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Heidrick & Struggles Reports Third Quarter 2014 Financial Results

CHICAGO, Oct. 28, 2014 /PRNewswire/ -- Heidrick & Struggles, a premier provider of senior-level Executive Search, Culture Shaping and Leadership Consulting services globally, today announced financial results for its third quarter ended September 30, 2014. 

Heidrick & Struggles Logo

Consolidated net revenue (revenue before reimbursements) increased 5.8 percent, or $6.8 million, to $125.8 million from $119.0 million in the 2013 third quarter.  The positive impact of exchange rate fluctuations resulted in $1.3 million of the increase, or about 1 percent of the growth.

Executive Search and Leadership Consulting net revenue increased 2.7 percent year over year, or $3.1 million, to $115.5 million. The improvement was driven by performance in Europe, where revenue increased 16.4 percent, or $3.8 million (approximately 12 percent on a constant currency basis).  Net revenue declined by $0.5 million in the Americas and by $0.2 million in Asia Pacific.  From a global practices perspective, the Financial Services, Industrial, and Global Technology & Services industry practices, three of the firm's four largest, were the primary drivers of year-over-year growth.

Net revenue from Culture Shaping services increased 57.4 percent, or $3.8 million, to $10.3 million from $6.6 million in the 2013 third quarter. The improvement in net revenue primarily reflects the stage of the project execution for several large clients.

The company ended the third quarter with 311 Executive Search and Leadership Consulting consultants, the same as at June 30, 2014, and compared to 308 at September 30, 2013.  Productivity, as measured by annualized net revenue per consultant, increased to $1.5 million compared to $1.4 million in the 2013 third quarter.  Specific to Executive Search, the company's primary business, the number of confirmed searches increased 8.1 percent compared to the 2013 third quarter and the average revenue per executive search was $122,200 compared to $124,500 in the 2013 third quarter.

"Our third quarter results reflect steady progress in stabilizing and rebuilding our business," said Tracy R. Wolstencroft, Heidrick & Struggles' President and Chief Executive Officer.  "During the quarter, we advanced several initiatives that support our vision to provide integrated leadership solutions to the world's leading organizations.  We began working on our largest integrated Search, Leadership Consulting and Culture Shaping services assignment to date and we rolled out two recently developed tools that add to our data and analytical capabilities and enhance the judgment we provide our clients making human capital decisions.  Although our results are trending in the right direction, we need to accelerate improvements, with revenue growth being the most important deliverable."

Salaries and employee benefits expense in the third quarter increased 2.9 percent, or $2.4 million, to $84.0 million from $81.7 million in the 2013 third quarter.  Variable compensation expense increased $3.1 million, primarily related to improved performance reflected in higher net revenue. Fixed compensation expense decreased $0.7 million, reflecting the absence of severance expense recognized for an executive departure in the 2013 third quarter, partially offset by an increase in base salaries and employee benefits expense. Salaries and employee benefits expense was 66.8 percent of net revenue for the quarter, compared to 68.6 percent in the 2013 third quarter. 

General and administrative expenses increased 11.3 percent, or $3.3 million, to $32.2 million from $29.0 million in the 2013 third quarter.  The increase reflects $1.8 million of expenses associated with the global partners' meeting held in the third quarter, as well as approximately $1.0 million for professional services, hiring and staffing fees. As a percentage of net revenue, general and administrative expenses were 25.6 percent compared to 24.3 percent in the 2013 third quarter. 

Adjusted EBITDA(1)  in the 2014 third quarter improved to $15.0 million compared to $13.8 million in the 2013 third quarter.  The Adjusted EBITDA margin (Adjusted EBITDA as a percentage of net revenue) in the 2014 third quarter was 11.9 percent, compared to 11.6 percent in the 2013 third quarter.  The year-over-year improvement in Adjusted EBITDA mostly reflects higher net revenue, partially offset by the increase in salaries and employee benefits expense and general and administrative expenses. 

Operating income in the third quarter increased by $1.2 million to $9.6 million and operating margin (operating income as a percentage of net revenue) improved to 7.6 percent, compared to operating income of $8.4 million and operating margin of 7.0 percent in the 2013 third quarter. 

Net income in the 2014 third quarter was $3.0 million and diluted earnings per share were $0.16, based on an effective tax rate of 66.4 percent in the quarter and a full-year projected tax rate of approximately 75 percent.  The third quarter tax rate reflects a valuation allowance established in Asia Pacific as well as the current forecasted mix of income by country.  Net income in the 2013 third quarter was $4.1 million and diluted earnings per share were $0.23, based on an effective quarterly tax rate of 45.4 percent.  In addition to the valuation allowance established in the 2014 third quarter, the effective tax rates in both years are higher than the statutory rate because of losses incurred that could not be benefitted for tax purposes due to valuation allowances in certain jurisdictions.

Net cash provided by operating activities in the 2014 third quarter was $43.0 million, compared to $36.6 million in the 2013 third quarter. Cash and cash equivalents at September 30, 2014 were $159.5 million ($128.5 million net of debt), compared to $132.8 million at September 30, 2013 ($95.8 million net of debt) and $123.4 million at June 30, 2014 ($90.9 million net of debt).  

(1) Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, stock-based compensation expense, compensation expense associated with Senn Delaney retention awards, earnout accretion expense related to acquisitions, restructuring charges, and other non-operating income (expense).  Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures which the company believes are useful to management and meaningful to investors because they provide insight into the ongoing operating results of the company's core business.  A reconciliation to the most directly comparable GAAP measures are provided on the last page of the financial statements in this release.

Nine Months Results

For the nine months ended September 30, 2014 consolidated net revenue of $373.0 million increased 8.4 percent from $344.0 million in the first nine months of 2013. The impact of exchange rate fluctuations was less than 1 percent.

Executive Search and Leadership Consulting net revenue increased 6.3 percent year over year, or $20.4 million, to $346.8 million, driven by a 30.1 percent increase in Europe (approximately 24 percent on a constant currency basis).  Compared to the first nine months of 2013, revenue in the Americas was essentially the same and revenue in Asia Pacific increased 1.0 percent (approximately 3 percent on a constant currency basis).  From a global practices perspective, the Consumer Markets, Financial Services and Global Technology & Services industry groups were the drivers of year-over-year growth.

Net revenue from Culture Shaping services increased 49.0 percent, or $8.6 million, to $26.2 million from $17.6 million in the first nine months of 2013.  Reported results in the first nine months of 2013 excluded $3.9 million of pre-acquisition deferred revenue related to Senn Delaney that the company was unable to recognize as a result of purchase accounting.

Productivity, as measured by annualized Executive Search and Leadership Consulting net revenue per consultant, was $1.5 million for the first nine months of 2014 compared to $1.4 million for the same period of 2013.  Specific to Executive Search, the company's primary business, the number of confirmed searches in the first nine months of 2014 increased 6.6 percent and the average revenue per executive search was $113,400 compared to $111,700 for the same period in 2013.  

Adjusted EBITDA(1)  for the first nine months of 2014 improved to $39.4 million and Adjusted EBITDA margin was 10.6 percent, compared to Adjusted EBITDA of $32.3 million and Adjusted EBITDA margin of 9.4 percent for the same period of 2013. Operating income for the first nine months of 2014 improved to $22.8 million and operating margin was 6.1 percent compared to operating income of $14.5 million and operating margin of 4.2 percent for the first nine months of 2013.

Net income for the first nine months of 2014 was $6.0 million and diluted earnings per share were $0.33, reflecting an effective tax rate of 72.8 percent.  Net income for the first nine months of 2013 was $4.8 million and diluted earnings per share were $0.27, reflecting an effective tax rate of 61.8 percent.  In addition to valuation allowances established in the 2014 second and third quarters, the effective tax rates in both years are higher than the statutory rate because of losses incurred that could not be benefitted for tax purposes due to valuation allowances in certain jurisdictions.

2014 Fourth Quarter Outlook

The company is forecasting 2014 fourth quarter consolidated net revenue of between $112 million and $123 million. Among other factors, this forecast reflects assumptions for the anticipated volume of new Executive Search confirmations, Leadership Consulting assignments, expectations for Culture Shaping services, the current backlog, consultant productivity, consultant retention, the seasonality of its business, the global economic climate and for no change in future currency rates.

Wolstencroft added, "Our year-to-date results reflect improvement in many of our operating and business metrics.  We have also made good progress in advancing our growth strategy as a fully integrated leadership solutions provider.  By leveraging the foundation that we have established this year, focusing on collaboration and innovation to help our clients address their leadership needs, and investing in our people and service offerings we can deliver the long-term value our shareholders expect."

Quarterly Conference Call

Executives of Heidrick & Struggles will host a conference call to review the 2014 third quarter results today, October 28, at 9 a.m. Central Time. Participants may access the company's call and supporting slides through the internet at www.heidrick.com.  For those unable to participate on the live call, a webcast and copy of the slides will be archived at www.heidrick.com and available for up to 30 days following the investor call.

About Heidrick & Struggles International, Inc.

Heidrick & Struggles (Nasdaq: HSII) is a premier provider of senior-level Executive Search, Culture Shaping and Leadership Consulting services. For more than 60 years, we have helped our clients build strong leadership teams through quality service, deep insights and our relationships with talented individuals worldwide. Today, Heidrick & Struggles' leadership experts operate from principal business centers in North America, Latin America, Europe, Asia Pacific, Africa and the Middle East. For more information about Heidrick & Struggles, please visit www.heidrick.com.

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of comprehensive income, balance sheets or statements of cash flow of the company. Pursuant to the requirements of Regulation G, this earnings release contains the most directly comparable GAAP financial measure to the non-GAAP financial measure.

The non-GAAP financial measures used within this earnings release are Adjusted EBITDA and Adjusted EBITDA margin.  Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, stock-based compensation expense, compensation expense associated with Senn Delaney retention awards, earnout accretion expense related to acquisitions, restructuring charges, and other non-operating income (expense).  Adjusted EBITDA margin refers to Adjusted EBITDA (as explained above) as a percentage of net revenue in the same period. A reconciliation of Adjusted EBITDA to Net Income is provided on the last page of this release.

These measures are presented because management uses this information to monitor and evaluate financial results and trends. Management believes this information is also useful for investors.

Safe Harbor Statement

This press release contains forward-looking statements. The forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management's beliefs and assumptions. Forward-looking statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. Factors that may affect the outcome of the forward-looking statements include, among other things, our ability to attract, integrate, manage and retain qualified executive search consultants; our ability to develop and maintain strong, long-term relationships with our clients; declines in the global economy and our ability to execute successfully through business cycles; the timing, speed or robustness of any future economic recovery; social or political instability in markets where we operate, the impact of foreign currency exchange rate fluctuations; unfavorable tax law changes and tax authority rulings; price competition; the ability to forecast, on a quarterly basis, variable compensation accruals that ultimately are determined based on the achievement of annual results; our ability to realize our tax losses; the timing of the establishment or reversal of valuation allowance on deferred tax assets; the mix of profit and loss by country; our reliance on information management systems; any impairment of our goodwill and other intangible assets; and the ability to align our cost structure and headcount with net revenue. For more information on the factors that could affect the outcome of forward-looking statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2013, under Risk Factors in Item 1A and our quarterly filings with the SEC. We caution the reader that the list of factors may not be exhaustive. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contacts
Investors & Analysts:
Julie Creed, Vice President, Investor Relations & Real Estate:
+1 312 496 1774 or jcreed@heidrick.com

Media:
Jon Harmon, Vice President, Corporate Communications
+1 312 496 1593 or jharmon@heidrick.com

 

 Heidrick & Struggles International, Inc. 

 Condensed Consolidated Statements of Comprehensive Income 

 (In thousands, except per share data) 

  (Unaudited) 
























 Three Months Ended 








 September 30, 








2014


2013


 $ Change 


 % Change 

Revenue: 









Revenue before reimbursements (net revenue) 

$ 125,829


$ 118,981


$      6,848


5.8%


Reimbursements 

4,432


4,523


(91)


-2.0%



Total revenue 

130,261


123,504


6,757


5.5%











Operating expenses: 









Salaries and employee benefits 

84,046


81,671


2,375


2.9%


General and administrative expenses 

32,226


28,957


3,269


11.3%


Reimbursed expenses 

4,432


4,523


(91)


-2.0%



Total operating expenses 

120,704


115,151


5,553


4.8%

Operating income 

9,557


8,353


1,204


14.4%











Non-operating expense: 









Interest, net 

(152)


(91)






Other, net 

(488)


(709)







Net non-operating expense 

(640)


(800)















Income before income taxes 

8,917


7,553






Provision for income taxes 

5,925


3,429





Net income  

2,992


4,124






Other comprehensive income (loss), net of tax

(2,587)


594





Comprehensive income 

$       405


$    4,718















Basic weighted average common shares outstanding 

18,233


18,104





Dilutive common shares 

233


119





Diluted weighted average common shares outstanding 

18,466


18,223





Basic net income per common share 

$0.16


$0.23





Diluted net income per common share 

$0.16


$0.23

























Salaries and employee benefits as a percentage of net revenue 

66.8%


68.6%





General and administrative expense as a percentage of net revenue 

25.6%


24.3%





Operating income as a percentage of net revenue 

7.6%


7.0%





 


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)





























Three Months Ended September 30,











2014


2013



2014


2013


$ Change


% Change


Margin *


Margin *

Revenue:












  Executive Search and Leadership Consulting













  Americas

$  64,982


$  65,522


$     (540)


-0.8%






  Europe

27,207


23,366


3,841


16.4%






  Asia Pacific

23,305


23,528


(223)


-0.9%






      Total Executive Search and Leadership Consulting

115,494


112,416


3,078


2.7%





  Culture Shaping

10,335


6,565


3,770


57.4%






      Revenue before reimbursements (net revenue)

125,829


118,981


6,848


5.8%






Reimbursements

4,432


4,523


(91)


-2.0%






      Total revenue

$130,261


$123,504


$   6,757


5.5%


















Operating income (loss): ^












  Executive Search and Leadership Consulting













  Americas

$  14,257


$  17,604


$  (3,347)


-19.0%


21.9%


26.9%


  Europe

1,946


342


$   1,604


469.0%


7.2%


1.5%


  Asia Pacific

2,228


1,737


491


28.3%


9.6%


7.4%


      Total Executive Search and Leadership Consulting

18,431


19,683


(1,252)


-6.4%


16.0%


17.5%

  Culture Shaping

2,866


(708)


3,574


504.8%


27.7%


-10.8%


      Total segments

21,297


18,975


2,322


12.2%


16.9%


15.9%

  Global Operations Support

(11,740)


(10,622)


(1,118)


-10.5%


-9.3%


-8.9%


      Operating income

$    9,557


$    8,353


$   1,204


14.4%


7.6%


7.0%














*

Margin based on revenue before reimbursements (net revenue).














^

During 2014, consistent with the Company's practice to periodically review its reporting structure and segments, the Company evaluated its allocation of corporate and support costs to each of its regions. In conjunction with that review, to better align our cost and reporting structure, additional costs were allocated to the regions reflecting the Company's current view of the costs necessary to support the regional operations. The prior period results have been recast to reflect these changes and present comparative year-over-year results.

 

 Heidrick & Struggles International, Inc. 

 Condensed Consolidated Statements of Comprehensive Income 

 (In thousands, except per share data) 

 (Unaudited) 
























Nine Months Ended 








 September 30, 








2014


2013


 $ Change 


 % Change 

Revenue: 









Revenue before reimbursements (net revenue) 

$ 373,030


$ 343,992


$    29,038


8.4%


Reimbursements 

13,721


14,148


(427)


-3.0%



Total revenue 

386,751


358,140


28,611


8.0%











Operating expenses: 









Salaries and employee benefits 

252,089


236,216


15,873


6.7%


General and administrative expenses 

98,092


93,292


4,800


5.1%


Reimbursed expenses 

13,721


14,148


(427)


-3.0%



Total operating expenses 

363,902


343,656


20,246


5.9%

Operating income 

22,849


14,484


8,365


57.8%











Non-operating expense: 









Interest, net 

(232)


(120)






Other, net 

(444)


(1,675)







Net non-operating expense 

(676)


(1,795)















Income before income taxes 

22,173


12,689






Provision for income taxes 

16,138


7,844





Net income  

6,035


4,845






Other comprehensive loss, net of tax

(899)


(910)





Comprehensive income 

$    5,136


$    3,935















Basic weighted average common shares outstanding 

18,200


18,064





Dilutive common shares 

197


143





Diluted weighted average common shares outstanding 

18,397


18,207





Basic net income per common share 

$0.33


$0.27





Diluted net income per common share 

$0.33


$0.27















Salaries and employee benefits as a percentage of net revenue 

67.6%


68.7%





General and administrative expense as a percentage of net revenue 

26.3%


27.1%





Operating income as a percentage of net revenue 

6.1%


4.2%





 


Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)





























Nine Months Ended September 30,











2014


2013



2014


2013


$ Change


% Change


Margin *


Margin *

Revenue:












  Executive Search and Leadership Consulting













  Americas

$ 193,034


$ 192,906


$      128


0.1%






  Europe

84,632


65,042


19,590


30.1%






  Asia Pacific

69,162


68,464


698


1.0%






      Total Executive Search and Leadership Consulting

346,828


326,412


20,416


6.3%





  Culture Shaping

26,202


17,580


8,622


49.0%






      Revenue before reimbursements (net revenue)

373,030


343,992


29,038


8.4%






Reimbursements

13,721


14,148


(427)


-3.0%






      Total revenue

$ 386,751


$ 358,140


$  28,611


8.0%


















Operating income (loss): ^












  Executive Search and Leadership Consulting













  Americas

$  43,266


$  47,028


$   (3,762)


-8.0%


22.4%


24.4%


  Europe

4,373


(4,740)


9,113


192.3%


5.2%


-7.3%


  Asia Pacific

4,790


4,797


(7)


-0.1%


6.9%


7.0%


      Total Executive Search and Leadership Consulting

52,429


47,085


5,344


11.3%


15.1%


14.4%

  Culture Shaping

3,643


(3,691)


7,334


198.7%


13.9%


-21.0%


      Total segments

56,072


43,394


12,678


29.2%


15.0%


12.6%

  Global Operations Support

(33,223)


(28,910)


(4,313)


-14.9%


-8.9%


-8.4%


      Operating income

$  22,849


$  14,484


$    8,365


57.8%


6.1%


4.2%














*

Margin based on revenue before reimbursements (net revenue).














^

During 2014, consistent with the Company's practice to periodically review its reporting structure and segments, the Company evaluated its allocation of corporate and support costs to each of its regions. In conjunction with that review, to better align our cost and reporting structure, additional costs were allocated to the regions reflecting the Company's current view of the costs necessary to support the regional operations. The prior period results have been recast to reflect these changes and present comparative year-over-year results.

 

Heidrick & Struggles International, Inc.

Condensed Consolidated Balance Sheets

(In thousands)























 September 30, 


 December 31, 




2014


2013




(Unaudited)



Current assets:





Cash and cash equivalents

$          159,537


$         181,646


Accounts receivable, net

94,130


71,666


Other receivables

9,762


6,906


Prepaid expenses

15,153


14,786


Other current assets

1,757


1,937


Income taxes recoverable

7,098


5,772


Deferred income taxes

6,949


8,061



Total current assets

294,386


290,774







Non-current assets:





Property and equipment, net

30,070


34,961


Restricted cash

7,998


7,878


Assets designated for retirement and pension plans

20,850


22,685


Investments

14,276


13,848


Other non-current assets

6,649


5,693


Goodwill

122,657


123,274


Other intangible assets, net

22,432


26,637


Deferred income taxes

22,258


27,474



Total non-current assets

247,190


262,450







Total assets

$          541,576


$         553,224







Current liabilities:





Current portion of debt

$              6,000


$     6,000


Accounts payable

5,532


7,791


Accrued salaries and employee benefits

104,803


109,943


Deferred revenue, net

31,848


27,714


Other current liabilities

24,797


18,938


Income taxes payable

4,655


5,401



Total current liabilities

177,635


175,787







Non-current liabilities:





Non-current debt, less current maturities

25,000


29,500


Retirement and pension plans

37,044


38,735


Other non-current liabilities

53,341


61,329



Total non-current liabilities

115,385


129,564







Stockholders' equity

248,556


247,873







Total liabilities and stockholders' equity

$          541,576


$         553,224







 

Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)































 Three Month Ended 







 September 30, 







2014


2013











Cash flows - operating activities:






Net income

$    2,992


$    4,124



Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation and amortization

3,711


4,019




Deferred income taxes

1,071


(1,926)




Stock-based compensation expense

1,044


303




Accretion expense related to earnout payments

409


518




Cash paid for restructuring charges

(35)


(302)




Changes in assets and liabilities, net of effects of acquisitions:








Accounts and other receivables

6,827


2,434





Accounts payable

289


(1,840)





Accrued expenses

28,236


31,373





Deferred revenue

(3,586)


(798)





Income taxes payable, net

(1,160)


3,338





Retirement and pension assets and liabilities

270


34





Prepaid expenses

1,128


(2,901)





Other assets and liabilities, net

1,798


(1,741)






Net cash provided by operating activities

42,994


36,635











Cash flows - investing activities:






Restricted cash

(1)


(24)



Capital expenditures

(742)


(562)



Purchases of available for sale investments 

(68)


(90)



Proceeds from sales of available for sale investments

374


91






Net cash used in investing activities

(437)


(585)











Cash flows - financing activities:






Debt repayment

(1,500)


(1,500)



Cash dividends paid 

(2,515)


(2,356)



Payment of employee tax withholdings on equity transactions

-


(71)






Net cash used in financing activities

(4,015)


(3,927)











Effect of exchange rate fluctuations on cash and cash equivalents

(2,355)


972











Net increase in cash and cash equivalents

36,187


33,095


Cash and cash equivalents at beginning of period

123,350


99,695


Cash and cash equivalents at end of period

$159,537


$132,790











 

Heidrick & Struggles International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)






























 Nine Months Ended 






 September 30, 






2014


2013









Cash flows - operating activities:





Net income

$    6,035


$    4,845


Adjustments to reconcile net income to net cash used in operating activities:






Depreciation and amortization

11,359


12,046



Deferred income taxes

5,633


(500)



Stock-based compensation expense

2,885


2,775



Accretion expense related to earnout payments

1,308


1,551



Cash paid for restructuring charges

(108)


(918)



Changes in assets and liabilities, net of effects of acquisitions:







Accounts and other receivables

(27,196)


(21,607)




Accounts payable

(2,177)


(2,381)




Accrued expenses

(1,774)


(12,073)




Deferred revenue

4,486


1,964




Income taxes payable, net

(2,220)


4,826




Retirement and pension assets and liabilities

100


574




Prepaid expenses

(557)


(3,207)




Other assets and liabilities, net

178


240





Net cash used in operating activities

(2,048)


(11,865)









Cash flows - investing activities:





Restricted cash

(103)


(50)


Capital expenditures

(2,609)


(1,920)


Purchases of available for sale investments 

(896)


(661)


Proceeds from sales of available for sale investments

966


155





Net cash used in investing activities

(2,642)


(2,476)









Cash flows - financing activities:





Proceeds from debt issuance

-


40,000


Debt repayment

(4,500)


(3,000)


Cash dividends paid 

(7,364)


(4,875)


Payment of employee tax withholdings on equity transactions

(406)


(647)


Acquisition earnout payments

(3,390)


(357)





Net cash (used in) provided by financing activities

(15,660)


31,121









Effect of exchange rate fluctuations on cash and cash equivalents

(1,759)


(1,595)









Net (decrease) increase in cash and cash equivalents

(22,109)


15,185

Cash and cash equivalents at beginning of period

181,646


117,605

Cash and cash equivalents at end of period

$159,537


$132,790









 

 Heidrick & Struggles International, Inc. 

 Reconciliation of Net Income and Operating Income (GAAP) to 

 Adjusted EBITDA (Non-GAAP) 

 (In thousands) 

  (Unaudited) 



























 Three Months Ended 


 Nine Months Ended 





 September 30, 


 September 30, 





2014


2013


2014


2013












Revenue before reimbursements (net revenue) 

$125,829


$118,981


$373,030


$343,992












Net income 

$    2,992


$    4,124


$    6,035


$    4,845


Interest, net 

(152)


(91)


(232)


(120)


Other, net 

(488)


(709)


(444)


(1,675)


Provision for income taxes 

5,925


3,429


16,138


7,844

 Operating income 

9,557


8,353


22,849


14,484












 Adjustments 









Salaries and employee benefits 










Stock-based compensation expense 

1,044


302


2,434


2,475



Senn Delaney retention awards 

291


584


1,458


1,750


General and administrative expenses 










Depreciation 

2,329


2,568


7,213


7,690



Intangible amortization 

1,400


1,451


4,146


4,356



Earnout accretion 

409


517


1,308


1,551




Total adjustments 

5,473


5,422


16,559


17,822












Adjusted EBITDA 

$  15,030


$  13,775


$  39,408


$  32,306

Adjusted EBITDA Margin 

11.9%


11.6%


10.6%


9.4%

Logo - http://photos.prnewswire.com/prnh/20140822/139029

SOURCE Heidrick & Struggles


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