Heidrick & Struggles Achieves Over $1 Billion in Annual Net Revenue, Attains Record Profitability

Actualizado el 28 de febrero, 2022 - 22.12hs.

Heidrick & Struggles Achieves Over $1 Billion in Annual Net Revenue, Attains Record Profitability

Q4 Net Revenue of $286 Million Climbs 77% Year over Year and Surpasses Record Q3 Levels

Company Provides Outlook that Guides to Record Q1 2022

PR Newswire

CHICAGO, Feb. 28, 2022 /PRNewswire/ -- Heidrick & Struggles International, Inc. (Nasdaq: HSII) ("Heidrick & Struggles" or the "Company"), today announced financial results for its fourth quarter and fiscal year ended December 31, 2021.

Fourth Quarter Highlights:

  • Net revenue reached a quarterly record of $285.5 million with growth of 77% over the 4th quarter of 2020.
  • Operating income grew to $16.6 million, while adjusted operating income achieved $28.0 million (an increase of 119%) at a margin of 9.8%.
  • Net income climbed to $12.5 million and adjusted net income and adjusted diluted earnings per share were $20.8 million (an increase of 78%) and $1.02 (an increase of 73%), respectively.
  • Adjusted EBITDA was $36.8 million (an increase of 69%) and adjusted EBITDA margin was 12.9%.

"We are very pleased with our outstanding fourth quarter and year-end performance, which continues to build the foundation for ongoing shareholder value creation," stated Heidrick & Struggles' President and Chief Executive Officer, Krishnan Rajagopalan.  "2021 was an exciting year of geographic expansion and industry-leading productivity in Executive Search, increased demand for our broad array of leadership, organizational effectiveness and culture shaping offerings from Heidrick Consulting, the addition of our high-growth On-Demand Talent business segment, and the initiation of a partnership for future digital innovation.  Our record results demonstrate that our differentiated strategy is working."

Mr. Rajagopalan continued, "Companies across all industries and regions know that top talent and quality work environments are business imperatives now more than ever, contributing to our momentum in to 2022.  Heidrick is on its front foot moving forward."

2021 Fourth Quarter Results

Record consolidated net revenue of $285.5 million grew by $124.6 million, or 77.4%, compared to $161.0 million in the 2020 fourth quarter. Excluding the impact of exchange rate fluctuations, which negatively impacted year over year results by $1.0 million, or 60 basis points, consolidated net revenue increased $125.5 million, or 78.0%.  Net revenue growth was driven by all regions in Executive Search, Heidrick Consulting, and by the addition of On-Demand Talent.

Consolidated salaries and benefits were $204.1 million compared to $120.8 million in the 2020 fourth quarter.   Year over year, fixed compensation expense increased $9.7 million due to increases in base salaries and payroll taxes, and retirement and benefits, partially offset by decreases in the deferred compensation plan, and stock compensation. Variable compensation increased $73.6 million year over year due to an increase in production. Salaries and benefits expense was 71.5% of net revenue for the quarter, compared to 75.0% in the 2020 fourth quarter.

General and administrative expenses were $46.9 million compared to $25.9 million in the 2020 fourth quarter due to a one-time adjustment to the earnout payment obligation in connection with the acquisition of the Company's On-Demand Talent business, professional fees, corporate development and internal travel, office occupancy, information technology, and intangible amortization. As a percentage of net revenue, general and administrative expenses were 16.4% compared to 16.1% in the 2020 fourth quarter.

The Company's cost of services was $18.0 million, compared to $1.5 million in the 2020 fourth quarter, primarily due to the acquisition of On-Demand Talent and an increase in the volume of consulting engagements. Cost of services consists of third-party contractor costs related to the delivery of various services in the Company's On-Demand Talent and Heidrick Consulting operating segments.

The Company recorded a one-time earnout charge of $11.4 million in the 2021 fourth quarter associated with its On-Demand Talent business.  In the 2020 fourth quarter the Company recorded a restructuring charge of $4.3 million primarily related to a reduction in the Company's real estate footprint. Including these charges, operating income was $16.6 million, compared to $8.5 million in the 2020 fourth quarter. Operating margin was 5.8%, compared to 5.3% in the 2020 fourth quarter.  Excluding these charges, adjusted operating income was $28.0 million, compared to $12.8 million in the 2020 fourth quarter.  Adjusted operating margin was 9.8%, compared to 7.9% in the 2020 fourth quarter.

Net income was $12.5 million and diluted earnings per share was $0.61 with an effective tax rate of 30.3%. This compares to net income of $5.5 million and diluted earnings per share of $0.28, with an effective tax rate of 54.0%, in the 2020 fourth quarter.  Excluding the previously mentioned non-recurring charges, adjusted net income was $20.8 million, compared to $11.6 million in the 2020 fourth quarter.  Adjusted diluted earnings per share was $1.02, compared to $0.59 for the 2020 fourth quarter.

Adjusted EBITDA increased 69.6% to $36.8 million compared to adjusted EBITDA of $21.7 million in the 2020 fourth quarter.  Adjusted EBITDA margin was 12.9%, compared to 13.5% in the 2020 fourth quarter. 

Net cash provided by operating activities was $206.6 million, compared to $96.3 million in the 2020 fourth quarter.  Cash, cash equivalents and marketable securities at December 31, 2021 was $545.2 million, compared to $336.5 million at December 31, 2020, and $348.3 million at September 30, 2021.  The Company's cash position typically builds throughout the year as employee bonuses are accrued, mostly to be paid out in the first quarter. 

Executive Search net revenue increased 66.3%, or $97.0 million, to $243.4 million compared to net revenue of $146.3 million in the 2020 fourth quarter.  Excluding the impact of exchange rate fluctuations, which negatively impacted year over year results by $1.0 million, or 70 basis points, net revenue increased $98.0 million, or 67.0%.  Net revenue increased 75.1% in the Americas (75.1% on a constant currency basis), 40.3% in Europe (42.4% on a constant currency basis), and 65.6% in Asia Pacific (67.6% on a constant currency basis). All industry practices exhibited growth over the prior year. 

The Company had 365 Executive Search consultants at December 31, 2021, compared to 361 at December 31, 2020.  Productivity, as measured by annualized Executive Search net revenue per consultant, was $2.7 million compared to $1.6 million in the 2020 fourth quarter.  Average revenue per executive search was approximately $144,000 compared to $125,000 a year earlier.  The number of confirmed searches reached a quarterly record, increasing 44.9% compared to the year-ago period.

On-Demand Talent, a new business segment which the Company acquired on April 1, 2021, generated net revenue of $23.6 million and exceeded the Company's expectations. This increase in performance required a one-time adjustment to the earnout obligation of $11.4 million, resulting in an operating loss of $10.3 million for the quarter.

Heidrick Consulting net revenue of $18.5 million increased by $3.9 million, or 26.4%, compared to net revenue of $14.7 million in the 2020 fourth quarter. Operating loss improved to $5.3 million, or 21.1%, compared to the prior year. Heidrick Consulting continues to build momentum from collaboration within the Company and is a a critical component of the growth strategy driving Executive Search and On-Demand Talent. There was no impact from exchange rate fluctuations in the quarter for Heidrick Consulting.  The Company had 69 Heidrick Consulting consultants at December 31, 2021, compared to 65 at December 31, 2020. 

Fiscal 2021 Results

Consolidated net revenue was a record $1,003.0 million compared to $621.6 million in 2020, an increase of 61.4%. Excluding the impact of exchange rate fluctuations, which positively impacted results by 210 basis points, or $13.3 million, consolidated net revenue increased 59.2% or $368.1 million.

Including restructuring charges of $3.8 million and $52.4 million in 2021 and 2020, respectively, and the one-time On-Demand Talent earnout charge of $11.4 million recorded in 2021, and the non-cash impairment charge of $33.0 million recorded in 2020, operating income for 2021 was $98.3 million compared to an operating loss of $35.5 million in 2020. Operating margin was 9.8% in 2021 compared to (5.7)% in 2020. Excluding charges in both years, adjusted operating income for 2021 more than doubled to $113.4 million compared to $49.8 million in the prior year, and the adjusted operating margin was 11.3% compared to 8.0% in the prior year.

Net income was $72.6 million and diluted earnings per share was $3.58, with an effective tax rate of 31.6%. This compares to a net loss of $37.7 million and diluted loss per share of $1.95 in 2020, with an effective tax rate of (20.1)%. Excluding the previously mentioned non-recurring charges, adjusted net income was $83.5 million with adjusted diluted earnings per share of $4.11, compared to $35.2 million and $1.77, respectively, in the prior year.  The adjusted effective tax rate was 31.1% in 2021 compared to 34.7% in 2020.

Adjusted EBITDA for 2021 increased 89.0% to $141.3 million compared to adjusted EBITDA of $74.8 million in 2020.  Adjusted EBITDA margin increased 210 basis points to14.1% compared to 12.0% in 2020.

Executive Search net revenue increased 53.7% to $868.8 million compared to $565.2 million in 2020. Excluding the impact of exchange rate fluctuations, which positively impacted results by 210 basis points, or $11.9 million, net revenue increased $291.7 million, or 51.6%. Net revenue increased 60.9% in the Americas (60.7% on a constant currency basis), 37.1% in Europe (30.8% on a constant currency basis), and 47.2% in Asia Pacific (42.9% on a constant currency basis). All practice groups exhibited growth over the prior year period.  Productivity was $2.4 million compared to $1.5 million in 2020. The average revenue per executive search was $131,000 compared to $123,000 in 2020, while confirmations increased 44.6%. 

On-Demand Talent, acquired on April 1, 2021, recorded year-to-date net revenue of $66.6 million and exceeded the Company's expectations due to increases in large account penetration, project wins, and higher than anticipated average project size when compared to the prior year.

Heidrick Consulting net revenue increased 19.8% to $67.6 million compared to $56.4 million in 2020. Excluding the impact of exchange rate fluctuations, which positively impacted results by 240 basis points, or $1.4 million, Heidrick Consulting revenue increased 17.4%, or $9.8 million. Heidrick Consulting's results reflect continued increases in confirmation values, average client value, Executive Search referred work, and the value of confirmations due to Executive Search collaborations.

Dividend

The Board of Directors declared a 2021 fourth quarter cash dividend of $0.15 per share payable on March 18, 2022, to shareholders of record at the close of business on March 4, 2022. 

2022 First Quarter Outlook

The Company expects 2022 first quarter consolidated net revenue of between $270 million and $280 million, while acknowledging the continued fluidity of the COVID-19 pandemic and instability in Ukraine and Russia that may impact quarterly results.  In addition, this outlook is based on the average currency rates in December 2021 and reflects, among other factors, management's assumptions for the anticipated volume of new Executive Search confirmations, Heidrick Consulting assignments, On-Demand Talent projects and the current backlog, consultant productivity, consultant retention, and the seasonality of the business.

Quarterly Webcast and Conference Call

Heidrick & Struggles will host a conference call to review its fourth quarter and 2021 results today, February 28, at 5:00 pm Eastern Time. Participants may access the Company's call and supporting slides through its website at www.heidrick.com or by dialing (866) 211-4120 or (647) 689-6618, conference ID# 1554329.  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 global leadership advisory and on-demand talent solutions, serving the senior-level talent and consulting needs of the world's top organizations. In our role as trusted leadership advisors, we partner with our clients to develop future-ready leaders and organizations, bringing together our services and offerings in executive search, diversity and inclusion, leadership assessment and development, organization and team acceleration, culture shaping and on-demand, independent talent solutions. Heidrick & Struggles pioneered the profession of executive search more than 65 years ago. Today, the firm provides integrated talent and human capital solutions to help our clients change the world, one leadership team at a time. ® www.heidrick.com

Non-GAAP Financial Measures

To supplement the financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), Heidrick & Struggles presents certain non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of comprehensive income, balance sheets or statements of cash flow of the Company. Pursuant to the requirements of Regulation G, this earnings release contains the most directly comparable GAAP financial measure to the non-GAAP financial measure.

The non-GAAP financial measures used within this earnings release are adjusted operating income, adjusted operating income margin, adjusted net income, adjusted basic and diluted earnings per share, adjusted effective tax rate, adjusted EBITDA, adjusted EBITDA margin, and impacts of foreign currency on current period results using prior period translation rates.  These measures are presented because management uses this information to monitor and evaluate financial results and trends. Management believes this information is also useful for investors. Reconciliations of these non-GAAP financial measures with the most directly comparable measures calculated and presented in accordance with GAAP are provided as schedules attached to this release.

Adjusted operating income reflects the exclusion of one-time earnout obligation adjustments, goodwill impairment, and restructuring charges.

Adjusted operating income margin refers to adjusted operating income as a percentage of net revenue in the same period.

Adjusted net income and adjusted diluted earnings per share reflect the exclusion of one-time earnout obligation adjustments, goodwill impairment, and restructuring charges, net of tax.

Adjusted effective tax rate reflects the exclusion of one-time earnout obligation adjustments, goodwill impairment, and restructuring charges, net of tax.

Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, equity-settled stock compensation expense, earnout accretion, one-time earnout obligation adjustments, contingent compensation related to acquisitions, restructuring charges, goodwill impairment, deferred compensation plan expenses and other non-operating income (expense). 

Adjusted EBITDA margin refers to adjusted EBITDA as a percentage of net revenue in the same period.   

The Company evaluates its results of operations on both an as reported and a constant currency basis.  The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing constant currency information provides valuable supplemental information regarding its results of operations, consistent with how it evaluates its performance.  The Company calculates constant currency percentages by converting its financial results in a local currency for a period using the average exchange rate for the prior period to which it is comparing.  This calculation may differ from similarly titled measures used by other companies.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the federal securities laws. 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," "outlook," "projects," "forecasts," and similar expressions. Forward-looking statements are not guarantees of future performance, rely on a number of assumptions, and involve certain known and unknown risks and uncertainties that are difficult to predict, many of which are beyond our control.  Factors that may cause actual outcomes and results to differ materially from what is expressed, forecasted, or implied in the forward-looking statements include, among other things, the impacts, direct and indirect, of the COVID-19 pandemic (including the emergence of variant strains) on our business, our consultants and employees, and the overall economy; leadership changes, our ability to attract, integrate, develop, manage and retain qualified consultants and senior leaders; our ability to prevent our consultants from taking our clients with them to another firm; our ability to maintain our professional reputation and brand name; the fact that our net revenue may be affected by adverse economic conditions; our clients' ability to restrict us from recruiting their employees; the aggressive competition we face; our heavy reliance on information management systems; the fact that we face the risk of liability in the services we perform; the fact that data security, data privacy and data protection laws and other evolving regulations and cross-border data transfer restrictions may limit the use of our services and adversely affect our business; social, political, regulatory and legal risks in markets where we operate; any challenges to the classification of our on-demand talent as independent contractors; the impact of foreign currency exchange rate fluctuations; the fact that we may not be able to align our cost structure with net revenue; unfavorable tax law changes and tax authority rulings; our ability to realize our tax losses; the timing of the establishment or reversal of valuation allowance on deferred tax assets; any impairment of our goodwill, other intangible assets and other long-lived assets; our ability to execute and integrate future acquisitions; the fact that we have anti-takeover provisions that make an acquisition of us difficult and expensive; our ability to access additional credit; and the increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted cyber-related attacks that could pose a risk to our systems, networks, solutions, services and data.  We caution the reader that the list of factors may not be exhaustive.  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, 2021, under the heading "Risk Factors" in Item 1A. We caution the reader that the list of factors may not be exhaustive.  The forward-looking statements contained in this press release speak only as of the date of this press release.  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:
Wendy Webb, Investor Relations
wwebb@heidrick.com

Media:
Nina Chang, Vice President, Corporate Communications
nchang@heidrick.com


 

Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)
(Unaudited)



Three Months Ended

December 31,




2021


2020


$ Change


% Change

Revenue








Revenue before reimbursements (net revenue)

$      285,539


$      160,987


$         124,552


77.4%

Reimbursements

1,654


1,200


454


37.8%

Total revenue

287,193


162,187


125,006


77.1%









Operating expenses








Salaries and benefits

204,090


120,784


83,306


69.0%

General and administrative expenses

46,873


25,860


21,013


81.3%

Cost of services

17,968


1,548


16,420


NM

Restructuring charges


4,257


(4,257)


(100.0)%

Reimbursed expenses

1,654


1,200


454


37.8%

Total operating expenses

270,585


153,649


116,936


76.1%









Operating income

16,608


8,538


8,070


94.5%









Non-operating income








Interest, net

95


44





Other, net

1,203


3,467





Net non-operating income

1,298


3,511













Income before income taxes

17,906


12,049













Provision for income taxes

5,429


6,511













Net income

12,477


5,538













Other comprehensive income (loss), net of tax

(393)


988













Comprehensive income

$        12,084


$          6,526













Weighted-average common shares outstanding








Basic

19,592


19,360





Diluted

20,301


19,865













Earnings per common share








Basic

$            0.64


$            0.29





Diluted

$            0.61


$            0.28













Salaries and benefits as a % of net revenue

71.5%


75.0%





General and administrative expenses as a % of net revenue

16.4%


16.1%





Cost of services as a % of net revenue

6.3%


1.0%





Operating margin

5.8%


5.3%





 


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)



Three Months Ended December 31,


2021


2020


$

Change


%
Change


2021
Margin1


2020
Margin1

Revenue












Executive Search












Americas

$  168,700


$    96,328


$    72,372


75.1%





Europe

45,084


32,135


12,949


40.3%





Asia Pacific

29,579


17,857


11,722


65.6%





Total Executive Search

243,363


146,320


97,043


66.3%





On-Demand Talent

23,630



23,630


NM





Heidrick Consulting

18,546


14,667


3,879


26.4%





Revenue before reimbursements (net revenue)

285,539


160,987


124,552


77.4%





Reimbursements

1,654


1,200


454


37.8%





Total revenue

$  287,193


$  162,187


$  125,006


77.1%





























Operating income (loss)












Executive Search












Americas2

$    42,218


$    21,906


$    20,312


92.7%


25.0%


22.7%

Europe3

5,110


4,047


1,063


26.3%


11.3%


12.6%

Asia Pacific4

4,926


(171)


5,097


NM


16.7%


(1.0)%

Total Executive Search

52,254


25,782


26,472


102.7%


21.5%


17.6%

On-Demand Talent5

(10,306)



(10,306)


NM


(43.6)%


—%

Heidrick Consulting6

(5,265)


(6,670)


1,405


21.1%


(28.4)%


(45.5)%

Total segments

36,683


19,112


17,571


91.9%


12.8%


11.9%

Global Operations Support7

(20,075)


(10,574)


(9,501)


(89.9)%


(7.0)%


(6.6)%

Total operating income (loss)

$    16,608


$      8,538


$      8,070


94.5%


5.8%


5.3%


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

2 Includes restructuring charges of $2.9 million for the three months ended December 31, 2020.

3 Includes restructuring reversals of $1.0 million for the three months ended December 31, 2020.

4 Includes restructuring charges of $0.1 million for the three months ended December 31, 2020.

5 Includes a one-time earnout obligation adjustment of $11.4 million for the three months ended December 31, 2021.

6 Includes restructuring charges of $0.2 million for the three months ended December 31, 2020.

7 Includes restructuring charges of $2.1 million for the three months ended December 31, 2020.

 


Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)



Year Ended

December 31,




2021


2020


$ Change


% Change

Revenue








Revenue before reimbursements (net revenue)

$  1,003,001


$      621,615


$         381,386


61.4%

Reimbursements

5,473


7,755


(2,282)


(29.4)%

Total revenue

1,008,474


629,370


379,104


60.2%









Operating expenses








Salaries and benefits

717,411


450,424


266,987


59.3%

General and administrative expenses

130,749


116,982


13,767


11.8%

Cost of services

52,785


4,396


48,389


NM

Impairment charges


32,970


(32,970)


(100.0)%

Restructuring charges

3,792


52,372


(48,580)


(92.8)%

Reimbursed expenses

5,473


7,755


(2,282)


(29.4)%

Total operating expenses

910,210


664,899


245,311


36.9%









Operating income (loss)

98,264


(35,529)


133,793


NM









Non-operating income








Interest, net

302


204





Other, net

7,463


3,927





Net non-operating income

7,765


4,131













Income (loss) before income taxes

106,029


(31,398)













Provision for income taxes

33,457


6,309













Net income (loss)

72,572


(37,707)













Other comprehensive loss, net of tax

(1,742)


(407)













Comprehensive income (loss)

$        70,830


$      (38,114)













Weighted-average common shares outstanding








Basic

19,515


19,301





Diluted

20,296


19,301













Earnings (loss) per common share








Basic

$            3.72


$           (1.95)





Diluted

$            3.58


$           (1.95)













Salaries and benefits as a % of net revenue

71.5%


72.5%





General and administrative expenses as a % of net revenue

13.0%


18.8%





Cost of services as a % of net revenue

5.3%


0.7%





Operating margin

9.8%


(5.7)%





 


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)



Year Ended Ended December 31,


2021


2020


$

Change


%
Change


2021
Margin1


2020
Margin1

Revenue












Executive Search












Americas

$  581,440


$  361,416


$  220,024


60.9%





Europe

170,312


124,243


46,069


37.1%





Asia Pacific

117,008


79,511


37,497


47.2%





Total Executive Search

868,760


565,170


303,590


53.7%





On-Demand Talent

66,636



66,636


NM





Heidrick Consulting

67,605


56,445


11,160


19.8%





Revenue before reimbursements (net revenue)

1,003,001


621,615


381,386


61.4%





Reimbursements

5,473


7,755


(2,282)


(29.4)%





Total revenue

$ 1,008,474


$  629,370


$  379,104


60.2%





























Operating income (loss)












Executive Search












Americas2

$  142,040


$    62,806


$    79,234


126.2%


24.4%


17.4%

Europe3

18,424


(22,827)


41,251


180.7%


10.8%


(18.4)%

Asia Pacific4

18,167


(6,724)


24,891


NM


15.5%


(8.5)%

Total Executive Search

178,631


33,255


145,376


NM


20.6%


5.9%

On-Demand Talent5

(9,272)



(9,272)


NM


(13.9)%


—%

Heidrick Consulting6

(16,162)


(28,369)


12,207


43.0%


(23.9)%


(50.3)%

Total segments

153,197


4,886


148,311


NM


15.3%


0.8%

Global Operations Support7

(54,933)


(40,415)


(14,518)


(35.9)%


(5.5)%


(6.5)%

Total operating income (loss)

$    98,264


$  (35,529)


$  133,793


NM


9.8%


(5.7)%


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

2 Includes restructuring charges of $3.9 million and $30.5 million for the years ended December 31, 2021 and 2020, respectively.

3 Includes a restructuring reversal of $0.1 million for the year ended December 31, 2021 and restructuring charges of $8.6 million for the year ended December 31, 2020. Includes goodwill impairment charges of $24.5 million for the year ended December 31, 2020.

4 Includes a restructuring reversal of $0.1 million for the year ended December 31, 2021 and restructuring charges of $4.6 million for the year ended December 31, 2020. Includes goodwill impairment charges of $8.5 million for the year ended December 31, 2020.

5 Includes a one-time earnout obligation adjustment of $11.4 million for the year ended December 31, 2021.

6 Includes restructuring charges of $0.4 million and $4.7 million for the years ended December 31, 2021 and 2020, respectively.

7 Includes a restructuring reversal of $0.2 million for the year ended December 31, 2021 and restructuring charges of $4.0 million for the year ended December 31, 2020.

 

Heidrick & Struggles International, Inc.

Reconciliation of Operating Income (Loss) and Adjusted Operating Income (Non-GAAP)

(In thousands)

(Unaudited)



Three Months Ended

December 31,


Year Ended

December 31,


2021


2020


2021


2020

Revenue before reimbursements (net revenue)

$      285,539


$      160,987


$  1,003,001


$      621,615









Operating income (loss)

16,608


8,538


98,264


(35,529)









Adjustments








Earnout obligation fair value adjustments1

11,368



11,368


Impairment charges2




32,970

Restructuring charges3


4,257


3,792


52,372

Total adjustments

11,368


4,257


15,160


85,342









Adjusted operating income

$        27,976


$        12,795


$      113,424


$        49,813









Operating margin

5.8%


5.3%


9.8%


(5.7)%

Adjusted operating margin

9.8%


7.9%


11.3%


8.0%


1 The Company incurred a one-time earnout obligation adjustment of $11.4 million for the three months and year ended December 31, 2021 in the On-Demand Talent operating segment.

The Company incurred goodwill impairment charges of approximately $33.0 million in the Europe and Asia Pacific operating segments for the year ended December 31, 2020.

3 The Company incurred restructuring charges of $4.3 million for the three months ended December 31, 2020. The Company incurred restructuring charges of $3.8 million and $52.4 million for the years ended December 31, 2021 and 2020, respectively.

 

Heidrick & Struggles International, Inc.

Reconciliation of Net Income (Loss) and Adjusted Net Income (Non-GAAP)

(In thousands)

(Unaudited)



Three Months Ended

December 31,


Year Ended

December 31,


2021


2020


2021


2020

Net income (loss)

$           12,477


$              5,538


$           72,572


$          (37,707)









Adjustments








Earnout obligation fair value adjustments1

8,282



8,282


Impairment charges, net of tax2




32,970

Restructuring charges, net of tax3


6,093


2,642


39,956

Total adjustments

8,282


6,093


10,924


72,926









Adjusted net income

$           20,759


$           11,631


$           83,496


$           35,219









Weighted-average common shares outstanding








Basic

19,592


19,360


19,515


19,301

Diluted

20,301


19,865


20,296


19,893









Earnings (loss) per common share








Basic

$                0.64


$                0.29


$                3.72


$              (1.95)

Diluted

$                0.61


$                0.28


$                3.58


$              (1.95)









Adjusted earnings per common share








Basic

$                1.06


$                0.60


$                4.28


$                1.82

Diluted

$                1.02


$                0.59


$                4.11


$                1.77


1 The Company incurred a one-time earnout obligation adjustment of $11.4 million for the three months and year ended December 31, 2021 in the On-Demand Talent operating segment.

The Company incurred goodwill impairment charges of approximately $33.0 million in the Europe and Asia Pacific operating segments for the year ended December 31, 2020.

3 The Company incurred restructuring charges of $4.3 million for the three months ended December 31, 2020. The Company incurred restructuring charges of $3.8 million and $52.4 million for the years ended December 31, 2021 and 2020, respectively.

 


Heidrick & Struggles International, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)



December 31,
2021


December 31,
2020





Current assets




Cash and cash equivalents

$          545,225


$          316,473

Marketable securities


19,999

Accounts receivable, net

133,750


88,123

Prepaid expenses

21,754


18,956

Other current assets

41,449


23,279

Income taxes recoverable

3,210


5,856

Total current assets

745,388


472,686





Non-current assets




Property and equipment, net

27,085


23,492

Operating lease right-of-use assets

72,320


92,671

Assets designated for retirement and pension plans

12,715


14,425

Investments

36,051


31,369

Other non-current assets

23,377


24,439

Goodwill

138,524


91,643

Other intangible assets, net

9,169


1,129

Deferred income taxes

42,169


35,958

Total non-current assets

361,410


315,126





Total assets

$       1,106,798


$          787,812





Current liabilities




Accounts payable

$            20,374


$               8,799

Accrued salaries and benefits

409,026


217,908

Deferred revenue

51,404


38,050

Operating lease liabilities

19,332


28,984

Other current liabilities

24,554


23,311

Income taxes payable

10,004


1,186

Total current liabilities

534,694


318,238





Non-current liabilities




Accrued salaries and benefits

73,779


56,925

Retirement and pension plans

55,593


53,496

Operating lease liabilities

65,625


86,816

Other non-current liabilities

41,087


4,735

Total non-current liabilities

236,084


201,972





Total liabilities

770,778


520,210





Stockholders' equity

336,020


267,602





Total liabilities and stockholders' equity

$       1,106,798


$          787,812

 


Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)




Three Months Ended

December 31,



2021


2020

Cash flows - operating activities





Net income


$           12,477


$              5,538

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





Depreciation and amortization


2,984


6,018

Deferred income taxes


(5,995)


(2,380)

Stock-based compensation expense


4,088


3,053

Accretion expense related to earnout payments


123


Gain on marketable securities



(10)

Loss (gain) on disposal of property and equipment


8


(2)

Impairment charges



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





Accounts receivable


48,058


32,260

Accounts payable


(3,263)


(2,358)

Accrued expenses


140,772


51,263

Restructuring accrual


(37)


(3,810)

Deferred revenue


6,330


204

Income taxes recoverable and payable, net


(3,560)


7,444

Retirement and pension plan assets and liabilities


(298)


490

Prepaid expenses


4,948


2,871

Other assets and liabilities, net


(10)


(4,323)

Net cash provided by operating activities


206,625


96,258






Cash flows - investing activities





Acquisition of business, net of cash acquired


(1,549)


Capital expenditures


(2,338)


(201)

Purchases of marketable securities and investments


(326)


(236)

Proceeds from sales of marketable securities and investments


169


47,219

Net cash provided by (used in) investing activities


(4,044)


46,782






Cash flows - financing activities





Cash dividends paid


(3,450)


(3,044)

Payment of employee tax withholdings on equity transactions


(50)


Net cash used in financing activities


(3,500)


(3,044)






Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash


(2,148)


5,916






Net increase in cash, cash equivalents and restricted cash


196,933


145,912

Cash, cash equivalents and restricted cash at beginning of period


348,326


170,577

Cash, cash equivalents and restricted cash at end of period


$         545,259


$         316,489

 


Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)




Year Ended

December 31,



2021


2020

Cash flows - operating activities





Net income (loss)


$           72,572


$          (37,707)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:





Depreciation and amortization


19,560


26,656

Deferred income taxes


(7,481)


(1,680)

Stock-based compensation expense


12,760


10,199

Accretion expense related to earnout payments


486


Gain on marketable securities


(1)


(154)

Loss on disposal of property and equipment


135


287

Impairment charges



32,970

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





Accounts receivable


(36,819)


22,644

Accounts payable


(332)


451

Accrued expenses


230,177


(26,513)

Restructuring accrual


(5,061)


2,479

Deferred revenue


12,783


(3,688)

Income taxes recoverable and payable, net


11,377


(4,016)

Retirement and pension plan assets and liabilities


1,145


1,794

Prepaid expenses


(2,776)


1,642

Other assets and liabilities, net


(37,124)


(2,011)

Net cash provided by operating activities


271,401


23,353






Cash flows - investing activities





Acquisition of businesses, net of cash acquired


(33,518)


Capital expenditures


(6,240)


(7,322)

Purchases of marketable securities and investments


(2,323)


(118,904)

Proceeds from sales of marketable securities and investments


20,822


158,852

Net cash provided by (used in) investing activities


(21,259)


32,626






Cash flows - financing activities





Proceeds from line of credit



100,000

Payments on line of credit



(100,000)

Cash dividends paid


(12,377)


(12,063)

Payment of employee tax withholdings on equity transactions


(3,140)


(1,550)

Acquisition earnout payments



(2,789)

Net cash used in financing activities


(15,517)


(16,402)






Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash


(5,855)


5,193






Net increase in cash, cash equivalents and restricted cash


228,770


44,770

Cash, cash equivalents and restricted cash at beginning of period


316,489


271,719

Cash, cash equivalents and restricted cash at end of period


$         545,259


$         316,489

 

Heidrick & Struggles International, Inc.

Reconciliation of Net Income (Loss) and Operating Income (Loss) to Adjusted EBITDA (Non-GAAP)

(In thousands)

(Unaudited)



Three Months Ended

December 31,


Year Ended

December 31,


2021


2020


2021


2020

Revenue before reimbursements (net revenue)

$           285,539


$           160,987


$        1,003,001


$           621,615









Net income (loss)

12,477


5,538


72,572


(37,707)

Interest, net

(95)


(44)


(302)


(204)

Other, net

(1,203)


(3,467)


(7,463)


(3,927)

Provision for (benefit from) income taxes

5,429


6,511


33,457


6,309

Operating income (loss)

16,608


8,538


98,264


(35,529)









Adjustments








Stock-based compensation expense

4,014


3,038


12,325


9,679

Depreciation

1,839


1,906


7,150


8,100

Intangible amortization

1,146


153


2,898


738

Earnout accretion

123



486


Earnout obligation fair value adjustments

11,368



11,368


Acquisition contingent consideration

575


460


1,973


1,942

Restructuring charges


4,257


3,792


52,372

Impairment charges




32,970

Deferred compensation plan

1,108


3,388


3,057


4,495

Total adjustments

20,173


13,202


43,049


110,296









Adjusted EBITDA

$             36,781


$             21,740


$           141,313


$             74,767

Adjusted EBITDA margin

12.9%


13.5%


14.1%


12.0%

 

Cision View original content:https://www.prnewswire.com/news-releases/heidrick--struggles-achieves-over-1-billion-in-annual-net-revenue-attains-record-profitability-301492010.html

SOURCE Heidrick & Struggles International, Inc.

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