Heidrick & Struggles International Inc. has a market cap of $414.4 million; its shares were traded at around $23.65 with a P/E ratio of 27.5 and P/S ratio of 1. The dividend yield of Heidrick & Struggles International Inc. stocks is 2.2%.HSII is in the portfolios of Arnold Van Den Berg of Century Management, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:For segment purposes, reimbursements of out-of-pocket expenses classified as revenue, restructuring and impairment charges, and other operating income are reported separately and, therefore, are not included in the results of each geographic region. We believe that analyzing trends in revenue before reimbursements (net revenue), analyzing operating expenses as a percentage of net revenue, and operating income (loss) excluding restructuring and impairment charges and other operating income, more appropriately reflects our core operations. By segment the restructuring charges recorded in the first nine months of 2010 were $1.0 million in the Americas, $0.3 million in the European region, and $0.3 million in Global Operations Support. Other operating income of $1.1 million was recorded in the European region in the first nine months of 2010. By segment, the restructuring and impairment charges recorded in the first nine months of 2009 were $13.0 million in the Americas, $9.1 million in Europe, $2.2 million in Asia Pacific and $1.1 million in Global Operations Support.
Revenue before reimbursements (net revenue). Consolidated net revenue increased $22.6 million, or 21.8%, to $126.1 million for the three months ended September 30, 2010 from $103.5 million for the three months ended September 30, 2009. The impact of exchange rate fluctuations on net revenue for the period ended September 30, 2010 was immaterial. Net revenue increased in the Americas and Asia Pacific regions with strong performance from the Financial Services, Industrial, and Global Technology and Services practices. Net revenue from Leadership Consulting Services increased 32.7% to $9.9 million and represented 7.8% of total net revenue in the quarter. The number of confirmed executive searches increased 3.5% compared to the third quarter of 2009. The number of consultants was 343 as of September 30, 2010 compared to 365 as of September 30, 2009. Productivity, as measured by annualized net revenue per consultant, was $1.5 million in the third quarter of 2010 compared to $1.1 million in the third quarter of 2009, and average revenue per executive search was $114,200 in the 2010 third quarter compared to $97,300 in the 2009 third quarter.
Net revenue in the Americas was $66.6 million for the three months ended September 30, 2010, an increase of $15.7 million, or 30.7%, from $50.9 million in the third quarter of 2009. Net revenue in Europe was $27.9 million for the three months ended September 30, 2010, a decrease of $3.6 million, or 11.6%, from $31.5 million in the third quarter of 2009. The negative impact of exchange rate fluctuations resulted in approximately 6 percentage points of the net revenue decrease in the third quarter of 2010. In Asia Pacific, net revenue was $31.7 million for the three months ended September 30, 2010, an
Salaries and employee benefits. Consolidated salaries and employee benefits expense increased $20.1 million, or 29.5%, to $88.3 million for the three months ended September 30, 2010 from $68.2 million for the three months ended September 30, 2009. The increase in salaries and employee benefits expense is a result of a $17.9 million increase in performance-related compensation expense reflecting higher bonus accruals associated with higher net revenue and the mix of consultants who generated the revenue. Included in this increase is approximately $5 million of discretionary consultant compensation related to individual performance factors. Fixed compensation increased $2.2 million primarily due to a $2.2 million increase in base compensation and other employee-related expenses associated with the restoration of a 5% salary reduction in place during 2009 and a 6% increase in worldwide headcount. Fixed compensation also included $1.9 million of expense associated with incentive awards issued in the second quarter of 2010 and a $0.9 million increase in severance expense. These increases were offset by a year-over-year decline in stock-based compensation expense of $2.8 million as a result of significant forfeitures and a decrease in the amount of equity awards granted in 2009 and 2010 compared to prior years when a portion of consultants bonus was paid in the form of equity. At September 30, 2010 we had 1,483 total employees, compared to 1,395 total employees as of September 30, 2009.
General and administrative expenses. Consolidated general and administrative expenses increased $3.9 million, or 13.6%, to $32.5 million for the three months ended September 30, 2010 from $28.6 million for the three months ended September 30, 2009. The increase reflects increases of $2.0 million in travel and meeting related expenses due to training and business development initiatives reinstated in 2010, $0.7 million of other operating and infrastructure expenses, $0.6 million of temporary employee and hiring expenses, and $0.4 million in bad debt expense. Fees for professional services increased $2.1 million primarily related to the ongoing development of our internal search system, other systems development projects and legal costs incurred in the third quarter of 2010. These increases were partially offset by a decline in professional fees related to a process improvement project aimed at increasing operational effectiveness and efficiency which is nearing completion and decreases in premise-related and depreciation expenses of $1.9 million.
Global Operations Support expenses for the three months ended September 30, 2010 increased $4.7 million or 56.9% to $13.0 million from $8.3 million for the three months ended September 30, 2009. Compensation expense increased $2.8 million and general and administrative expenses increased $1.9 million. The increase in compensation expense is primarily due to increased base compensation and bonus expense, $0.7 million of search and corporate support expenses previously provided through the Americas region that is now provided through our Global Business Services group, and $0.7 million of severance expense. The increase in general and administrative expenses reflects several initiatives reinstated in 2010 including professional services fees, training and development programs.
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