Heidrick & Struggles International Inc. (NASDAQ:HSII) Q3 2020 Earnings Conference Call - Final Transcript

Ladies and gentlemen, thank you for standing by and welcome to the Heidrick & Struggles Q3 2020 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Suzanne Rosenberg, Vice President of Investor Relations. You may begin. Thank you.

Good afternoon everyone and thank you for participating in Heidrick & Struggles 2020 third quarter conference call. Joining me on today's call is our President and CEO, Krishnan Rajagopalan and Chief Financial Officer, Mark Harris.

We have posted our third quarter slides on the IR homepage of our website at heidrick.com and we encourage you to view them for additional context, but we won't be referring to specific page numbers during our opening comment. In our materials, we refer to non-GAAP financial measures that we believe provide additional insight into our underlying results. A reconciliation between GAAP and non-GAAP financial measures can be found in the last schedule of the release. Also in our remarks, we'll be making forward-looking statements and ask that you please refer to the Safe Harbor language contained in our news release.

With that, Krishnan, I'll now turn the call over to you.

Suzanne, thank you. Good afternoon everyone and thank you for taking the time to join our call. Heidrick continues to rise to the occasion and meet the unprecedented challenges of 2020. We're advising our clients in new and different ways and supporting our colleagues and communities where we live and work. Amidst this, we posted quarterly results that exceeded our expectations and we remain focused on gaining market share in what continues to be a dynamic environment.

Stronger business trends are beginning to come into focus and we have the financial strength to continue to make strategic investments, which will position us for long-term growth.

Let me briefly touch on our third quarter results, which Mark will go into further detail shortly. Net revenue was $143.5 million, which represents a sequential decline of a little more than 1%, significantly better than what we anticipated in our last call with you. This translated into an adjusted operating margin of 6.9%, which was up 70 basis points for the second quarter and an adjusted EBITDA margin of 11% or 250 basis point increase from the prior quarter. These results are adjusted for the restructuring charge.

As you know in the beginning of the third quarter, we implemented a restructuring plan to optimize future growth and profitability. Following these actions, we are confident that we have right-sized the business for anticipated demand. Even as business improves and we invest appropriately to meet increased demand, we see permanent cost savings and efficiencies. For example, we see opportunities to further optimize our global real estate footprint as we change the way we work and Mark will speak more specifically about this later on the call.

The key takeaway here is that as we eventually emerge from this pandemic, we will be in an even stronger position to navigate through future market uncertainties