(In thousands, except per share amounts) | Three Months Ended | Three months ended | |||
(Unaudited) | June 30, 2017 | June 30, 2016 | |||
GAAP | Adjusted* | GAAP | |||
Net revenue (before reimbursements) | $152,214 | $152,214 | $148,861 | ||
Operating income (Loss) | (28,411) | 10,747 | 11,694 | ||
Net income (Loss) | (18,248) | 6,281 | 6,655 | ||
Diluted Earnings (Loss) per Share | ($0.97) | $0.33 | $0.35 |
*Adjusted operating income, net income and diluted earnings per share reflect results that exclude the non-cash impairment charge of $39.2 million in the 2017 second quarter. |
"Our 2017 second quarter results reflect solid performance in our core business, Executive Search, and strong growth in
Consolidated net revenue (revenue before reimbursements) increased 2.3 percent, or
Executive Search net revenue increased 2.9 percent year over year, or
There were 355 Executive Search consultants at
Culture Shaping net revenue declined 35.7 percent, or
Consolidated salaries and employee benefits expense in the 2017 second quarter increased 1.8 percent, or
General and administrative expenses increased 6.9 percent, or
In the second quarter, the company recorded a non-cash impairment charge of
Reflecting the impairment charge, the company reported an operating loss in the 2017 second quarter of
The net loss in the 2017 second quarter was
Net cash provided by operating activities in the 2017 second quarter was
Six Months Results
For the six months ended
Executive Search net revenue increased 5.1 percent, or
Culture Shaping net revenue declined 33.5 percent, or
The operating loss for the first six months of 2017 was
Two unusual items impacted operating income in the first six months of 2016. Following the acquisitions of
Adjusted EBITDA(1) for the first six months of 2017 was
Net loss for the first six months of 2017 was
2017 Third Quarter Outlook
The company is forecasting third quarter 2017 consolidated net revenue of between
"As a trusted advisor to our clients, we will increasingly combine distinctive, data-driven talent, leadership and culture solutions to accelerate the performance of the world's most influential organizations. We will continue to develop
Quarterly Conference Call
Executives of
About
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, Adjusted EBITDA margin and Adjusted diluted earnings per share (1)Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, stock-based compensation expense, compensation expense associated with
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 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
Press Release Contacts:
1 312 496 1774, jcreed@heidrick.com
H&S Media Contact:
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 | ||||||||
June 30 | ||||||||
2017 | 2016 | $ Change | % Change | |||||
Revenue: | ||||||||
Revenue before reimbursements (net revenue) | $152,214 | $148,861 | $3,353 | 2.3% | ||||
Reimbursements | 4,904 | 4,955 | (51) | -1.0% | ||||
Total revenue | 157,118 | 153,816 | 3,302 | 2.1% | ||||
Operating expenses: | ||||||||
Salaries and employee benefits | 103,378 | 101,542 | 1,836 | 1.8% | ||||
General and administrative expenses | 38,089 | 35,625 | 2,464 | 6.9% | ||||
Impairment charges | 39,158 | 0 | 39,158 | NM | ||||
Reimbursed expenses | 4,904 | 4,955 | (51) | -1.0% | ||||
Total operating expenses | 185,529 | 142,122 | 43,407 | 30.5% | ||||
Operating income (loss) | (28,411) | 11,694 | (40,105) | -343.0% | ||||
Non-operating income (expense): | ||||||||
Interest, net | (96) | 58 | ||||||
Other, net | (179) | 29 | ||||||
Net non-operating income (expense) | (275) | 87 | ||||||
Income (loss) before income taxes | (28,686) | 11,781 | ||||||
Provision for (benefit from) income taxes | (10,438) | 5,126 | ||||||
Net income (loss) | (18,248) | 6,655 | ||||||
Other comprehensive income (loss), net of tax | 3,393 | (1,275) | ||||||
Comprehensive income (loss) | (14,855) | $5,380 | ||||||
Basic weighted average common shares outstanding | 18,749 | 18,557 | ||||||
Dilutive common shares | - | 260 | ||||||
Diluted weighted average common shares outstanding | 18,749 | 18,817 | ||||||
Basic net income (loss) per common share | ($0.97) | $0.36 | ||||||
Diluted net income (loss) per common share | ($0.97) | $0.35 | ||||||
Salaries and employee benefits as a % of net revenue | 67.9% | 68.2% | ||||||
General and administrative expense as a % of net revenue | 25.0% | 23.9% | ||||||
Operating income (loss) as a % of net revenue | -18.7% | 7.9% |
Heidrick & Struggles International, Inc. | ||||||||||||
Segment Information | ||||||||||||
(In thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended June 30, | ||||||||||||
$ | % | 2017 | 2016 | |||||||||
2017 | 2016 | Change | Change | Margin * | Margin * | |||||||
Revenue: | ||||||||||||
Executive Search | ||||||||||||
Americas | $83,090 | $81,494 | $1,596 | 2.0% | ||||||||
Europe | 30,335 | 27,538 | 2,797 | 10.2% | ||||||||
Asia Pacific | 21,115 | 21,677 | (562) | -2.6% | ||||||||
Total Executive Search | 134,540 | 130,709 | 3,831 | 2.9% | ||||||||
Leadership Consulting | 11,433 | 8,450 | 2,983 | 35.3% | ||||||||
Culture Shaping | 6,241 | 9,702 | (3,461) | -35.7% | ||||||||
Revenue before reimbursements (net revenue) | 152,214 | 148,861 | 3,353 | 2.3% | ||||||||
Reimbursements | 4,904 | 4,955 | (51) | -1.0% | ||||||||
Total revenue | $157,118 | $153,816 | $3,302 | 2.1% | ||||||||
Operating income (loss): | ||||||||||||
Executive Search | ||||||||||||
Americas | $23,445 | $21,581 | $1,864 | 8.6% | 28.2% | 26.5% | ||||||
Europe | 1,717 | 3,107 | (1,390) | -44.7% | 5.7% | 11.3% | ||||||
Asia Pacific | 786 | 1,988 | (1,202) | -60.5% | 3.7% | 9.2% | ||||||
Total Executive Search | 25,948 | 26,676 | (728) | -2.7% | 19.3% | 20.4% | ||||||
Leadership Consulting | (1,688) | (2,344) | 656 | 28.0% | -14.8% | -27.7% | ||||||
Culture Shaping (1) | (39,532) | 87 | (39,619) | NM | NM | 0.9% | ||||||
Total segments | (15,272) | 24,419 | (39,691) | -162.5% | -10.0% | 16.4% | ||||||
Global Operations Support | (13,139) | (12,725) | (414) | -3.3% | -8.6% | -8.5% | ||||||
Operating income (loss) | ($28,411) | $11,694 | ($40,105) | -343.0% | -18.7% | 7.9% |
* Margin based on revenue before reimbursements (net revenue). | ||||||||||||
(1) Culture Shaping operating loss includes $39.2 million of impairment charges. |
Heidrick & Struggles International, Inc. | |||||||
Condensed Consolidated Statements of Comprehensive Income | |||||||
(In thousands, except per share amounts) | |||||||
(Unaudited) | |||||||
Six Months Ended | |||||||
June 30, | |||||||
2017 | 2016 | $ Change | % Change | ||||
Revenue: | |||||||
Revenue before reimbursements (net revenue) | $ 292,220 | $ 279,050 | $ 13,170 | 4.7% | |||
Reimbursements | 9,075 | 9,053 | 22 | 0.2% | |||
Total revenue | 301,295 | 288,103 | 13,192 | 4.6% | |||
Operating expenses: | |||||||
Salaries and employee benefits | 200,613 | 192,660 | 7,953 | 4.1% | |||
General and administrative expenses | 74,222 | 70,828 | 3,394 | 4.8% | |||
Impairment charges | 39,158 | - | 39,158 | NM | |||
Reimbursed expenses | 9,075 | 9,053 | 22 | 0.2% | |||
Total operating expenses | 323,068 | 272,541 | 50,527 | 18.5% | |||
Operating income (loss) | (21,773) | 15,562 | (37,335) | -239.9% | |||
Non-operating income (expense): | |||||||
Interest, net | 101 | 130 | |||||
Other, net | (2,920) | 78 | |||||
Net non-operating income (expense) | (2,819) | 208 | |||||
Income (loss) before income taxes | (24,592) | 15,770 | |||||
Provision for (benefit from) income taxes | (6,994) | 7,790 | |||||
Net income (loss) | (17,598) | 7,980 | |||||
Other comprehensive income, net of tax | 6,018 | 55 | |||||
Comprehensive income (loss) | $ (11,580) | $ 8,035 | |||||
Basic weighted average common shares outstanding | 18,689 | 18,503 | |||||
Dilutive common shares | - | 260 | |||||
Diluted weighted average common shares outstanding | 18,689 | 18,763 | |||||
Basic net income (loss) per common share | $ (0.94) | $ 0.43 | |||||
Diluted net income (loss) per common share | $ (0.94) | $ 0.43 | |||||
Salaries and employee benefits as a % of net revenue | 68.7% | 69.0% | |||||
General and administrative expense as a % of net revenue | 25.4% | 25.4% | |||||
Operating income (loss) as a % of net revenue | -7.5% | 5.6% |
Heidrick & Struggles International, Inc. | ||||||||||||
Segment Information | ||||||||||||
(In thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Six Months Ended June 30, | ||||||||||||
2017 | 2016 | |||||||||||
2017 | 2016 | $ Change | % Change | Margin * | Margin * | |||||||
Revenue: | ||||||||||||
Executive Search | ||||||||||||
Americas | $ 160,188 | $ 154,884 | $ 5,304 | 3.4% | ||||||||
Europe | 56,540 | 50,939 | 5,601 | 11.0% | ||||||||
Asia Pacific | 42,297 | 40,614 | 1,683 | 4.1% | ||||||||
Total Executive Search | 259,025 | 246,437 | 12,588 | 5.1% | ||||||||
Leadership Consulting | 21,199 | 14,568 | 6,631 | 45.5% | ||||||||
Culture Shaping | 11,996 | 18,045 | (6,049) | -33.5% | ||||||||
Revenue before reimbursements (net revenue) | 292,220 | 279,050 | 13,170 | 4.7% | ||||||||
Reimbursements | 9,075 | 9,053 | 22 | 0.2% | ||||||||
Total revenue | $ 301,295 | $ 288,103 | $ 13,192 | 4.6% | ||||||||
Operating income (loss): | ||||||||||||
Executive Search | ||||||||||||
Americas | $ 42,512 | $ 39,375 | $ 3,137 | 8.0% | 26.5% | 25.4% | ||||||
Europe | 1,816 | 4,396 | (2,580) | -58.7% | 3.2% | 8.6% | ||||||
Asia Pacific | 4,106 | 2,607 | 1,499 | 57.5% | 9.7% | 6.4% | ||||||
Total Executive Search | 48,434 | 46,378 | 2,056 | 4.4% | 18.7% | 18.8% | ||||||
Leadership Consulting | (2,570) | (4,905) | 2,335 | 47.6% | -12.1% | -33.7% | ||||||
Culture Shaping (1) | (42,497) | (1,969) | (40,528) | NM | -354.3% | -10.9% | ||||||
Total segments | 3,367 | 39,504 | (36,137) | -91.5% | 1.2% | 14.2% | ||||||
Global Operations Support | (25,140) | (23,942) | (1,198) | -5.0% | -8.6% | -8.6% | ||||||
Total operating income (loss) | $ (21,773) | $ 15,562 | $ (37,335) | -239.9% | -7.5% | 5.6% | ||||||
* Margin based on revenue before reimbursements (net revenue). | ||||||||||||
(1) Culture Shaping operating loss includes $39.2 million of impairment charges. |
Heidrick & Struggles International, Inc. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(In thousands) | ||||||
June 30, | December 31, | |||||
2017 | 2016 | |||||
(Unaudited) | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ 58,178 | $ 165,011 | ||||
Accounts receivable, net | 124,410 | 93,191 | ||||
Prepaid expenses | 23,784 | 21,602 | ||||
Other current assets | 13,783 | 13,779 | ||||
Income taxes recoverable | 5,467 | 4,847 | ||||
Total current assets | 225,622 | 298,430 | ||||
Non-current assets: | ||||||
Property and equipment, net | 41,491 | 35,099 | ||||
Assets designated for retirement and pension plans | 17,050 | 15,698 | ||||
Investments | 19,717 | 17,346 | ||||
Other non-current assets | 11,913 | 9,322 | ||||
Goodwill | 124,671 | 151,844 | ||||
Other intangible assets, net | 8,027 | 20,690 | ||||
Deferred income taxes | 48,946 | 33,073 | ||||
Total non-current assets | 271,815 | 283,072 | ||||
Total assets | $ 497,437 | $ 581,502 | ||||
Current liabilities: | ||||||
Accounts payable | $ 8,170 | $ 7,952 | ||||
Accrued salaries and employee benefits | 88,073 | 155,523 | ||||
Deferred revenue, net | 32,301 | 28,367 | ||||
Other current liabilities | 21,761 | 24,133 | ||||
Income taxes payable | 7,064 | 4,617 | ||||
Total current liabilities | 157,369 | 220,592 | ||||
Non-current liabilities: | ||||||
Accrued salaries and employee benefits | 26,619 | 34,993 | ||||
Retirement and pension plans | 43,351 | 39,039 | ||||
Other non-current liabilities | 26,585 | 28,288 | ||||
Total non-current liabilities | 96,555 | 102,320 | ||||
Stockholders' equity | 243,513 | 258,590 | ||||
Total liabilities and stockholders' equity | $ 497,437 | $ 581,502 |
Heidrick & Struggles International, Inc. | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2017 | 2016 | ||||||
Cash flows - operating activities: | |||||||
Net income (loss) | ($18,248) | $6,655 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 3,758 | 3,973 | |||||
Deferred income taxes | (17,704) | (1,258) | |||||
Stock-based compensation expense | 2,076 | 2,069 | |||||
Accretion expense related to earnout payments | 199 | 212 | |||||
Impairment charges | 39,158 | - | |||||
Changes in assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | (11,337) | (13,090) | |||||
Accounts payable | 388 | (2,534) | |||||
Accrued expenses | 17,557 | 18,464 | |||||
Deferred revenue | (537) | (620) | |||||
Income taxes payable, net | 1,695 | 5,100 | |||||
Retirement and pension assets and liabilities | 499 | 236 | |||||
Prepaid expenses | 1,253 | 1,338 | |||||
Other assets and liabilities, net | 5,557 | 13,676 | |||||
Net cash provided by operating activities | 24,314 | 34,221 | |||||
Cash flows - investing activities: | |||||||
Restricted cash | (2) | - | |||||
Acquisition of businesses | (114) | (236) | |||||
Capital expenditures | (6,280) | (371) | |||||
Purchases of available for sale investments | (157) | (115) | |||||
Proceeds from sale of available for sale investments | 118 | 125 | |||||
Net cash used in investing activities | (6,435) | (597) | |||||
Cash flows - financing activities: | |||||||
Payments on line of credit | (25,000) | - | |||||
Cash dividends paid | (2,561) | (2,496) | |||||
Acquisition earnout payments | (2,308) | (7,074) | |||||
Net cash used in financing activities | ($29,869) | (9,570) | |||||
Effect of exchange rate fluctuations on cash and cash equivalents | 1,839 | (710) | |||||
Net increase (decrease) in cash and cash equivalents | (10,151) | 23,344 | |||||
Cash and cash equivalents at beginning of period | 68,329 | 62,047 | |||||
Cash and cash equivalents at end of period | $ 58,178 | $ 85,391 |
Heidrick & Struggles International, Inc. | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
Six Months Ended | |||||||
June 30, | |||||||
2017 | 2016 | ||||||
Cash flows - operating activities: | |||||||
Net income (loss) | $(17,598) | $ 7,980 | |||||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||
Depreciation and amortization | 7,566 | 7,645 | |||||
Deferred income taxes | (15,323) | 1,012 | |||||
Stock-based compensation expense | 3,716 | 3,900 | |||||
Accretion expense related to earnout payments | 625 | 558 | |||||
Impairment charges | 39,158 | - | |||||
Changes in assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | (28,516) | (30,138) | |||||
Accounts payable | 63 | (1,011) | |||||
Accrued expenses | (80,558) | (87,255) | |||||
Deferred revenue | 3,334 | 3,684 | |||||
Income taxes payable, net | 2,018 | (712) | |||||
Retirement and pension assets and liabilities | 2,892 | 2,530 | |||||
Prepaid expenses | (1,351) | (1,226) | |||||
Other assets and liabilities, net | (2,238) | 8,072 | |||||
Net cash used in operating activities | (86,212) | (84,961) | |||||
Cash flows - investing activities: | |||||||
Restricted cash | (2) | 6,501 | |||||
Acquisition of business | (114) | (9,006) | |||||
Capital expenditures | (10,443) | (1,092) | |||||
Purchases of available for sale investments | (1,963) | (2,247) | |||||
Proceeds from sale of available for sale investments | 374 | 244 | |||||
Net cash used in investing activities | (12,148) | (5,600) | |||||
Cash flows - financing activities: | |||||||
Proceeds from line of credit | 40,000 | - | |||||
Payments on line of credit | (40,000) | - | |||||
Cash dividends paid | (5,159) | (4,946) | |||||
Payment of employee tax withholdings on equity transactions | (2,392) | (2,676) | |||||
Acquisition earnout payments | (4,497) | (7,461) | |||||
Net cash used in financing activities | (12,048) | (15,083) | |||||
Effect of exchange rate fluctuations on cash and cash equivalents | 3,575 | 583 | |||||
Net decrease in cash and cash equivalents | (106,833) | (105,061) | |||||
Cash and cash equivalents at beginning of period | 165,011 | 190,452 | |||||
Cash and cash equivalents at end of period | $ 58,178 | $ 85,391 |
Heidrick & Struggles International, Inc. | |||||||||||
Reconciliation of Net Income and Operating Income (GAAP) to | |||||||||||
Adjusted EBITDA (Non-GAAP) | |||||||||||
(In thousands) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Revenue before reimbursements (net revenue) | $ 152,214 | $ 148,861 | $ 292,220 | $ 279,050 | |||||||
Net income (loss) | (18,248) | 6,655 | (17,598) | 7,980 | |||||||
Interest, net | (96) | 58 | 101 | 130 | |||||||
Other, net | (179) | 29 | (2,920) | 78 | |||||||
Provision for (benefit from) income taxes | (10,438) | 5,126 | (6,994) | 7,790 | |||||||
Operating income | (28,411) | 11,694 | (21,773) | 15,562 | |||||||
Adjustments | |||||||||||
Salaries and employee benefits | |||||||||||
Stock-based compensation expense | 1,737 | 1,506 | 3,378 | 3,337 | |||||||
Senn Delaney retention awards | - | 730 | - | 1,803 | |||||||
General and administrative expenses | |||||||||||
Depreciation | 2,712 | 2,275 | 4,546 | 4,561 | |||||||
Intangible amortization | 1,253 | 1,698 | 3,020 | 3,084 | |||||||
Earnout accretion | 200 | 212 | 626 | 558 | |||||||
Impairment charges | 39,158 | - | 39,158 | - | |||||||
Total adjustments | 45,060 | 6,421 | 50,728 | 13,343 | |||||||
Adjusted EBITDA | $ 16,649 | $ 18,115 | $ 28,955 | $ 28,905 | |||||||
Adjusted EBITDA Margin | 10.9% | 12.2% | 9.9% | 10.4% |
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