HSII - Earnings call transcript Q3 2017 | Heidrick & Struggles International, Inc.

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Operator

Good day and this is Heidrick & Struggles' Third Quarter 2017 Conference Call. This call is being recorded. It may not be reproduced or retransmitted without the Company's consent. [Operator Instructions].

Now I will turn the call over to Julie Creed, Vice President of Investor Relations and Real Estate. ahead. go Please

Julie Creed

and Third everyone for in participating Good Conference thank Call. XXXX Quarter our afternoon, you

Joining the Officer, Krishnan Rajagopalan; me and and President on our call today Chief Financial Rich our Pehlke. is CEO,

available Krishnan, adjusted we terms today, Today, adjusted we'll diluted we'll print our be we to that homepage During the adjusted to adjusted and on per heidrick.com follow better results. EBITDA, are adjusted on financial be margin, explain IR and measures our found call the and at non-GAAP margin our operating cover them. the press call release, The operating These earnings EBITDA ask the three Throughout making you our supporting the initial in slide of can be shown are and non-GAAP comments income, on to And and be our referring slides financial right-hand GAAP share. measures using last course believe are in encourage Reconciliation website that forward-looking between or you one of we'll some safe news along page release language that statements our that going please each the remarks, of of numbers supporting over in to bottom harbor are to to of be you referring in corner eight. Krishnan’s the our we'll through of slides. slide I'll presentation. and turn slide. our slide now. financials our contained refer

Krishnan Rajagopalan

has thank Julie, our really joining with out thank for call you team I’m and pleased everyone, afternoon, today. what you. Good accomplished.

a is of per group X% increased in of partially grew third XX% by increased Specific for compared the Americas as the the million X% in search XX to in very consulting additional from Leadership nine of to in just last share quarter. last first operating to We offset up X% the $X.X were X%. good. decline improved XX improved XX%, last in on executive quarter compared quarters. executive and confirmations our the Consultant grew hires executive to per average in this achieved first strong slightly search for made revenue, practice consolidated in the for promotions $X.XX productivity search. XX% we Europe results still year-over-year and quarter X% revenue in quarter and XX% approximately basis and and month both five XX% is which over Net was ramp slight third share third the highest income year’s revenue and earnings total were XX% months. third Search diluted And by large quarter year. Asia in trailing search operating added X.X%, of continue XX% the the over nine the year’s number margin year-over-year $X.XX or X.X% year. quarter the search the last grew a the margin industry growth. to Operating driven consultants months. XX% to The growth Our Pac quarter. the line net Every

our clients’ unit, year up shaping was to Heidrick leadership with in our client down out we the improved now cohesive standpoint we but revenue will provide to results net accelerate variability our as relatively focused stabilize quarter. profitability sequentially as there Heidrick and quarter-to-quarter clear, we consultants expect, focus shaping business one of from consulting that Culture business Consulting past, this the growth. quarter As of results compared Consulting. announced we are base. and a performance. on We we this service driving business suite Last the pointed leadership be combing that culture small ramp a we’d compared from revenue be in offerings second and last into believe a to will

on also announcement, to that as these with by initiatives. on Simultaneous launch and the integration requirements. beginning businesses We leverage number with believe the screens and go-to-market calendar combing that culture general XXXX. the complete this delivery, year and and strategy, product increase Since to the operating of to the and integration with of formed hiring, focus training leadership development were an work consulting key the of work elements through can shaping hope at marketing by compensation integration drive our and two We strategic entities. leaders growth the focus the in end my be such search, it service part is collaboration improved integration of of to

strategy the for search collaboration go-to-market elements executive and cross are Our strategy. growth with the key

it look come Now I’ll to then the to I’ll Rich turn over back firm. a more our some for and detailed quarter of the of at priorities discuss

Richard Pehlke

Krishnan afternoon, income in drivers, you an revenue attention the the everyone. good overview I’ll statement my of the you, some focus comments so bit than of more detail line release. in and given press in Thank items has a of Krishnan key the

new of compensation and slide third The -- larger expense increase compensation largely increased in fixed search increase in XXXX and a the salaries compensation on Fixed XX.X%. well employee other associated XXXX search related quarter increased million, expense million or executive primarily hires variable benefits reflects acquisitions $X.X with reflects search. in as to increase benefits well and in the $XX.X consultant performance Looking investments in revenue increased executive increase. compensation made XX, in that compensation $XX.X variable the million. The as

to $XX.X inclusion rate primary decline able were $X.X In July lower quarter, third slight to these to than the $X we’re with related to the million administrative million compared Turning drivers Meeting reductions million run that the of increased largely in second expenses our a and Consultants increases end expense showed year-over-year cost. the I’m million two related of the and very occupancy at quarter. to acquisition cost approximately expected offset with Global of expenses pleased held increase and XX, $X.X and related and other business. our higher of slide general the

XX, dropped slides last you’ll see adjusted increased XX to income was to last share rate net quarter. margin of was $XX earnings pace equation. the operating in to $X.XX the As $X faster $XX in Referring through slides in XX.X% in the quarter. And reflecting compared $X.X X%. XX.X% for rate operating differed from quarter over XX.X% That charges. in Referring reflecting quarter a the slightly to third increased slides a and year’s growth through rate million year’s XX a year benefit margin XX.X% XX million third million of EBITDA to projected revenue or and the million the compared to X.X% associated and $XX.X X.X% effective diluted XX, XX, the to of year tax per income tax tax third impairment the to the million in an full reflects full of approximately

estimated be Our XXXX the in would for we tax year adjusted impairment reported QX that to XX% full the charge closer EBT and rate settlement. QX

was in was at $XX.X $XXX at XXXX. slide third generated compared XX, September quarter. XX at year’s last to a million XX, to million operating Now million $XXX.X Cash $XX.X cash September activities cash by a and equivalents compared million looking

quite plus continue business. and excellent we to position Our have the strong the are and we grow to our facility access cash position in invest remains cash in credit through revolving

are to up after trends is our our consultants our productivity, slide quite in the but business, seasonality the We exchange and is expectations X.X% Now their related the week XXXX. in XX, revenue the current shown climate model, on of through October which still we September shown executive compared XX fluctuations. of the confirmations of looking quarter, still Other for were based confirmation our anticipated search forecast rate a factors slide recognition the year-to-date economic fourth search month left healthy. search and number fees, and consulting assignments, have backlog the foreign our on include

and revenue turn XXXX back quarter the Krishnan. million. Reported million. are forecasting between the to fourth call $XXX.X And million quarter with over of in net We $XXX XXXX net I’ll fourth that, $XXX a was of revenue

Krishnan Rajagopalan

Thank you, to four end faster of and and Meeting to summarize want the be I held priorities we’re at at was Global to priorities last our which firm moving summarized we around as those call, speak Rich. July. making we and I the progress the aligned One need reiterate our well. the that Consultants where

Our on strategic be achieving initiatives focused must results these towards priorities.

of only sustain consultant seeing three the the grow we’ll compound business over years our new added turnover continue Search this and in year-to-date. year at We’ve X.X% growth been consultants grown XX a years. annual X% net and search and First, our voluntary X% revenues over rate are search has heavily has and last to year-to-date last up We’ve the this return. invested few business.

to growth markets growth work our on priority. have continuing perfect healthy this the We example top future The larger focusing by of acquisition recent for higher push the of at is organizations of presence. good the should in in opportunities we announcement a and to by Nordics have where a economies and

Second the scale Consulting. is our priority of and Heidrick to grow substantially size

Following and focus. shaping, consulting the will culture integration of leadership this our be

in a We across thoughtful coordinated and go and way a first strategy go-to-market impact. services must these two more manner. joint offering we greater of search consulting the to in our clients Towards priorities, will integrated accelerate market more pace for

the streams integration is most focused integration, process, and joint account Consulting Heidrick areas. the planning focus is the Outside on key of the of my part As one strategy. work search between one consulting go-to-market of important

to aggressively and do to need will date. have we get right this than We more it

recruit firm We only aligning the clarity truly have and consultants, that impact further not but strategy also come in the of to way our I our performance a enhance into go-to-market long clients and ability but accelerating offering our around will firm. refining believe positively platform, talent the

to path commitment consultant this We trusted this Simultaneous the Heidrick advisor. range use projects Meeting human our working mentoring initiative service offerings services our knowledge been multiple my capitalize of off a is and the their at across successful training the top Consultants Additionally, best expectation has increasing sessions both in focused of who our leadership it. where where our at training, commitment were product in on on to with on that our products, to accelerate issues. Global transfer and and teams that and kept consultants talent order development held and we’re to capital

lead for knowledge their a continue the on our specifically solutions program we selling to initiatives. consultants up and advance of cross increase to consulting to Following products conference,

in leveraged continue Our fully third priority the is distinctive IP and our analytics. development investing more our and data of to

projects this we future. our methodology than rolling consultants assessment This to not be and assessment leadership framework, is firm. have leading more language January are use our and forms search to can more now will last, the dive out had new support of of basis development it XX% Our between modules, consistent on a via been taking but eight incorporates Today online the our for and business And least, required IP definitely consulting. today it’s to cost in XXXX. fully the into apply the we the deep effective we X, structure a trained

from employees We our ahead services in client & and and to firmly pleased I these to achieved the for containment Heidrick relationships. implementation date priorities will be opportunity that We were We’re faster, we savings is our there should achieve impact savings great see benefit and clients, able of our full savings our and the the but shareholders from these achieved priority. with integrated strategic believe Struggles. to our of cost believe this complementary a be deeper

moving We’re to their growth. strong. employees hard to firm enough take and this work I positioning for the year profitable for full thank forward forward can’t finish year our advantage the look sustainable

to I’d and Rich be Now take have. any you may happy questions

Operator

question with our And Sommer first from SunTrust. Tobey Instructions] [Operator is

Kwan Kim

Hi, my this for thanks Kim is Kwan for Tobey, taking on questions.

First question is otherwise the cash, balance be on is invested off, [Inaudible]? Thank what available to you. that and a

Richard Pehlke

have restrictions at it’ll XX% move locations that current costly probably between cash X% from money that of where Sure. around. At to of standpoint I our call in say countries rate – or there the balance current we that in I is geographic be would would rate

revolving of percentage mind, in top keep have our credit restrictions our And so or facility. cash. then any We balance full it’s don’t beyond – the that. And that we overall small very our a other of have of on

liquidity flow. of the is there issue terms in from company at in no So, standpoint cash all the

Kwan Kim

a you could environment the on us sluggish in practices of Pacific, are give your turnaround some details talk you. and industry Thank that for the expectations there? maybe Asia And about

Krishnan Rajagopalan

isn’t I really is question. you end a take this big a very step have it a but Asia Krishnan, Look, at to it considered if Sure, hard put strong it over we’re have the there there. see it’s that positioned in markets today set that many see one back, so because issues. region a Pacific very all been is thank where for Korea a And differently today’s of presence, saw having really region competitively your of region market. we and a is in in inside we market and just of We so are umbrella it’s different are growth, there markets We that is that dynamics different finally each different reacting of a the difficult market. – GDP

we’re seeing So India. some seeing in China, momentum seeing we’re in Australia, we’re momentum in momentum

of Japan of like bit well, the have as Some flatter we’ve some than see. the other what been we’d in a and markets momentum seen to markets little

we up so dramatically look market. as look make cost continue hiring making We’re the investments – optimistic well doing very team cautiously and in several gone there Asia everything business at last but to that because cautious the years, has very, over in to and forward of on the we’re

Kwan Kim

Thank you very much.

Richard Pehlke

Thank you.

Operator

question next Blair from Company. Tim with McHugh our & is William And

Tim McHugh

Hi guys.

connected First some other was the service, fees search guess strength those quarter, is spoke never for this or the two the are or this I also in factor? really strength and guess, search upticks financial then per I revenue strong

Richard Pehlke

things I results, saw in our very we and drove Tim, services they think they’re good of think relative I think results. overall industry a No, We connected practice financial healthy board the had revenue to Across other especially couple just improvement. strong a I the highlighted verticals, because Europe. the Americas

key drivers. that’s think was our certainly one of I So

bit comments third the a year also my of the way coming timing little a and from had in a assisted our We I the when us strong quarter model as mentioned even works about the revenue guidance, compared in to we relative and confirmations recognition ago. that to benefited happened backlog

us and of if towards bit very much look year, performance it could fourth pickup it of small but the the by the across the in the a be and the guidance higher board in So determined we year. the pace we lead quality creates little of end solid pressure Again in a that just that’ll at the and amount next end overall a all benefited pretty that, of search. was confirmations quarter,

Tim McHugh

the why a as And I I Okay. it was services, there I the strong subsector if missed it, were? but reason it financial guess particular apologize is or

Richard Pehlke

was the Again, pretty balance good a across board it – bounce.

Julie Creed

all regions. Yeah, it was [Inaudible] in

Tim McHugh

Okay. And much caution at know last was into the to the we’ve too is anyone what seen leadership not of quarters. I but read it’s, least towards quarter I it guess the lower three for end

of gives anything So, terms behavior or guess pause client you comfortable saw that that is there the just that anything of market anything or are in competition I through that you you it’s volatility? place or – kind normal that in

Krishnan Rajagopalan

on rather of is right offerings hiring, there parts time – market of into continued There us productivity the is be costs reduce of of better and continue got able lot well. attractive consulting market as to and out Heidrick And we’re demand we with we’ve platform an a to we I as positioned sort on that our nothing demand, I hiring retooling, than improving our consultants the the we Look think on of there pause. most have to now to on spent external emerge absolutely Consultant in leadership place so our causes now kind well. hiring of as model

nothing is there into read to it. there So,

Tim McHugh

fair enough. Okay, you. Thank

Richard Pehlke

Tim. Thanks,

Krishnan Rajagopalan

Tim. Thanks,

Operator

question Research. our And next Instructions] Steinke [Operator with Kevin comes Barrington from

Kevin Steinke

Good afternoon.

you that going So, wondering shaping now a stabilized, or confident as and to gives stabilized, the forward. business I what position is you the grow you culture know, out business the having believe mentioned, you called sense that just

Krishnan Rajagopalan

very started take of that business, at done for you need when question. quarter and we and the we’ve look And lost back culture step selling drive a relatively a the on you a some progress the to the – opportunities year And you up arm other culture Sure, And I as Look, we’ve and consultants new at firms with take hired that, as think well, as been all up business. we also project what and it’s XXXX. advisory that new time. their a making your ramping really a in in for and looking fourth job they’re projects several we’re it’s of projects addition, working on long well, pipelines partner well. the as you thank a pipeline, in of lead with growth that’s reestablishing nice funnel since

stable in confidence confidence is us at we the feel So, business that’s look now more lot that as the our ahead that. gives and what say pipeline look and we to

Kevin Steinke

that of Okay, you’ve then outlined couple the priorities touching that’s on strategic helpful. And just here.

in of of opportunistic what of just hiring of scale Heidrick and go kind of, thought in entails the is terms through size as growing of or along? or Consulting, growing In hiring how it have terms be timing or size the much you that – of we plans kind kind

Krishnan Rajagopalan

Yeah, opportunistic definitely not to along. it’s as we go going be

So together the plans putting for growth the that business. and finalizing integration we’re

completes, it’s integration that be we able but not to opportunistic. be will the to if better So, articulate going definitely

plan, will grow surrounds plan that have have that to and that various it hiring a we’ll we a be looking We in. that pockets

Kevin Steinke

just of business pieces that your I that Okay. one said you into of the mentioned work Heidrick Consulting culture – And you on establishing integration leadership in the compensation, of and integration believe structure. was the

the all think sell integrated of have cross the go-to-market search what you the consulting whole those any between compensation I and driving entail? strategy built incentives and or for

Krishnan Rajagopalan

to then deeper. a the take Rich want – and I’ll stab quick Yeah, if go you

educate cross place people train, that question we’ve a a appears we established to particular program search we a something place. it’s something so as in that working. have bit consulting, be but that as to collaboration incentive do cross without on between We more and have need got And in

Richard Pehlke

would thing the the both add to integration, do that is very just of search it’s we that have most one work I they’re in active streams other Kevin design and – had that we’re they’re slightly all thinking compensation from if and compensation much the about models that Yeah, different different businesses and and the model. two

so of some establish the the time, consultants right behaviors day and grow entirety. bringing do right that the that overtime business type its of the we type of the back right And sure the things drive that, in end attract at we’re Well making to that business. at profitability and need that the same we to

is, tricky parts of know the So, because on our you invest and part, in equation we the off that news business now. much and business type doing and the we the not most right through business, growth driven operate keep the statement the the is as the good we’re those sheet all that structure. that’s of most so through work a lot intended trying income incentives the But a for balance as of are for the very today part of profitability that

Kevin Steinke

into And on the or just cost of wondering are and that process that right. into that kind dive if deep any result then, All structure a there how objective? you for conclusion timeline mentioned, far the is along you

Richard Pehlke

have Yeah, we’re these initiatives of off to services you our deeper. over timeline with to few the the stagnant Look, the got going G&A we said, it’s driven client base. our some over we’ve tell I partner line. intangible last look growth meeting expense can the never done And clarity the fails have integrating my of in pretty have for out increase have able basically that’s a were so those strategy, think things in hit more all some constantly we that absorb past the as and pleased fast we’ve it. channels and go-to-market growth in line in question. we at few and line And pretty had we’re the through the a take years etcetera, modest when with we full enough. quarter, of – acquisitions of and what, some the so G&A are pretty integrating had calm in expense you to we the And we’re that, of I this this years quarter [Inaudible] G&A how kind depreciation about how me know, of external boss as table the at marketing to of fund our amortization inclusion our you That’s acquisitions,

to further we’re so And faster go and do. and what to continue ourselves challenging to going that’s we’re

Kevin Steinke

questions. Okay, enough. taking the for fair Thanks

Richard Pehlke

Thanks Kevin.

Krishnan Rajagopalan

you. Thank

Operator

appears questions closing like It no I’d further this over Instructions] have at [Operator or conference to back time. for speakers turn to additional we the any remarks.

Krishnan Rajagopalan

thank reach opportunity here to as move we there. energized work. we lots you. at again I us ahead close, objectives, realize Heidrick. have by for completely faster of opportunity for faster need large team you a got that the us just Thank to To of look have reaching much those We’ve call Thank forward however I that outstanding get and and well. their to this being those I’m recognize like work to to that, challenges very today. on ahead and of to our we our

Operator

This concludes Thank participation. today's for call. your you

You may now disconnect.

Heidrick & Struggles International (HSII) 26 Oct 172017 Q3 Earnings call transcript