Heidrick & Struggles International, Inc. (ticker: HSII, exchange: NASDAQ) News Release - 3-Aug-2000
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Heidrick & Struggles Reports Record 2000 Second Quarter Revenue and Earnings
CHICAGO, Aug. 3 /PRNewswire/ -- Heidrick & Struggles International, Inc. (Nasdaq: HSII), the world's largest and premier executive search firm, today announced record revenue and earnings for the 2000 second quarter. On an adjusted basis, diluted earnings per share were $0.49, an increase of 63 percent from $0.30 in the 1999 second quarter. Revenue in the 2000 second quarter grew 47 percent to $166.4 million, up from $113.0 million in the comparable quarter of 1999. Net income was $10.0 million, an increase of 106 percent from $4.8 million in last year's second quarter. (For an explanation of "adjusted basis," see the Special Notes section at the end of the release.) Results reflect the pooling of interests merger in the 1999 third quarter with Sullivan & Company, a leading financial services executive search firm.
''We continue to see exceptional strength from our core executive search business with all geographic segments contributing to yet another quarter of impressive growth in revenue and earnings. Further, LeadersOnline continues to exceed our expectations,'' said Patrick S. Pittard, Chairman, President and Chief Executive Officer of Heidrick & Struggles International (HSI Group). ''We could not have done it without the extraordinary talent of our people, who are performing more searches than ever in our history. It is because of their dedication and world-class leadership that we are the premier search firm of choice for executive talent.''
On an adjusted basis, diluted earnings per share for the core business, Heidrick & Struggles Executive Search, were $0.54 in the 2000 second quarter. This excludes $0.09 in income from the warrant program and $0.13 in losses generated by LeadersOnline, the company's Internet-based recruiting solution for mid-level executives and professionals. In the 1999 second quarter, diluted earnings per share for Executive Search were $0.35. Confirmed searches increased 23 percent from the 1999 second quarter.
All Geographic Segments Report Double-Digit Revenue Growth
In the 2000 second quarter, Executive Search revenue in the U.S. segment rose 41 percent to $98.1 million, compared to $69.4 million in the 1999 second quarter, with the Financial Services and Technology practice groups continuing to lead the way. In the Americas-Other segment (Canada and Latin America), revenue grew 48 percent to $6.1 million, compared to $4.1 million in the 1999 second quarter.
In the 2000 second quarter, revenue in the Europe segment (which includes Africa and the Middle East) increased 36 percent to $46.6 million, compared to $34.3 million in the 1999 second quarter, due in part to the continued strong performance from the Financial Services and Consumer practice groups. Excluding the negative effects of foreign currency translation into the U.S. dollar, revenue increased 51 percent on a local currency basis over the comparable quarter in 1999. In Asia Pacific, revenue grew 84 percent to $9.5 million, compared to $5.2 million in the 1999 second quarter, with significant contributions from most of the operations in the segment.
Searches with Equity Component Continue to Grow
As of June 30, 2000, Heidrick & Struggles had confirmation letters for 570 searches in which warrants for equity in the client company were included as a portion of the fee in addition to the normal cash fee. The sale of equity obtained as partial payment in these assignments resulted in a pre-tax gain in the second quarter of $3.1 million, net of administrative costs of the warrant program and consultant bonuses; this amount is included in Other Non-Operating Income on the income statement.
LeadersOnline Update
LeadersOnline reported revenue of $6.1 million in the 2000 second quarter, compared to $150,000 in the 1999 second quarter. LeadersOnline did not begin to generate revenue until the 1999 second quarter and reported $2.6 million in revenue for the 1999 full year.
LeadersOnline reported a pre-tax loss of $4.2 million -- or $0.13 per diluted share -- in the 2000 second quarter, compared to a pre-tax loss of $1.4 million -- or $0.05 per diluted share -- in the 1999 second quarter. The 2000 second quarter included a non-cash compensation charge of $1.0 million, or $0.05 per diluted share, related to the amortization of the difference between the deemed fair market value for accounting purposes and the exercise price of LeadersOnline options granted to certain Heidrick & Struggles and LeadersOnline employees.
As of June 30, LeadersOnline employed a staff of 74 professionals. Of these employees, 68 were located in North America and six were located outside North America. The average compensation of a LeadersOnline placement is presently approximately $140,000.
In April 2000, LeadersOnline entered into a strategic five-year alliance with Business Week, under which The Business Week Online Careers Channel and the LeadersOnline site will be linked to form a comprehensive online career destination for professional and managerial talent. In addition, Business Week Online will supply editorial content for a weekly electronic newsletter and custom-publish a magazine called ''LeadersOnline,'' designed to be the premier career management resource for the next generation of corporate leaders. It is anticipated that the magazine will launch in the 2000 fourth quarter.
For the year 2000, LeadersOnline anticipates generating revenue of at least $20 million and incurring losses of approximately $15 million. These losses are anticipated to be offset on Heidrick & Struggles' consolidated income statement by income generated from the company's warrant program and by out-performance in Executive Search. LeadersOnline currently anticipates revenue to grow nearly 100 percent in 2001, with an expectation to break even no later than the 2001 third quarter.
On April 10, 2000, LeadersOnline filed a registration statement with the Securities and Exchange Commission relating to a proposed initial public offering of its Class A common stock.
Six Month Results
For the six months ended June 30, 2000, diluted earnings per share on an adjusted basis were $0.68, an increase of 66 percent from $0.41 in the comparable period last year. Revenue grew 44 percent to $298.4 million from $207.6 million in the comparable period last year. Net income was $13.5 million, an increase of 106 percent from $6.6 million in the comparable period last year.
For the six months ended June 30, 2000, diluted earnings per share for Executive Search were $0.82. This excludes $0.13 in income from the warrant program and $0.28 in losses generated by LeadersOnline. In the comparable period for 1999, diluted earnings per share for Executive Search were $0.50, on an adjusted basis.
LeadersOnline reported revenue of $9.3 million for the six months ended June 30, 2000, compared to $150,000 during the first six months of 1999. LeadersOnline reported a pre-tax loss of $8.4 million -- or $0.28 per diluted share -- during the first six months of 2000, compared to a pre-tax loss of $2.6 million -- or $0.09 per diluted share -- during the first six months of 1999.
On a reported basis for consolidated results for the six months ended June 30, 2000, diluted earnings per share were $0.68 versus a loss of $0.50 in the comparable period last year. Revenue grew 59 percent to $298.4 million from $187.6 million in the comparable period last year. Net income was $13.5 million versus a loss of $5.3 million in the comparable period last year.
About Heidrick & Struggles International, Inc.
Heidrick & Struggles International is the world's largest and premier executive search firm, specializing in chief executive, board of directors and senior level management assignments. Today, nearly 900 Heidrick & Struggles professionals serve a broad range of organizations, including Fortune 500 companies, financial institutions, major health care organizations, universities and not-for-profit organizations, leading mid-cap companies, and emerging growth companies from offices in more than 70 locations throughout North and South America, Europe, the Middle East, Africa and Asia Pacific. For more information about Heidrick & Struggles, visit our web site at http://www.heidrick.com/ .
Special Notes
References to ''adjusted basis'' information above apply to figures that exclude current and prior period non-recurring items. Further, ''adjusted basis'' assumes the merger of Heidrick & Struggles, Inc. (''H&S Inc.'') and Heidrick & Struggles International, Inc. (''HSI'') occurred on January 1, 1999. The merger, completed on February 26, 1999, combined the operations of H&S Inc., which operated in all regions of the world except Europe, with Europe-based HSI, which previously had been approximately 35 percent owned by H&S Inc.
Safe Harbor Statement
Certain matters discussed in this news release are forward-looking statements that are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise, and include known and unknown risks, uncertainties and other important factors that could cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Some of the risks, uncertainties, assumptions and factors that could affect the company's financial results are included in the company's recent SEC filings. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. All forward-looking statements in this news release are expressly qualified by these cautionary statements, and the company expressly disclaims any duty to update such forward-looking statements.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME, AS ADJUSTED
(Excluding one-time adjustments and assuming completion of the merger
of H&S and HSI and public company status at January 1, 1999)
(In thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 (A) % Change 2000 1999 (A)(B) % Change
Revenue $166,416 $113,046 47.2% $298,352 $207,632 43.7%
Operating expenses:
Salaries and
employee
benefits(C)(D) 108,263 76,397 41.7% 200,663 140,460 42.9%
General and
administrative
expenses(E) 44,933 27,845 61.4% 80,743 54,876 47.1%
Total operating
expenses 153,196 104,242 47.0% 281,406 195,336 44.1%
Operating
income 13,220 8,804 50.2% 16,946 12,296 37.8%
Non-operating
income (expense):
Interest income 1,833 426 330.3% 3,350 596 462.1%
Interest expense (52) (460) -88.7% (127) (993) -87.2%
Minority interest 157 - - 157 - -
Other, net 3,023 63 4698.4% 4,719 76 6109.2%
Net
non-operating
income
(expense) 4,961 29 17006.9% 8,099 (321) -
Income before
income taxes(F) 18,181 8,833 105.8% 25,045 11,975 109.1%
Provision for
income taxes 8,183 3,984 105.4% 11,532 5,415 113.0%
Net income $9,998 $4,849 106.2% $13,513 $6,560 106.0%
Basic earnings
per common share $0.52 $0.30 73.3% $0.72 $0.41 75.6%
Basic weighted
average common
shares
outstanding(G) 19,211 16,132 19.1% 18,643 16,049 16.2%
Diluted earnings
per common share $0.49 $0.30 63.3% $0.68 $0.41 65.9%
Diluted weighted
average common
shares
outstanding
(G)(H) 20,497 16,172 26.7% 19,906 16,109 23.6%
(A)Statements have been restated to give retroactive effect to the merger of HSI and Sullivan & Company on September 1, 1999, which has been accounted for using the pooling of interests method and, as a result, the results of operations are presented as if the combining companies had been consolidated for all periods presented and as if the shares of additional common stock issued in connection with the merger had been issued for all periods presented.
(B)Amounts assume that the merger of H&S Inc. and HSI had occurred on January 1, 1999.
(C)Amount excludes the $12.4 million nonrecurring Mulder charge ($0.77 per share on a diluted basis) for the six months ended June 30, 1999. This charge is the result of the modification of the terms of the Mulder acquisition agreement, including the termination of all employment contingencies. It represents the write-off of $2.9 million of deferred compensation assets, the settlement of the remaining cash due of $4.3 million and the issuance of 428,452 common shares (worth $5.2 million) to the previous owners of Mulder. In addition, $0.9 million of deferred compensation expense relating to the acquisition has been excluded for the six months ended June 30, 1999.
(D)Amount includes a non-cash compensation charge of $1.0 million and $1.9 million ($0.05 per share and $0.10 per share on a diluted basis) for the three months and six months ended June 30, 2000, respectively. This charge is due to the issuance of options by LeadersOnline, Inc., at a price below the deemed fair market value for accounting purposes, at the time of issuance.
(E)Amount has been adjusted to include amortization related to acquired intangibles and goodwill arising from the merger of H&S and HSI of $0.2 million for the six months ended June 30, 1999.
(F)Equity in net loss of affiliate has been eliminated for the six months ended June 30, 1999 to reflect 100% ownership of HSI after the merger.
(G)Amount has been adjusted to give effect to the initial public offering of 3.7 million shares and issuance of 0.7 million shares under the Company's GlobalShare plan as of January 1, 1999. In addition, the three months and six months ended June 30, 1999 have been adjusted for the issuance of 0.5 million shares on June 1, 1999 which arose from the exercise of a portion of the over-allotment option granted to certain underwriters of the initial public offering.
(H)Amount has been adjusted to give effect to the issuance of options pursuant to the Company's GlobalShare plan equivalent to 0.04 million shares and 0.1 million shares for the three months and six months ended June 30, 1999, respectively under the treasury stock method.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 (A) % Change 2000 1999 (A) % Change
Revenue $166,416 $113,046 47.2% $298,352 $187,647 59.0%
Operating expenses:
Salaries and
employee
benefits(B) 108,263 76,397 41.7% 200,663 125,544 59.8%
General and
administrative
expenses 44,933 27,845 61.4% 80,743 48,435 66.7%
Nonrecurring
charge(C) - - - - 12,420 -
Total operating
expenses 153,196 104,242 47.0% 281,406 186,399 51.0%
Operating
income 13,220 8,804 50.2% 16,946 1,248 1257.9%
Non-operating
income (expense):
Interest income 1,833 426 330.3% 3,350 596 462.1%
Interest expense (52) (460) -88.7% (127) (937) -86.4%
Minority interest 157 - - 157 - -
Other, net 3,023 63 4698.4% 4,719 76 6109.2%
Net
non-operating
income
(expense) 4,961 29 17006.9% 8,099 (265) -
Equity in net loss
of affiliate - - - - (630) -
Income before
income taxes 18,181 8,833 105.8% 25,045 353 6994.9%
Provision for
income taxes 8,183 3,984 105.4% 11,532 5,652 104.0%
Net income
(loss) $9,998 $4,849 106.2% $13,513 $(5,299) -
Basic earnings
(loss) per
common share $0.52 $0.33 57.6% $0.72 $(0.50) -
Basic weighted
average common
shares
outstanding 19,211 14,884 29.1% 18,643 10,636 75.3%
Diluted earnings
(loss) per common
share $0.49 $0.33 48.5% $0.68 $(0.50) -
Diluted weighted
average common
shares
outstanding 20,497 14,913 37.4% 19,906 10,651 86.9%
(A)Statements have been restated to give retroactive effect to the merger of HSI and Sullivan & Company on September 1, 1999, which has been accounted for using the pooling of interests method and, as a result, the results of operations are presented as if the combining companies had been consolidated for all periods presented and as if the shares of additional common stock issued in connection with the merger had been issued for all periods presented.
(B)Amount includes a non-cash compensation charge of $1.0 million and $1.9 million ($0.05 per share and $0.10 per share on a diluted basis) for the three months and six months ended June 30, 2000, respectively. This charge is due to the issuance of options by LeadersOnline, Inc., at a price below the deemed fair market value for accounting purposes, at the time of issuance.
(C)The Company incurred a $12.4 million nonrecurring charge during the first quarter of 1999 as a result of the modification of the terms of the Mulder acquisition agreement, including the termination of all employment contingencies. This nonrecurring charge represents the write-off of $2.9 million of deferred compensation assets, the settlement of the remaining cash due of $4.3 million, and the issuance of 428,452 common shares (worth $5.2 million) to the previous owners of Mulder.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31, June 30,
2000 1999 1999 (A)
(unaudited) (unaudited)
Current assets:
Cash and cash equivalents $144,214 $76,848 $66,555
Accounts receivable, net of
allowance for doubtful accounts125,987 83,162 82,107
Other receivables 6,813 4,241 3,163
Prepaid expenses 9,742 7,583 3,747
Deferred income taxes 21,107 19,881 15,860
Total current assets 307,863 191,715 171,432
Property and equipment, net 55,708 52,352 48,751
Other assets:
Cash and investments designated
for nonqualified retirement
plans 32,076 32,702 30,924
Investments and other assets 26,731 11,772 12,914
Deferred income taxes 1,371 376 6,346
Goodwill & other intangibles,
net 64,329 45,832 45,376
Total other assets 124,507 90,682 95,560
Total assets $488,078 $334,749 $315,743
(A)Amounts have been restated to give retroactive effect to the merger with Sullivan & Company as of January 1, 1999.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31, June 30,
2000 1999 1999 (A)
(unaudited) (unaudited)
Current liabilities:
Current maturities of long-term
debt $- $3,039 $4,370
Accounts payable 10,598 8,052 9,896
Accrued expenses-
Salaries and employee
benefits 141,008 100,762 96,386
Other 21,483 14,964 16,650
Income taxes payable 8,466 10,891 2,075
Total current liabilities 181,555 137,708 129,377
Long-term debt, less current
maturities - - 3,074
Liability for nonqualified
retirement plans 28,399 29,161 28,555
Other long-term liabilities 2,072 - 2,552
Stockholders' equity 276,052 167,880 152,185
Total liabilities and
stockholders' equity $488,078 $334,749 $315,743
(A) Amounts have been restated to give retroactive effect to the merger with Sullivan & Company as of January 1, 1999.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
SEGMENT INFORMATION, AS ADJUSTED (A)
(In thousands, unaudited)
Three Months Ended June 30,
2000 1999
2000 1999 (A) % Change Margin Margin
Revenue
Americas
United States $98,112 $69,363 41.4%
Other 6,113 4,117 48.5%
International
Europe 46,608 34,265 36.0%
Asia Pacific 9,476 5,151 84.0%
Total Executive Search 160,309 112,896 42.0%
LeadersOnline 6,107 150 3971.3%
Total Company $166,416 $113,046 47.2%
Operating Income (Loss)
Americas
United States $17,503 $11,441 53.0% 17.8% 16.5%
Other 921 740 24.5% 15.1% 18.0%
International
Europe 5,249 1,234 325.4% 11.3% 3.6%
Asia Pacific 1,682 905 85.9% 17.8% 17.6%
Total Executive Search 25,355 14,320 77.1% 15.8% 12.7%
LeadersOnline (4,333) (1,384) 213.1% - -
Corporate (7,802) (4,132) 88.8% - -
Total Company $13,220 $8,804 50.2% 7.9% 7.8%
Six Months Ended June 30,
2000 1999
2000 1999 (A) % Change Margin Margin
Revenue
Americas
United States $172,438 $124,955 38.0%
Other 11,013 7,281 51.3%
International
Europe 87,992 66,282 32.8%
Asia Pacific 17,598 8,964 96.3%
Total Executive Search 289,041 207,482 39.3%
LeadersOnline 9,311 150 6107.3%
Total Company $298,352 $207,632 43.7%
Operating Income (Loss)
Americas
United States $28,275 $19,214 47.2% 16.4% 15.4%
Other 1,290 954 35.2% 11.7% 13.1%
International
Europe 8,684 1,706 409.0% 9.9% 2.6%
Asia Pacific 2,991 892 235.3% 17.0% 10.0%
Total Executive Search 41,240 22,766 81.1% 14.3% 11.0%
LeadersOnline (8,519) (2,639) 222.8% - -
Corporate (15,775) (7,831) 101.4% - -
Total Company $16,946 $12,296 37.8% 5.7% 5.9%
(A) Excludes all one-time adjustments and assumes the merger of H&S and HSI had occurred on January 1, 1999. In addition, the three months and six months ended June 30, 1999 have been restated to include the effect of the Merger of HSI and Sullivan & Company.
SOURCE Heidrick & Struggles International, Inc.
CONTACT: Media, Jennifer Silver, 404-572-0019, e-mail, jsilver@heidrick.com or Analysts, Barry Hollingsworth, 312-496-1723, e-mail, bhollingsworth@heidrick.com, both of Heidrick & Struggles