David L. Richter, CEO of Philadelphia-based construction consultant Hill International Inc. since 2014, has stepped down from the role and left the firm after 22 years. His departure comes amid pressure from an activist investor over shareholder return.
Richter has formed a new asset management fund called Richter Capital LLC, of which he is chairman and CEO.
Richter’s exit follows the delayed closing of the sale of Hill’s claims consulting unit to Bridgepoint Development Capital, part of a UK-based private equity firm, for $140 million. Hill, founded in 1976 by Richter’s father, Irvin Richter, who stepped down last year as chairman, remains a 3,300-employee global project management consultant.
Named as interim CEO is Paul Evans, who joined Hill’s board last August as one of three new members nominated by Hill activist investor Bulldog Investors LLC, which used its 7% company stake to lead a proxy dispute last year. The Richter family has a 21% stake in the firm, says David Richter.
Hill says it now seeks a permanent CEO. Evans had been vice president, chief financial officer and treasurer of MYR Group. It also says that Chairman Craig L. Martin, the former CEO of Jacobs Engineering who joined the PM consultant’s board last year, becomes executive chairman with creation of a new Office of the Chairman that also includes Raouf S. Ghali, president and chief operating officer, and William H. Dengler Jr., executive vice president and general counsel.
Bulldog did not respond by ENR deadline on the C-suite changes or whether Ghali is a candidate for the CEO slot.
The sale of the claims group is set to shore up Hill’s hard-hit bottom line. “This sale will significantly improve Hill’s financial position and create opportunities for growth that were not possible prior to the sale,” Richter said in the May 3 announcement of its completion.
“We have very expensive debt, and it was restricting us,” says one firm executive. “We’re hoping we’ll grow faster with the new liquidity.”
In announcing first-quarter 2017 results earlier this month, Hill reported a 20% revenue drop to $107.6 million from the same time last year, which it said stemmed from a 36.7% revenue decline in the Middle East, which made up nearly half of its 2016 revenue total. Richter attributes the drop to slower than usual payments by its Middle East-based clients.
Said one company source: “When they see oil prices going down and see an opportunity to hold back cash, they will.”
But the firm said U.S. consulting revenue rose 17% and total company backlog was up 6.3% to $883 million. Hill announced on May 15 an indefinite delivery-indefinite quantity contract from the University of Texas for project management services. It also won PM services contracts earlier this year from the U.S. Social Security Administration and Florida Dept. of Transportation.
Even so, Hill reported a net loss of $7.1 million for the quarter compared with a profit of $1.5 million in the first quarter of 2016. “This company on a contract margin basis does very well. Something happens with this company when we take that number down to the bottom line,” said Evans in a May 5 results call with analysts. “So we’re going to look at all costs and where we have to make adjustments.” With speculation that the firm remains a takeover target, Evans told analysts that following cost-reduction efforts, “we can think about other ideas.”
According to a federal 8-K filing earlier this month, Richter will receive $3.3 million in severance over two years. “We ran the firm keeping clients number one and professionals number two,” says Richter. “Now the board has focused on shareholders number one.”