HSII
$31.59
Heidrick & Struggl
$.14
.45%
Earnings Details
3rd Quarter September 2019
Monday, October 28, 2019 4:01:00 PM
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Summary

Heidrick & Struggles Sees Revenue Below Estimates

Heidrick & Struggl (HSII) reported 3rd Quarter September 2019 earnings of $0.70 per share on revenue of $186.5 million. The consensus earnings estimate was $0.69 per share on revenue of $179.1 million. Revenue fell 3.0% compared to the same quarter a year ago.

The company said it expects fourth quarter revenue of $170.0 million to $180.0 million. The current consensus revenue estimate is $180.7 million for the quarter ending December 31, 2019.

Heidrick & Struggles International, Inc., is an advisory firm providing executive search, culture shappin & leadership consulting services.

Results
Reported Earnings
$0.70
Earnings Whisper
-
Consensus Estimate
$0.69
Reported Revenue
$186.5 Mil
Revenue Estimate
$179.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Heidrick & Struggles Reports 2019 Third Quarter and Nine Month Results

CHICAGO, Oct. 28, 2019 /PRNewswire/ -- Heidrick & Struggles International, Inc. (Nasdaq: HSII), today announced financial results for its third quarter and nine months ended September 30, 2019.

Heidrick & Struggles Logo (PRNewsFoto/Heidrick & Struggles) (PRNewsfoto/Heidrick & Struggles)

Highlights:

  • Q3 net revenue of $182.2 million
  • Q3 operating margin of 7.9%; adjusted operating margin* of 10.2%
  • Q3 diluted EPS of $0.51; adjusted diluted EPS* of $0.70
  • Completed Latin American acquisition, expanding search consultant headcount by 13; forecasted to be EPS accretive in Q4

* Adjusted for a one-time restructuring charge of $4.1 million, as referenced in the "Supplemental Financial Information Non-GAAP Measures" section.

"We are pleased to be keeping pace with last year's record revenue, despite some geographic variability," stated Heidrick & Struggles' President and Chief Executive Officer, Krishnan Rajagopalan.  "Moreover, strong focus on our business operations has generated increases in year-to-date operating income, operating margin, net income and earnings per share, all on an adjusted basis. Cross collaboration between Executive Search and Heidrick Consulting continues to bear fruit as evidenced by Heidrick Consulting's third quarter revenue growth both sequentially and year-over-year.  We are also very excited about our acquisition in Brazil, which gives us a strong platform to grow throughout Latin America, where we see great opportunities for both Executive Search and Heidrick Consulting." 

Mr. Rajagopalan concluded, "Looking ahead, we are advancing important long-term initiatives that we expect will broaden our capabilities and drive growth in the years to come, while enhancing our data analytics as we focus on delivering a fully integrated premium offering to our clients.  Importantly, our market position and cash flow remain strong.  We believe this strategically positions our company to capitalize on a variety of opportunities, which we expect will create future value for our shareholders."

2019 Third Quarter Results
On September 23, 2019, the Company acquired 2GET, one of the leading search firms in Brazil.  This transaction provides the Company with a strong platform for Latin America growth.  As a result, the Company recorded a restructuring charge of $4.1 million in the quarter in connection with related employee, facility and legal costs associated with the transition away from its legacy Brazil operations.  The acquisition of 2GET, coupled with the transition away from the Company's legacy operations, is expected to be accretive to earnings per share.       

Consolidated net revenue (revenue before reimbursements) of $182.2 million declined 2.9%, or $5.4 million, from $187.6 million in the 2018 third quarter.  Excluding the impact of exchange rate fluctuations, consolidated net revenue declined 1.6%, or $2.9 million.

Executive Search net revenue of $166.5 million declined 3.2%, or $5.6 million, from $172.1 million in the 2018 third quarter.  Excluding the impact of exchange rate fluctuations, Executive Search net revenue declined 2.0%, or $3.4 million.  Net revenue increased 2.2% in the Americas (2.3% increase on a constant currency basis), decreased 7.0% in Europe (2.6% decrease on a constant currency basis) and decreased 18.9% in Asia Pacific (17.4% decrease on a constant currency basis).  Growth in the Consumer Markets and Global Technology & Services practices was offset by declines in the other three industry practices.

There were 380 Executive Search consultants at September 30, 2019 compared to 346 at September 30, 2018 and 371 at June 30, 2019.  Thirteen consultants were added in the 2019 third quarter following the Company's acquisition of 2GET in Brazil.  Productivity, as measured by annualized Executive Search net revenue per consultant, was $1.8 million compared to $2.0 million in the 2018 third quarter.  The average revenue per executive search was $133,500 compared to $133,700 in the 2018 third quarter, while the number of confirmed searches declined 3.1% compared to the 2018 third quarter.

Heidrick Consulting net revenue increased 1.0%, or $0.1 million, to $15.7 million from $15.5 million in the 2018 third quarter.  Excluding the impact of exchange rate fluctuations which negatively impacted results by 2.0%, or $0.3 million, Heidrick Consulting net revenue increased 3.1%, or $0.5 million.  There were 71 Heidrick Consulting consultants at September 30, 2019 compared to 66 at September 30, 2018 and 68 at June 30, 2019

Consolidated salaries and benefits expense declined 2.6%, or $3.5 million, to $130.5 million from $133.9 million in the 2018 third quarter.  Fixed compensation expense decreased $0.6 million and variable compensation expense declined $2.8 million, mostly related to lower revenue in the quarter.  Salaries and benefits expense were 71.6% of net revenue for the quarter compared to 71.4% for the 2018 third quarter. 

General and administrative expenses were $33.1 million, the same as in the 2018 third quarter.  As a percentage of net revenue, general and administrative expenses were 18.2% compared to 17.6% in the 2018 third quarter.

Including the previously mentioned restructuring charges, operating income was $14.5 million compared to $20.6 million in the 2018 third quarter.  Operating margin was 7.9% in the 2019 third quarter compared to 11.0% in the 2018 third quarter.  Excluding restructuring charges, adjusted operating income was $18.6 million and adjusted operating margin was 10.2%.    

Net income in the 2019 third quarter was $9.9 million and diluted earnings per share was $0.51 with an effective tax rate of 32.9%.  This compares to net income of $16.5 million and diluted earnings per share of $0.85 with an effective tax rate of 29.0% in last year's third quarter.  Excluding restructuring charges, adjusted net income was $13.7 million and adjusted diluted earnings per share was $0.70.  The full-year projected tax rate is in the low 30% range excluding any one-time items.

Adjusted EBITDA in the 2019 third quarter was $23.9 million compared to $26.4 million in the 2018 third quarter.  Adjusted EBITDA margin was 13.1% compared to 14.1% in the 2018 third quarter.  The declines in adjusted EBITDA and adjusted EBITDA margin were primarily driven by lower revenue in the quarter.    

Net cash provided by operating activities was $86.5 million in the 2019 third quarter, compared to $84.2 million in the 2018 third quarter.  Cash and marketable securities at September 30, 2019 were $218.9 million, compared to $279.9 million at December 31, 2018, and $164.2 million at September 30, 2018.  The company's cash position typically builds throughout the year as bonuses are accrued, and which are mostly paid out in the first quarter. 

2019 Nine Months Results
For the nine months ended September 30, 2019, consolidated net revenue of $526.9 million decreased 0.7%, or $3.8 million, from $530.7 million in the first nine months of 2018.  Excluding the impact of exchange rate fluctuations, consolidated net revenue increased 1.2% or $6.5 million

Operating income for the first nine months of 2019 was $49.2 million compared to $52.2 million in the same period of 2018.  Operating margin was 9.3% compared to 9.8% in the first nine months of 2018.  Excluding restructuring charges of $4.1 million in the 2019 third quarter, adjusted operating income was $53.3 million and adjusted operating margin was 10.1%.

Net income for the first nine months of 2019 was $36.3 million and diluted earnings per share was $1.86, with an effective tax rate of 31.7%.  This compares to net income of $38.1 million and diluted earnings per share of $1.96 in the first nine months of 2018, with an effective tax rate of 30.1%.  Excluding restructuring charges of $4.1 million in the 2019 third quarter, adjusted net income was $40.0 million and adjusted diluted earnings per share was $2.05

Adjusted EBITDA for the first nine months of 2019 increased to $68.6 million and Adjusted EBITDA margin improved to 13.0%, compared to Adjusted EBITDA of $68.4 million and Adjusted EBITDA margin of 12.9% for the same period in 2018.

2019 Fourth Quarter Outlook 
The company expects 2019 fourth quarter consolidated net revenue of between $170 million and $180 million.  The outlook is based on the average currency rates in September 2019 and reflects, among other factors, management's assumptions for the anticipated volume of new Executive Search confirmations, Heidrick Consulting assignments, the current backlog, consultant productivity, consultant retention, and the seasonality of the Company's business.  

Dividend
The Board of Directors has declared a 2019 fourth quarter cash dividend of $0.15 per share payable on November 22, 2019 to shareholders of record at the close of business on November 8, 2019.  

Quarterly Conference Call
Executives of Heidrick & Struggles will host a conference call to review its 2019 third quarter financial results today, October 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 (647)689-6618, conference ID# 1358548.  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) serves the senior-level talent and leadership needs of the world's top organizations as a trusted advisor across executive search, leadership assessment and development, organization and team effectiveness, and culture shaping services. Heidrick & Struggles pioneered the profession of executive search more than 65 years ago. Today, the firm provides integrated leadership 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 Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Diluted Earnings Per Share.  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 refers to operating income excluding restructuring charges.
  • Adjusted operating 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 restructuring charges, net of tax.
  • Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, equity- settled stock compensation expense, earnout accretion expense related to acquisitions, restructuring charges, and other non-operating income (expense).
  • Adjusted EBITDA margin refers to Adjusted EBITDA as a percentage of net revenue in the same period.

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, 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; 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 undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  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, 2018, under Risk Factors in Item 1A and our quarterly filings with the SEC. We caution the reader that the list of factors may not be exhaustive. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contacts:
Investors & Analysts:
Suzanne Rosenberg - Vice President, Investor Relations
+1 212 551 0554, srosenberg@heidrick.com

Media:
Nina Chang – Vice President, Corporate Communications
+1 212 551 1634, nchang@heidrick.com

Heidrick & Struggles International, Inc.

 Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)


















Three Months Ended






September 30,






2019


2018


$ Change


% Change

Revenue








Revenue before reimbursements (net revenue)

$ 182,174


$ 187,588


$   (5,414)


(2.9%)

Reimbursements

4,344


4,753


(409)


(8.6%)

Total revenue

186,518


192,341


(5,823)


(3.0%)









Operating expenses








Salaries and employee benefits

130,479


133,933


(3,454)


(2.6%)

General and administrative expenses

33,093


33,072


21


0.1%

Restructuring charges

4,130


-


4,130


100.0%

Reimbursed expenses

4,344


4,753


(409)


(8.6%)

Total operating expenses

172,046


171,758


288


0.2%

Operating income

14,472


20,583


(6,111)


(29.7%)









Non-operating income (expense)








Interest, net

819


259





Other, net

(464)


2,345





Net non-operating income

355


2,604












Income before income taxes

14,827


23,187





Provision for income taxes

4,880


6,718





Net income

9,947


16,469





Other comprehensive loss, net of tax

(1,337)


(881)





Comprehensive income

$     8,610


$   15,588













Basic weighted average common shares outstanding

19,127


18,954





Diluted weighted average common shares outstanding

19,428


19,401













Basic net income per common share

$       0.52


$       0.87





Diluted net income per common share

$       0.51


$       0.85













Salaries and employee benefits as a % of net revenue

71.6%


71.4%





General and administrative expense as a % of net revenue

18.2%


17.6%





Operating income as a % of net revenue

7.9%


11.0%





 

Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)





























Three Months Ended September 30,











2019


2018



2019


2018


$ Change


% Change


Margin *


Margin *

Revenue












    Executive Search













Americas

$ 108,878


$ 106,504


$     2,374


2.2%






Europe

34,827


37,452


(2,625)


(7.0%)






Asia Pacific

22,784


28,095


(5,311)


(18.9%)






      Total Executive Search

166,489


172,051


(5,562)


(3.2%)





    Heidrick Consulting

15,685


15,537


148


1.0%






      Revenue before reimbursements (net revenue)

182,174


187,588


(5,414)


(2.9%)






Reimbursements

4,344


4,753


(409)


(8.6%)






      Total revenue

$ 186,518


$ 192,341


$   (5,823)


(3.0%)


















Operating income (loss)












    Executive Search













Americas (1)

$   23,211


$   23,341


$      (130)


(0.6%)


21.3%


21.9%


Europe

466


904


(438)


(48.5%)


1.3%


2.4%


Asia Pacific

2,421


6,414


(3,993)


(62.3%)


10.6%


22.8%


      Total Executive Search

26,098


30,659


(4,561)


(14.9%)


15.7%


17.8%

    Heidrick Consulting

(3,150)


(1,761)


(1,389)


(78.9%)


(20.1%)


(11.3%)


      Total segments

22,948


28,898


(5,950)


(20.6%)


12.6%


15.4%


Global Operations Support (1)

(8,476)


(8,315)


(161)


(1.9%)


(4.7%)


(4.4%)


      Total operating income

$   14,472


$   20,583


$   (6,111)


(29.7%)


7.9%


11.0%




























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


(1) 2019 includes restructuring charges of $4.1 million in the Americas and less than $0.1 million in Global Operations Support

 

Heidrick & Struggles International, Inc.

 Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)


















Nine Months Ended






September 30,






2019


2018


$ Change


% Change

Revenue








Revenue before reimbursements (net revenue)

$ 526,890


$530,718


$   (3,828)


(0.7%)

Reimbursements

14,075


13,970


105


0.8%

Total revenue

540,965


544,688


(3,723)


(0.7%)









Operating expenses








Salaries and employee benefits

371,898


373,021


(1,123)


(0.3%)

General and administrative expenses

101,646


105,532


(3,886)


(3.7%)

Restructuring charges

4,130


-


4,130


100.0%

Reimbursed expenses

14,075


13,970


105


0.8%

   Total operating expenses

491,749


492,523


(774)


(0.2%)

Operating income

49,216


52,165


(2,949)


(5.7%)









Non-operating income








Interest, net

2,039


496





Other, net

1,887


1,849





Net non-operating income

3,926


2,345












Income before income taxes

53,142


54,510





Provision for income taxes

16,828


16,410





Net income

36,314


38,100





Other comprehensive loss, net of tax

(1,012)


(3,107)





Comprehensive income

$   35,302


$  34,993













Basic weighted average common shares outstanding

19,084


18,905





Diluted weighted average common shares outstanding

19,518


19,444













Basic net income per common share

$       1.90


$       2.02





Diluted net income per common share

$       1.86


$       1.96













Salaries and employee benefits as a % of net revenue

70.6%


70.3%





General and administrative expense as a % of net revenue

19.3%


19.9%





Operating income as a % of net revenue

9.3%


9.8%





 

Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)





























Nine Months Ended September 30,











2019


2018



2019


2018


$ Change


% Change


Margin *


Margin *

Revenue












    Executive Search













Americas

$ 308,700


$ 295,499


$  13,201


4.5%






Europe

103,244


110,419


(7,175)


(6.5%)






Asia Pacific

71,394


78,460


(7,066)


(9.0%)






      Total Executive Search

483,338


484,378


(1,040)


(0.2%)





    Heidrick Consulting

43,552


46,340


(2,788)


(6.0%)






      Revenue before reimbursements (net revenue)

526,890


530,718


(3,828)


(0.7%)






Reimbursements

14,075


13,970


105


0.8%






      Total revenue

$ 540,965


$ 544,688


$   (3,723)


(0.7%)


















Operating income (loss)












    Executive Search













Americas (1)

$   74,211


$   69,988


$     4,223


6.0%


24.0%


23.7%


Europe

3,788


6,453


(2,665)


(41.3%)


3.7%


5.8%


Asia Pacific

10,642


13,608


(2,966)


(21.8%)


14.9%


17.3%


      Total Executive Search

88,641


90,049


(1,408)


(1.6%)


18.3%


18.6%

     Heidrick Consulting

(12,770)


(10,988)


(1,782)


(16.2%)


(29.3%)


(23.7%)


      Total segments

75,871


79,061


(3,190)


(4.0%)


14.4%


14.9%


Global Operations Support (1)

(26,655)


(26,896)


241


0.9%


(5.1%)


(5.1%)


      Total operating income

$   49,216


$   52,165


$   (2,949)


(5.7%)


9.3%


9.8%




























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






(1) 2019 includes restructuring charges of $4.1 million in the Americas and less than $0.1 million in Global Operations Support





 

 Heidrick & Struggles International, Inc. 

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

 (In thousands) 

  (Unaudited) 





























 Three Months Ended 


 Nine Months Ended 






 September 30, 


 September 30, 






2019


2018


2019


2018














 Revenue before reimbursements (net revenue) 

$ 182,174


$ 187,588


$ 526,890


$ 530,718














 Operating income  

14,472


20,583


49,216


52,165














 Adjustments 










 Restructuring charges (1) 

4,130


-


4,130


-




 Total adjustments 

4,130


-


4,130


-














 Adjusted operating income 

$   18,602


$   20,583


$   53,346


$   52,165














Operating income as a % of net revenue

7.9%


11.0%


9.3%


9.8%


Adjusted operating income as a % of net revenue

10.2%


11.0%


10.1%


9.8%






































 Heidrick & Struggles International, Inc. 

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

 (In thousands, except per share amounts) 

  (Unaudited) 




















 Three Months Ended 


 Nine Months Ended 



 September 30, 


 September 30, 



2019


2018


2019


2018











 Net income  

$     9,947


$   16,469


$   36,314


$   38,100











 Adjustments 










 Restructuring charges, net of tax 

3,717


-


3,717


-




 Total adjustments 

3,717


-


3,717


-











 Adjusted net income  

$   13,664


$   16,469


$   40,031


$   38,100











Basic weighted average common shares outstanding

19,127


18,954


19,084


18,905


Diluted weighted average common shares outstanding

19,428


19,401


19,518


19,444











Basic net income per common share

$       0.52


$       0.87


$       1.90


$       2.02


Diluted net income per common share

$       0.51


$       0.85


$       1.86


$       1.96











Adjusted basic net income per common share

$       0.71


$       0.87


$       2.10


$       2.02


Adjusted diluted net income per common share

$       0.70


$       0.85


$       2.05


$       1.96











Explanation of Non-GAAP adjustments













(1) In 2019, the Company incurred approximately $4.1 million in restructuring charges related to the closing of the Company's legacy Brazil operations due to the acquisition of 2GET. The restructuring charges consist primarily of employee-related costs for the Company's existing Brazil operations.


 

Heidrick & Struggles International, Inc.

 Condensed Consolidated Balance Sheets

(In thousands)

















 September 30, 


December 31,




2019


2018




(Unaudited)



Current assets






Cash and cash equivalents


$         176,372


$         279,906


Marketable securities


42,566


-


Accounts receivable, net


150,872


114,977


Prepaid expenses


20,436


22,766


Other current assets


27,966


29,598


Income taxes recoverable


5,818


3,620


   Total current assets


424,030


450,867







Non-current assets






Property and equipment, net


29,356


33,871


Operating lease right-of-use assets


98,097


-


Assets designated for retirement and pension plans


14,289


15,035


Investments


23,807


19,442


Other non-current assets


20,317


22,276


Goodwill


128,286


122,092


Other intangible assets, net


4,428


2,216


Deferred income taxes


34,013


34,830


   Total non-current assets


352,593


249,762







Total assets


$          776,623


$         700,629







Current liabilities






Accounts payable


$              9,093


$             9,166


Accrued salaries and employee benefits


180,207


227,653


Deferred revenue, net


40,434


40,673


Operating lease liabilities


30,663


-


Other current liabilities


29,327


33,219


Income taxes payable


6,517


8,240


   Total current liabilities


296,241


318,951







Non-current liabilities






Accrued salaries and employee benefits


53,099


57,234


Retirement and pension plans


43,269


39,865


Operating lease liabilities


76,871


-


Other non-current liabilities


10,508


17,423


   Total non-current liabilities


183,747


114,522







Stockholders' equity


296,635


267,156







Total liabilities and stockholders' equity


$         776,623


$         700,629

 

Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)






























 Three Months Ended 






 September 30, 






2019


2018









Cash flows - operating activities





Net income

$     9,947


$   16,469


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






Depreciation and amortization

2,635


3,065



Deferred income taxes

(536)


(91)



Stock-based compensation expense

2,539


2,911



Accretion expense related to earnout payments

168


316



Gain on marketable securities

(237)


-



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







Accounts receivable

(4,868)


(4,660)




Accounts payable

834


1,036




Accrued expenses

62,820


63,950




Restructuring accrual

3,951


(1,948)




Deferred revenue

3,353


2,811




Income taxes payable, net

83


1,063




Retirement and pension assets and liabilities

138


(1,140)




Prepaid expenses

2,587


2,463




Other assets and liabilities, net

3,050


(2,070)





Net cash provided by operating activities

86,464


84,175









Cash flows - investing activities





Acquisition of business

(3,520)


42


Capital expenditures

(848)


(2,391)


Purchases of available for sale investments 

(42,669)


(155)


Proceeds from sale of available for sale investments

38,930


1,326





Net cash used in investing activities

(8,107)


(1,178)









Cash flows - financing activities





Cash dividends paid 

(2,963)


(2,531)


Acquisition earnout payments

(1,446)


-





Net cash used in financing activities

(4,409)


(2,531)









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

(2,890)


(2,084)









Net increase in cash, cash equivalents, and restricted cash

71,058


78,382

Cash, cash equivalents, and restricted cash at beginning of period

105,314


86,432

Cash, cash equivalents, and restricted cash at end of period

$ 176,372


$ 164,814

 

Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)






























 Nine Months Ended 






 September 30, 






2019


2018









Cash flows - operating activities





Net income

$   36,314


$      38,100


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






Depreciation and amortization

7,983


9,558



Deferred income taxes

(24)


(438)



Stock-based compensation expense

7,250


6,763



Accretion expense related to earnout payments

495


963



Gain on marketable securities

(353)


-



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







Accounts receivable

(36,961)


(60,057)




Accounts payable

(144)


(761)




Accrued expenses

(52,680)


3,834




Restructuring accrual

2,762


(10,833)




Deferred revenue

113


185




Income taxes payable, net

(3,952)


(2,003)




Retirement and pension assets and liabilities

1,824


(1,019)




Prepaid expenses

(920)


(3,416)




Other assets and liabilities, net

2,874


(3,761)





Net cash used in operating activities

(35,419)


(22,885)









Cash flows - investing activities





Acquisition of business

(3,520)


(3,119)


Capital expenditures

(2,641)


(4,939)


Purchases of available for sale investments 

(83,146)


(2,046)


Proceeds from sale of available for sale investments

39,162


2,890





Net cash used in investing activities

(50,145)


(7,214)









Cash flows - financing activities





Proceeds from line of credit

-


20,000


Payments on line of credit

-


(20,000)


Cash dividends paid 

(8,866)


(7,573)


Payment of employee tax withholdings on equity transactions

(4,552)


(2,234)


Acquisition earnout payments

(1,853)


-





Net cash used in financing activities

(15,271)


(9,807)









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

(3,055)


(3,442)









Net decrease in cash, cash equivalents, and restricted cash

(103,890)


(43,348)

Cash, cash equivalents, and restricted cash at beginning of period

280,262


208,162

Cash, cash equivalents, and restricted cash at end of period

$ 176,372


$    164,814

 

 Heidrick & Struggles International, Inc. 

 Reconciliation of Net Income and Operating Income to 

 Adjusted EBITDA (Non-GAAP) 

 (In thousands) 

  (Unaudited) 



























 Three Months Ended 


 Nine Months Ended 





 September 30, 


 September 30, 





2019


2018


2019


2018












 Revenue before reimbursements (net revenue) 

$    182,174


$    187,588


$    526,890


$    530,718












 Net income 

9,947


16,469


36,314


38,100


 Interest, net 

(819)


(259)


(2,039)


(496)


 Other, net 

464


(2,345)


(1,887)


(1,849)


 Provision for income taxes 

4,880


6,718


16,828


16,410

 Operating income 

14,472


20,583


49,216


52,165












 Adjustments 









 Salaries and employee benefits 










 Stock-based compensation expense 

2,539


2,464


6,790


5,755


 General and administrative expenses 










 Depreciation 

2,444


2,709


7,316


8,337



 Intangible amortization 

192


355


667


1,220



 Earnout accretion 

168


316


495


963



 Restructuring charges 

4,130


-


4,130


-




 Total adjustments 

9,473


5,844


19,398


16,275












 Adjusted EBITDA 

$      23,945


$      26,427


$      68,614


$      68,440

 Adjusted EBITDA Margin 

13.1%


14.1%


13.0%


12.9%

 

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SOURCE Heidrick & Struggles International, Inc.