      3,259      2.8

Reimbursements

  5,226      4,850      376      7.8
  

 

 

   

 

 

   

 

 

       

Total revenue

$ 126,488    $ 122,853    $ 3,635      3.0
  

 

 

   

 

 

   

 

 

       

Operating income: ^

Executive Search and Leadership Consulting

Americas

$ 14,416    $ 13,143    $ 1,273      9.7   21.3   20.6

Europe

  433      (1,773   2,206      124.4   1.8   -7.1

Asia Pacific

  96      (1,119   1,215      108.6   0.5   -5.1
  

 

 

   

 

 

   

 

 

       

Total Executive Search and Leadership Consulting

  14,945      10,251      4,694      45.8   13.3   9.3

Culture Shaping

  978      (524   1,502      286.6   11.4   -7.3
  

 

 

   

 

 

   

 

 

       

Total segments

  15,923      9,727      6,196      63.7   13.1   8.2

Global Operations Support

  (12,119   (8,646   (3,473   -40.2   -10.0   -7.3
  

 

 

   

 

 

   

 

 

       

Operating income

$ 3,804    $ 1,081    $ 2,723      251.9   3.1   0.9
  

 

 

   

 

 

   

 

 

       

 

* 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.


Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

     Twelve months ended
December 31,
             
     2014     2013     $ Change     % Change  

Revenue:

        

Revenue before reimbursements (net revenue)

   $ 494,292      $ 461,995      $ 32,297        7.0

Reimbursements

     18,947        18,998        (51     -0.3
  

 

 

   

 

 

   

 

 

   

Total revenue

  513,239      480,993      32,246      6.7

Operating expenses:

Salaries and employee benefits

  337,448      319,499      17,949      5.6

General and administrative expenses

  130,191      126,931      3,260      2.6

Reimbursed expenses

  18,947      18,998      (51   -0.3
  

 

 

   

 

 

   

 

 

   

Total operating expenses

  486,586      465,428      21,158      4.5
  

 

 

   

 

 

   

 

 

   

Operating income

  26,653      15,565      11,088      71.2

Non-operating expense:

Interest, net

  (358   (175

Other, net

  (2,108   (2,002
  

 

 

   

 

 

     

Net non-operating expense

  (2,466   (2,177
  

 

 

   

 

 

     

Income before income taxes

  24,187      13,388   

Provision for income taxes

  17,390      7,041   
  

 

 

   

 

 

     

Net income

  6,797      6,347   

Other comprehensive (loss) income, net of tax

  (3,746   9   
  

 

 

   

 

 

     

Comprehensive income

$ 3,051    $ 6,356   
  

 

 

   

 

 

     

Basic weighted average common shares outstanding

  18,210      18,077   

Dilutive common shares

  222      155   
  

 

 

   

 

 

     

Diluted weighted average common shares outstanding

  18,432      18,232   
  

 

 

   

 

 

     

Basic net income per common share

$ 0.37    $ 0.35   

Diluted net income per common share

$ 0.37    $ 0.35   

Salaries and employee benefits as a % of net revenue

  68.3   69.2

General and administrative expense as a % of net revenue

  26.3   27.5

Operating income as a % of net revenue

  5.4   3.4


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 

     Twelve Months Ended December 31,  
     2014     2013     $
Change
    %
Change
    2014
Margin *
    2013
Margin *
 

Revenue:

            

Executive Search and Leadership Consulting

            

Americas

   $ 260,830      $ 256,706      $ 4,124        1.6    

Europe

     108,979        90,081        18,898        21.0    

Asia Pacific

     89,732        90,418        (686     -0.8    
  

 

 

   

 

 

   

 

 

   

 

 

     

Total Executive Search and Leadership Consulting

  459,541      437,205      22,336      5.1

Culture Shaping

  34,751      24,790      9,961      40.2
  

 

 

   

 

 

   

 

 

   

 

 

     

Revenue before reimbursements (net revenue)

  494,292      461,995      32,297      7.0

Reimbursements

  18,947      18,998      (51   -0.3
  

 

 

   

 

 

   

 

 

       

Total revenue

$ 513,239    $ 480,993    $ 32,246      6.7
  

 

 

   

 

 

   

 

 

       

Operating income: ^

Executive Search and Leadership Consulting

Americas

$ 57,682    $ 60,171    ($ 2,489   -4.1   22.1   23.4

Europe

  4,806      (6,513   11,319      173.8   4.4   -7.2

Asia Pacific

  4,886      3,678      1,208      32.8   5.4   4.1
  

 

 

   

 

 

   

 

 

       

Total Executive Search and Leadership Consulting

  67,374      57,336      10,038      17.5   14.7   13.1

Culture Shaping

  4,621      (4,215   8,836      209.6   13.3   -17.0
  

 

 

   

 

 

   

 

 

       

Total segments

  71,995      53,121      18,874      35.5   14.6   11.5

Global Operations Support

  (45,342   (37,556   (7,786   -20.7   -9.2   -8.1
  

 

 

   

 

 

   

 

 

       

Operating income

$ 26,653    $ 15,565    $ 11,088      71.2   5.4   3.4
  

 

 

   

 

 

   

 

 

       

 

* 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.


Heidrick & Struggles International, Inc.

Consolidated Balance Sheets

(In thousands)

 

     December 31,
2014
     December 31,
2013
 
     (Unaudited)         

Current assets:

     

Cash and cash equivalents

   $ 211,352       $ 181,646   

Restricted cash

     6,501         130   

Accounts receivable, net

     68,353         71,666   

Other receivables

     10,613         6,906   

Prepaid expenses

     14,536         14,786   

Other current assets

     1,592         1,807   

Income taxes recoverable

     5,288         5,772   

Deferred income taxes

     12,094         8,061   
  

 

 

    

 

 

 

Total current assets

  330,329      290,774   
  

 

 

    

 

 

 

Non-current assets:

Property and equipment, net

  30,417      34,961   

Restricted cash

  1,411      7,878   

Assets designated for retirement and pension plans

  19,426      22,685   

Investments

  13,989      13,848   

Other non-current assets

  6,601      5,693   

Goodwill

  122,176      123,274   

Other intangible assets, net

  20,939      26,637   

Deferred income taxes

  23,413      27,474   
  

 

 

    

 

 

 

Total non-current assets

  238,372      262,450   
  

 

 

    

 

 

 

Total assets

$ 568,701    $ 553,224   
  

 

 

    

 

 

 

Current liabilities:

Current portion of debt

$ 6,000    $ 6,000   

Accounts payable

  5,493      7,791   

Accrued salaries and employee benefits

  130,434      109,943   

Deferred revenue, net

  30,452      27,714   

Other current liabilities

  26,835      18,938   

Income taxes payable

  6,684      5,401   
  

 

 

    

 

 

 

Total current liabilities

  205,898      175,787   
  

 

 

    

 

 

 

Non-current liabilities:

Non-current debt, less current maturities

  23,500      29,500   

Retirement and pension plans

  39,892      38,735   

Other non-current liabilities

  54,747      61,329   
  

 

 

    

 

 

 

Total non-current liabilities

  118,139      129,564   
  

 

 

    

 

 

 

Stockholders’ equity

  244,664      247,873   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

$ 568,701    $ 553,224   
  

 

 

    

 

 

 


Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Twelve Months Ended
December 31,
 
     2014     2013  

Cash flows - operating activities:

    

Net income

   $ 6,797      $ 6,347   

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

    

Depreciation and amortization

     15,312        16,275   

Deferred income taxes

     237        (3,749

Stock-based compensation expense

     3,579        3,747   

Accretion expense related to earnout payments

     1,854        2,082   

Cash paid for restructuring charges

     (142     (999

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

    

Accounts and other receivables

     (4,129     236   

Accounts payable

     (2,113     (504

Accrued expenses

     29,979        12,888   

Deferred revenue

     3,486        2,735   

Income taxes recoverable, net

     1,482        4,292   

Retirement and pension assets and liabilities

     4,477        1,201   

Prepaid expenses

     (207     (625

Other assets and liabilities, net

     (3,848     107   
  

 

 

   

 

 

 

Net cash provided by operating activities

  56,764      44,033   
  

 

 

   

 

 

 

Cash flows - investing activities:

Restricted cash

  (53   26   

Acquisition of business and earnout payments, net of cash acquired

  —        (1,023

Capital expenditures

  (3,359   (3,731

Purchases of available for sale investments

  (963   (749

Proceeds from sale of available for sale investments

  1,084      252   
  

 

 

   

 

 

 

Net cash used in investing activities

  (3,291   (5,225
  

 

 

   

 

 

 

Cash flows - financing activities:

Proceeds from debt issuance

  —        40,000   

Debt repayment

  (6,000   (4,500

Cash dividends paid

  (9,864   (7,260

Payment of employee tax withholdings on equity transactions

  (406   (713

Acquisition earnout payments

  (3,390   (357
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

  (19,660   27,170   
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

  (4,107   (1,937
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

  29,706      64,041   

Cash and cash equivalents at beginning of period

  181,646      117,605   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 211,352    $ 181,646   
  

 

 

   

 

 

 


Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Three Month Ended
December 31,
 
     2014     2013  

Cash flows - operating activities:

    

Net income

   $ 762      $ 1,502   

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

    

Depreciation and amortization

     3,953        4,229   

Deferred income taxes

     (5,396     (3,249

Stock-based compensation expense

     694        972   

Accretion expense related to earnout payments

     546        532   

Cash paid for restructuring charges

     (34     (81

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

    

Accounts and other receivables

     23,067        21,843   

Accounts payable

     64        1,877   

Accrued expenses

     31,753        24,961   

Deferred revenue

     (1,000     771   

Income taxes (payable) recoverable, net

     3,702        (534

Retirement and pension assets and liabilities

     4,377        627   

Prepaid expenses

     350        2,582   

Other assets and liabilities, net

     (4,026     (133
  

 

 

   

 

 

 

Net cash provided by operating activities

  58,812      55,899   
  

 

 

   

 

 

 

Cash flows - investing activities:

Restricted cash

  50      76   

Acquisition of business and earnout payments, net of cash acquired

  —        (1,023

Capital expenditures

  (750   (1,811

Purchases of available for sale investments

  (67   (88

Proceeds from sale of available for sale investments

  118      97   
  

 

 

   

 

 

 

Net cash used in investing activities

  (649   (2,749
  

 

 

   

 

 

 

Cash flows - financing activities:

Debt repayment

  (1,500   (1,500

Cash dividends paid

  (2,500   (2,385

Payment of employee tax withholdings on equity transactions

  —        (66
  

 

 

   

 

 

 

Net cash used in financing activities

  (4,000   (3,951
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

  (2,348   (343

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

  51,815      48,856   

Cash and cash equivalents at end of period

  159,537      132,790   
  

 

 

   

 

 

 
$ 211,352    $ 181,646   
  

 

 

   

 

 

 


Heidrick & Struggles International, Inc.

Reconciliation of Net Income and Operating Income (GAAP) to

Adjusted EBITDA (Non-GAAP)

(In thousands)

(Unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2014     2013     2014     2013  

Revenue before reimbursements (net revenue)

   $ 121,262      $ 118,003      $ 494,292      $ 461,995   

Net income

     762        1,502        6,797        6,347   

Interest, net

     (126     (55     (358     (175

Other, net

     (1,664     (327     (2,108     (2,002

Provision for (benefit from) income taxes

     1,252        (803     17,390        7,041   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  3,804      1,081      26,653      15,565   

Adjustments

Salaries and employee benefits

Stock-based compensation expense

  694      972      3,128      3,447   

Senn Delaney retention awards

  542      582      2,000      2,332   

General and administrative expenses

Depreciation

  2,589      2,754      9,802      10,443   

Intangible amortization

  1,364      1,475      5,510      5,832   

Earnout accretion

  546      532      1,854      2,082   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

  5,735      6,315      22,294      24,136   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ 9,539    $ 7,396    $ 48,947    $ 39,701   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

  7.9   6.3   9.9   8.6