HSII - Earnings call transcript Q2 2019 | Heidrick & Struggles International, Inc.

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Operator

Good afternoon. My name is Shantell and I'll be your conference operator today. At this time, I would like to welcome everyone to the Heidrick & Struggles 2019 Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After management's opening remarks, there will be a question-and-answer session. Instructions] [Operator

the and Julie your Real turn of Vice conference. over Relations Investor Estate, call now Creed, to President I'll to begin

Julie Creed

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

additional and me review IR CEO, Rajagopalan but and specific website homepage context, Mark We of and our quarter them second heidrick.com, Officer, Krishnan posted Financial our on our our be today's we Chief slides won't Joining to referring is numbers Harris. page President for opening encourage call you our on comments. we at the to during

In supporting between Harbor non-GAAP in ask statements EBITDA in our slide Safe financial adjusted and the can measures to GAAP our underlying in our remarks, additional release and our are we that you news margin. our our believe two non-GAAP provide forward-looking last financial These refer that materials, slides. press making found of schedule measures will and and of presentation. release we be insight we language reconciliation in Also adjusted the on contained A to be to into refer and our please EBITDA results.

you. turn now over And Krishnan, the call I'll to

Krishnan Rajagopalan

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

quarter We year second pleased are to of report and the half first our results.

few we're a As evidenced are outperforming. all on hitting cylinders but and experiencing demand by share. other to and top There slowdown, the numbers, more are the we solid are economic still at markets win market uncertainty seeing markets

where for we're when results revenue time. year of look mix but the slightly we at six at last overall our this the first So, were months, we ahead of different, the is

XXXX date year a we be Given consider revenue positive. XXXX performance record to our to was

last all the running years, we're two business the operating made with over more our changes efficiently. the Importantly, model to we've that

and net the profitability delivering EPS higher income are We improving to and shareholders.

X%, X% quarter compared in About constant and quarter currency. to $XXX.X XX% million and over highlights. share was quarter. net year's diluted the second in that as per Let globally revenue year one last the consultant. productivity expected, year's from down in at high increased January high to increased few principal possibly Remember largest quite to also per our second noting me earnings turnover we share share worth per X% the $X.XX the year's history the date, classes of XX $X.XX unusually X% quarter. an in allowing first we million to improved Consolidated at per consultant in to lowest a or us share individuals to year-to-date $XX.X XX% last operating Net of in given revenue included Even to $X.X search that income search second level. so, It's that margin XX.X% expanded million promoted second maintain consultant XX.X% is upticks. quarter of compared our last our year to number

strongly becoming with business. more technology talent, being our is and increasingly our by and are solutions clients. embedded our culture data-driven Our across to continuing approach employees are and This leadership enabled fully embraced resonate

process have our we examples, that through Some over now way. to searches XXXX Heidrick refer the tech-enabled as executed we

are methodology data. of to gather Assessment proprietary Framework part our process, leveraging this As Infinity we consistent

the introductions, and human focusing driven in through Last on their first approximately revenue initiatives of this year, to Revenge the and digital our of by culture and this approximately acceleration their have year on consulting transformation XX with clients introducing Since clients that our XX%. of climbed search to Goliath's half work year, earlier than innovation book up more our offerings capital. has our XX% to was us digital signed and

performance working with starting work candidates from are but accelerate We their with our clients, only also CEOs to our the placing by one. CEO at day continuing by expand to not top, those

have projects We such several landmark underway.

we made year, is This a with be. business services. business. and overall but growing single year year, margin line integrated the on isn't Heidrick fully our this and improvements. of we We've Last the focused integration advisory to clients want focused consulting Consulting progress, Last it consulting to going yet began launched on where we attention

Our our increasing and important, will have our be and we and long advisory growth human ways offerings services power depth a to bring increasing And hiring, accelerate acquisitions. breadth solutions an partnerships must on of still strategic service within capital driven the through equally to dimension. and Heidrick external by go, firm We by collaboration globally. full the of to the clients this

of more earlier, market, good and our said with June business, search very organizations. and Boards portfolio this aggregate, delivery search are in than see July In to continue and focused their too. our I it's executives organizations, where In to aren't favorable a of empower either. type As share about but well market senior of aren't all tracking confirmations seeing operating share. is seeing we advisory believe slowdown, were top we we of top premium winning diversified fair transform demand. at an Directors winning of and we of a And the we acceleration market leverage we're that the global solution efficiently talent a

start and a Thank year. to organizational experience. leader, a their superior initiatives, continue a work differentiated going our with broadening an firm delivering to market vision, business and to focus the capabilities unique value we and team suite capabilities, teams to leadership on clients, distinctive client achieve our performance, one the as for service of offerings To again our several integrated solutions to grow to around our proposition, world you and maximize solid that hard

to to the Now elaborate Mark call turn let on me quarter. the over

Mark Harris

afternoon, thank everyone, and for joining Thank you, Good today. call Krishnan. our you

compared the but net of our mentioned, given second to Krishnan unexpected revenue million, upticks down of number last As year. consolidated year's was quarter, last second not unusual quarter search $XXX.X

pro forma on to that basis net Our similar context. some a both revenue, quarters upticks been would excluding in give have

XXXX, period year-over-year we due X% the about but quarter revenue second year's quarter, about search to just of ahead was in revenue high Search given constant still the the basis, last year-to-date our the on same revenue. Executive Reflecting can even our currency declined with uptick the X%. quarter-to-quarter is first of Europe and performance, In see markets, X% variability on a XXXX. declined Americas in

Asia last Pacific However, factors comps and declined X.X% to consultant turnover, several mix play, generally compared including consultant with at tough year.

currency a Consulting Heidrick year-over-year declined XX% constant sequentially, revenue increased XX% although on basis.

included revenue year aren't replaced constant were For consultants, to was fully consultants, compared the Factors integration to X.X% six on contributed who results a left yet year, being lower new months last that currency the who consulting because first by year-over-year the off to productivity after the up basis XXXX. of speed.

planned Revenue we several engagements pushed fourth from had and was third client quarters. the into

positive see business, revenue being the mentioned, driven However, trends in is we as the search by more continue Krishnan consultants. to

in We the are longer projects, but will proposing We for our Heidrick complex, were especially that and Consulting close deliver. are with and which multi-layered larger excited on term. about long won is for also to highly conjunction take accretive Heidrick impactful in be several search. strategy and profile clients, high believe assignments more strategic this

This much million, stock mostly compensation this in was Turning million $XX year's offset the to such benefits; quarter. expense, by second with of higher fixed an lower this expense expenses expense. decline fixed to driven $X compared increase benefit million to last salaries and lower a saw or by variable increase by revenue $X.X deferred X% of We compensation in quarter. was as compensation related compensation other in retirement and in compensation and

There decrease million, and a For to biggest but were down of services. year-over-year savings X.X% were to number general the the seventh second $XX.X reducing a in expenses the focus $X.X quarter. of compared improvement million year's was in administrative consecutive continued or approximately quarter, professional areas, last

in operating led second our the second $XX.X trailing XX the and quarter to quarter, with flat month prior active quarter time XXXX the in operating XX% year's management improvements Through of third since ago. XX.X% at is income from XX.X% expenses, the operating on of despite basis, last years our first million, operating year margin for or margin a expanded XX of these of essentially to lower revenue. the our All

of Finally, our compared while earnings per structure in in tax $X.XX achievement to was increase pleased $X.XX drove our has much team net an our $XX.X This by us of to order the income job our XX.X%. in the the of performance, done XX.X% effective operating in tax to achieve we're quarter. an year, rate of a second driven of managing to help very in good share tax diluted XXXX, very report last quarter our million increase second

For the low the XX% tax are an we effective full year rate still range. in expecting XXXX,

year's second increase to compared activities quarter, an at I'll of in to our Cash sheet. our to by the $XX.X million provided At Now our million year's $XX.X million $XXX increased of compared cash turn of was end quarter, last the second to last $XX.X XX%. end million second and marketable securities operating quarter. balance

to June XXXX, good $XXX revenue Turning of were third the million $XXX.X achieved range be million we compared the quarter expect record last confirmations that well to in third of in million quarterly and the too. revenue $XXX of will tracking to year's net quarter. July very is

climate. quarter, at which expectations backlog Heidrick trends productivity the quarter, assignments, number the in search of fees, is our the of anticipated the on second consultants their the typical the seasonality based for guidance further increased economic end third the and from Consulting quarter, Our anticipated search confirmation of and first

are line. to summary, second bottom we management delivered with the the of improvements pleased our our In that especially performance, quarter tangible business

record better build and track to We forward a are to similar on look even brand further. with we bottom new an XXXX, line to opportunities finding our year a

take With to that, we'd be happy questions. your

Operator

Your Credit first with line of the comes Instructions] McVeigh question [Operator Kevin from Suisse.

open. is Kevin McVeigh, line line is open. your Your

Tobey the comes Sommer next SunTrust. Your line question from with of

open. is Your line

Tobey Sommer

touch comment was one space I seeing been you. rest. verticals which the the have Thanks. search strengthened softer two in you than and if maybe the wondering conversely, what Thank on across executive also that the could within or you're they're about

Krishnan Rajagopalan

meant it's our meant? Tobey, you here. what industry Yes. you Vertical verticals, is Krishnan that

Tobey Sommer

Correct.

Krishnan Rajagopalan

Yes.

healthcare, for related for work, a industrial look, robust well. we we're technology our practice marginally consumer generally practice So, for our -- as life sciences, market for seeing and

some the a little where here which seen only practice Europe, we have large and seen really particularly in in we've services in headwinds more and is a headwinds our US. bit think for even is practice, Europe the large I financial practice, us

Tobey Sommer

your of been saying industry, between are the different as remarks, By in you that, delineated prepared is below concentration search that know, below demand in What the gives somehow so you In you of end high seeing area? suite. you are in implication in that your where much kind kind house that, thing, the noting of have the stable. C breadth that you more exposure, you has

Krishnan Rajagopalan

and end on way, we tracked was We my tend I to comment cetera we robust play that we et where the really Yes, intended play. market think searches in I mean, onboard focus and top the to CEO by are a Heidrick our area. at and seeing

it more is down, might not level bit in sense below it's next robust than the Our sure. a that but be we're

So, we in much. play that market as don't

can don't I mentioned. confirmations our up. it playing by But I we're have I think different it's back seem to vary still I reasonably So, data that tell and strong. than does robust. But last mean where you it's market, pretty the as to but I be year,

Tobey Sommer

of What the changed intentions mid-single the growth your headcount much balance sequentially. digits year year-over-year, comments…? - the the to the context your of your manage in intention are not growth, headcount in for What's

Krishnan Rajagopalan

yes. Sure,

January promoted we're XX the strategic for some some done in We expect strategic you'll headcount third we plus down we've in are show quarter bit. and see very where -- up markets us, it search we'll in to and So, in and hiring a and growth. people see Asia marginal

we the and grow business see headcount third and work you'll quarter we again top, over to to quite business In that as more you're going to that and the in we're of well. sort the and a business, competitive like trying that competitive talent it's and But in as that So, on we Heidrick be business it's Consulting, expect be -- there expect so hiring is to another okay where it's we'll the that. single we seeing hiring digits not doing do grow well.

Tobey Sommer

trends question you kind get of no a give between or -- the Last connect Thanks. I'll that is Asia-Pac and for about trade in say queue. the and dispute back in and elaborate connection if thing? me China a you the there little Could more in bit could,

Krishnan Rajagopalan

headwinds some the China that Asia trends Yes, we're in clearly that in seen. seeing is Sure. are that greater China, there we've

think it historic coming is Japan Asia, So, little business market impacting bit. that I still is strong, our a off high. In a it's

quite doing is India doing little Singapore for well us. down. for So, very bit that's well us a is well. as

say those there markets imbalance. But would issues of, trade advantage where China an this are that are of taking So, I of some too. area, guess, are is I all

Tobey Sommer

Thank queue. very the much. in back you I'll get

Operator

William Your next with comes McHugh question from Blair. Tim

Your is open. line

Tim McHugh

wonder maybe if but to little longer it's I could just ask, you're more some progress, team? I you've are Hi, know wanted on the of lagging the well the certain you're a the I where with elaborate consulting guess you taking guess on seeing color specifically, specialties there just -- talked found projects little a and there. if right certain more types any business. and I about haven't strategy doing

Krishnan Rajagopalan

Yes, Tim. you. Thank Sure.

Heidrick in of lot look Consulting, we're a things So, doing here.

I that'll to as and said, so up So, continuing we are hire, show here.

it's get As I highly individuals work board. on at competitive top, to those said, we the

in board quarter. will You the new third see on hires some

the search. year we about very to XX% very XX% and revenues over that Our the strategy in as trying about for increase good consulting driven through by I that, with we're collaboration mentioned, feel right last were up being much the was now. I driven search were

So, well. that's good The backlog consulting as increased well. for has as

a that's see. -- that's positive So, that another we

be mentioned, offering. as companies be shaping through those Mark complex, doing there, projects, consider their clients. with Examples and helping to very are would include would sticky example strategic impact more culture we're transformation with acceleration high focused We our on, what digital our digital around and we

we but bit this, of do a to amplify set on to we these more, complex. we very, that then their with nonetheless little has hope get there agenda work. And trends in we're a acceleration reasonably CEOs that the And all in And all offering. the engaged, very positive and of causes delays onboard more CEO in of before strategic so for and get CEO the see helping and helping The trends remainder year. of are there

Tim McHugh

tight obviously the think talked the labor as managing Okay, guess great. a this of kind tight then being and I that of you year we that you bonus the kind risk market in and down about expense what's it's And there forward to is strongest trend. what's then mentioned revenue can the the labor lever? as rest some a ever of year-over-year, retention I just in matches But the future, the market, line? in to guess also one been. labor continue risk follow-up, the and But in you being accruals Or like use market natural which

Krishnan Rajagopalan

that. context. trying that surrounds around collaborate global coming building that a regional of teams We're here; Yes, got. but think a more energy there's and some the in our all that this purpose our brought think look to, look, I how And culture I a we've conference, -- know, where fantastic and firm's lot think to down together always off that it we've we're is the and there's organization than risk, about I So, -- building I of of think comes what it's what of we're there impact we're okay? clients you it's and to

Mark Harris

would The of the add actual still year-to-date I still bonus itself point XXXX. and the up in that it thing only is higher revenue X.X%. to our actually same Remember, that was is is than accrual

don't accrual, comment a when actual So, being we basis. misunderstand on comparative overall at we've look my lowered that is the

Tim McHugh

or is the Okay. that of…? expense global that as And quarter we item think then conferences quarter, third mentioned the in second you last, a

Krishnan Rajagopalan

the in was That second…

Mark Harris

second That been was all on quarter, in a expensed. it's

Tim McHugh

you. Thank

Operator

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

Your open. line is

Kevin Steinke

afternoon. good Hi,

looks to kind so well. on global expense the pretty we can there you about from mean, conference, idea what So, G&A just control like meaningful the an obviously rate up get might couple of run maybe on continue was quarter that I could following you in their the the out it next G&A the discussion over call be of just costs conference quarters?

Mark Harris

let out. Sure, help to me you try

the was QX were about So, regional basis. on regional last It quarter had meetings call the you talked about meeting. XXX,XXX in meetings comparatively than that again we on to year, saw more last a comparative last we global

less So, G&A a difference because the pretty initiatives is the the done relatively that it's over QX we've here. probably between minor of bit come side would little But than obviously consistent, be some two.

comparative comparable. it's basis, pretty on So, a

Kevin Steinke

little maybe started in you softer I a than some mean, some or around expected? you highlight underperforming. some financial services. then, touched maybe markets off talking stronger And overperforming of Asia Europe a on China, Okay. others but by about some you've mean, in geographic weakness markets I should is doing better, the we little any

Mark Harris

on everything in UK given to what's in I lead Financial Well, been or the as basis elections, clearly UK. expecting et those on use Brexit compared comparative cetera. given industries expected the think services pack we seen the comparative. was comparative, expected of demographics the going the helps other that a of only most I were and we've it

Germany should we've base macroeconomic the So, even was but obviously seeing strong. softening, released, very we've that that's surprise, seen be hardly a economic probably there suggests enough, data there. the though in data Germany. very obviously, softening Italy, been we've softening pleasant level and a some the one. of And good been

hence, we're see given been with going to we while in ourselves And we've shift though Europe, diversify doing on seen Europe. just still that there result, different. X% on that we've we're currency very down Spain's well. been constant pleased a and within are what of tell even you replacing, when would Continental to doing with economically ones you're by are France, other doing so those confirmations definition, UK that confirmations and good. interesting those because very the going Denmark's demographic German Europe it's I be obviously confirmations, the that, and pretty basis natural the just

Krishnan Rajagopalan

fast even speed if were the continues And to And know, US, not you see sometimes, that. with forget shouldn't little bit a it look in we've last running year. happy very faster we that, we very, been that

Kevin Steinke

not And mentioned that but an you either. really not you're slowdown, a seeing seeing you're acceleration

decline press reconcile with the had second release Just percentage in down trying confirmation the quarter. to you year-over-year in the X.X%

You said June good, was I mean.

comp. really attribute somewhat Just, difficult know, last strong, decline is know year of was year-over-year XX% would a you you that I year-over-year. up

trying a just some saying year-over-year least softness So, necessarily at seen to you're confirmation on we've when a slowdown, but basis? not reconcile,

Krishnan Rajagopalan

you again, per it actually confirmation of mix Yes, bit. numbers view, see The a are tracking the mean, point fees think I from a up. about might down search

the probably really that kind is ahead in at look offsetting revenue about a we're them. you when what's think again, six basis, see X.X% I kind of So month of on

emerging we So, an But and you eye that. of with again, kind going Pacific Americas trading overall, for performing We're those know, kind and keep off other you're happy seeing obviously, the sides cetera, continental, terms with markets UK of on of we're and very on Asia pretty when each in I well very, Greater on counterbalancing other. us. in et what mean, China

Kevin Steinke

executed you've I searches running most lastly, Way. the solution you of goal said to or and through And that XXXX mean, searches now through get are the I be your would through Heidrick think all technology? What running technology-enabled technology percentage that

Krishnan Rajagopalan

There's be XXX%. the some languages that require will Look, goal in, local some at Yes. searches point require some languages. being

XX%, So, XX%. had over it we're well over actually

-- in right it's there. So, the direction we're headed

Kevin Steinke

for taking the Okay. Thanks questions.

Krishnan Rajagopalan

you. Thank

Operator

question Credit Kevin next from McVeigh the of comes Suisse. Your line with

open. is line Your

Kevin McVeigh

for impact? give sense some where you've doing Are Mark of, uncertainty slowdown to that? you well? but you sustainability, just any any any a maybe wonder just this perspective, the trade hire of market plan as around stake. you as head to you. or planning Or seen it's Krishnan, M&A just know good sense of from could incremental, thoughts kind you to the thoughts the to on as know, any thank the some in a a related us higher debate been Great, there's I little areas, use more do see a or opposed if of I

Krishnan Rajagopalan

a a with market of start type your sort falling there. hiring of cliff me don't let I I off mean, slowdown. a we're seeing any like question Yes, of a think with

we adjusting those plans, So, areas, a our mean, go our may we're slower with I bit that think I little in hiring.

thinking don't the see about more in maybe bit we're would many would we that changing But year We few that thinking yes, anything And off plan. that's elongated. Okay? executing we search. started and I And that like how hire it. a promote a we're

surprising I forecasted what it some plan. from think seeing, So, said, and that, had of as Mark too isn't, in that's we what we're our

acquisition a And, I is side, clearly areas So, that, look area. we thoughtful then in assets mean, very Yes. the of focus manner. one the focus on the that our in of strategic at continue consulting to area

Mark Harris

I'll of not it but preidentified a and disciplined look on that's only we quite in is do the IRRs very we where get kind we mean to ensuring is, development it going to kind acquisition. have side, term need be pipeline corporate at long companies we accretive a actually just make thing When the that were the in we that what we look of our something we the putting the when consider IRRs, at shareholders then to putting with P&L before finding that I our cash supplement a strategy. company; and look on, of it's at something sense, so place seriously only to structure part actually think the both valuations the take

you now, that create we're of it's are it seen I that ones not important a a think for just yet. deals. appropriate remember right even lot the always seeing us So, we may We though right think fit seeing to to haven't

Kevin McVeigh

you. thank Okay,

Krishnan Rajagopalan

Sure.

Operator

question Your the from with line of next comes Toby SunTrust. Sommer

open. is line Your

Tobey Sommer

year sort you tax what's were have term some of modeling? I beneficial in quarter? discuss that we that for won't a Thanks. a long just the discrete tax of the kind in can And Mark, good then could rate the use numbers any question. just quarter year rest and benchmark or the for the of rate items full the recur

Mark Harris

we end that's to XX% to I one, of idea second so the things, where are around give planning the kind outline, some discrete I gains out. number year Yes, try going for pertaining we're that why quarter capital some of on mean, to XXs. What were of then we the at measured saw of items low in a was couple the as kind and at in Tobey come

we The looked other tax our under at tent. from of tax other felt the comment to box or the corporate analytics brought was point prudent where an it more is, we that structure, either we change check them view some and of some

view should term of on be we that longer focused to is policy we and low that. that hyperfocused our able maintain obviously the less demographics And taxes on changes to plan. why why without So, That's we're we kind in to XXs continue very different hope cash, which is it.

Tobey Sommer

And have what CapEx estimate will for Perfect. be in you an do XXXX?

Mark Harris

Really… It's great question. a

Julie Creed

I estate pretty be think year. at low the will real it for this

Mark Harris

We next a we've initiatives up I think that quantifiable again, some be that We've have probably don't that outs some Yes. this CapEx leases done don't think on any have be. yet build will will will coming what the in analysis terms of got for. lot year. spend year, of But we

Tobey Sommer

Okay, thank you.

Operator

closing the turn questions I'd Management back over now any time, -- remarks. make to Heidrick any are at for further no this to call There

Krishnan Rajagopalan

thank to saying -- And you. to Heidrick Great thank our off by job. thank let team. Okay, you you me start

know, market. the of and lot is market take it on this true. about well. forward track and and the from much. know, our the much seeing from look in We in a half We're are we take you ahead to first we And, seriously and wars, what performing profitability themes trade executing we on record Heidrick of & in Through The year, We're focused to Struggles hear that Thank relevant are on highly clients the it the slowdowns, we and XXXX. year. very as you we head you on performance of rest well. is are

Operator

call. conference today's concludes This

You may now disconnect.

Heidrick & Struggles International (HSII) 29 Jul 192019 Q2 Earnings call transcript