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Heidrick & Struggles International Inc. Reports Operating Results (10-Q)

May 04, 2009 | About:

Heidrick & Struggles International Inc. (HSII) filed Quarterly Report for the period ended 2009-03-31.

Heidrick & Struggles International is one of the leading global executive search firms. With years of experience in fulfilling their clients' leadership needs Heidrick & Struggles offers and conducts executive search services in every major business center in the world. They focus on identifying evaluating and recommending qualified candidates for senior level executive positions. Through their worldwide network of professionals they provide executive search services to a broad range of clients. Heidrick & Struggles International Inc. has a market cap of $272.3 million; its shares were traded at around $16.63 with a P/E ratio of 14.59 and P/S ratio of 0.42. The dividend yield of Heidrick & Struggles International Inc. stocks is 3.13%. Heidrick & Struggles International Inc. had an annual average earning growth of 73.8% over the past 5 years.

Highlight of Business Operations:

Revenue before reimbursements (net revenue). Consolidated net revenue decreased $64.0 million, or 41.8%, to $89.1 million for the three months ended March 31, 2009 from $153.1 million for the three months ended March 31, 2008. The negative impact of exchange rate fluctuations resulted in approximately 6 percentage points of the decline. Revenue decreased in all the industry practice groups. The number of confirmed executive searches was approximately 38% lower than in the 2008 first quarter and 7% lower compared to the 2008 fourth quarter. There were 403 executive search consultants as of March 31, 2009, compared to 419 as of December 31, 2008 and 408 as of March 31, 2008. Since December 31, 2008, we severed 37 consultants as part of our January 2009 reduction in force and 10 consultants resigned or were terminated. We also promoted 13 of our associates to consultants as part of our annual promotion process, acquired 7 consultants as part our acquisition in Eastern Europe and hired 11 consultants in our faster growing regions or practices. Productivity, as measured by annualized net revenue per consultant, decreased to $0.9 million from $1.5 million in the 2008 first quarter, and the average fee per executive search decreased to $98,900 for the three months ended March 31, 2009 compared to $106,700 for the three months ended March 31, 2008.

Net revenue in the Americas was $46.4 million for the three months ended March 31, 2009, a decrease of $30.9 million, or 40.0%, from $77.3 million in the first quarter of 2008. Revenue declined in all industry groups. Net revenue in Europe was $28.1 million for the three months ended March 31, 2009, a decrease of $24.8 million, or 46.9%, from $52.9 million in the first quarter of 2008. Revenue declined in all industry groups. The negative impact of exchange rate fluctuations resulted in approximately twelve percentage points of the revenue decline in the first quarter of 2009. In Asia Pacific, net revenue was $14.7 million for the three months ended March 31, 2009, a decrease of $8.3 million, or 36.0%, from $22.9 million in the first quarter of 2008. Revenue in the Financial Services and Industrial groups experienced the largest declines. The negative impact of exchange rate fluctuations resulted in approximately eight percentage points of the revenue decline in the first quarter of 2009.

Restructuring charges. In the first quarter of 2009, we recorded restructuring charges of $13.4 million in connection with initiatives to reduce our overall costs and improve operational efficiencies, consisting of $12.5 million of cash charges and $0.9 million of non-cash write-offs. These charges relate to severance and other employee-related costs associated with reductions in our workforce. The workforce reductions affected 197 employees globally, of which 108 were in the Americas, 41 in Europe, 31 in Asia Pacific and 17 in Corporate. By segment, the restructuring charges recorded in the first quarter of 2009 were $6.4 million in the Americas, $5.7 million in Europe, $0.7 million in Asia Pacific and $0.6 million in Corporate.

The Americas reported an operating loss of $7.5 million for the three months ended March 31, 2009, a decrease of $19.2 million compared to operating income of $11.7 million for the three months ended March 31, 2008. The decrease is due to lower net revenue of $31.0 million offset by a $12.2 million decrease in salaries and employee benefits expense and a $0.4 million increase in general and administrative expenses. The decrease in salaries and employee benefits expense is due to a decrease in performance-related compensation expense due to lower net revenue and operating margin expectations for 2009. The increase in general and administrative expenses is due to a charge of $0.7 million associated with exiting our Wall Street in conjunction with the consolidation of our New York offices offset by lower travel expenses and other cost containment initiatives in the first quarter of 2009 compared to the first quarter of 2008.

Asia Pacific reported an operating loss of $1.1 million for the three months ended March 31, 2009, a decrease of $3.8 million compared to operating income of $2.7 million for the three months ended March 31, 2008. The decrease in operating income is a result of a decrease in revenue of $8.3 million offset by decreases of $3.6 million in salaries and employee benefits expense and $0.9 million in general and administrative expenses. The decrease in salaries and employee benefits expense represents a decrease in performance-related compensation expense due to lower net revenue and operating margin expectations for 2009. The decrease in general and administrative expenses is primarily due to lower travel expenses and other cost containment initiatives in the three months ended March 31, 2009 compared to the three months ended March 31, 2008.

Corporate expenses for the three months ended March 31, 2009 were $7.8 million compared to $8.8 million for the three months ended March 31, 2008. The decrease was primarily the result of a $1.6 million decrease in compensation expense partially offset by a $0.6 million increase in general and administrative expenses. The decrease in compensation-related expense is due to $1.1 million charge recorded in the first quarter of 2008 related to an executive separation and transition agreement and a decrease in performance-related compensation expense due to our lower net revenue and operating margin expectations for 2009. The increase in general and administrative expenses is due to higher fees for professional services of $0.9 million primarily related to a process benchmarking study aimed at achieving operational cost reductions partially offset by cost containment initiatives.

Read the The complete ReportHSII is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC.

Rating: 5.0/5 (1 vote)

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