Heidrick & Struggles International Annual Report 2017

Plain-text annual report

2017 Annual Report Accelerate. Break Through. Outperform. Heidrick & Struggles 2017 Annual Report FELLOW SHAREHOLDERS: Record revenue, positive market momentum and traction on our strategy for proﬁ table growth. I am proud of what the people of Heidrick & Struggles accomplished together this past year and I am excited about how the ﬁ rm is positioned for further success in 2018 and beyond. Financial highlights in 2017 included: (cid:127) The highest net revenue in the company’s 64-year history— $621 million, up 6.7% from 2016 (cid:127) Executive Search net revenue grew 8.8%, with all three regions and all industry practices contributing to the increase (cid:127) Leadership Consulting revenue increased by 6.2% (cid:127) Culture Shaping revenue declined 22.3% (cid:127) Excluding special items, adjusted operating income* increased 17% to $41 million and adjusted operating margin improved to 6.7% (cid:127) Adjusted EBITDA** in 2017 was $60 million and Adjusted EBITDA margin was 9.7% We made the decision last summer to combine our Leadership Consulting business with our Culture Shaping business. The subsequent integration to form Heidrick Consulting focused on product and service development and delivery, go-to-market strategy, and organizational structure. With this work completed, we are moving forward at full speed to grow this business. We also made signiﬁ cant strides in lowering the run rate of our administrative and business support expenses. These actions allow us to shift the focus of our capital to investments that support the growth of our business, including technology, while helping the ﬁ rm achieve improved operating margins on a more sustained basis. We have four priorities for 2018 across the enterprise: First is growth—increasing the scale and impact of both our business segments. In Executive Search, we intend to build on our momentum. We have invested signiﬁ cantly in this business in the last few years—through acquisitions, strategic hires and the development of technology and intellectual property—and are now positioned for increased proﬁ table growth and to take market share in every region. We will continue to hire selectively, focusing on the growth markets and healthy economies where we should have a larger presence. For Heidrick Consulting, we will scale the business to increase our impact with clients building on the success of our platform, Accelerating Performance. We will invest in new consultant expertise, new service off erings, and scalable tools and methodologies. Second is cross-enterprise collaboration. Our Executive Search and Heidrick Consulting teams will work closely together to provide our clients with an integrated suite of leadership advisory solutions. We are cross-training consultants in each of the businesses to look for opportunities to further increase our client impact. Third is delivering a premium service experience to our clients. We have developed a comprehensive assessment framework based on our foundational Accelerating Performance research. We have developed a new client portal solution enabling us to digitally engage with the leading organizations we serve. We showcased this new capability to a number of client executives at the World Economic Forum in Davos and their response was overwhelmingly positive. The combination of our assessment framework and new technology platform will further diff erentiate us competitively, and the process standardization that it brings will support margin improvement. And fourth is to maintain a focus on cost containment initiatives. We are making cost control part of our culture and we will not lose this focus. We are committed to delivering more proﬁ table growth to our shareholders. I want to again thank our colleagues around the world for their hard work and dedication to living our values, helping us achieve record revenue and signiﬁ cant gains on so many initiatives. We will further distinguish Heidrick & Struggles as the most trusted advisor to the world’s leading organizations on executive talent, leadership assessment and development, team and organizational performance and culture. Sincerely, Krishnan Rajagopalan President and Chief Executive Offi cer * Adjusted operating income in 2017 excludes expenses associated with a settlement with the HMRC related to the taxation of a legacy U.K. beneﬁ t trust obligation in the 2017 ﬁ rst quarter, impairment charges in the 2017 second quarter and 2017 fourth quarter, and restructuring charges in the 2017 fourth quarter. Adjusted operating margin refers to adjusted operating income (as explained above) as a percentage of net revenue in the same period. Adjusted operating income and adjusted operating margin are non-GAAP ﬁ nancial measures ** 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, goodwill and intangible asset impairment, 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.). EXECUTIVE OFFICERS BOARD OF DIRECTORS Krishnan Rajagopalan President and Chief Executive Offi cer Kamau Coar General Counsel and Corporate Secretary Richard W. Greene Chief Human Resources Offi cer Mark R. Harris Chief Financial Offi cer Elizabeth L. Axelrod *(1) (3) Vice President, Employee Experience, Airbnb, Inc. Richard I. Beattie *(2) Lead Independent Director Senior Chairman Simpson Thacher & Bartlett LLP Clare M. Chapman *(2) (3+) Former Group People Director, BT Group Gary E. Knell *(2+) (3) Chief Executive Offi cer National Geographic Partners Lyle Logan *(1) (2) Executive Vice President and Managing Director, Global Financial Institutions Group, Northern Trust Company T. Willem Mesdag *(1+) (3) Founder and Managing Partner, Red Mountain Capital Partners Krishnan Rajagopalan President and Chief Executive Offi cer, Heidrick & Struggles Adam H. Warby *(3) Chief Executive Offi cer, Avanade Inc. Tracy R. Wolstencroft Chairman of the Board Former President and Chief Executive Offi cer, Heidrick & Struggles * Independent Director (1) Member, Audit and Finance Committee (2) Member, Nominating and Board Governance Committee (3) Member, Human Resources and Compensation Committee + denotes committee chair Annual Meeting The annual meeting of shareholders will be held on Thursday, May 24, 2018 at 9 a.m. EDT, at the offi ces of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, NY 10017 Stock Transfer Agent and Registrar For address changes, account consolidation, registration changes, stock holdings and lost stock certiﬁ cates, please contact: Computershare / BNY Mellon Shareholder Services 480 Washington Boulevard Jersey City, NJ 07310–1900 866 892 5631 Shareholders can also obtain account information through Investor Service Direct at: www.bnymellon.com/shareowner/isd Independent Registered Public Accounting Firm KPMG LLP, Chicago, Illinois Exchange Listing Our common stock has been listed on the Nasdaq Global Select Market under the Symbol HSII since our initial public off ering in April 1999. SEC Filings & Investor Contact Information Filings with the Securities and Exchange Commission and other investor information are available through our website at www.heidrick.com, or by request to the Investor Relations Department by mail at our corporate headquarters address, by email at investorrelations@heidrick.com or by telephone at 312 496 1774. Corporate Governance Visit the Who We Are section of our website at www.heidrick.com to see our corporate governance documents, including the Code of Business Conduct, Corporate Governance Guidelines, Director Independence Standards and Charters of our Audit and Finance Committee, Nominating and Board Governance Committee and Human Resources and Compensation Committee. Heidrick & Struggles® and We Help Our Clients Change The World One Leadership Team at a Time® are registered trademarks of Heidrick & Struggles International, Inc. o g a c i h C , n g i s e D z o W n g : i s e D Some statements in the Letter to Shareholders may be forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995. Actual outcomes and results may diff er materially from what is expressed, forecasted or implied in the forward-looking statements. For more information on the factors that could aff ect the outcome of forward-looking statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2017, under Risk Factors in Item 1A and our quarterly ﬁ lings 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. Heidrick & Struggles International, Inc. 233 South Wacker Drive, Suite 4900 Chicago, IL 60606 312 469 1200 www.heidrick.com WE HELP OUR CLIENTS CHANGE THE WORLD, ONE LEADERSHIP TEAM AT A TIME.® Our Worldwide Locations AMERICAS — Atlanta Boston Calgary Chicago Dallas Florham Park Houston Huntington Beach Los Angeles Menlo Park Mexico City Miami Minneapolis New York Philadelphia San Francisco São Paulo Toronto Washington, D.C. EUROPE — Amsterdam Brussels Copenhagen Düsseldorf Frankfurt Helsinki Istanbul Lisbon London Madrid Milan Moscow Munich Paris Stockholm Warsaw Zürich AFRICA / MIDDLE EAST — Johannesburg Dubai ASIA PACIFIC — Bangalore Bangkok Beijing Hong Kong Melbourne Mumbai New Delhi Perth Seoul Shanghai Singapore Sydney Tokyo

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