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Heidrick & Struggles Reports First Quarter 2011 Financial Results

Heidrick & Struggles Reports First Quarter 2011 Financial Results

Heidrick & Struggles International, Inc. has announced its financial results for its first quarter ended March 31, 2011.

Consolidated net revenue of $115.6 million increased 1.7 percent from $113.7 million in the 2010 first quarter. Year over year, net revenue increased 10.4 percent in the Americas, declined 16.0 percent in Europe (approximately 17 percent on a constant currency basis), and increased 5.3 percent in Asia Pacific (declined approximately 2 percent on a constant currency basis). Net revenue from Leadership Consulting Services increased 12.4 percent to $8.4 million and represented 7.3 percent of consolidated net revenue in the quarter.

The number of executive search and leadership consulting consultants at March 31, 2011 was 372, compared to 367 at March 31, 2010, and 347 at December 31, 2010.
Productivity, as measured by annualized net revenue per consultant, was $1.3 million, compared to $1.2 million in the 2010 first quarter and $1.5 million in the 2010 fourth quarter. The number of executive search confirmations in the quarter decreased 1.6 percent compared to the 2010 first quarter, but increased 5.4 percent compared to the 2010 fourth quarter. The average revenue per executive search was $101,200 compared to $98,400 in the 2010 first quarter and $112,600 in the
2010 fourth quarter.

Consolidated salaries and employee benefits increased 6.3 percent to $88.4 million, from $83.1 million in the comparable quarter of 2010. The increase reflects higher fixed compensation expense including higher base compensation and payroll taxes associated with an 8.7 percent increase in employee headcount and merit salary increases, an increase in deferred cash compensation, the amortization of special recognition awards issued in the 2010 second quarter, and severance expense, partially offset by a decline in stock-based compensation expense. Salaries and employee benefits were 76.4 percent of net revenue for the quarter, compared to
73.1 percent in the 2010 first quarter.

Consolidated general and administrative expenses increased 4.1 percent to $31.3 million from $30.1 million in the 2010 first quarter. The largest components of the increase relate to the continued investment in developing the companys proprietary search system and the outsourcing of a portion of its information technology function. As a percentage of net revenue, consolidated general and administrative expenses were 27.1 percent, compared to 26.5 percent in the 2010 first quarter.

The operating loss in the quarter was $4.1 million compared to an operating loss of $3.8 million in the 2010 first quarter.
The net loss was $2.5 million and the net loss per share was $0.14, based upon an effective tax benefit rate in the quarter of 26.3 percent. In the 2010 first quarter, the net loss was $1.5 million and the net loss per share was $0.09, which reflected an effective tax benefit rate of 55.8 percent.
Net cash used in operating activities in the quarter was $80.2 million, compared to $32.2 million in the 2010 first quarter. Cash and cash equivalents at March 31, 2011 were $92.6 million compared to $81.2 million at March 31, 2010, and $181.1 million
at December 31, 2010.

Chief Executive Officer L. Kevin Kelly said, March confirmations were not as strong as we had projected, especially in the Financial Services practice, and this resulted in lower than anticipated revenue and operating margin in the first quarter. However, we are encouraged by April confirmations, which will be better than March, and do not believe that our first quarter results are indicative of what we believe is achievable in 2011. We expect confirmations to continue to improve as our new
hires become more productive and market conditions improve. We remain
committed to our goals for reducing general & administrative expenses and are encouraged by the first quarter decline of $3.8 million compared to the 2010 fourth quarter.

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