Heidrick & Struggles CEO Discusses Q3 2010 Results - Earnings Call Transcript
Heidrick & Struggles International, Inc (
)
Q3 2010 Earnings Call
November 02, 2010 10:00 a.m. ET
Executives
Julie Creed - VI, IR
Kevin Kelly - CEO
Scott Krenz - EVP & CFO
Analysts
Tim McHugh
Kelly Flynn
Tobey Sommer
Mark Marcon
Presentation
Operator
Compare to:
Previous Statements by HSII
»
Heidrick & Struggles International, Inc. Q2 2010 Earnings Call Transcript
»
Heidrick & Struggles Q1 2010 Earnings Call Transcript
»
Heidrick & Struggles International Inc. Q1 2009 Earnings Call Transcript
»
Heidrick & Struggles International, Inc. Q4 2008 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the Heidrick & Struggles' Third Quarter 2010 Conference Call. (Operator Instructions). I would now like to introduce your host for today's conference Ms. Julie Creed. Ms. Creed you may begin.
Julie Creed
Good morning, everyone, and thanks for participating in our third quarter conference call. Participating with me on the call today are Kevin Kelly, Chief Executive Officer; and, Scott Krenz, our Chief Financial Officer. As a reminder, we'll be referring to supporting slides that are available on our website at www.heidrick.com, and we encourage you to follow along or print them.
As always we advise you that this call may not be reproduced or retransmitted without our consent. Also, we will be making forward-looking statements on today's call and ask that you please refer to the Safe Harbor language contained in our news release and on Slide one of our presentation.
And now I'll turn it over to you, Kevin. Please start on slide two
Kevin Kelly
Thanks Julie. Good morning and thank you for joining today's call. Before we get into the normal review of the numbers that we are doing in these calls, I would like to give you what I think are some of the headlines. First of all, it was a strong quarter, a revenue of a 126 million exceeds our expectations and encouragingly October showed strong conformation trends.
The operating margin of 3.5% was acceptable and we have not shown these for competitive reasons which I will talk about in a second to increase our variable competition by 5 million in the quarter, operating margin also exceeds our guidance.
The second headline is a very strong performance of a very specific business where we are market leader. For the first quarter ever, Asia Pacific revenue exceeded that of Europe which leads to me to my third headline, Europe did not perform well. Revenue was down 12% quarter-over-quarter and the quarterly operating loss in this region was 1.4 million.
A large part of the relating to my fourth and final headline, turnover and consulting ranked higher than even sort of liked and it's no secret in the industry that certain of our competitors have targeted us.
We have gone a great lengths to prior tearing away tactics have included offering large signed bonus, multi-year guarantees, too many cases leaderships roles were offered. But I believe that we have to come with a strong more cohesive group consultants in our client service and our results to date have clearly demonstrated the incredible strong batch we have at Heidrick & Struggles. We've been both proactive and responsive about retention having deal with the issue in a multitude of ways.
The first and most obvious is looking at the competitiveness of our pay. We firmly believe that we are one of the most competitive consultation packages in the industry and benchmarking in our system towards that. Where we feel we are not being competitive, we've taken action and that is why added this variable component to our consultants compensation this quarter in addition to our normal bonus accrual.
We invested heavily in improving our communications with the consultants and better connecting them to our leadership advisory strategy. The first global consultants meeting in three years in our customer education programs with Harvard and Duke fall under this category as well.
We have also brought together several groups of consultants under them umbrella program we call Aspire to assure that our culture and our organization support our strategy to provide a working environment to this strategy or work force.
We have also been very active in the recruiting front and numerically we will more or less offset our losses this year. And we continue to pursue our strategy at hiring mostly experienced search consultants from boutiques.
All of our data supports this strategies being superior to hiring some other top tier firms where there is a significant upfront investment combined with a fall off in production resulting from a range in the environment so then produces a positive ROI.
However it's not just a number's game. We believe the quality of the hire supports Heidrick at the top of the executive search industry and our strategy to become a leadership advisor. We're being equally aggressive in addressing the challenges we face in Europe for operations in Europe suffered disproportionately from the consultant turnover and that has obviously been quite disruptive to the business. So as one would expect with our new recruits on the European region but there is almost always a 12 to 18 month period for new hires to hit their stride.
This is the time necessary for even an experienced service consultant to adapt to a new -- to adapt to new people, a new environment and a new way of doing things. The other major issue we faced in Europe is just more difficult to address individual performance issues. This is a result of a relatively inflexible and relatively inflexible work roles in many of the locations which we operate. For addressing this issue by focusing our leaders on the underperformers; the idea is to improve their performance through training, maturing and coaching. And we've already begun to see positive results from this effort.
Finally, we are evaluating the leadership to assure we have the right leaders in place to maximize performance in this region. And now I'll hand it over to Julie to go through some of the numbers.
Julie Creed
Thanks Kevin. Starting on slide three, net revenue in the quarter came in slightly ahead of our expectations at $126.1 million, up 21.8% compared to the last year's third quarter and the same as the second quarter. The America's and Asia Pacific had great quarters. From a practice perspective the education and social enterprise practice was up 42% year-over-year. Financial services increased 38%, global technology and services was up 22% and the industrial projects grew 21%.
Read the rest of this transcript for free on seekingalpha.com
