SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: August 4, 2004
(Date of earliest event reported)
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
(Exact name of registrant as specified in the charter)
| Delaware | 000-25837 | 36-2681268 | ||
| (State or other jurisdiction of incorporation) |
(Commission File No.) | (IRS Employer Identification No.) |
233 South Wacker Drive, Suite 4200
Chicago, Illinois 60606-6303
(Address of Principal Executive Offices)
312-496-1200
(Registrant’s telephone number including area code)
n/a
(Former name or former address, if changed since last report)
| Item 7. | Financial Statements and Exhibits. |
(c) Exhibits.
| Exhibit Number |
Description | |
| 99.1 | Heidrick & Struggles International, Inc. August 4, 2004 Investor Relations Presentation | |
| Item 9. | Regulation FD Disclosure |
Additional information of the registrant is attached as Exhibit 99.1 to this report and is incorporated herein by reference. The registrant undertakes no obligation to update this information including any forward-looking statements, to reflect subsequently occurring events or circumstances.
NOTE: The information in this report (including the exhibit) is furnished pursuant to Item 9 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. The inclusion of the information contained herein will not be deemed an admission as to the materiality of any of this information.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HEIDRICK & STRUGGLES INTERNATIONAL, INC. |
| /s/ Fritz E. Freidinger |
| Fritz E. Freidinger, Secretary |
Dated: August 4, 2004
Exhibit 99.1
HEIDRICK & STRUGGLES
Baird Small Cap Conference August 4, 2004
Safe Harbor Statement
This presentation 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,” 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 and retain qualified executive search consultants; the condition of the economies in the United States, Europe, or elsewhere; social or political instability in markets where we operate; price competition; an inability to achieve the planned cost savings from our cost-reduction initiatives; an inability to sublease or assign unused office space; our ability to realize our tax loss carry forwards; the mix of profit or loss by country; an impairment of our goodwill and other intangible assets; and delays in the development and/or implementation of new technology and systems. Our reports filed with the U.S. Securities and Exchange Commission also include information on factors that may affect the outcome of forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Heidrick & Struggles
World’s premiere executive search and leadership consulting firm
Global network of approximately 300 consultants working from 51 offices in principal cities of the world
Global Presence
North America
Europe
Latin America
Asia Pacific
Atlanta
Boston
Chicago
Cleveland
Dallas
Denver
Greenwich
Houston
Los Angeles
Menlo Park
New York
Philadelphia
San Francisco
Toronto
Tyson’s Corner
Wall Street (NY)
Amsterdam
Barcelona
Berlin
Brussels
Copenhagen
Dusseldorf
Frankfurt
Hamburg
Helsinki*
Istanbul*
Johannesburg*
Lisbon
London
Madrid
Milan
Munich
Paris
Rome
Stockholm
Vienna
Warsaw
Zurich
Bogota*
Buenos Aires
Caracas*
Lima*
Mexico City
Miami
Santiago
Sao Paulo
| * |
|
Affiliate relationship |
Beijing
Hong Kong
Melbourne
Mumbai
New Delhi
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Diverse Geographic Mix*
Latin America 3%
Asia Pacific 7%
Europe 36%
North America 54%
* 2003 Net Revenue
2003 Industry Practice Mix
Professional Services 9%
Education/Nonprofit 3%
Health Care 9%
Technology 15%
Consumer 16%
Industrial 20%
Financial Services 28%
World’s Largest Search Firms
Firm 2003 Revenue
Heidrick & Struggles $317.9 M
Korn/Ferry 316.9 M
Spencer Stuart 306.7 M
Egon Zehnder 271.9 M
Russell Reynolds 202.8 M
Ray & Berndtson 126.2 M
Amrop Hever Group 112.5 M
Whitehead Mann 101.9 M
Highland Partners 60.1 M
I.I.C. Partners 60.0 M
Source: Kennedy Information
Focus on Top-Level Services
Board, CEO and other senior-level searches generate the majority of our revenue Advantages of top-level services
Provides access and influence with decision makers Increases probability of downstream work Strengthens the Heidrick & Struggles brand Generates higher fees per search Establishes barriers to entry Attracts and retains high-caliber consultants
Recent Representative CEO/Board Searches
Economics of the Firm
Fees
For executive search, fees are one-third of placement’s first year cash compensation
Includes salary and bonus
Billed in three monthly installments
Project-based for board services, leadership services
Consultant compensation
Primarily cash based on revenue generation (formula based) and on quality and other firm-building behaviors Formula-based component structured on progressive tiers
HEIDRICK & STRUGGLES
Client Needs
Searches and services for Boards (including CEO searches)
Searches and services supporting CEOs and the entire C-level executive group
A range of services for key client accounts to help them build effective leadership teams
2004 Investments
After several years of contraction, we have resumed some investment spending Planning for operating margin expansion despite investments Investing in business-building activities
Strategic marketing Target account development Research / knowledge management Training Select “investment hires”
This Is Fundamentally A Growth Business
Cyclicality more pronounced than previous recessions, with hyper-growth followed by severe contraction 1993-1998 CAGR was 24% Growth for last three quarters (yr.over yr.)
12/03 5% 03/04 13% 06/04 20%
Fundamentals remain strong
Fundamentals Strong
Shortage of management talent Higher-caliber talent is aspirant and mobile Executive management tenures are getting shorter Focus on corporate governance creating opportunities
SOX 404, revamping of Boards, turnover of directors
Cash compensation of placements will continue to rise
HEIDRICK & STRUGGLES
Financial Performance
Revenue Performance & Consultant Headcount
Average Number of Consultants
Annual Revenue in Millions $800 $700 $600 $500 $400 $300 $200 $100
1995 1996 1997 1998 1999 2000 2001 2002 2003
Number of Consultants
600 500 400 300 200 100
180
206
253
316
369
441
507
391
328 $167 $212 $276 $342 $436 $594 $456 $351 $318
Revenue
Quarterly Revenue Trends
Revenue in Millions $100.0 $95.0 $90.0 $85.0 $80.0 $75.0 $70.0
Q103 Q203 Q303 Q403 Q104 Q204
Number of Consultants
300
200
Ending Number of Consultants
337
318
317
311
302
296 $77.3 $81.7 $77.0 $82.0 $87.2 $97.9
Quarterly Operating Income
Operating Income Millions
$ 10.0
$ 8.0
$ 6.0
$ 4.0
$ 2.0
$ 0.0
- $ 2.0
Number of Consultants
337
Ending Number of Consultants
318
317
311
302
296 $0.6
Q103
| -$ |
|
1.6 |
Q203
Q303
Q403
Q104
Q204 $4.7 $3.4 $5.1
200
300 $8.6
Financial Results
Second Quarter Ended
June 30, 2004
June 30, 2003
Change $
%
Net Revenue $97.9 $81.7 $16.2 20% Operating Income (Loss) $8.6 $(1.6) $10.2 Per Share $0.34 $(0.14) $0.48 Cash Position $118.7 $95.9 $22.8 24%
(Dollars in millions, except per share data)
Results By Geography
Three Months Ended June 30,
(Dollars in millions)
2004
2003 $Change
2004 Margin
2003 Margin
Net Revenue
North America $53.7 $44.7 $9.0 Latin America 3.1 2.7 0.6 Europe 32.5 28.2 4.3 Asia Pacific 8.6 6.2 2.5 Total Company $97.9 $81.7 $16.2
Operating Income (Loss)
North America $11.1 $10.2 $0.9 20.6% 22.7% Latin America 0.1 0.1 0.0 4.3% 3.9% Europe 0.6 (1.9) 2.5 1.8% —Asia Pacific 2.3 1.1 1.2 27.3% 17.8% Total regions 14.1 9.4 4.7 14.4% 11.5% Corporate (5.5) (11.0) 5.5 Total Company $8.6 $(1.6) $10.2
Columns may not foot due to rounding.
Strong Balance Sheet
June 30 2004 $118.7 million cash and no debt Cash flow from operations Q204 $20.5 million Expect $125-135 million of cash at September 30, 2004
Outlook
(last updated 7/30/04)
2004
Expect net revenue growth in the low-mid teens
Assumes the economy continues to improve
Estimate operating margin in the 6-8% range
2004 Third Quarter
Anticipate net revenue in the $87-92 million range Expect diluted earnings per share of $0.20 to $0.25, using 21% tax rate
Summary
Strengths
Premier brand name in executive search Unparalleled group of consultants Outstanding client base
Goals
Capitalize on our strengths Improve margins and cash flow
Continue to invest in people and initiatives
HEIDRICK & STRUGGLES
Salaries & Employee Benefits
Millions
% to Revenue
% of Revenue
$250.0
$200.0
$150.0
$100.0
$50.0
$0.0
69.1
70.3
69.0 $242.3 $223.5 $127.7
FY2002
FY2003
Jun 04 YTD
70 65 60 55 50 45
Salaries & Employee Benefits
Quarterly % Reflects YTD adjustments
(excludes severance)
Millions
$70.0
$60.0
$50.0
$40.0
$30.0
$20.0
$10.0
$0.0
% to Revenue
70.4
70.0
67.2
66.5
67.5
67.7 $54.2
Q103 $62.9
Q203 $51.1
Q303
55.3
Q403 $61.4
Q104 $66.3
Q204
%
70.0
69.0
68.0
67.0
66.0
65.0
Salaries & Employee Benefits
Quarterly % Reflects YTD adjustments
DRAFT
Millions $70 $60 $50 $40 $30 $20 $10 $0 $0.0 $4.8 $2.1 $2.1 $61.4 $61.5 $55.5 55.5
Q1 Q2 Q3 Q4 Actual 0 FCST 2 $0.0 $4.8 $2.1 $2.1 FCST 1 $61.4 $61.5 $55.5 55.5