HSII - Earnings call transcript Q2 2018 | Heidrick & Struggles International, Inc.

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Operator

Good afternoon. This is the Heidrick & Struggles' Second Quarter 2018 Quarterly Conference Call. This call is being recorded. It may not be reproduced or retransmitted without the Company's consent. At this time, all participants are in a listen-only mode. a conduct will we question-and-answer session. Later, be will provided at time. that Instructions

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

Julie Creed

thank you quarter second Good afternoon, call. everyone, for in Struggles conference Heidrick participating XXXX & and

to and but we and posted Also, referring and income of our measures supporting we during of presentation. the schedule refer quarterly in our Slide it Harbor our or on me in won’t statements adjusted and you our at contained be context, we specific financial adjusted some be page slides margin IR making believe the be adjusted are homepage release explain and our non-GAAP Rajagopalan; adjusted in to second website and additional language referring a is measures better A GAAP and Financial financial release heidrick.com, EPS. end slides. opening These net our of over our Officer, encourage numbers Krishnan, between and our found to now in to be CEO, can our you. results. that margin quarter them slides, news Joining I'll X Safe in to to that ask of a on remarks, and we'll Chief President Mark income you EBITDA our In forward-looking non-GAAP opening our going EBITDA, we're and comments. call Krishnan today’s operating remarks, for our print Harris. We’ve on operating reconciliation turn

Krishnan Rajagopalan

call. and afternoon you. our thank Good you thank for Julie, joining

of as last quarter, beginning we profitability release, result As the impact quarter a of you've the changes Moreover, we're strong year. our growth. in revenue making a been another over seen our on year-over-year positive from XXth the we've to see reported press row

Executive million, go-to-market quarterly of financial of These diluted offerings. last record in achieving year-over-year with In quarterly to quarter and up we in of few earnings in in record Search margin solidified Consulting, more the business. margin three Company Some XX%, share We in results driven the I'll financial all $X.X quarter the restructuring for rate were: of is the company sequential relevant from run comparison significant sequentially; in a quarterly consultant last least at resulting growth a two revenue second the of years; productivity net in million; a up of XX% in growth increase the $XXX.X in lowest for believe Executive Heidrick reorganization year; given revenue XX% business of regions a XX%; highlights Search in seen revenue per XX.X%, G&A a diluted year-over-year January. are Excellence reduction this almost we in Consulting, expenses and per have in improvements Heidrick quarter we of being more are XXXX; the partners Centers are We examples. third and that $X.XX highest operating we a of official of the since by and year's in second three the three compared give new the operating pleased improvements added have our earnings share pipeline. the per with you and second adjusted $X.XX continuous quarter. XX% launch

upticks our work executing is searches. opportunities. going already In company integrated very revenue future we record up have the and more searches, the are higher is model growth initiatives clients, getting them industrial excited X leadership number C-suite very average definition sequential rate the a these our are We growth winning more outpacing XQ helped development and searches, of in believe of an large Search market. win in assessment, team top resulted fees. achieving with with be cross-collaboration Our design, organizational Search, doing for we're some and to about drive completing that more international which a impactful One Executive engagements that I'm efficiently, includes setting and

hiring And stay are continuously strategically we are needs. our of clients' to working as We well. ahead

new example, market For Innovators rapid and breakthrough well for world practice these specialty in to to strong around the our the Disruptive we like year-to-date second quarter emerging cusp Artificial results. innovation I'd launched who Team the are at a as as Intelligence advise employees companies thank growth, and driving of disruption.

to what I'm and our and excited proud momentum strategic, I'm of on potential operational quite execute our going and forward. financial about the achieved continue half, We we first initiatives. in

the me Mark over let call turn financial to Now discuss the to results. further

Mark Harris

you, to and afternoon on good everyone call. Krishnan, Thank the

strength performance Heidrick quarterly of continued in last we prudent excellent started good the Consulting in end expense was the initiatives of progress result at Search, year. that and Our

year-over-year, of me quarter second our million Let XX% with net revenue year. start we In and of this first the sequentially XX% consolidated $XX up XXXX, the from or $XXX.X quarter net million, up revenue. reached

This was Struggles for & great a entire and achievement quarterly Struggles revenue net Heidrick a team. our Heidrick from record &

Search XX% year-over-year Executive and or sequentially. Search. revenue million increased Executive XX% to $XX Turning was up

metrics the did every region. Search of improved, as All key

$XXX,XXX $X.X Search example, confirmations second quarter; about $XXX,XXX over revenue million million second average in per in consultant $X.X sequentially; For productivity was per quarter. last XX% a compared increased was XX% the last and year-over-year year's to record compared search to year's

quarter, we the generally in Upticks inherently results. ahead second difficult reporting achievement. to first significant contribute significantly on increase for our historical predict when all the in addition to to upticks cylinders, we we and a quarter saw are guidance provided quarter were firing which of unusual searches also were In reason an

sequentially Heidrick increased of quarter the year. Heidrick Consulting Now XX% first revenue this turning by compared to Consulting. to

revenue, should in a was new this there noted that Although to methodology. year-over-year it was of recognition revenue decline much be the attributable

with million increased quarter or business are from integration. first the the by million an of compensation, second fixed to $XX.X acquisition was we future. increase pleased related the primarily in sequential higher the retention we $X.X with into and related and results as for associated to of methodology, to second and by the impacted in benefits both proxy talent this XXXX. performance growth quarter XX.X% this strong a our Given the increase and improvement variable compensation costs million Salary continue were as for Search, encouraged and this of $XX.X invest was

quarter. number margin For that included, the two third savings since GAAP we added the third XX-month the million XXX this general nearly shown The we the the year-over-year. focus administrative margin The impairment maximum expenses moving on XXXX, the But highest external operating XX quarter and metric areas, quarter comparisons of in XX.X%, are declined on with contributors a given achieved $XX.X in XX-month slides, as as of basis income quarter. quarterly we that intangible the X.X% points Operating on X platform aren't consultants to a to and our are our an G&A down operating with quarter even to relevant deck that in amortization. charge profitability. we impairments, end on lower adjusted see We're from to in to you mid-XXXX Slides than adjusted to the the pleased increased value. X.X% for Slide $X.X leveraging driving a its basis, but at primary of last is results the is trailing year's the margin that trailing basis, million, ensure row, quarter. million. will making $XX.X the was use fewer in a decline operating year's are our year-over-year of were in the margins or shows of but and restructuring a last we first an this of and as X% progress second Further, we XX higher that operating and shows achieved improved

second keep. While a we in basis, diluted variability of quarter $XX.X always income on an XX.X%. share and tax million, there's it quarterly earnings with a was grew per to to trend rate Net intend $X.XX effective the is

drive range year, the our be tax With from of a rate believe XX.X% annual we the the end this tax our down, in focus to adjusted XXXX. rate the by reduction mid-XX% effective effective tax will in continued

payment currency, the is of million and repayment and second me this let cash in of facility, quarter efficient $XX.X quarter sheet. on million our second credit end XXXX. of for available other $X to in it balance to second compared Now $XX.X less of to and that at the million the $XX at factors million outstanding while the tax cash Reflecting $XX the equivalents with cash the million was limited $XX due quarter ended bonuses use turn time. that Further, cash to availability of use, equivalents, we has our the more million make operational and

the Now give you for let guidance third quarter. me

strong. remains backlog Search Executive Our

first third we Heidrick the we outstanding expectations are consultants other summary, million. forecasting of and anticipated trends confirmations and exchange our the business, $XXX.X quarter. delivered $XXX quarter. number assignments, and Consulting quarter which million based of climate third the our seasonality the compares of in net Search between last on economic from pace revenue revenue in monthly net our continued fees, million This quarter $XXX rate, to productivity, In their including currency we and anticipated XXXX growth foreign Given year's the factors our forecast, for another and

growth, will But to indicates. strategic turn Krishnan, very the our believe business overall and this irrespective, back capturing who With execution, to Our financial market for continue we and our long-term future in an over benefit This from that, environment. adding planning to assuming our macro value no us this the call strong change clients. on performance update prudent I'll to strength, well we positions priorities. are on continues focus give we as well

Krishnan Rajagopalan

Mark. you, Thank

our power our the we be region our Our of results in couldn't same calls, achievement. the context as we do of that second what this the results a I've four accomplished team. showcase contributed to quarter discussed have. and Struggles globally, & In Heidrick every I priorities of last quarter. I'll more proud the two initiatives the

business of is The increasing segments. the priority our and scale first impact growth, both

we that on of I Search, letting safe are we to initiative up. think no executing well intentions is this Executive in it say and have

we scaling on that still consultants we growth. strategically talent to looking In developing a practices Heidrick for on January our on opportunities and Consulting, where launched are within while significant from we new good see focusing maintaining expansion hire business markets the X. We are driving and into focus

on between Leadership We added We methodologies. cross more that we and and offerings our tools the to engagements consultants Consulting expertise, add have three and offering that reflect in report second scalable continue former are and quarter, and several service net to consultants service to we'll train new pleased continue Culture Organization. cross-selling the

pipeline the are growing client We with of pleased engagements.

our to collaboration. been enterprise achieve and Consulting people bring Our accelerate impact drive from clients, cross- them full the can When the and to our growth we Search second for priority firm. greatest both for our of we power has profitable services and the

very Search As of training made joint develop the to for part Heidrick Consulting. Heidrick creation in and Consulting we concerted of effort programs a Executive January,

We has opportunities, seeing joint that are we cross-collaboration in and held been where well, I encouraging. some of opportunities, and regional on for a opportunities. training increased a training like earlier The of There also partnership a was many number meaningful focus three large the pursuing second referenced as very industrial teams conferences company. the quarter wins consultant large this and the one are as result good

we premium we driving progress benefits follow-on its who and our We different of immediately But are service competitors. and initiative, us. our further saw searches XXXX, we insightful and data, were The with that they from planning on three Way Way Our using awarded such feedback for initiative Heidrick was when outstanding. on Asia, can I'm experience clients. been the capture continue nine this recently of adoption clients Heidrick client with number for is will our to on communicate have in has client is has how using client our portal, the this third candidates, globally. a consistent search deliver Heidrick a Heidrick making The the been proprietary the our and firms. in clients very about nine Recall had grow. excited searches Connect, to our an methodology to as a assess we distinguish all Heidrick priority foundation methodology the There standardized the assessment rates service of how and experience premium that Way. standardized launched provide searches

share to cost are we us better, is fourth improve data that with We insights searches more in efficiencies our gives as And valuable collecting completing well. consistent finally, see and clients, our to structure. more increased further priority

we're half not great we quarter, and but improvements EPS, income, first operating pleased return A the but the felt double-digit satisfied. in margin with margin We are operating in second to focused remain our better year. the believe work do I hard we can for to want globe operating on thank this model. margin our around again our and their employees improving and

be Now to questions. happy we your would take

Operator

you. Sommer with the floor Thank this we will [Operator SunTrust. Tobey comes time, Instructions] for from our first At And open questions. question

Kwan Kim

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

First, this what the your for Search the you. plan on what get are focused And the Executive gauges is of hiring sites? year Consulting both on mode? you're back on hiring rest Thank and as you most

Krishnan Rajagopalan

on, aggressive and This over Yes. the and a for Search, you we That's executing hiring in strategic to for expect very, growth pipeline. great going is modest Consulting, year, bit got We've been scale a thank the in what platform plan there. for be we'll hire Heidrick more strategically. talent. Kwan, we as your Look, Krishnan, look are our the been In very so question. a we've that's

in a we've said, we've the Heidrick continuing us quarter. I As added third but additional Consulting. that we're few already to the hire onboarded ones the for in have three quarter, And got with

Kwan Kim

talk you generating Asia are Which premium about mentioned growth most on or could service? And that front? Heidrick your more markets it it. Way. You Is regions Pacific? Got

Krishnan Rajagopalan

the It's it's global practices that driving, don't beginning the our that a year across-the-board I We've across-the-board. that were that that and got in started with and it's program onto we of all regions system. data we are ones running the we adopting. we're more off XX% get honest way, mean, than All of ones the adopting, I'll are see. the with be projects – we couldn't you, and

all projects running we're our So that way.

Kwan Kim

you Thank very much.

Operator

Thank you.

from with Kevin Barrington. question next Research Steinke comes Investment Our

Kevin Steinke

seen so Executive X% Hi, that Search to you've accelerated few quarters. in a growth growth confirmations rate X% prior XX% this really about versus the quarter,

know meaningful in kind wondering you're will growth accelerated helpful? be to how internally? market? parse if of difficult any doing you would the confirmations that just saw Search a So commentary kind Or seeing be the much in I you what change to of you're attribute but out, might on

Krishnan Rajagopalan

good well. Mark, think Yes, you Krishnan, in I out. let add start this one, to that. a market, I we're should definitely we can Look, think maybe me number as acknowledge so

be go that and but I how acceleration think the I we're like of excellent. is I seeing, document assessment, more And competitor every we able for we're to we feeling. our the share. through are that getting receptivity Heidrick feel that's can't we're winning Heidrick think than that Way you, new to Connect our methodology we think to approach, our our

want So contributing add know, a globally I think if good all fairly you and they're I the of in don't context it's to to that. Mark, market. to it,

Mark Harris

will. I

X% XX basis. growth it it's – we outpacing. GDP, the there's of of six-month out Search see can low of couple that for regions would months out, think a believe as we Executive on playing is, a very that in numbers of enterprise, that as And Even et being all Krishnan on sequential the first APAC is look cetera, that about strength strong, and very all, rightly on add And market out market We of that well. at to the point and how have. benchmarks you XX%. as and trailing the of over there we point XX%; the macro being things three just a pointed quarter-over-quarter into we're about had we're came as XX% ourselves I out, I come we that we concept Europe. bench basis, clearly, use as in kind a to growth, quarter-over-quarter six-month on kind of XX%, look America our an When that XX% through. around see we

Kevin Steinke

Good. Okay.

attribute more pipeline You��d continue the pipeline? grow effort mention to cross-collaboration that and And it's the the building, pleased to to Heidrick seeing you undergoing? you're do sales need with the building. Consulting there, you even to see How you’re with what the to efforts would add much you're resources pipeline that

Mark Harris

off, around. I'll Let and let play – we'll and back me Krishnan start it

very growth that your was coming has the on versus What individual just going services. of in answer from their a that you and we're cross-collaboration, on pipeline consulting their of we're side it, very, point quarter-on-quarter felt we on increased seeing to the terms of the revenue seeing So right, out XX% percentage good. cross-collaboration the selling

So we are sides, both Krishnan. it kind over of from I'll seeing it and turn to

Krishnan Rajagopalan

need opportunities. that be and be out close have many so process more good is onboard And coming look, I to on we to able Yes, think as we're that. to with drive as able these are be to When do news well, we people I resources into hire you opportunities of that. the we we and the continue to to in to will to as timely us respond to them have, think have able be help hiring,

Kevin Steinke

how mean, you of you more much of how there there. being record could productivity mentioned the to upside? modestly million is those You don't And there consultant go continuing consultant in relative feel do? to of Or levels I pace Executive I stretched Okay. to have in guess, like how much at terms productivity. much room do hiring that think $X.X is you more Search, the to go higher higher

Krishnan Rajagopalan

working a very, and heady Yes, very look, that. think teams I think it's I pretty hard number, our are at

or see before up. about our think some as promote the I consultants probably back we goes to well, we it dip onboard it, those in as consultants numbers model, when you when you'll think

numbers. between this we've of we're So the these changes it to helping heady technology, with – and that's what people operating historically able And we've made, some between seen. to year drive

continue this we I'd grow – business. we very maintain be to number could it's as the think I So if happy

Kevin Steinke

Okay.

the quarter. can was happened what any of you analyze increase, terms mean, kind in that upticks, you thoughts Or in you attribute was that to? just as the that there what in compensation said anything Is unusual quarter? market driven an I saw of levels? the On you on the

Krishnan Rajagopalan

Sure.

of mean, the on and significantly I market trend. revenue being higher strength as So Specific is it's view confirmations anticipated your well than as a upticks, view rightly is our my the driven upticks out, as the was the now to point pointed twofold, we side. general

per We our not up talked be our so – as we are retainers as speak. revenue well about to flat, seeing to Search

war to. different for coming onboard out war, noise used in it forecasting more guidance has it created of that a talent is war what very to get And well ahead difficult pace practices, really that down were the is that we our just the upticks, of costing So expecting in the would talent, which gave. not but there that's we be the than the

Kevin Steinke

Okay.

that I mentioned on searches a I prepared little the in of the me, efficiencies lower your can methodology or that's completion of assessment for the driving? you're you're more standardized describe does efficiencies some getting in in efficiencies think that assessment them initial seeing? and you've mean, at completions methodology terms faster in cost? feedback that Lastly Search bit new seeing result you're the rolled based that you doing out. you mean And I a comments any

Krishnan Rajagopalan

Yes.

we'll approaches efficiently. things. early and share doing more times be see completion with we Let beginning also drive as to Mark, well. We're able just to We're analytics of – we're resource as easier a over but of that more talking having data in to of which lot completion We'll the behind to times able a you will well, able to think lot benefits that. that result further We're a some believe should the onboard far me a our you're down to as share the other begin stages, things. time, resources that. how standardized some output, higher-quality that, more effectively beginning not see start I and have we're And impact about may

on we're as got we'll of to and operational that. our that six So sort And plans of we've be that on part months into continue eye here. focused journey, our

Kevin Steinke

Thank you very much.

Krishnan Rajagopalan

you. Thank

Operator

Tim comes Thank from & with Blair next question you. [Operator Our Company. Instructions] McHugh William

Trevor Romeo

Trevor Hi. This Tim. our is for questions. Thanks for taking Romeo on

trends that's growth seen the you've end. bit a in even revenue bit is implies on slower why the but what July, outlook you at that a And quarters, touched accelerating, about if revenue talk seeing you'd than guidance touch lower maybe you growth high than just you're be two a on into that? past First, the willing. rate Can

Mark Harris

Sure.

a XX%. we you growth holiday you're I side August, is a in about in is guess in Search XX% say big slower Europe; keep the know, here. But midpoint, enterprise that on all we overall of gave. because Executive August, is Search QX mind, please a Executive being using July as the and QX from to revenue the quarter So and in mainly And QX typically based somewhat it's a about guidance holiday

the seasonality gave. and really see function the seeing approximate just on that the you're midpoint that it's based why So the more in the you in we of guidance XX% cycle, that's

Trevor Romeo

Okay, it what then bit strong strong particularly a it. little about seem vertical Talk And there? quarter. maybe is got this drove growth like the technology the

Krishnan Rajagopalan

comment Well, would the vertical, of in my we're side again, that of in. really is it we're a the market function and in that cycle that technology be the the

all-in to is – what we're So And and terms in that again up element both more than that our just if what those GDP much war seeing we directions the inflation of practice of as has of their seen alone a tick particular go employment the an call in of it the strong doing it. you with want we again, had it the really talent, and rates and on in been that, – searches we're imagine, average rates past. strong different opposite a in stronger retainers it in create in

Trevor Romeo

last me. Okay. for And then one

continue at? substantially last quarter turnover is think it And you a trending was people? turnover mentioned I to quarter? did have retain well. elevated, Are still up might the difficult was that in as in pretty consultants bit finding pretty So you second that compensation for quarter Search so the how

Krishnan Rajagopalan

in if it's this expect they're we company, QX slow and in of the bad out way calendar any very were that’s in you so speak. in down what terms on you abated, the especially year, quarter QX, unexpected – kind saw bonuses, hit after a QX pay would has come much of that for the most not news they and so to Turnover payments part the

with it’s misimpression market not So there, you don’t still but leave that's slowdown, robust out to the definitely I so want to speak.

hit terms to benefits, so because as kind of through In they increase in And their salary of hadn't likely and they tiers, QX. we again, going pertaining you the more they're count of likely, whole not, tiers, package, we their But hit couldn't increase books is put people the accrual very year than the accounting to that actually some then show until really start it. that accordingly.

make that six comment So not per months se movement. XX a is quarter-on-quarter months, I think, better a the that at only as well as trailing But the look again, first I as would on indicator.

Trevor Romeo

you Thank great. very Okay, much guys.

Krishnan Rajagopalan

Sure. Q&A End of

Operator

the would I we further no like remarks. at to management in Thank queue turn closing this over back time. the you. questions now And conference for have to

Krishnan Rajagopalan

Krishnan. is This Great.

me our Let quick an create value. a to plan for clients, for with ambitious close just on shareholder set out people and win our summary. We've

very We Thanks, you again, team help are much. very they team the to Thank have that us our market us. all with have terrific a for focused, a all doing in we execute. to great plan, we're

Operator

conference. today’s concludes this gentlemen, and Ladies

now may You disconnect.

Heidrick & Struggles International (HSII) 30 Jul 182018 Q2 Earnings call transcript