Press Release

Heidrick & Struggles Reports Third Quarter 2024 Results

04-Nov-2024

Quarterly Revenue Up 6% Year Over Year to $279 Million

All Business Segments Contribute to Top Line Growth

Delivers Strong Profitability with Diluted EPS of $0.71

Declares $0.15 Per Share Cash Dividend

CHICAGO, Nov. 4, 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 third quarter ended September 30, 2024.

Third Quarter Highlights:

  • Net revenue of $278.6 million increased 5.9% year-over-year
  • Adjusted EBITDA of $30.4 million
  • Adjusted EBITDA margin of 10.9%

"Our Heidrick colleagues delivered solid quarterly results, outperforming industry trends and reaching the upper end of our outlook. This performance reflects our team's sharp focus on market opportunities and client needs even as we implemented significant change across our organization," said CEO Tom Monahan. "Looking ahead, there is still much work to be done as we pursue growth opportunities in Executive Search, more tightly focus our suite of leadership solutions, and drive profitability and scalability across the portfolio."

"This work will allow us to take advantage of a large and growing market opportunity as clients increasingly put leadership strategy at the heart of their corporate strategy.  With an iconic brand, deep expertise across regions and sectors, and a robust financial position, we believe Heidrick is well positioned to attract top talent and cultivate deeper and more durable client relationships. Combining these assets with disciplined execution will enable us to achieve sustained and profitable organic growth while enhancing long-term shareholder value."

2024 Third Quarter Results

Consolidated net revenue of $278.6 million increased $15.4 million, or 5.9%, compared to $263.2 million in the 2023 third 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 $30.4 million compared to $29.3 million in the 2023 third quarter. Adjusted EBITDA margin was 10.9%, compared to 11.2% in the 2023 third quarter. In Executive Search, Adjusted EBITDA was $50.7 million compared to $51.0 million in the prior year period. In On-Demand Talent, Adjusted EBITDA was $1.8 million versus a loss of $0.6 million in the prior year period. In Heidrick Consulting, Adjusted EBITDA was a loss of $1.0 million compared to a loss of $2.4 million in the prior year period.

Net income was $14.8 million and diluted earnings per share was $0.71 with an effective tax rate of 29.7% compared to net income of $15.0 million and diluted earnings per share of $0.73, with an effective tax rate of 37.5% in the 2023 third quarter. The 2024 third quarter effective tax rate was positively impacted by a decrease in the Company's estimated annual effective tax rate. 2024 third quarter adjusted net income was $15.1 million and adjusted diluted earnings per share was $0.72, with an adjusted effective tax rate of 28.5%. 

Executive Search net revenue of $204.4 million increased $5.6 million, or 2.8%, compared to net revenue of $198.8 million in the 2023 third quarter. Excluding the impact of exchange rate fluctuations, which positively impacted results by $0.2 million, or 0.1%, net revenue increased 2.7%, or $5.4 million from the 2023 third quarter. Net revenue increased 1.7% in the Americas (up 2.1% on a constant currency basis), decreased 3.3% in Europe (down 5.0% on a constant currency basis), and increased 22.0% in Asia Pacific (up 22.0% on a constant currency basis) when compared to the prior year third quarter.

The Company had 414 Executive Search consultants at September 30, 2024, compared to 417 at September 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 third quarter, reflecting a lower number of consultants combined with higher revenue.  Average revenue per executive search was approximately $149,000 compared to $153,000 in the prior year period. The number of search confirmations increased 5.4% compared to the year-ago period.

On-Demand Talent net revenue of $46.2 million increased $5.2 million, or 12.6%, compared to net revenue of $41.1 million in the 2023 third quarter.  Excluding the impact of exchange rate fluctuations, which positively impacted results by $0.4 million, or 0.9%, net revenue increased 11.7%, or $4.8 million from the 2023 third quarter.

Heidrick Consulting net revenue of $27.9 million increased $4.6 million, or 19.9%, compared to net revenue of $23.3 million in the 2023 third quarter. Excluding the impact of exchange rate fluctuations, which positively impacted results by $0.3 million, or 1.1%, net revenue increased 18.9%, or $4.4 million.  The Company had 84 Heidrick Consulting consultants at September 30, 2024, compared to 90 at September 30, 2023. 

Consolidated salaries and benefits increased $15.8 million, or 9.5%, to $183.0 million compared to $167.2 million in the 2023 third quarter. Year-over-year, fixed compensation expense increased $9.9 million primarily reflecting increases in expenses related to the non-cash mark-to-market adjustments associated with the deferred compensation and stock compensation plans. Variable compensation increased $5.9 million due to an increase in consultant production. Salaries and benefits expense was 65.7% of net revenue for the quarter, compared to 63.5% in the 2023 third quarter.

General and administrative expenses increased $2.2 million, or 5.8%, to $39.7 million compared to $37.6 million in the 2023 third quarter. The increase was due to bad debt, office occupancy costs, expenses related to information technology, and business development travel, partially offset by decreases in professional fees, intangible amortization, and insurance and bank fees.  As a percentage of net revenue, general and administrative expenses were 14.3% for both the 2024 and 2023 third quarters.

The Company's cost of services was $31.0 million, or 11.1% of net revenue for the quarter, compared to $30.7 million, or 11.7% of net revenue in the 2023 third 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 $5.7 million, or 2.0%, of net revenue for the quarter compared to $5.6 million, or 2.1%, of net revenue for the third quarter 2023.

Net cash provided by operating activities was $101.1 million compared to net cash provided by operating activities of $109.5 million in the 2023 third quarter. Cash, cash equivalents and marketable securities at September 30, 2024, was $409.4 million compared to $334.0 million at September 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 fourth quarter cash dividend of $0.15 per share payable on November 21, 2024, to shareholders of record at the close of business on November 14, 2024. 

2024 Fourth Quarter Outlook

The Company expects 2024 fourth quarter consolidated net revenue of between $255 million and $275 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 September 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 third quarter results today, November 4, 2024 at 5:00 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 fourth 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, Public Relations
bwilson@heidrick.com 

 

Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 
 

Three Months Ended

September 30,

  
 

2024

 

2023

 

$ Change

 

% Change

Revenue

       

Revenue before reimbursements (net revenue)

$   278,559

 

$   263,160

 

$        15,399

 

5.9 %

Reimbursements

4,256

 

4,736

 

(480)

 

(10.1) %

 Total revenue

282,815

 

267,896

 

14,919

 

5.6 %

        

Operating expenses

       

Salaries and benefits

183,025

 

167,219

 

15,806

 

9.5 %

General and administrative expenses

39,740

 

37,564

 

2,176

 

5.8 %

Cost of services

31,030

 

30,680

 

350

 

1.1 %

Research and development

5,682

 

5,560

 

122

 

2.2 %

Reimbursed expenses

4,256

 

4,736

 

(480)

 

(10.1) %

 Total operating expenses

263,733

 

245,759

 

17,974

 

7.3 %

        

Operating income

19,082

 

22,137

 

(3,055)

 

(13.8) %

        

Non-operating income (loss)

       

Interest, net

2,570

 

2,505

    

Other, net

(555)

 

(649)

    

 Net non-operating income

2,015

 

1,856

    
        

Income before income taxes

21,097

 

23,993

    
        

Provision for income taxes

6,268

 

9,006

    
        

Net income

14,829

 

14,987

    
        

Other comprehensive income (loss), net of tax

6,996

 

(4,001)

    
        

Comprehensive income

$     21,825

 

$     10,986

    
        

Weighted-average common shares outstanding

       

Basic

20,357

 

20,076

    

Diluted

21,024

 

20,553

    
        

Earnings per common share

       

Basic

$        0.73

 

$        0.75

    

Diluted

$        0.71

 

$        0.73

    
        

Salaries and benefits as a % of net revenue

65.7 %

 

63.5 %

    

General and administrative expenses as a % of net revenue

14.3 %

 

14.3 %

    

Cost of services as a % of net revenue

11.1 %

 

11.7 %

    

Research and development as a % of net revenue

2.0 %

 

2.1 %

    

Operating margin

6.9 %

 

8.4 %

    

 

Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 
 

Three Months Ended September 30,

 

2024

 

2023

 

$

Change

 

% 
Change

 

2024 
Margin1

 

2023 
Margin1

Revenue

           

Executive Search

           

Americas

$ 134,545

 

$ 132,320

 

$   2,225

 

1.7 %

    

Europe

43,143

 

44,606

 

(1,463)

 

(3.3) %

    

Asia Pacific

26,701

 

21,888

 

4,813

 

22.0 %

    

Total Executive Search

204,389

 

198,814

 

5,575

 

2.8 %

    

On-Demand Talent

46,231

 

41,053

 

5,178

 

12.6 %

    

Heidrick Consulting

27,939

 

23,293

 

4,646

 

19.9 %

    

Revenue before reimbursements (net revenue)

278,559

 

263,160

 

15,399

 

5.9 %

    

Reimbursements

4,256

 

4,736

 

(480)

 

(10.1) %

    

Total revenue

$ 282,815

 

$ 267,896

 

$ 14,919

 

5.6 %

    
            
            

Adjusted EBITDA

           

Executive Search

           

Americas

$ 40,465

 

$ 39,354

 

$   1,111

 

2.8 %

 

30.1 %

 

29.7 %

Europe

5,022

 

8,950

 

(3,928)

 

(43.9) %

 

11.6 %

 

20.1 %

Asia Pacific

5,247

 

2,704

 

2,543

 

94.0 %

 

19.7 %

 

12.4 %

Total Executive Search

50,734

 

51,008

 

(274)

 

(0.5) %

 

24.8 %

 

25.7 %

On-Demand Talent

1,763

 

(580)

 

2,343

 

NM

 

3.8 %

 

(1.4) %

Heidrick Consulting

(1,025)

 

(2,391)

 

1,366

 

57.1 %

 

(3.7) %

 

(10.3) %

Total segments

51,472

 

48,037

 

3,435

 

7.2 %

 

18.5 %

 

18.3 %

Research and Development

(4,606)

 

(4,927)

 

321

 

6.5 %

 

(1.7) %

 

(1.9) %

Global Operations Support

(16,451)

 

(13,761)

 

(2,690)

 

(19.5) %

 

(5.9) %

 

(5.2) %

Total Adjusted EBITDA

$ 30,415

 

$ 29,349

 

$   1,066

 

3.6 %

 

10.9 %

 

11.2 %

  

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)

 
 

Nine Months Ended

September 30,

  
 

2024

 

2023

 

$ Change

 

% Change

Revenue

       

Revenue before reimbursements (net revenue)

$   822,382

 

$   773,702

 

$        48,680

 

6.3 %

Reimbursements

12,408

 

10,090

 

2,318

 

23.0 %

 Total revenue

834,790

 

783,792

 

50,998

 

6.5 %

        

Operating expenses

       

Salaries and benefits

535,330

 

504,994

 

30,336

 

6.0 %

General and administrative expenses

127,556

 

112,405

 

15,151

 

13.5 %

Cost of services

88,158

 

78,818

 

9,340

 

11.9 %

Research and development

17,002

 

16,746

 

256

 

1.5 %

Impairment charges

16,224

 

7,246

 

8,978

 

123.9 %

Restructuring charges

6,939

 

—

 

6,939

 

100.0 %

Reimbursed expenses

12,408

 

10,090

 

2,318

 

23.0 %

 Total operating expenses

803,617

 

730,299

 

73,318

 

10.0 %

        

Operating income

31,173

 

53,493

 

(22,320)

 

(41.7) %

        

Non-operating income

       

Interest, net

9,268

 

7,667

    

Other, net

3,013

 

2,537

    

 Net non-operating income

12,281

 

10,204

    
        

Income before income taxes

43,454

 

63,697

    
        

Provision for income taxes

19,750

 

24,142

    
        

Net income

23,704

 

39,555

    
        

Other comprehensive income (loss), net of tax

811

 

(3,633)

    
        

Comprehensive income

$     24,515

 

$     35,922

    
        

Weighted-average common shares outstanding

       

Basic

20,254

 

19,998

    

Diluted

21,144

 

20,716

    
        

Earnings per common share

       

Basic

$        1.17

 

$        1.98

    

Diluted

$        1.12

 

$        1.91

    
        

Salaries and benefits as a % of net revenue

65.1 %

 

65.3 %

    

General and administrative expenses as a % of net revenue

15.5 %

 

14.5 %

    

Cost of services as a % of net revenue

10.7 %

 

10.2 %

    

Research and development as a % of net revenue

2.1 %

 

2.2 %

    

Operating margin

3.8 %

 

6.9 %

    

 

Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)

 
 

Nine Months Ended September 30,

 

2024

 

2023

 

$

Change

 

%

Change

 

2024 
Margin1

 

2023 
Margin1

Revenue

           

Executive Search

           

Americas

$   418,302

 

$   398,210

 

$    20,092

 

5.0 %

    

Europe

124,706

 

129,104

 

(4,398)

 

(3.4) %

    

Asia Pacific

72,829

 

68,766

 

4,063

 

5.9 %

    

Total Executive Search

615,837

 

596,080

 

19,757

 

3.3 %

    

On-Demand Talent

125,983

 

111,410

 

14,573

 

13.1 %

    

Heidrick Consulting

80,562

 

66,212

 

14,350

 

21.7 %

    

Revenue before reimbursements (net revenue)

822,382

 

773,702

 

48,680

 

6.3 %

    

Reimbursements

12,408

 

10,090

 

2,318

 

23.0 %

    

Total revenue

$   834,790

 

$   783,792

 

$    50,998

 

6.5 %

    
            
            

Adjusted EBITDA

           

Executive Search

           

Americas

$   130,448

 

$   127,557

 

$     2,891

 

2.3 %

 

31.2 %

 

32.0 %

Europe

11,215

 

16,487

 

(5,272)

 

(32.0) %

 

9.0 %

 

12.8 %

Asia Pacific

10,182

 

7,901

 

2,281

 

28.9 %

 

14.0 %

 

11.5 %

Total Executive Search

151,845

 

151,945

 

(100)

 

(0.1) %

 

24.7 %

 

25.5 %

On-Demand Talent

(787)

 

660

 

(1,447)

 

NM

 

(0.6) %

 

0.6 %

Heidrick Consulting

(4,447)

 

(6,848)

 

2,401

 

35.1 %

 

(5.5) %

 

(10.3) %

Total segments

146,611

 

145,757

 

854

 

0.6 %

 

17.8 %

 

18.8 %

Research and Development

(14,312)

 

(15,396)

 

1,084

 

7.0 %

 

(1.7) %

 

(2.0) %

Global Operations Support

(47,205)

 

(40,501)

 

(6,704)

 

(16.6) %

 

(5.7) %

 

(5.2) %

Total Adjusted EBITDA

$     85,094

 

$     89,860

 

$    (4,766)

 

(5.3) %

 

10.3 %

 

11.6 %

  

1

Margin based on revenue before reimbursements (net revenue).

 

Heidrick & Struggles International, Inc.

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

(In thousands, except per share amounts)

(Unaudited)

 
 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2024

 

2023

 

2024

 

2023

Net income

$          14,829

 

$          14,987

 

$        23,704

 

$        39,555

        

Adjustments

       

Impairment charges, net of tax(1)

—

 

—

 

14,190

 

6,038

Earnout fair value adjustment, net of tax(2)(4)

39

 

—

 

788

 

—

Restructuring charges, net of tax(3)(4)

225

 

—

 

4,516

 

—

 Total adjustments

264

 

—

 

19,494

 

6,038

        

Adjusted net income

$          15,093

 

$          14,987

 

$        43,198

 

$        45,593

        

Weighted-average common shares outstanding

       

Basic

20,357

 

20,076

 

20,254

 

19,998

Diluted

21,024

 

20,553

 

21,144

 

20,716

        

Earnings per common share

       

Basic

$              0.73

 

$              0.75

 

$           1.17

 

$           1.98

Diluted

$              0.71

 

$              0.73

 

$           1.12

 

$           1.91

        

Adjusted earnings per common share

       

Basic

$              0.74

 

$              0.75

 

$           2.13

 

$           2.28

Diluted

$              0.72

 

$              0.73

 

$           2.04

 

$           2.20

  

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 nine months ended September 30, 2024. The Company recorded a goodwill impairment charge of $7.2 million in the Heidrick Consulting segment for the nine months ended September 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 nine months ended September 30, 2024.

3

The Company recorded restructuring charges of $6.9 million for the nine months ended September 30, 2024.

4

Amounts for the three months ended September 30, 2024 reflect the impact of a change to the estimated annual effective tax rate. There were no further impairment charges, earnout fair value adjustments, or restructuring charges recorded during the period.

 

Heidrick & Struggles International, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 
 

September 30,
2024

 

December 31,
2023

    

Current assets

   

Cash and cash equivalents

$         363,422

 

$         412,618

Marketable securities

46,005

 

65,538

Accounts receivable, net

186,252

 

133,128

Prepaid expenses

27,682

 

23,597

Other current assets

48,928

 

47,923

Income taxes recoverable

10,795

 

10,410

 Total current assets

683,084

 

693,214

    

Non-current assets

   

Property and equipment, net

53,508

 

35,752

Operating lease right-of-use assets

83,262

 

86,063

Assets designated for retirement and pension plans

11,203

 

11,105

Investments

59,089

 

47,287

Other non-current assets

25,507

 

17,071

Goodwill

185,400

 

202,252

Other intangible assets, net

15,110

 

20,842

Deferred income taxes

29,617

 

28,005

 Total non-current assets

462,696

 

448,377

    

Total assets

$      1,145,780

 

$      1,141,591

    

Current liabilities

   

Accounts payable

$           21,517

 

$           20,837

Accrued salaries and benefits

277,498

 

322,744

Deferred revenue

47,106

 

45,732

Operating lease liabilities

18,985

 

21,498

Other current liabilities

23,394

 

21,823

Income taxes payable

6,891

 

6,057

 Total current liabilities

395,391

 

438,691

    

Non-current liabilities

   

Accrued salaries and benefits

55,338

 

52,108

Retirement and pension plans

75,048

 

62,100

Operating lease liabilities

84,623

 

78,204

Other non-current liabilities

46,158

 

41,808

Deferred income taxes

5,937

 

6,402

 Total non-current liabilities

267,104

 

240,622

    

Total liabilities

662,495

 

679,313

    

Stockholders' equity

483,285

 

462,278

    

Total liabilities and stockholders' equity

$      1,145,780

 

$      1,141,591

 

Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
  

Three Months Ended

September 30,

  

2024

 

2023

Cash flows - operating activities

    

Net income

 

$        14,829

 

$        14,987

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

    

Depreciation and amortization

 

4,950

 

4,740

Deferred income taxes

 

273

 

(6,994)

Stock-based compensation expense

 

3,792

 

3,559

Accretion expense related to earnout payments

 

478

 

455

Gain on marketable securities

 

(1,343)

 

(346)

Loss on disposal of property and equipment

 

3

 

61

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

    

Accounts receivable

 

4,135

 

7,785

Accounts payable

 

(10,968)

 

1,257

Accrued expenses

 

83,375

 

76,113

Restructuring accrual

 

(1,396)

 

—

Deferred revenue

 

1,836

 

(2,165)

Income taxes recoverable and payable, net

 

(5,021)

 

9,205

Retirement and pension plan assets and liabilities

 

585

 

294

Prepaid expenses

 

595

 

(1,136)

Other assets and liabilities, net

 

5,022

 

1,659

Net cash provided by operating activities

 

101,145

 

109,474

     

Cash flows - investing activities

    

Acquisition of businesses, net of cash acquired

 

—

 

(2,204)

Capital expenditures

 

6,891

 

(2,805)

Purchases of marketable securities and investments

 

(346)

 

(47,781)

Proceeds from sales of marketable securities and investments

 

62,496

 

21,571

Net cash provided by (used in) investing activities

 

69,041

 

(31,219)

     

Cash flows - financing activities

    

Cash dividends paid

 

(3,211)

 

(3,149)

Payment of employee tax withholdings on equity transactions

 

(53)

 

—

Acquisition earnout payments

 

—

 

(2,038)

Net cash used in financing activities

 

(3,264)

 

(5,187)

     

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

 

6,578

 

(4,414)

     

Net increase in cash, cash equivalents and restricted cash

 

173,500

 

68,654

Cash, cash equivalents and restricted cash at beginning of period

 

189,922

 

217,817

Cash, cash equivalents and restricted cash at end of period

 

$      363,422

 

$      286,471

 

Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
  

Nine Months Ended

September 30,

  

2024

 

2023

Cash flows - operating activities

    

Net income

 

$          23,704

 

$          39,555

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

    

Depreciation and amortization

 

13,650

 

13,432

Deferred income taxes

 

(2,060)

 

(548)

Stock-based compensation expense

 

9,901

 

7,331

Accretion expense related to earnout payments

 

1,413

 

1,097

Gain on marketable securities

 

(2,323)

 

(2,040)

Loss on disposal of property and equipment

 

264

 

192

Impairment charges

 

16,224

 

7,246

Changes in assets and liabilities:

    

Accounts receivable

 

(51,707)

 

(52,205)

Accounts payable

 

(13,292)

 

(1,657)

Accrued expenses

 

(41,372)

 

(197,698)

Restructuring accrual

 

2,990

 

—

Deferred revenue

 

1,163

 

(1,622)

Income taxes recoverable and payable, net

 

347

 

6,617

Retirement and pension plan assets and liabilities

 

6,385

 

6,697

Prepaid expenses

 

(4,057)

 

(3,771)

Other assets and liabilities, net

 

(987)

 

(3,243)

Net cash used in operating activities

 

(39,757)

 

(180,617)

     

Cash flows - investing activities

    

Acquisition of business, net of cash acquired

 

—

 

(37,953)

Capital expenditures

 

(9,647)

 

(9,619)

Purchases of marketable securities and investments

 

(115,608)

 

(75,464)

Proceeds from sales of marketable securities and investments

 

129,070

 

289,689

Net cash provided by investing activities

 

3,815

 

166,653

     

Cash flows - financing activities

    

Repurchases of common stock

 

—

 

(904)

Cash dividends paid

 

(9,609)

 

(9,383)

Payment of employee tax withholdings on equity transactions

 

(3,800)

 

(4,141)

Acquisition earnout payments

 

—

 

(37,984)

Net cash used in financing activities

 

(13,409)

 

(52,412)

     

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

 

155

 

(2,642)

     

Net decrease in cash, cash equivalents and restricted cash

 

(49,196)

 

(69,018)

Cash, cash equivalents and restricted cash at beginning of period

 

412,618

 

355,489

Cash, cash equivalents and restricted cash at end of period

 

$        363,422

 

$        286,471

 

Heidrick & Struggles International, Inc.

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

(In thousands)

(Unaudited)

 
 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2024

 

2023

 

2024

 

2023

Revenue before reimbursements (net revenue)

$    278,559

 

$    263,160

 

$    822,382

 

$    773,702

        

Net income

14,829

 

14,987

 

23,704

 

39,555

Interest, net

(2,570)

 

(2,505)

 

(9,268)

 

(7,667)

Other, net

555

 

649

 

(3,013)

 

(2,537)

Provision for income taxes

6,268

 

9,006

 

19,750

 

24,142

Operating income

19,082

 

22,137

 

31,173

 

53,493

        

Adjustments

       

Depreciation

2,997

 

2,387

 

7,480

 

6,563

Intangible amortization

1,953

 

2,353

 

6,170

 

6,869

Earnout accretion

478

 

455

 

1,413

 

1,097

Earnout fair value adjustments

—

 

—

 

1,211

 

—

Acquisition contingent consideration

2,947

 

3,268

 

8,220

 

8,711

Deferred compensation plan

2,958

 

(1,427)

 

6,264

 

2,309

Reorganization costs

—

 

176

 

—

 

3,572

Impairment charges

—

 

—

 

16,224

 

7,246

   Restructuring charges

—

 

—

 

6,939

 

—

Total adjustments

11,333

 

7,212

 

53,921

 

36,367

        

Adjusted EBITDA

$      30,415

 

$      29,349

 

$      85,094

 

$      89,860

Adjusted EBITDA margin

10.9 %

 

11.2 %

 

10.3 %

 

11.6 %

 

Heidrick & Struggles International, Inc.

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

(In thousands)

(Unaudited)

 
 

Three Months Ended September 30, 2024

 

Executive 
Search

 

On-Demand 
Talent

 

Heidrick 
Consulting

 

Research & 
Development

 

Global 
Operations 
Support

 

Total

            

Revenue before reimbursements (net 
revenue)

$    204,389

 

$      46,231

 

$      27,939

 

$         —

 

$         —

 

$    278,559

            

Operating income (loss)1

46,270

 

(2,036)

 

(2,835)

 

(5,682)

 

(16,635)

 

19,082

            

Adjustments

           

Depreciation

1,389

 

175

 

227

 

1,029

 

177

 

2,997

Intangible amortization

17

 

1,560

 

376

 

—

 

—

 

1,953

Earnout accretion

—

 

436

 

42

 

—

 

—

 

478

Acquisition contingent compensation

209

 

1,628

 

1,110

 

—

 

—

 

2,947

Deferred compensation plan

2,849

 

—

 

55

 

47

 

7

 

2,958

Total adjustments

4,464

 

3,799

 

1,810

 

1,076

 

184

 

11,333

            

Adjusted EBITDA

$      50,734

 

$        1,763

 

$       (1,025)

 

$       (4,606)

 

$     (16,451)

 

$      30,415

Adjusted EBITDA margin

24.8 %

 

3.8 %

 

(3.7) %

 

(1.7) %

 

(5.9) %

 

10.9 %

            
 

Three Months Ended September 30, 2023

 

Executive 
Search

 

On-Demand 
Talent

 

Heidrick 
Consulting

 

Research & 
Development

 

Global 
Operations 
Support

 

Total

            

Revenue before reimbursements (net 
revenue)

$    198,814

 

$      41,053

 

$      23,293

 

$              —

 

$              —

 

$    263,160

            

Operating income (loss)1

50,290

 

(4,595)

 

(4,075)

 

(5,560)

 

(13,923)

 

22,137

            

Adjustments

           

Depreciation

1,288

 

125

 

156

 

655

 

163

 

2,387

Intangible amortization

40

 

1,869

 

444

 

—

 

—

 

2,353

Earnout accretion

—

 

397

 

58

 

—

 

—

 

455

Acquisition contingent compensation

649

 

1,559

 

1,060

 

—

 

—

 

3,268

Deferred compensation plan

(1,370)

 

—

 

(34)

 

(22)

 

(1)

 

(1,427)

Reorganization costs

111

 

65

 

—

 

—

 

—

 

176

Total adjustments

718

 

4,015

 

1,684

 

633

 

162

 

7,212

            

Adjusted EBITDA

$      51,008

 

$          (580)

 

$       (2,391)

 

$       (4,927)

 

$     (13,761)

 

$      29,349

Adjusted EBITDA margin

25.7 %

 

(1.4 %)

 

(10.3 %)

 

(1.9) %

 

(5.2) %

 

11.2 %

  

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)

 
 

Nine Months Ended September 30, 2024

 

Executive 
Search

 

On-Demand 
Talent

 

Heidrick 
Consulting

 

Research & 
Development

 

Global 
Operations 
Support

 

Total

            

Revenue before reimbursements (net 
revenue)

$    615,837

 

$    125,983

 

$      80,562

 

$         —

 

$         —

 

$    822,382

            

Operating income (loss)1

138,623

 

(28,580)

 

(13,207)

 

(17,002)

 

(48,661)

 

31,173

            

Adjustments

           

Depreciation

3,493

 

423

 

506

 

2,592

 

466

 

7,480

Intangible amortization

54

 

4,928

 

1,188

 

—

 

—

 

6,170

Earnout accretion

—

 

1,251

 

162

 

—

 

—

 

1,413

Earnout fair value adjustments

—

 

1,125

 

86

 

—

 

—

 

1,211

Acquisition contingent compensation

(126)

 

5,019

 

3,327

 

—

 

—

 

8,220

Deferred compensation plan

6,028

 

—

 

124

 

98

 

14

 

6,264

Impairment charges

1,463

 

14,761

 

—

 

—

 

—

 

16,224

Restructuring charges

2,310

 

286

 

3,367

 

—

 

976

 

6,939

Total adjustments

13,222

 

27,793

 

8,760

 

2,690

 

1,456

 

53,921

            

Adjusted EBITDA

$    151,845

 

$          (787)

 

$       (4,447)

 

$     (14,312)

 

$     (47,205)

 

$      85,094

Adjusted EBITDA margin

24.7 %

 

(0.6 %)

 

(5.5 %)

 

(1.7 %)

 

(5.7) %

 

10.3 %

            
 

Nine Months Ended September 30, 2023

 

Executive 
Search

 

On-Demand 
Talent

 

Heidrick 
Consulting

 

Research & 
Development

 

Global 
Operations 
Support

 

Total

            

Revenue before reimbursements (net 
revenue)

$    596,080

 

$    111,410

 

$      66,212

 

$              —

 

$              —

 

$    773,702

            

Operating income (loss)1

140,923

 

(11,821)

 

(17,877)

 

(16,746)

 

(40,986)

 

53,493

            

Adjustments

           

Depreciation

3,928

 

326

 

507

 

1,319

 

483

 

6,563

Intangible amortization

145

 

5,737

 

987

 

—

 

—

 

6,869

Earnout accretion

—

 

982

 

115

 

—

 

—

 

1,097

Acquisition contingent compensation

2,449

 

4,144

 

2,118

 

—

 

—

 

8,711

Deferred compensation plan

2,220

 

—

 

56

 

31

 

2

 

2,309

Reorganization costs

2,280

 

1,292

 

—

 

—

 

—

 

3,572

Impairment charges

—

 

—

 

7,246

 

—

 

—

 

7,246

Total adjustments

11,022

 

12,481

 

11,029

 

1,350

 

485

 

36,367

            

Adjusted EBITDA

$    151,945

 

$           660

 

$       (6,848)

 

$     (15,396)

 

$     (40,501)

 

$      89,860

Adjusted EBITDA margin

25.5 %

 

0.6 %

 

(10.3 %)

 

(2.0 %)

 

(5.2 %)

 

11.6 %

  

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