Press Release

Heidrick & Struggles Reports Second Quarter 2024 Results

29-Jul-2024

Delivers Strong Revenue Performance with Robust Profitability

Restructuring for Accelerated Growth Implemented in the Quarter

Declares $0.15 Per Share Cash Dividend

CHICAGO, July 29, 2024  /PRNewswire/ -- Heidrick & Struggles International, Inc. (Nasdaq: HSII) ("Heidrick & Struggles", "Heidrick" or the "Company"), a premier provider of global leadership advisory and on-demand talent solutions, today announced financial results for its second quarter ended June 30, 2024.

Second Quarter Highlights:

  • Net revenue grew to $278.6 million driven by all businesses
  • Adjusted EBITDA was $28.8 million
  • Adjusted EBITDA margin was 10.3%

"Our team delivered a strong second quarter. In a very complex operating environment, clients continue to need help engaging, assessing and enabling critical leadership talent – and our world-class colleagues met those needs with energy and creativity. This work helped propel our second quarter revenue beyond the high end of our outlook range while generating a double-digit EBITDA margin," stated CEO Tom Monahan.

"Even as we continued to deliver value to clients, we also made important changes to our leadership team and staffing levels. As a result, we enter the second half of the year with more targeted solutions and better alignment of our organization with client needs. Going forward, we are tightly focused on accelerating returns from our recent investment cycle and on creating unmatched value for clients, colleagues and investors."

2024 Second Quarter Results

Consolidated net revenue of $278.6 million compared to $271.2 million in the 2023 second quarter. The Company experienced revenue growth in On-Demand Talent, Heidrick Consulting, and Executive Search in the Americas and Asia Pacific, partially offset by a decrease in Executive Search in Europe. 

Adjusted EBITDA was $28.8 million compared to $34.9 million in the 2023 second quarter. Adjusted EBITDA margin was 10.3%, compared to 12.9% in the 2023 second quarter. In Executive Search, Adjusted EBITDA was $52.7 million compared to $53.2 million in the prior year period. In On-Demand Talent, Adjusted EBITDA was a loss of $1.6 million versus a gain of $2.6 million in the prior year period. In Heidrick Consulting, Adjusted EBITDA was a loss of $1.4 million compared to a loss of $1.7 million in the prior year period.

In the 2024 second quarter, the company recorded a non-cash goodwill impairment charge of $16.2 million primarily related to the Company's On-Demand Talent segment, a $6.9 million restructuring charge and a $1.2 million earnout fair value adjustment. In the 2023 second quarter, the Company recorded a non-cash goodwill impairment charge of $7.2 million associated with the Company's Heidrick Consulting segment.

Including these unusual charges in the 2024 second quarter, net loss was $5.2 million and diluted loss per share was $0.25. Excluding these unusual charges in both the 2024 and 2023 second quarters, adjusted net income was $14.1 million and adjusted diluted earnings per share was $0.67, with an adjusted effective tax rate of 40.9%, in the 2024 second quarter. This compares to adjusted net income of $15.0 million and adjusted diluted earnings per share of $0.73, with an adjusted effective tax rate of 37.7% in the 2023 second quarter.

Executive Search net revenue of $210.0 million increased 1.5% compared to net revenue of $206.8 million in the 2023 second quarter. Excluding the impact of exchange rate fluctuations, which negatively impacted results by 0.4%, or $0.9 million, net revenue increased 2.0%, or $4.1 million from the 2023 second quarter. Net revenue increased 6.1% in the Americas (up 6.3% on a constant currency basis), decreased 12.0% in Europe (down 11.7% on a constant currency basis), and increased 0.7% in Asia Pacific (up 3.3% on a constant currency basis) when compared to the prior year second quarter. All practice groups, except for Consumer and Industrial, exhibited growth over the prior year period. 

The Company had 415 Executive Search consultants at June 30, 2024, compared to 423 at June 30, 2023. Productivity, as measured by annualized Executive Search net revenue per consultant, was $2.0 million compared to $1.9 million in the 2023 second quarter, reflecting a lower number of consultants combined with higher revenue. Average revenue per executive search was approximately $151,000 compared to $146,000 in the prior year period. The number of search confirmations decreased 1.6% compared to the year-ago period.

On-Demand Talent net revenue of $41.9 million increased 6.8% compared to net revenue of $39.2 million in the 2023 second quarter. Excluding the impact of exchange rate fluctuations, which negatively impacted results by $0.2 million, or 0.5%, net revenue increased 7.3%, or $2.9 million from the 2023 second quarter.

Heidrick Consulting net revenue of $26.8 million increased 6.2% compared to net revenue of $25.2 million in the 2023 second quarter. The Company had 85 Heidrick Consulting consultants at June 30, 2024, compared to 89 at June 30, 2023. 

Consolidated salaries and benefits decreased $1.0 million to $177.9 million compared to $178.9 million in the 2023 second quarter. Year-over-year, fixed compensation expense decreased $3.0 million due to decreases in separation expense, talent acquisition and retention costs, retirement and benefits expenses, and expenses related to the deferred compensation plan, partially offset by increases in stock compensation, and base salaries and payroll taxes. Variable compensation increased $1.9 million due to an increase in consultant production. Salaries and benefits expense was 63.8% of net revenue for the quarter, compared to 66.0% in the 2023 second quarter.

General and administrative expenses increased $5.9 million, or 14.7%, to $46.5 million compared to $40.5 million in the 2023 second quarter. The increase was due to the 2024 Global Conference, earnout fair value adjustments, professional fees, office occupancy, hiring fees, IT, and marketing, partially offset by decreases in intangible amortization, travel and entertainment, and the use of external third-party consultants. As a percentage of net revenue, general and administrative expenses were 16.7% for the 2024 second quarter compared to 14.9% in the 2023 second quarter.

The Company's cost of services was $29.7 million, or 10.7% of net revenue for the quarter, compared to $25.3 million, or 9.3% of net revenue in the 2023 second quarter. This primarily related to an increase in the volume of On-Demand Talent and Heidrick Consulting projects.

The Company's research and development expenses were $5.6 million, or 2.0%, of net revenue for the quarter compared to $5.7 million, or 2.1%, of net revenue for the second quarter 2023.

Net cash provided by operating activities was $62.5 million compared to net cash provided by operating activities of $46.9 million in the 2023 second quarter. Cash, cash equivalents and marketable securities at June 30, 2024 was $296.9 million compared to $239.0 million at June 30, 2023 and $478.2 million at December 31, 2023. The Company's cash position typically builds throughout the year as employee bonuses are accrued, mostly to be paid out in the first half of the year following the year in which they are earned.

Dividend

The Board of Directors declared a 2024 second quarter cash dividend of $0.15 per share payable on August 22, 2024, to shareholders of record at the close of business on August 9, 2024. 

2024 Third Quarter Outlook

The Company expects 2024 third quarter consolidated net revenue of between $260 million and $280 million, while acknowledging that continued fluidity in external factors, such as the foreign exchange and interest rate environments, foreign conflicts, inflation and macroeconomic constraints on pricing actions, may impact quarterly results. In addition, this outlook is based on the average currency rates in June 2024 and reflects, among other factors, management's assumptions for the anticipated volume of new Executive Search confirmations, On-Demand Talent projects, and Heidrick Consulting assignments, consultant productivity, consultant retention, and the seasonality of the business along with the current backlog.

Quarterly Webcast and Conference Call

Heidrick & Struggles will host a conference call to review its second quarter results today, July 29, 2024 at 5:30 pm Eastern Time. Participants may access the Company's call and supporting slides through its website at www.heidrick.com or by dialing (800) 715-9871 or (646) 307-1963, conference ID# 4805686. For those unable to participate on the live call, a webcast and copy of the slides will be archived at www.heidrick.com and available for up to 30 days following the investor call. 

About Heidrick & Struggles International, Inc.

Heidrick & Struggles (Nasdaq: HSII) is a premier provider of global leadership advisory and on-demand talent solutions, serving the senior-level talent and consulting needs of the world's top organizations. In our role as trusted leadership advisors, we partner with our clients to develop future-ready leaders and organizations, bringing together our services and offerings in executive search, diversity and inclusion, leadership assessment and development, organization and team acceleration, culture shaping and on-demand, independent talent solutions. Heidrick & Struggles pioneered the profession of executive search more than 70 years ago. Today, the firm provides integrated talent and human capital solutions to help our clients change the world, one leadership team at a time. ® www.heidrick.com 

Non-GAAP Financial Measures

To supplement the financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), Heidrick & Struggles presents certain non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of comprehensive income, balance sheets or statements of cash flow of the Company.

Non-GAAP financial measures used within this earnings release are Adjusted EBITDA, Adjusted EBITDA margin, and consolidated net revenue excluding the impact of exchange rate fluctuations (referred to as on a constant currency basis). These measures are presented because management uses this information to monitor and evaluate financial results and trends. Management believes this information is also useful for investors to evaluate the comparability of financial information presented. Reconciliations of these non-GAAP financial measures to the most directly comparable measures calculated and presented in accordance with GAAP are provided as schedules attached to this release.

Adjusted EBITDA refers to net income before interest, other income or expense, income taxes, depreciation and amortization, as adjusted, to the extent they occur, for earnout accretion, earnout fair value adjustments, contingent compensation, deferred compensation plan income or expense, certain reorganization costs, impairment charges and restructuring charges.

Adjusted EBITDA margin refers to Adjusted EBITDA as a percentage of net revenue in the same period.   

Adjusted net income and adjusted diluted earnings per share reflect the exclusion of goodwill impairment, restructuring charges and earnout fair value adjustments, net of tax.

Adjusted effective tax rate reflects the exclusion of goodwill impairment, restructuring charges and earnout fair value adjustments, net of tax.

The Company evaluates its results of operations on both an as reported and a constant currency basis. The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing constant currency information provides valuable supplemental information regarding its results of operations, consistent with how it evaluates its performance. The Company calculates constant currency percentages by converting its financial results in a local currency for a period using the average exchange rate for the prior period to which it is comparing. This calculation may differ from similarly titled measures used by other companies.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the federal securities laws, including statements regarding guidance for the third quarter of 2024. 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," "outlook," "projects," "forecasts," "aim" and similar expressions. Forward-looking statements are not guarantees of future performance, rely on a number of assumptions, and involve certain known and unknown risks and uncertainties that are difficult to predict, many of which are beyond our control. Factors that may cause actual outcomes and results to differ materially from what is expressed, forecasted or implied in the forward-looking statements include, among other things, our ability to attract, integrate, develop, manage, retain and motivate qualified consultants and senior leaders; our ability to prevent our consultants from taking our clients with them to another firm; our ability to maintain our professional reputation and brand name; our clients' ability to restrict us from recruiting their employees; our heavy reliance on information management systems; risks arising from our implementation of new technology and intellectual property to deliver new products and services to our clients; our dependence on third parties for the execution of certain critical functions; the fact that we face the risk of liability in the services we perform; the fact that data security, data privacy and data protection laws and other evolving regulations and cross-border data transfer restrictions may limit the use of our services and adversely affect our business; any challenges to the classification of our on-demand talent as independent contractors; the fact that increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted cyber-related attacks could pose a risk to our systems, networks, solutions, services and data; the fact that our net revenue may be affected by adverse macroeconomic or labor market conditions, including impacts of inflation and effects of geopolitical instability; the aggressive competition we face; the impact of foreign currency exchange rate fluctuations; our ability to access additional credit; social, political, regulatory, legal and economic risks in markets where we operate, including the impact of the ongoing war in Ukraine and the conflict in Israel and the Gaza strip, the risks of an expansion or escalation of those conflicts and our ability to quickly and completely recover from any disruption to our business; unfavorable tax law changes and tax authority rulings; our ability to realize the benefit of our net deferred tax assets; the fact that we may not be able to align our cost structure with net revenue; any impairment of our goodwill, other intangible assets and other long-lived assets; our ability to maintain an effective system of disclosure controls and internal control over our financial reporting and produce accurate and timely financial statements; our ability to execute and integrate future acquisitions; and the fact that we have anti-takeover provisions that make an acquisition of us difficult and expensive. We caution the reader that the list of factors may not be exhaustive. For more information on these risks, uncertainties and other factors, refer to our Annual Report on Form 10-K for the year ended December 31, 2023, under the heading "Risk Factors" in Item 1A. The forward-looking statements contained in this press release speak only as of the date of this press release. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contacts:

Investors & Analysts:
Suzanne Rosenberg, Vice President, Investor Relations
srosenberg@heidrick.com 

Media:
Bianca Wilson, Director of Public Relations
bwilson@heidrick.com 

Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)
 
 

Three Months Ended

June 30,

    
 

2024

  

2023

  

$ Change

  

% Change

Revenue

              

Revenue before reimbursements (net revenue)

$   278,626

  

$   271,225

  

$          7,401

  

2.7 %

Reimbursements

4,251

  

2,552

  

1,699

  

66.6 %

Total revenue

282,877

  

273,777

  

9,100

  

3.3 %
               

Operating expenses

              

Salaries and benefits

177,892

  

178,916

  

(1,024)

  

(0.6) %

General and administrative expenses

46,453

  

40,514

  

5,939

  

14.7 %

Cost of services

29,696

  

25,306

  

4,390

  

17.3 %

Research and development

5,605

  

5,658

  

(53)

  

(0.9) %

Impairment charges

16,224

  

7,246

  

8,978

  

123.9 %

Restructuring charges

6,939

  

—

  

6,939

  

100.0 %

Reimbursed expenses

4,251

  

2,552

  

1,699

  

66.6 %

Total operating expenses

287,060

  

260,192

  

26,868

  

10.3 %
               

Operating income (loss)

(4,183)

  

13,585

  

(17,768)

  

(130.8) %
               

Non-operating income

              

Interest, net

2,612

  

1,913

        

Other, net

997

  

1,377

        

Net non-operating income

3,609

  

3,290

        
               

Income (loss) before income taxes

(574)

  

16,875

        
               

Provision for income taxes

4,583

  

7,893

        
               

Net income (loss)

(5,157)

  

8,982

        
               

Other comprehensive loss, net of tax

(2,094)

  

(75)

        
               

Comprehensive income (loss)

$     (7,251)

  

$       8,907

        
               

Weighted-average common shares outstanding

              

Basic

20,259

  

20,010

        

Diluted

20,259

  

20,637

        
               

Earnings (loss) per common share

              

Basic

$       (0.25)

  

$        0.45

        

Diluted

$       (0.25)

  

$        0.44

        
               

Salaries and benefits as a % of net revenue

63.8 %

  

66.0 %

        

General and administrative expenses as a % of net revenue

16.7 %

  

14.9 %

        

Cost of services as a % of net revenue

10.7 %

  

9.3 %

        

Research and development as a % of net revenue

2.0 %

  

2.1 %

        

Operating margin

(1.5) %

  

5.0 %

        

 

Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)
 
 

Three Months Ended June 30,
 

2024

  

2023

  

$

Change

  

% Change

  

2024
Margin1

  

2023
Margin1

Revenue

                      

Executive Search

                      

Americas

$ 147,078

  

$ 138,563

  

$   8,515

  

6.1 %

        

Europe

40,082

  

45,567

  

(5,485)

  

(12.0) %

        

Asia Pacific

22,807

  

22,649

  

158

  

0.7 %

        

Total Executive Search

209,967

  

206,779

  

3,188

  

1.5 %

        

On-Demand Talent

41,895

  

39,240

  

2,655

  

6.8 %

        

Heidrick Consulting

26,764

  

25,206

  

1,558

  

6.2 %

        

Revenue before reimbursements (net revenue)

278,626

  

271,225

  

7,401

  

2.7 %

        

Reimbursements

4,251

  

2,552

  

1,699

  

66.6 %

        

Total revenue

$ 282,877

  

$ 273,777

  

$   9,100

  

3.3 %

        
                       
                       

Adjusted EBITDA

                      

Executive Search

                      

Americas

$ 48,112

  

$ 46,079

  

$   2,033

  

4.4 %

  

32.7 %

  

33.3 %

Europe

2,840

  

5,456

  

(2,616)

  

(47.9) %

  

7.1 %

  

12.0 %

Asia Pacific

1,740

  

1,630

  

110

  

6.7 %

  

7.6 %

  

7.2 %

Total Executive Search

52,692

  

53,165

  

(473)

  

(0.9) %

  

25.1 %

  

25.7 %

On-Demand Talent

(1,629)

  

2,587

  

(4,216)

  

(163.0) %

  

(3.9) %

  

6.6 %

Heidrick Consulting

(1,395)

  

(1,662)

  

267

  

16.1 %

  

(5.2) %

  

(6.6) %

Total segments

49,668

  

54,090

  

(4,422)

  

(8.2) %

  

17.8 %

  

19.9 %

Research and Development

(4,781)

  

(5,218)

  

437

  

8.4 %

  

(1.7) %

  

(1.9) %

Global Operations Support

(16,076)

  

(13,988)

  

(2,088)

  

(14.9) %

  

(5.8) %

  

(5.2) %

Total operating income

$ 28,811

  

$ 34,884

  

$  (6,073)

  

(17.4) %

  

10.3 %

  

12.9 %
 

1   Margin based on revenue before reimbursements (net revenue).

 

Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)
 
 

Six Months Ended

June 30,

    
 

2024

  

2023

  

$ Change

  

% Change

Revenue

              

Revenue before reimbursements (net revenue)

$   543,823

  

$   510,542

  

$        33,281

  

6.5 %

Reimbursements

8,152

  

5,354

  

2,798

  

52.3 %

Total revenue

551,975

  

515,896

  

36,079

  

7.0 %
               

Operating expenses

              

Salaries and benefits

352,305

  

337,775

  

14,530

  

4.3 %

General and administrative expenses

87,816

  

74,841

  

12,975

  

17.3 %

Cost of services

57,128

  

48,138

  

8,990

  

18.7 %

Research and development

11,320

  

11,186

  

134

  

1.2 %

Impairment charges

16,224

  

7,246

  

8,978

  

123.9 %

Restructuring charges

6,939

  

—

  

6,939

  

100.0 %

Reimbursed expenses

8,152

  

5,354

  

2,798

  

52.3 %

Total operating expenses

539,884

  

484,540

  

55,344

  

11.4 %
               

Operating income

12,091

  

31,356

  

(19,265)

  

(61.4) %
               

Non-operating income

             

Interest, net

6,698

  

5,162

        

Other, net

3,568

  

3,186

        

Net non-operating income

10,266

  

8,348

        
               

Income before income taxes

22,357

  

39,704

        
               

Provision for income taxes

13,482

  

15,136

        
               

Net income

8,875

  

24,568

        
               

Other comprehensive income (loss), net of tax

(6,185)

  

368

        
               

Comprehensive income

$       2,690

  

$     24,936

        
               

Weighted-average common shares outstanding

              

Basic

20,202

  

19,958

        

Diluted

21,061

  

20,701

        
               

Earnings per common share

              

Basic

$        0.44

  

$        1.23

        

Diluted

$        0.42

  

$        1.19

        
               

Salaries and benefits as a % of net revenue

64.8 %

  

66.2 %

        

General and administrative expenses as a % of net revenue

16.1 %

  

14.7 %

        

Cost of services as a % of net revenue

10.5 %

  

9.4 %

        

Research and development as a % of net revenue

2.1 %

  

2.2 %

        

Operating margin

2.2 %

  

6.1 %

        

 

Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)
 
 

Six Months Ended June 30,
 

2024

  

2023

  

$

Change

  

%

Change

  

2024
Margin1

  

2023
Margin1

Revenue

                      

Executive Search

                      

Americas

$   283,757

  

$   265,890

  

$    17,867

  

6.7 %

        

Europe

81,563

  

84,498

  

(2,935)

  

(3.5) %

        

Asia Pacific

46,128

  

46,878

  

(750)

  

(1.6) %

        

Total Executive Search

411,448

  

397,266

  

14,182

  

3.6 %

        

On-Demand Talent

79,752

  

70,357

  

9,395

  

13.4 %

        

Heidrick Consulting

52,623

  

42,919

  

9,704

  

22.6 %

        

Revenue before reimbursements (net revenue)

543,823

  

510,542

  

33,281

  

6.5 %

        

Reimbursements

8,152

  

5,354

  

2,798

  

52.3 %

        

Total revenue

$   551,975

  

$   515,896

  

$    36,079

  

7.0 %

        
                       
                       

Adjusted EBITDA

                      

Executive Search

                      

Americas

$     89,983

  

$     88,203

  

$     1,780

  

2.0 %

  

31.7 %

  

33.2 %

Europe

6,193

  

7,537

  

(1,344)

  

(17.8) %

  

7.6 %

  

8.9 %

Asia Pacific

4,935

  

5,197

  

(262)

  

(5.0) %

  

10.7 %

  

11.1 %

Total Executive Search

101,111

  

100,937

  

174

  

0.2 %

  

24.6 %

  

25.4 %

On-Demand Talent

(2,550)

  

1,240

  

(3,790)

  

NM

  

(3.2) %

  

1.8 %

Heidrick Consulting

(3,422)

  

(4,457)

  

1,035

  

23.2 %

  

(6.5) %

  

(10.4) %

Total segments

95,139

  

97,720

  

(2,581)

  

(2.6) %

  

17.5 %

  

19.1 %

Research and Development

(9,706)

  

(10,469)

  

763

  

7.3 %

  

(1.8) %

  

(2.1) %

Global Operations Support

(30,754)

  

(26,740)

  

(4,014)

  

(15.0) %

  

(5.7) %

  

(5.2) %

Total Adjusted EBITDA

$     54,679

  

$     60,511

  

$    (5,832)

  

(9.6) %

  

10.1 %

  

11.9 %
                       
 

1   Margin based on revenue before reimbursements (net revenue).

 

Heidrick & Struggles International, Inc.

Reconciliation of Net Income (Loss) and Adjusted Net Income (Non-GAAP)

(In thousands, except per share amounts)

(Unaudited)
 
 

Three Months Ended

June 30,

  

Six Months Ended

June 30,
 

2024

  

2023

  

2024

  

2023

Net income (loss)

$          (5,157)

  

$            8,982

  

$          8,875

  

$        24,568
               

Adjustments

              

Impairment charges, net of tax1

14,190

  

6,038

  

14,190

  

6,038

Earnout fair value adjustment, net of tax2

749

  

—

  

749

  

—

Restructuring charges, net of tax3

4,291

  

—

  

4,291

  

—

Total adjustments

19,230

  

6,038

  

19,230

  

6,038
               

Adjusted net income

$          14,073

  

$          15,020

  

$        28,105

  

$        30,606
               

Weighted-average common shares outstanding

              

Basic

20,259

  

20,010

  

20,202

  

19,958

Diluted

20,865

  

20,637

  

21,061

  

20,701
               

Earnings per common share

              

Basic

$            (0.25)

  

$              0.45

  

$           0.44

  

$           1.23

Diluted

$            (0.25)

  

$              0.44

  

$           0.42

  

$           1.19
               

Adjusted earnings per common share

              

Basic

$              0.69

  

$              0.75

  

$           1.39

  

$           1.53

Diluted

$              0.67

  

$              0.73

  

$           1.33

  

$           1.48
 

1 The Company recorded goodwill impairment charges of $14.8 million in the On-Demand Talent segment and $1.5 million in the Europe segment for the three and six months ended June 30, 2024. The Company recorded a goodwill impairment charge of $7.2 million in the Heidrick Consulting segment for the three and six months ended June 30, 2023.

2  The Company recorded a fair value adjustment to increase the On-Demand Talent earnout by $1.1 million and increase the  Heidrick Consulting earnout by $0.1 million for the three and six months ended June 30, 2024.

3  The Company recorded restructuring charges of $6.9 million for the three and six months ended June 30, 2024.

 

Heidrick & Struggles International, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)
 
 

June 30,
2024

  

December 31,
2023
       

Current assets

      

Cash and cash equivalents

$         189,922

  

$         412,618

Marketable securities

106,963

  

65,538

Accounts receivable, net

187,113

  

133,128

Prepaid expenses

28,016

  

23,597

Other current assets

43,745

  

47,923

Income taxes recoverable

7,660

  

10,410

Total current assets

563,419

  

693,214
       

Non-current assets

      

Property and equipment, net

48,434

  

35,752

Operating lease right-of-use assets

82,114

  

86,063

Assets designated for retirement and pension plans

10,779

  

11,105

Investments

55,927

  

47,287

Other non-current assets

26,875

  

17,071

Goodwill

183,150

  

202,252

Other intangible assets, net

16,411

  

20,842

Deferred income taxes

29,216

  

28,005

Total non-current assets

452,906

  

448,377
       

Total assets

$      1,016,325

  

$      1,141,591
       

Current liabilities

      

Accounts payable

$           19,515

  

$           20,837

Accrued salaries and benefits

190,225

  

322,744

Deferred revenue

44,679

  

45,732

Operating lease liabilities

18,044

  

21,498

Other current liabilities

25,693

  

21,823

Income taxes payable

8,593

  

6,057

Total current liabilities

306,749

  

438,691
       

Non-current liabilities

      

Accrued salaries and benefits

51,404

  

52,108

Retirement and pension plans

70,855

  

62,100

Operating lease liabilities

78,120

  

78,204

Other non-current liabilities

42,562

  

41,808

Deferred income taxes

5,703

  

6,402

Total non-current liabilities

248,644

  

240,622
       

Total liabilities

555,393

  

679,313
       

Stockholders' equity

460,932

  

462,278
       

Total liabilities and stockholders' equity

$      1,016,325

  

$      1,141,591

 

Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)
 
   

Three Months Ended

June 30,
   

2024

  

2023

Cash flows - operating activities

        

Net income

  

$        (5,157)

  

$          8,982

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization

  

3,910

  

4,819

Deferred income taxes

  

(2,246)

  

(223)

Stock-based compensation expense

  

3,465

  

1,919

Accretion expense related to earnout payments

  

469

  

451

Gain on marketable securities

  

(441)

  

(49)

Loss on disposal of property and equipment

  

247

  

1

Impairment charges

  

16,224

  

7,246

Changes in assets and liabilities, net of effects of acquisition:

        

Accounts receivable

  

(14,717)

  

(35,658)

Accounts payable

  

(255)

  

(1,777)

Accrued expenses

  

57,843

  

52,164

Restructuring accrual

  

4,386

  

—

Deferred revenue

  

(2,624)

  

396

Income taxes recoverable and payable, net

  

645

  

495

Retirement and pension plan assets and liabilities

  

347

  

333

Prepaid expenses

  

3,339

  

4,500

Other assets and liabilities, net

  

(2,913)

  

3,341

Net cash provided by operating activities

  

62,522

  

46,940
         

Cash flows - investing activities

        

Acquisition of businesses, net of cash acquired

  

—

  

(5,842)

Capital expenditures

  

(10,365)

  

(3,006)

Purchases of marketable securities and investments

  

(109,862)

  

(21,511)

Proceeds from sales of marketable securities and investments

  

289

  

153

Net cash used in investing activities

  

(119,938)

  

(30,206)
         

Cash flows - financing activities

        

Repurchases of common stock

  

—

  

(904)

Cash dividends paid

  

(3,182)

  

(3,122)

Payment of employee tax withholdings on equity transactions

  

(885)

  

—

Net cash used in financing activities

  

(4,067)

  

(4,026)
         

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash

  

(1,426)

  

376
         

Net increase (decrease) in cash, cash equivalents and restricted cash

  

(62,909)

  

13,084

Cash, cash equivalents and restricted cash at beginning of period

  

252,831

  

204,733

Cash, cash equivalents and restricted cash at end of period

  

$      189,922

  

$      217,817

 

Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)
 
   

Six Months Ended

June 30,
   

2024

  

2023

Cash flows - operating activities

        

Net income

  

$            8,875

  

$          24,568

Adjustments to reconcile net income to net cash used in operating activities:

        

Depreciation and amortization

  

8,700

  

8,692

Deferred income taxes

  

(2,333)

  

6,446

Stock-based compensation expense

  

6,109

  

3,772

Accretion expense related to earnout payments

  

935

  

642

Gain on marketable securities

  

(980)

  

(1,694)

Loss on disposal of property and equipment

  

261

  

131

Impairment charges

  

16,224

  

7,246

Changes in assets and liabilities:

        

Accounts receivable

  

(55,842)

  

(59,990)

Accounts payable

  

(2,324)

  

(2,914)

Accrued expenses

  

(124,747)

  

(273,811)

Restructuring accrual

  

4,386

  

—

Deferred revenue

  

(673)

  

543

Income taxes recoverable and payable, net

  

5,368

  

(2,588)

Retirement and pension plan assets and liabilities

  

5,800

  

6,403

Prepaid expenses

  

(4,652)

  

(2,635)

Other assets and liabilities, net

  

(6,009)

  

(4,902)

Net cash used in operating activities

  

(140,902)

  

(290,091)
         

Cash flows - investing activities

        

Acquisition of business, net of cash acquired

  

—

  

(35,749)

Capital expenditures

  

(16,538)

  

(6,814)

Purchases of marketable securities and investments

  

(115,262)

  

(27,683)

Proceeds from sales of marketable securities and investments

  

66,574

  

268,118

Net cash provided by (used in) investing activities

  

(65,226)

  

197,872
         

Cash flows - financing activities

        

Repurchases of common stock

  

—

  

(904)

Cash dividends paid

  

(6,398)

  

(6,234)

Payment of employee tax withholdings on equity transactions

  

(3,747)

  

(4,141)

Acquisition earnout payments

  

—

  

(35,946)

Net cash used in financing activities

  

(10,145)

  

(47,225)
         

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash

  

(6,423)

  

1,772
         

Net decrease in cash, cash equivalents and restricted cash

  

(222,696)

  

(137,672)

Cash, cash equivalents and restricted cash at beginning of period

  

412,618

  

355,489

Cash, cash equivalents and restricted cash at end of period

  

$        189,922

  

$        217,817

 

Heidrick & Struggles International, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA (Non-GAAP)

(In thousands)

(Unaudited)
 
 

Three Months Ended

June 30,

  

Six Months Ended

June 30,
 

2024

  

2023

  

2024

  

2023

Revenue before reimbursements (net revenue)

$    278,626

  

$    271,225

  

$    543,823

  

$    510,542
               

Net income (loss)

(5,157)

  

8,982

  

8,875

  

24,568

Interest, net

(2,612)

  

(1,913)

  

(6,698)

  

(5,162)

Other, net

(997)

  

(1,377)

  

(3,568)

  

(3,186)

Provision for income taxes

4,583

  

7,893

  

13,482

  

15,136

Operating income (loss)

(4,183)

  

13,585

  

12,091

  

31,356
               

Adjustments

              

Depreciation

1,990

  

2,172

  

4,483

  

4,176

Intangible amortization

1,920

  

2,647

  

4,217

  

4,516

Earnout accretion

469

  

451

  

935

  

642

Earnout fair value adjustments

1,211

  

—

  

1,211

  

—

Acquisition contingent consideration

3,285

  

3,784

  

5,273

  

5,443

Deferred compensation plan

956

  

1,603

  

3,306

  

3,736

Reorganization costs

—

  

3,396

  

—

  

3,396

Impairment charges

16,224

  

7,246

  

16,224

  

7,246

Restructuring charges

6,939

  

—

  

6,939

  

—

Total adjustments

32,994

  

21,299

  

42,588

  

29,155
               

Adjusted EBITDA

$      28,811

  

$      34,884

  

$      54,679

  

$      60,511

Adjusted EBITDA margin

10.3 %

  

12.9 %

  

10.1 %

  

11.9 %

 

Heidrick & Struggles International, Inc.

Reconciliation of Operating Income to Adjusted EBITDA by Line of Business (Non-GAAP)

(In thousands)

(Unaudited)
 
 

Three Months Ended June 30, 2024
 

Executive Search

  

On-Demand Talent

  

Heidrick Consulting

  

Research & Development

  

Global
Operations Support

  

Total
                       

Revenue before reimbursements (net revenue)

$    209,967

  

$      41,895

  

$      26,764

  

$         —

  

$         —

  

$    278,626
                       

Operating income (loss)1

46,821

  

(21,695)

  

(6,530)

  

(5,605)

  

(17,174)

  

(4,183)
                       

Adjustments

                      

Depreciation

863

  

117

  

82

  

809

  

119

  

1,990

Intangible amortization

20

  

1,533

  

367

  

—

  

—

  

1,920

Earnout accretion

—

  

409

  

60

  

—

  

—

  

469

Earnout fair value adjustments

—

  

1,125

  

86

  

—

  

—

  

1,211

Acquisition contingent compensation

295

  

1,835

  

1,155

  

—

  

—

  

3,285

Deferred compensation plan

920

  

—

  

18

  

15

  

3

  

956

Impairment charges

1,463

  

14,761

  

—

  

—

  

—

  

16,224

Restructuring charges

2,310

  

286

  

3,367

  

—

  

976

  

6,939

Total adjustments

5,871

  

20,066

  

5,135

  

824

  

1,098

  

32,994
                       

Adjusted EBITDA

$      52,692

  

$       (1,629)

  

$       (1,395)

  

$       (4,781)

  

$     (16,076)

  

$      28,811

Adjusted EBITDA margin

25.1 %

  

(3.9) %

  

(5.2) %

  

(1.7) %

  

(5.8) %

  

10.3 %
                       
 

Three Months Ended June 30, 2023
 

Executive Search

  

On-Demand Talent

  

Heidrick Consulting

  

Research & Development

  

Global
Operations Support

  

Total
                       

Revenue before reimbursements (net revenue)

$    206,779

  

$      39,240

  

$      25,206

  

$              —

  

$              —

  

$    271,225
                       

Operating income (loss)1

46,940

  

(2,862)

  

(10,686)

  

(5,658)

  

(14,149)

  

13,585
                       

Adjustments

                      

Depreciation

1,297

  

116

  

183

  

416

  

160

  

2,172

Intangible amortization

53

  

2,151

  

443

  

—

  

—

  

2,647

Earnout accretion

—

  

394

  

57

  

—

  

—

  

451

Acquisition contingent compensation

1,165

  

1,561

  

1,058

  

—

  

—

  

3,784

Deferred compensation plan

1,541

  

—

  

37

  

24

  

1

  

1,603

Reorganization costs

2,169

  

1,227

  

—

  

—

  

—

  

3,396

Impairment charges

—

  

—

  

7,246

  

—

  

—

  

7,246

Total adjustments

6,225

  

5,449

  

9,024

  

440

  

161

  

21,299
                       

Adjusted EBITDA

$      53,165

  

$        2,587

  

$       (1,662)

  

$       (5,218)

  

$     (13,988)

  

$      34,884

Adjusted EBITDA margin

25.7 %

  

6.6 %

  

(6.6 %)

  

(1.9) %

  

(5.2) %

  

12.9 %
 

1 The Company does not allocate interest income or expense, other income or expense, and the provision for income taxes to the Company's reportable operating segments. As such, the Company has concluded that operating income (loss) represents the most directly comparable measure of financial performance presented in accordance with U.S. GAAP for the reconciliation of Adjusted EBITDA in this presentation.

 

Heidrick & Struggles International, Inc.

Reconciliation of Operating Income (Loss) to Adjusted EBITDA (Non-GAAP)

(In thousands)

(Unaudited)
 
 

Six Months Ended June 30, 2024
 

Executive Search

  

On-Demand Talent

  

Heidrick Consulting

  

Research & Development

  

Global
Operations
Support

  

Total
                       

Revenue before reimbursements (net revenue)

$    411,448

  

$      79,752

  

$      52,623

  

$         —

  

$         —

  

$    543,823
                       

Operating income (loss)1

92,353

  

(26,544)

  

(10,372)

  

(11,320)

  

(32,026)

  

12,091
                       

Adjustments

                      

Depreciation

2,104

  

248

  

279

  

1,563

  

289

  

4,483

Intangible amortization

37

  

3,368

  

812

  

—

  

—

  

4,217

Earnout accretion

—

  

815

  

120

  

—

  

—

  

935

Earnout fair value adjustments

—

  

1,125

  

86

  

—

  

—

  

1,211

Acquisition contingent compensation

(335)

  

3,391

  

2,217

  

—

  

—

  

5,273

Deferred compensation plan

3,179

  

—

  

69

  

51

  

7

  

3,306

Impairment charges

1,463

  

14,761

  

—

  

—

  

—

  

16,224

Restructuring charges

2,310

  

286

  

3,367

  

—

  

976

  

6,939

Total adjustments

8,758

  

23,994

  

6,950

  

1,614

  

1,272

  

42,588
                       

Adjusted EBITDA

$    101,111

  

$       (2,550)

  

$       (3,422)

  

$       (9,706)

  

$     (30,754)

  

$      54,679

Adjusted EBITDA margin

24.6 %

  

(3.2 %)

  

(6.5 %)

  

(1.8 %)

  

(5.7) %

  

10.1 %
                       
 

Six Months Ended June 30, 2023
 

Executive Search

  

On-Demand Talent

  

Heidrick Consulting

  

Research & Development

  

Global
Operations Support

  

Total
                       

Revenue before reimbursements (net revenue)

$    397,266

  

$      70,357

  

$      42,919

  

$              —

  

$              —

  

$    510,542
                       

Operating income (loss)1

90,633

  

(7,226)

  

(13,802)

  

(11,186)

  

(27,063)

  

31,356
                       

Adjustments

                      

Depreciation

2,640

  

201

  

351

  

664

  

320

  

4,176

Intangible amortization

105

  

3,868

  

543

  

—

  

—

  

4,516

Earnout accretion

—

  

585

  

57

  

—

  

—

  

642

Acquisition contingent compensation

1,800

  

2,585

  

1,058

  

—

  

—

  

5,443

Deferred compensation plan

3,590

  

—

  

90

  

53

  

3

  

3,736

Reorganization costs

2,169

  

1,227

  

—

  

—

  

—

  

3,396

Impairment charges

—

  

—

  

7,246

  

—

  

—

  

7,246

Total adjustments

10,304

  

8,466

  

9,345

  

717

  

323

  

29,155
                       

Adjusted EBITDA

$    100,937

  

$        1,240

  

$       (4,457)

  

$     (10,469)

  

$     (26,740)

  

$      60,511

Adjusted EBITDA margin

25.4 %

  

1.8 %

  

(10.4 %)

  

(2.1 %)

  

(5.2 %)

  

11.9 %
 

1 The Company does not allocate interest income or expense, other income or expense, and the provision for income taxes to the Company's reportable operating segments. As such, the Company has concluded that operating income (loss) represents the most directly comparable measure of financial performance presented in accordance with U.S. GAAP for the reconciliation of Adjusted EBITDA in this presentation.

 

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SOURCE Heidrick & Struggles