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8-K - 8-K - HEIDRICK & STRUGGLES INTERNATIONAL INCd257232d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Heidrick & Struggles Reports Third Quarter 2016 Financial Results

CHICAGOOctober 24, 2016- Heidrick & Struggles International, Inc. (Nasdaq: HSII), a premier provider of senior-level executive search, leadership consulting and culture shaping services globally, today announced financial results for its third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

 

    Consolidated net revenue (revenue before reimbursements) increased 3.7 percent, or $5.1 million, to $143.5 million from $138.4 million in the 2015 third quarter. Net revenue increased 4.1 percent on a constant currency basis.

 

    The number of Executive Search and Leadership Consulting consultants was 356 at September 30, 2016 compared to 336 at June 30, 2016, and 334 at September 30, 2015.

 

    Operating income of $12.0 million and operating margin of 8.4 percent, compares to operating income of $12.9 million and operating margin of 9.3 percent in the 2015 third quarter. Adjusted EBITDA(1) of $17.5 million and adjusted EBITDA margin of 12.2 percent, compares to Adjusted EBITDA of $18.2 million and EBITDA margin of 13.1 percent in the 2015 third quarter.

 

    Reflecting the addition of 30 new consultants in the third quarter, productivity, as measured by annualized Executive Search and Leadership Consulting net revenue per consultant, was $1.5 million in the 2016 third quarter, compared to $1.6 million in the 2015 third quarter.

 

    Completed the acquisitions of JCA Group, a distinguished London-based executive search advisory firm, and Philosophy IB, a boutique management consultancy firm based in New Jersey.

Consolidated net revenue (revenue before reimbursements) increased 3.7 percent, or $5.1 million, to $143.5 million from $138.4 million in the 2015 third quarter. Excluding the impact of exchange rate fluctuations which negatively impacted results by $0.6 million, consolidated net revenue increased $5.7 million or 4.1 percent.

Executive Search and Leadership Consulting net revenue increased 4.4 percent year over year, or $5.7 million, to $134.9 million from $129.2 million in the 2015 third quarter. The impact of exchange rate fluctuations was less than one percent. Europe was the driver of third quarter revenue growth, up 26.8 percent or $6.9 million (30.7 percent on a constant currency basis), with more than half of this growth coming from the contributions from Co Company and JCA Group, acquired in October 2015 and August 2016 respectively. Year-over-year revenue growth in the Americas was flat in the third quarter and declined 4.9 percent or $1.2 million in Asia Pacific (7.6 percent on a constant currency basis). Growth in the Consumer Markets, Industrial, Healthcare & Life Sciences and Education, Nonprofit & Social Enterprise industry practices, was offset by declines in the Financial Services and Global Technology & Services practices.


 

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Net revenue from Culture Shaping services declined 6.0 percent, or $0.6 million, to $8.6 million from $9.2 million in the 2015 third quarter reflecting a lower volume of client work. The impact of exchange rate fluctuations adversely impacted results by $0.2 million or 2.6 percent.

The company ended the third quarter with 356 Executive Search and Leadership Consulting consultants compared to 334 at September 30, 2015. Productivity, as measured by annualized Executive Search and Leadership Consulting net revenue per consultant, was $1.5 million in the 2016 third quarter, compared to $1.6 million in the 2015 third quarter. Specific to Executive Search, the company’s largest business, the number of Executive Search consultants was 334 compared to 312 at September 30, 2015. The number of confirmed searches in the 2016 third quarter increased 5.7 percent compared to the 2015 third quarter and the average revenue per executive search was $113,700 compared to $121,200 in the 2015 third quarter.

“Today we reported third quarter results that reflect the investments we have made in growing our business over the last year,” said Tracy Wolstencroft, Heidrick & Struggles’ President and Chief Executive Officer. “The most notable investment has been in our people. In the third quarter alone, we added 20 net new Search and Leadership Consulting consultants, including 14 through the acquisitions of JCA Group and Philosophy IB. We also continued our investment in Culture Shaping talent. We are encouraged by the progress being made in integrating the three leadership advisory boutiques acquired in the last year and are seeing increasingly positive impact in client engagements.”

Salaries and employee benefits expense in the 2016 third quarter declined 0.4 percent, or $0.4 million, to $95.4 million from $95.7 million in the 2015 third quarter. An increase in fixed compensation expense of $7.3 million, mostly reflecting compensation related to four acquisitions and new hires over the last year, was offset by a decline in variable compensation expense of $7.7 million related to lower bonus accruals. The composition of salaries and employee benefits, between fixed and variable expense, reflects investments the company has made in the last year. It also reflects an increasing proportion of leadership consulting revenue delivered by third-party consultants and contractors, whose costs are included in general and administrative expenses, and the large increase in new consultants this year with higher fixed compensation who not yet fully productive. Salaries and employee benefits expense was 66.4 percent of net revenue for the quarter compared to 69.2 percent in the 2015 third quarter.


 

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General and administrative expenses increased 21.5 percent, or $6.4 million, to $36.2 million from $29.8 million in the 2015 third quarter. Half of this increase, or $3.2 million, reflects costs associated with ongoing general and administrative expenses related to the acquisitions of Co Company, DSI, JCA Group and Philosophy IB, including their use of third-party consultants and contractors to execute work for leadership consulting services. The balance of the increase mostly reflects IT and HR initiatives, hiring fees, business development expenses, and one-time expenses associated with acquisitions made in the quarter. As a percentage of net revenue, general and administrative expenses were 25.2 percent compared to 21.5 percent in the 2015 third quarter.

Operating income in the 2016 third quarter decreased 7.2 percent, or $0.9 million, to $12.0 million, and operating margin (operating income as a percentage of net revenue) was 8.4 percent. This compares to operating income of $12.9 million and operating margin of 9.3 percent in the 2015 third quarter. Adjusted EBITDA(1) in the 2016 third quarter decreased 1.0 percent, or $0.7 million, to $17.5 million compared to $18.2 million in the 2015 third quarter. The Adjusted EBITDA margin (Adjusted EBITDA as a percentage of net revenue) in the 2016 third quarter was 12.2 percent compared to 13.1 percent in the 2015 third quarter. The year-over-year declines in operating income and Adjusted EBITDA largely reflect the increase in general and administrative expenses, mostly related to the four acquisitions made during the past year.

Net income in the 2016 third quarter was $6.9 million and diluted earnings per share were $0.37, based on an effective tax rate of 44.0 percent in the quarter and a full-year projected tax rate of approximately 48 percent. In the 2015 third quarter, the company reported net income of $7.5 million and diluted earnings per share of $0.40 based on an effective tax rate of 32.7 percent in the quarter. The tax rate was higher in this year’s third quarter based on the mix of income.

Net cash provided by operating activities in the 2016 third quarter was $35.9 million, compared to $43.1 million in the 2015 third quarter. Mostly reflecting the acquisitions of JCA Group and Philosophy IB, cash and cash equivalents at September 30, 2016 were $100.0 million compared to $129.0 million at September 30, 2015 and $85.4 million at June 30, 2016.


 

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Nine Months Results

For the nine months ended September 30, 2016 consolidated net revenue of $422.6 million increased 9.3 percent, or $36.0 million, from $386.6 million in the first nine months of 2015. Excluding the impact of exchange rate fluctuations which negatively impacted results by $4.3 million, or 1.1 percent, consolidated net revenue increased $40.3 million or 10.4 percent.

Executive Search and Leadership Consulting net revenue increased 9.7 percent, or $34.9 million, to $395.9 million from $361.0 million in the first nine months of 2015. Excluding the impact of exchange rate fluctuations which negatively impacted results by $3.9 million, or 1.1 percent, consolidated net revenue increased $38.8 million or 10.8 percent. Revenue growth in the Americas of 8.7 percent (approximately 9.1 percent on a constant currency basis) and in Europe of 30.6 percent (approximately 34.2 percent on a constant currency basis) was partially offset by a decline in Asia Pacific of 7.4 percent (approximately 6.9 percent on a constant currency basis). Every industry practice except the Education, Non-profit & Social Enterprise practice contributed to growth in this segment.

Net revenue from Culture Shaping services increased 3.9 percent, or $1.0 million, to $26.7 million in the first nine months of 2016 from $25.7 million in the first nine months of 2015. Exchange rate fluctuations negatively impacted net revenue by $0.5 million, or 1.8 percent.

Productivity, as measured by annualized Executive Search and Leadership Consulting net revenue per consultant, was $1.5 million for the first nine months of 2016, the same as in the first nine months of 2015. The number of executive searches confirmed in the first nine months of 2016 increased 5.8 percent and the average revenue per executive search was $110,800 compared to $111,200 for the same period in 2015.

Operating income for the first nine months of 2016 declined 4.2 percent, or $1.2 million, to $27.6 million and operating margin was 6.5 percent compared to operating income of $28.8 million and operating margin of 7.4 percent for the first nine months of 2015. Adjusted EBITDA(1) for the first nine months of 2016 increased 4.2 percent, or $1.9 million to $46.4 million and Adjusted EBITDA margin was 11.0 percent, compared to Adjusted EBITDA of $44.5 million and Adjusted EBITDA margin of 11.5 percent for the same period of 2015.


 

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Two unusual items contributed to the decline in operating income in the first nine months of 2016. Following the acquisitions of Co Company in the 2015 fourth quarter and Decision Strategies International (DSI) in the 2016 first quarter, the company took the opportunity to reposition its Leadership Consulting business for future growth. The integration of these acquisitions with the company’s legacy business and the realignment of resources around its strategic leadership service offering resulted in approximately $2.1 million of non-recurring expenses in the 2016 first quarter, primarily in Europe. Additionally, the company invested $5.2 million in the first nine months of 2016 in new and existing leadership and client service talent for its Culture Shaping business.

Net income for the first nine months of 2016 was $14.9 million and diluted earnings per share were $0.79, reflecting an effective tax rate of 47.0 percent. Net income for the first nine months of 2015 was $15.9 million and diluted earnings per share were $0.85, reflecting an effective tax rate of 40.7 percent. The effective tax rates in 2016 and 2015 are higher than the statutory rates because of losses incurred that could not be benefitted for tax purposes due to valuation allowances in certain jurisdictions.

Fourth Quarter 2016 Outlook

The company is forecasting fourth quarter 2016 consolidated net revenue of between $142 million and $152 million. This forecast is based on the average currency rates in September 2016 and reflects, among other factors, management’s 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.

Wolstencroft added, “It is important for us to achieve a strong finish to 2016, capitalizing on the investments we made over the last year. Confirmations for new searches and leadership consulting assignments were notably improved in September and we are hopeful that this momentum carries into and throughout the fourth quarter and 2017. Our larger base of higher quality consultants, combined with the additional services and intellectual property we have added in Leadership Consulting, should position Heidrick & Struggles for future revenue growth and profitability.”

Quarterly Conference Call

Executives of Heidrick & Struggles will host a conference call to review its third quarter results today, October 24, at 4:00 pm 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.


 

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About Heidrick & Struggles International, Inc.

Heidrick & Struggles (Nasdaq: HSII) serves the executive talent and leadership needs of the world’s top organizations as a premier provider of leadership consulting, culture shaping and senior-level executive search services. Heidrick & Struggles pioneered the profession of executive search more than 60 years ago. Today, the firm serves as a trusted advisor, providing integrated leadership solutions and helping its clients change the world, one leadership team at a time. 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(1) and Adjusted EBITDA margin. Adjusted EBITDA(1) 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, leadership changes, our ability to attract, integrate, manage and retain qualified executive search consultants and senior leaders; 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 the U.K. referendum to leave the European Union (Brexit); 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 allowances 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, 2015, 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.

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Press Release Contacts:

H&S Investors & Analysts Contact:

Julie Creed—Vice President, Investor Relations & Real Estate

1 312 496 1774, jcreed@heidrick.com

H&S Media Contact:

Jon Harmon—Vice President, Corporate Communications, Marketing

1 312 496 1593, jharmon@heidrick.com


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended              
     September 30,              
     2016     2015     $ Change     % Change  

Revenue:

        

Revenue before reimbursements (net revenue)

   $ 143,519      $ 138,421      $ 5,098        3.7

Reimbursements

     4,720        4,429        291        6.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     148,239        142,850        5,389        3.8

Operating expenses:

        

Salaries and employee benefits

     95,355        95,724        (369     -0.4

General and administrative expenses

     36,158        29,764        6,394        21.5

Reimbursed expenses

     4,720        4,429        291        6.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     136,233        129,917        6,316        4.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     12,006        12,933        (927     -7.2

Non-operating income (expense):

        

Interest, net

     42        (54    

Other, net

     340        (1,742    
  

 

 

   

 

 

     

Net non-operating income (expense)

     382        (1,796    
  

 

 

   

 

 

     

Income before income taxes

     12,388        11,137       

Provision for income taxes

     5,448        3,647       
  

 

 

   

 

 

     

Net income

     6,940        7,490       

Other comprehensive loss, net of tax

     (198     (1,288    
  

 

 

   

 

 

     

Comprehensive income

   $ 6,742      $ 6,202       
  

 

 

   

 

 

     

Basic weighted average common shares outstanding

     18,577        18,372       

Dilutive common shares

     273        277       
  

 

 

   

 

 

     

Diluted weighted average common shares outstanding

     18,850        18,649       
  

 

 

   

 

 

     

Basic net income per common share

   $ 0.37      $ 0.41       

Diluted net income per common share

   $ 0.37      $ 0.40       

Salaries and employee benefits as a % of net revenue

     66.4     69.2    

General and administrative expense as a % of net revenue

     25.2     21.5    

Operating income as a % of net revenue

     8.4     9.3    


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 

     Three Months Ended September 30,  
     2016     2015     $
Change
    %
Change
    2016
Margin *
    2015
Margin *
 

Revenue:

            

Executive Search and Leadership Consulting

            

Americas

   $ 78,198      $ 78,265      ($ 67     -0.1    

Europe

     32,895        25,946        6,949        26.8    

Asia Pacific

     23,801        25,031        (1,230     -4.9    
  

 

 

   

 

 

   

 

 

   

 

 

     

Total Executive Search and Leadership Consulting

     134,894        129,242        5,652        4.4    

Culture Shaping

     8,625        9,179        (554     -6.0    
  

 

 

   

 

 

   

 

 

   

 

 

     

Revenue before reimbursements (net revenue)

     143,519        138,421        5,098        3.7    

Reimbursements

     4,720        4,429        291        6.6    
  

 

 

   

 

 

   

 

 

   

 

 

     

Total revenue

   $ 148,239      $ 142,850      $ 5,389        3.8    
  

 

 

   

 

 

   

 

 

   

 

 

     

Operating income (loss):

            

Executive Search and Leadership Consulting

            

Americas

   $ 18,552      $ 18,193      $ 359        2.0     23.7     23.2

Europe

     2,371        1,470        901        61.3     7.2     5.7

Asia Pacific

     2,029        2,630        (601     -22.9     8.5     10.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Executive Search and Leadership Consulting

     22,952        22,293        659        3.0     17.0     17.2

Culture Shaping

     41        1,539        (1,498     -97.3     0.5     16.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total segments

     22,993        23,832        (839     -3.5     16.0     17.2

Global Operations Support

     (10,987     (10,899     (88     -0.8     -7.7     -7.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 12,006      $ 12,933      ($ 927     -7.2     8.4     9.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*  Margin based on revenue before reimbursements (net revenue).


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

     Nine Months Ended              
     September 30,              
     2016     2015     $ Change     % Change  

Revenue:

        

Revenue before reimbursements (net revenue)

   $ 422,569      $ 386,619      $ 35,950        9.3

Reimbursements

     13,773        12,396        1,377        11.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     436,342        399,015        37,327        9.4

Operating expenses:

        

Salaries and employee benefits

     288,015        264,914        23,101        8.7

General and administrative expenses

     106,986        92,928        14,058        15.1

Reimbursed expenses

     13,773        12,396        1,377        11.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     408,774        370,238        38,536        10.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     27,568        28,777        (1,209     -4.2

Non-operating income (expense):

        

Interest, net

     172        (300    

Other, net

     418        (1,696    
  

 

 

   

 

 

     

Net non-operating income (expense)

     590        (1,996    
  

 

 

   

 

 

     

Income before income taxes

     28,158        26,781       

Provision for income taxes

     13,238        10,909       
  

 

 

   

 

 

     

Net income

     14,920        15,872       

Other comprehensive loss, net of tax

     (143     (2,525    
  

 

 

   

 

 

     

Comprehensive income

   $ 14,777      $ 13,347       
  

 

 

   

 

 

     

Basic weighted average common shares outstanding

     18,528        18,318       

Dilutive common shares

     273        277       
  

 

 

   

 

 

     

Diluted weighted average common shares outstanding

     18,801        18,595       
  

 

 

   

 

 

     

Basic net income per common share

   $ 0.81      $ 0.87       

Diluted net income per common share

   $ 0.79      $ 0.85       

Salaries and employee benefits as a % of net revenue

     68.2     68.5    

General and administrative expense as a % of net revenue

     25.3     24.0    

Operating income as a % of net revenue

     6.5     7.4    


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 

     Nine Months Ended September 30,  
     2016     2015     $
Change
    %
Change
    2016
Margin *
    2015
Margin *
 

Revenue:

            

Executive Search and Leadership Consulting

            

Americas

   $ 237,557      $ 218,560      $ 18,997        8.7    

Europe

     91,017        69,679        21,338        30.6    

Asia Pacific

     67,325        72,712        (5,387     -7.4    
  

 

 

   

 

 

   

 

 

   

 

 

     

Total Executive Search and Leadership Consulting

     395,899        360,951        34,948        9.7    

Culture Shaping

     26,670        25,668        1,002        3.9    
  

 

 

   

 

 

   

 

 

   

 

 

     

Revenue before reimbursements (net revenue)

     422,569        386,619        35,950        9.3    

Reimbursements

     13,773        12,396        1,377        11.1    
  

 

 

   

 

 

   

 

 

   

 

 

     

Total revenue

   $ 436,342      $ 399,015      $ 37,327        9.4    
  

 

 

   

 

 

   

 

 

   

 

 

     

Operating income (loss):

            

Executive Search and Leadership Consulting

            

Americas

   $ 56,817      $ 50,563      $ 6,254        12.4     23.9     23.1

Europe

     2,429        1,018        1,411        138.6     2.7     1.5

Asia Pacific

     5,179        8,088        (2,909     -36.0     7.7     11.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Executive Search and Leadership Consulting

     64,425        59,669        4,756        8.0     16.3     16.5

Culture Shaping

     (1,928     2,948        (4,876     -165.4     -7.2     11.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total segments

     62,497        62,617        (120     -0.2     14.8     16.2

Global Operations Support

     (34,929     (33,840     (1,089     -3.2     -8.3     -8.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 27,568      $ 28,777      ($ 1,209     -4.2     6.5     7.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*  Margin based on revenue before reimbursements (net revenue).


Heidrick & Struggles International, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

     September 30,      December 31,  
     2016      2015  
     (Unaudited)         

Current assets:

     

Cash and cash equivalents

   $ 99,975       $ 190,452   

Accounts receivable, net

     114,726         76,058   

Prepaid expenses

     23,936         19,197   

Other current assets

     14,867         18,447   

Income taxes recoverable

     5,451         4,809   
  

 

 

    

 

 

 

Total current assets

     258,955         308,963   
  

 

 

    

 

 

 

Non-current assets:

     

Property and equipment, net

     36,137         36,498   

Assets designated for retirement and pension plans

     17,438         16,857   

Investments

     17,268         14,145   

Other non-current assets

     11,233         11,115   

Goodwill

     155,313         131,122   

Other intangible assets, net

     20,154         18,687   

Deferred income taxes

     37,277         35,331   
  

 

 

    

 

 

 

Total non-current assets

     294,820         263,755   
  

 

 

    

 

 

 

Total assets

   $ 553,775       $ 572,718   
  

 

 

    

 

 

 

Current liabilities:

     

Accounts payable

   $ 9,644       $ 6,150   

Accrued salaries and employee benefits

     120,102         158,875   

Deferred revenue, net

     31,713         29,724   

Other current liabilities

     25,103         31,239   

Income taxes payable

     3,897         3,442   
  

 

 

    

 

 

 

Total current liabilities

     190,459         229,430   
  

 

 

    

 

 

 

Non-current liabilities:

     

Accrued salaries and employee benefits

     30,363         32,690   

Retirement and pension plans

     39,921         35,949   

Other non-current liabilities

     27,267         19,847   
  

 

 

    

 

 

 

Total non-current liabilities

     97,551         88,486   
  

 

 

    

 

 

 

Stockholders’ equity

     265,765         254,802   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 553,775       $ 572,718   
  

 

 

    

 

 

 


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Nine Months Ended  
     September 30,  
     2016     2015  

Cash flows - operating activities:

    

Net income

   $ 14,920      $ 15,872   

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

    

Depreciation and amortization

     11,676        9,983   

Deferred income taxes

     (1,731     (153

Stock-based compensation expense

     5,055        3,684   

Accretion expense related to earnout payments

     198        861   

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

    

Accounts receivable

     (33,267     (40,582

Accounts payable

     2,270        (1,311

Accrued expenses

     (47,130     (5,361

Deferred revenue

     1,298        3,921   

Income taxes payable, net

     (76     (3,101

Retirement and pension assets and liabilities

     3,009        69   

Prepaid expenses

     (4,228     (1,054

Other assets and liabilities, net

     (1,008     (2,868
  

 

 

   

 

 

 

Net cash used in operating activities

     (49,014     (20,040
  

 

 

   

 

 

 

Cash flows - investing activities:

    

Restricted cash

     7,228        —     

Acquisition of business

     (27,722     —     

Capital expenditures

     (2,179     (13,897

Purchases of available for sale investments

     (2,361     (1,402

Proceeds from sale of available for sale investments

     510        630   
  

 

 

   

 

 

 

Net cash used in investing activities

     (24,524     (14,669
  

 

 

   

 

 

 

Cash flows - financing activities:

    

Debt repayment

     —          (29,500

Debt issuance costs

     —          (422

Cash dividends paid

     (7,442     (7,496

Payment of employee tax withholdings on equity transactions

     (2,676     (878

Acquisition earnout payments

     (7,641     (5,496
  

 

 

   

 

 

 

Net cash used in financing activities

     (17,759     (43,792
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

     640        (3,891
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (90,657     (82,392

Cash and cash equivalents at beginning of period

     190,452        211,352   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 99,795      $ 128,960   
  

 

 

   

 

 

 


Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Three Months Ended  
     September 30,  
     2016     2015  

Cash flows - operating activities:

    

Net income

   $ 6,940      $ 7,490   

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

    

Depreciation and amortization

     4,031        3,323   

Deferred income taxes

     (2,743     (119

Stock-based compensation expense

     1,155        1,094   

Accretion expense related to earnout payments

     (360     276   

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

    

Accounts receivable

     (3,129     (11,036

Accounts payable

     3,281        (1,569

Accrued expenses

     40,125        43,259   

Deferred revenue

     (2,386     782   

Income taxes payable, net

     636        662   

Retirement and pension assets and liabilities

     479        (1,154

Prepaid expenses

     (3,002     (493

Other assets and liabilities, net

     (9,080     583   
  

 

 

   

 

 

 

Net cash provided by operating activities

     35,947        43,098   
  

 

 

   

 

 

 

Cash flows - investing activities:

    

Restricted cash

     727        —     

Acquisition of businesses

     (18,716     —     

Capital expenditures

     (1,087     (3,649

Purchases of available for sale investments

     (114     (126

Proceeds from sale of available for sale investments

     266        375   
  

 

 

   

 

 

 

Net cash used in investing activities

     (18,924     (3,400
  

 

 

   

 

 

 

Cash flows - financing activities:

    

Debt repayment

     —          (26,500

Debt issuance costs

     —          (41

Cash dividends paid

     (2,496     (2,493

Payment of employee tax withholdings on equity transactions

     —          (58
  

 

 

   

 

 

 

Net cash used in financing activities

     (2,496     (29,092
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

     57        (1,530
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     14,584        9,076   

Cash and cash equivalents at beginning of period

     85,391        119,884   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 99,975      $ 128,960   
  

 

 

   

 

 

 


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,  
     2016     2015     2016     2015  

Revenue before reimbursements (net revenue)

   $ 143,519      $ 138,421      $ 422,569      $ 386,619   

Net income

     6,940        7,490        14,920        15,872   

Interest, net

     42        (54     172        (300

Other, net

     340        (1,742     418        (1,696

Provision for income taxes

     5,448        3,647        13,238        10,909   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     12,006        12,933        27,568        28,777   

Adjustments

        

Salaries and employee benefits

        

Stock-based compensation expense

     1,155        1,094        4,492        3,234   

Senn Delaney retention awards

     627        542        2,430        1,625   

General and administrative expenses

        

Depreciation

     2,444        2,158        7,005        6,485   

Intangible amortization

     1,587        1,165        4,671        3,498   

Earnout accretion

     (360     276        198        861   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

     5,453        5,235        18,796        15,703   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 17,459      $ 18,168      $ 46,364      $ 44,480   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

     12.2     13.1     11.0     11.5