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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 0-25837
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2681268
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification Number)
233 South Wacker Drive-Suite 4900
Chicago, Illinois
60606-6303
(Address of Principal Executive Offices)

(312) 496-1200
(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange On Which Registered
Common Stock, $0.01 par valueHSIIThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
  Accelerated filer 
Non-Accelerated filer 
¨
  Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 22, 2022, there were 19,737,277 shares of the Company’s common stock outstanding.



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
 
  PAGE
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 6.



PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 

HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June 30,
2022
December 31,
2021
 (Unaudited) 
Current assets
Cash and cash equivalents$336,634 $545,225 
Accounts receivable, net of allowances of $6,646 and $5,666, respectively
214,268 133,750 
Prepaid expenses25,819 21,754 
Other current assets46,314 41,449 
Income taxes recoverable4,990 3,210 
Total current assets628,025 745,388 
Non-current assets
Property and equipment, net27,294 27,085 
Operating lease right-of-use assets68,008 72,320 
Assets designated for retirement and pension plans11,721 12,715 
Investments33,756 36,051 
Other non-current assets26,296 23,377 
Goodwill138,511 138,524 
Other intangible assets, net7,720 9,169 
Deferred income taxes40,735 42,169 
Total non-current assets354,041 361,410 
Total assets$982,066 $1,106,798 
Current liabilities
Accounts payable$16,428 $20,374 
Accrued salaries and benefits286,683 409,026 
Deferred revenue48,764 51,404 
Operating lease liabilities18,400 19,332 
Other current liabilities60,383 24,554 
Income taxes payable3,544 10,004 
Total current liabilities434,202 534,694 
Non-current liabilities
Accrued salaries and benefits62,576 73,779 
Retirement and pension plans51,877 55,593 
Operating lease liabilities60,140 65,625 
Other non-current liabilities4,797 41,087 
Total non-current liabilities179,390 236,084 
Total liabilities613,592 770,778 
Commitments and contingencies (Note 17)
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued at June 30, 2022 and December 31, 2021
  
Common stock, $0.01 par value, 100,000,000 shares authorized, 19,742,357 and 19,596,607 shares issued, 19,737,277 and 19,591,527 shares outstanding at June 30, 2022 and December 31, 2021, respectively
197 196 
Treasury stock at cost, 5,080 shares at June 30, 2022 and December 31, 2021
(191)(191)
Additional paid in capital237,829 233,163 
Retained earnings137,570 101,177 
Accumulated other comprehensive income (loss)(6,931)1,675 
Total stockholders’ equity368,474 336,020 
Total liabilities and stockholders’ equity$982,066 $1,106,798 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
1



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Revenue
Revenue before reimbursements (net revenue)$298,701 $259,981 $582,562 $453,637 
Reimbursements2,408 1,254 4,084 2,329 
Total revenue301,109 261,235 586,646 455,966 
Operating expenses
Salaries and benefits207,684 186,054 409,129 327,417 
General and administrative expenses35,203 27,353 64,997 54,721 
Cost of services17,403 14,675 35,391 16,131 
Research and development4,545  8,947  
Restructuring charges 3,193  7,054 
Reimbursed expenses2,408 1,254 4,084 2,329 
Total operating expenses267,243 232,529 522,548 407,652 
Operating income33,866 28,706 64,098 48,314 
Non-operating income (expense)
Interest, net299 35 409 117 
Other, net774 3,033 (1,697)6,115 
Net non-operating income (expense)1,073 3,068 (1,288)6,232 
Income before income taxes34,939 31,774 62,810 54,546 
Provision for income taxes10,790 11,009 20,194 18,949 
Net income24,149 20,765 42,616 35,597 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment(7,524)5 (8,606)(688)
Other comprehensive income (loss), net of tax(7,524)5 (8,606)(688)
Comprehensive income$16,625 $20,770 $34,010 $34,909 
Weighted-average common shares outstanding
Basic19,726 19,510 19,675 19,449 
Diluted20,314 20,115 20,485 20,197 
Earnings per common share
Basic$1.22 $1.06 $2.17 $1.83 
Diluted$1.19 $1.03 $2.08 $1.76 
Cash dividends paid per share$0.15 $0.15 $0.30 $0.30 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
2



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except per share amounts)
(Unaudited)
 
   Additional
Paid in
Capital
Retained EarningsAccumulated
Other
Comprehensive
Income
Total
Common StockTreasury Stock
SharesAmountSharesAmount
Balance at December 31, 202119,597 $196 5 $(191)$233,163 $101,177 $1,675 $336,020 
Net income— — — — — 18,467 — 18,467 
Other comprehensive loss, net of tax— — — — — — (1,082)(1,082)
Common and treasury stock transactions:
Stock-based compensation— — — — 3,698 — — 3,698 
Vesting of equity awards, net of tax withholding126 1 — — (3,220)— — (3,219)
Cash dividends declared ($0.15 per share)
— — — — — (2,940)— (2,940)
Dividend equivalents on restricted stock units— — — — — (179)— (179)
Balance at March 31, 202219,723 $197 5 $(191)$233,641 $116,525 $593 $350,765 
Net income— — — — — 24,149 — 24,149 
Other comprehensive loss, net of tax— — — — — — (7,524)(7,524)
Common and treasury stock transactions:
Stock-based compensation— — — — 3,784 — — 3,784 
Vesting of equity awards19  — — 404 — — 404 
Cash dividends declared ($0.15 per share)
— — — — — (2,957)— (2,957)
Dividend equivalents on restricted stock units— — — — — (147)— (147)
Balance at June 30, 202219,742 197 5 (191)237,829 137,570 (6,931)368,474 

























3



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except per share amounts)
(Unaudited)

   Additional
Paid in
Capital
Retained EarningsAccumulated
Other
Comprehensive
Income
Total
Common StockTreasury Stock
SharesAmountSharesAmount
Balance at December 31, 202019,586 $196 226 $(8,041)$231,048 $40,982 $3,417 $267,602 
Net income— — — — — 14,832 — 14,832 
Other comprehensive loss, net of tax— — — — — — (693)(693)
Common and treasury stock transactions:
Stock-based compensation— — — — 2,991 — — 2,991 
Vesting of equity awards, net of tax withholdings— — (138)4,951 (8,041)— — (3,090)
Cash dividends declared ($0.15 per share)
— — — — — (2,905)— (2,905)
Dividend equivalents on restricted stock units— — — — — (167)— (167)
Balance at March 31, 202119,586 $196 88 $(3,090)$225,998 $52,742 $2,724 $278,570 
Net income— — — — — 20,765 — 20,765 
Other comprehensive income, net of tax— — — — — — 5 5 
Common and treasury stock transactions:
Stock-based compensation— — — — 2,861 — — 2,861 
Vesting of equity awards— — (23)808 (808)— —  
Re-issuance of treasury stock— — (9)280 65 — — 345 
Cash dividends declared ($0.15 per share)
— — — — — (2,926)— (2,926)
Dividend equivalents on restricted stock units— — — — — (67)— (67)
Balance at June 30, 202119,586 $196 56 $(2,002)$228,116 $70,514 $2,729 $299,553 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
4



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 Six Months Ended
June 30,
 20222021
Cash flows - operating activities
Net income$42,616 $35,597 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization5,241 12,042 
Deferred income taxes(246)(1,139)
Stock-based compensation expense7,482 5,852 
Accretion expense related to earnout payments545 181 
Gain on marketable securities (1)
Loss on disposal of property and equipment309 115 
Changes in assets and liabilities:
Accounts receivable(84,783)(70,980)
Accounts payable(3,944)2,497 
Accrued expenses(124,281)(24,292)
Restructuring accrual (4,663)
Deferred revenue(1,527)2,878 
Income taxes recoverable and payable, net(8,114)12,515 
Retirement and pension plan assets and liabilities3,297 1,436 
Prepaid expenses(4,670)(5,982)
Other assets and liabilities, net(11,437)(18,399)
Net cash used in operating activities(179,512)(52,343)
Cash flows - investing activities
Acquisition of business, net of cash acquired— (31,969)
Capital expenditures(4,236)(2,706)
Purchases of marketable securities and investments(5,358)(1,671)
Proceeds from sales of marketable securities and investments990 20,315 
Net cash used in investing activities(8,604)(16,031)
Cash flows - financing activities
Cash dividends paid(6,223)(6,065)
Payment of employee tax withholdings on equity transactions(3,219)(3,090)
Net cash used in financing activities(9,442)(9,155)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash(11,051)(1,112)
Net decrease in cash, cash equivalents and restricted cash(208,609)(78,641)
Cash, cash equivalents and restricted cash at beginning of period545,259 316,489 
Cash, cash equivalents and restricted cash at end of period336,650 $237,848 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

5



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All tables in thousands, except per share figures)
(Unaudited) 

1.    Basis of Presentation of Interim Financial Information

The accompanying unaudited Condensed Consolidated Financial Statements of Heidrick & Struggles International, Inc. and subsidiaries (the "Company") have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Significant items subject to estimates and assumptions include revenue recognition, income taxes, interim effective tax rate and the assessment of goodwill, other intangible assets and long-lived assets for impairment. Estimates are subject to a degree of uncertainty and actual results could differ from these estimates. In the opinion of management, all adjustments necessary to fairly present the financial position of the Company at June 30, 2022 and December 31, 2021, the results of operations for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021 have been included and are of a normal, recurring nature except as otherwise disclosed. These financial statements and notes are to be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022.

2.    Summary of Significant Accounting Policies

A complete listing of the Company’s significant accounting policies is discussed in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Revenue Recognition

See Note 3, Revenue.

Cost of Services

Cost of services consists of third-party contractor costs related to the delivery of various services in the Company's On-Demand Talent and Heidrick Consulting operating segments.

Research and Development

Research and development consists of payroll, employee benefits, stock-based compensation, other employee expenses and third-party professional fees associated with new product development.

Marketable Securities

The Company’s marketable securities consist of available-for-sale debt securities with original maturities exceeding three months.

Restricted Cash

The following table provides a reconciliation of the cash and cash equivalents between the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Cash Flows as of June 30, 2022 and 2021, and December 31, 2021 and 2020:
June 30,December 31,
2022202120212020
Cash and cash equivalents$336,634 $237,832 $545,225 $316,473 
Restricted cash included within other non-current assets16 16 34 16 
Total cash, cash equivalents and restricted cash$336,650 $237,848 $545,259 $316,489 
6




Earnings per Common Share

Basic earnings per common share is computed by dividing net income by weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Common equivalent shares are excluded from the determination of diluted earnings per share in periods in which they have an anti-dilutive effect.

The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net income$24,149 $20,765 $42,616 $35,597 
Weighted average shares outstanding:
Basic19,726 19,510 19,675 19,449 
Effect of dilutive securities:
Restricted stock units455 498 608 593 
Performance stock units133 107 202 155 
Diluted20,314 20,115 20,485 20,197 
Basic earnings per share$1.22 $1.06 $2.17 $1.83 
Diluted earnings per share$1.19 $1.03 $2.08 $1.76 

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in Operating Lease Right-of-Use Assets, Operating Lease Liabilities - Current and Operating Lease Liabilities - Non-Current in the Company's Condensed Consolidated Balance Sheets. The Company does not have any leases that meet the finance lease criteria.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, an incremental borrowing rate based on the information available at the commencement date is used in determining the present value of lease payments. The operating lease right-of-use asset also includes any lease payments made in advance and any accrued rent expense balances. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components. For office leases, the Company accounts for the lease and non-lease components as a single lease component. For equipment leases, such as vehicles and office equipment, the Company accounts for the lease and non-lease components separately.

Recently Issued Financial Accounting Standards

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance is intended to provide temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The new guidance is not expected to have a material effect on the Company's financial statements.
7



3.    Revenue

Executive Search

Revenue is recognized as performance obligations are satisfied by transferring a good or service to a client. Generally, each executive search contract contains one performance obligation which is the process of identifying potentially qualified candidates for a specific client position. In most contracts, the transaction price includes both fixed and variable consideration. Fixed compensation is comprised of a retainer, equal to approximately one-third of the estimated first year compensation for the position to be filled, and indirect expenses, equal to a specified percentage of the retainer, as defined in the contract. The Company generally bills clients for the retainer and indirect expenses in one-third increments over a three-month period commencing in the month of a client’s acceptance of the contract. If actual compensation of a placed candidate exceeds the original compensation estimate, the Company is often authorized to bill the client for one-third of the excess compensation. The Company refers to this additional billing as uptick revenue. In most contracts, variable consideration is comprised of uptick revenue and direct expenses. The Company bills its clients for uptick revenue upon completion of the executive search, and direct expenses are billed as incurred.

The Company estimates uptick revenue at contract inception, based on a portfolio approach, utilizing the expected value method based on a historical analysis of uptick revenue realized in the Company’s geographic regions and industry practices, and initially records a contract’s uptick revenue in an amount that is probable not to result in a significant reversal of cumulative revenue recognized when the actual amount of uptick revenue for the contract is known. Differences between the estimated and actual amounts of variable consideration are recorded when known. The Company does not estimate revenue for direct expenses as it is not materially different than recognizing revenue as direct expenses are incurred.

Revenue from executive search engagement performance obligations is recognized over time as clients simultaneously receive and consume the benefits provided by the Company's performance.  Revenue from executive search engagements is recognized over the expected average period of performance, in proportion to the estimated personnel time incurred to fulfill the obligations under the executive search contract. Revenue is generally recognized over a period of approximately six months.

The Company's executive search contracts contain a replacement guarantee which provides for an additional search to be completed, free of charge except for expense reimbursements, should the candidate presented by the Company be hired by the client and subsequently terminated by the client for performance reasons within a specified period of time. The replacement guarantee is an assurance warranty, which is not a performance obligation under the terms of the executive search contract, as the Company does not provide any services under the terms of the guarantee that transfer benefits to the client in excess of assuring that the identified candidate complies with the agreed-upon specifications. The Company accounts for the replacement guarantee under the relevant warranty guidance in Accounting Standards Codification 460 - Guarantees.

On-Demand Talent

The Company enters into contracts with clients that outline the general terms and conditions of the assignment to provide on-demand consultants for various types of consulting projects, which consultants may be independent contractors or temporary employees. The consideration the Company expects to receive under each contract is dependent on the time-based fees specified in the contract. Revenue from on-demand engagement performance obligations is recognized over time as clients simultaneously receive and consume the benefits provided by the Company's performance. The Company has applied the practical expedient to recognize revenue for these services in the amount to which the Company has a right to invoice the client, as this amount corresponds directly with the value provided to the client for the performance completed to date. For transactions where a third-party contractor is involved in providing the services to the client, the Company reports the revenue and the related direct costs on a gross basis as it has determined that it is the principal in the transaction. The Company is primarily responsible for fulfilling the promise to provide consulting services to its clients and the Company has discretion in establishing the prices charged to clients for the consulting services and is able to contractually obligate the independent service provider to deliver services and deliverables that the Company has agreed to provide to its clients.

8



Heidrick Consulting

Revenue is recognized as performance obligations are satisfied by transferring a good or service to a client. Heidrick Consulting enters into contracts with clients that outline the general terms and conditions of the assignment to provide succession planning, executive assessment, top team and board effectiveness and culture shaping programs. The consideration the Company expects to receive under each contract is generally fixed. Most of the Company's consulting contracts contain one performance obligation, which is the overall process of providing the consulting service requested by the client. The majority of the Company's consulting revenue is recognized over time utilizing both input and output methods. Contracts that contain coaching sessions, training sessions or the completion of assessments are recognized using the output method as each session or assessment is delivered to the client. Contracts that contain general consulting work are recognized using the input method utilizing a measure of progress that is based on time incurred on the project.
The Company enters into enterprise agreements with clients to provide a license for online access, via the Company's Culture Connect platform, to training and other proprietary material related to the Company's culture shaping programs. The consideration the Company expects to receive under the terms of an enterprise agreement is comprised of a single fixed fee. The enterprise agreements contain multiple performance obligations, the delivery of materials via Culture Connect and material rights related to options to renew enterprise agreements at a significant discount. The Company allocates the transaction price to the performance obligations in the contract on a stand-alone selling price basis. The stand-alone selling price for the initial term of the enterprise agreement is outlined in the contract and is equal to the price paid by the client for the agreement over the initial term of the contract. The stand-alone selling price for the options to renew, or material right, are not directly observable and must be estimated. This estimate is required to reflect the discount the client would obtain when exercising the option to renew, adjusted for the likelihood that the option will be exercised. The Company estimates the likelihood of renewal using a historical analysis of client renewals. Access to Culture Connect represents a right to access the Company’s intellectual property that the client simultaneously receives and consumes as the Company performs under the agreement, and therefore the Company recognizes revenue over time. Given the continuous nature of this commitment, the Company utilizes straight-line ratable revenue recognition over the estimated subscription period as the Company's clients will receive and consume the benefits from Culture Connect equally throughout the contract period. Revenue related to client renewals of enterprise agreements is recognized over the term of the renewal, which is generally twelve months. Enterprise agreements do not comprise a significant portion of the Company's revenue.

Contract Balances

Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. Contract assets and liabilities are classified as current due to the nature of the Company's contracts, which are completed within one year. Contract assets are included within Other Current Assets on the Condensed Consolidated Balance Sheets.

Unbilled receivables: Unbilled receivables represents contract assets from revenue recognized over time in excess of the amount billed to the client and the amount billed to the client is solely dependent upon the passage of time. This amount includes revenue recognized in excess of billed executive search retainers, Heidrick Consulting fees, and On-Demand Talent fees.

Contract assets: Contract assets represent revenue recognized over time in excess of the amount billed to the client and the amount billed to the client is not solely subject to the passage of time. This amount primarily includes revenue recognized for upticks and contingent placement fees in executive search contracts.

Deferred revenue: Contract liabilities consist of deferred revenue, which is equal to billings in excess of revenue
9



recognized.

The following table outlines the changes in the contract asset and liability balances from December 31, 2021 to June 30, 2022:
June 30,
2022
December 31,
2021
Change
Contract assets
Unbilled receivables, net$19,592 $17,947 $1,645 
Contract assets21,639 18,995 2,644 
Total contract assets
41,231 36,942 4,289 
Contract liabilities
Deferred revenue$48,764 $51,404 $(2,640)

During the six months ended June 30, 2022, the Company recognized revenue of $42.3 million that was included in the contract liabilities balance at the beginning of the period. The amount of revenue recognized during the six months ended June 30, 2022, from performance obligations partially satisfied in previous periods as a result of changes in the estimates of variable consideration was $12.7 million.

Each of the Company's contracts has an expected duration of one year or less. Accordingly, the Company has elected to utilize the available practical expedient related to the disclosure of the transaction price allocated to the remaining performance obligations under its contracts. The Company has also elected the available practical expedients related to adjusting for the effects of a significant financing component and the capitalization of contract acquisition costs. The Company charges and collects from its clients sales tax and value added taxes as required by certain jurisdictions. The Company has made an accounting policy election to exclude these items from the transaction price in its contracts.

4.    Credit Losses

The Company is exposed to credit losses primarily through the provision of its executive search, consulting, and on-demand talent services. The Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of clients' trade accounts receivables. Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is primarily based on historical loss-rate experience. When required, the Company adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions. The Company generally assesses future economic conditions for a period of sixty to ninety days, which corresponds with the contractual life of its accounts receivables. Additionally, specific allowance amounts are established to record the appropriate provision for clients that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of clients' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.

The activity in the allowance for credit losses on the Company's trade receivables is as follows:
Balance at December 31, 2021
$5,666 
Provision for credit losses3,966 
Write-offs(2,876)
Foreign currency translation(110)
Balance at June 30, 2022
$6,646 

The Company had zero available for sale debt securities in an unrealized loss position at June 30, 2022 and December 31, 2022.


10



5.    Property and Equipment, net

The components of the Company’s property and equipment are as follows:
June 30,
2022
December 31,
2021
Leasehold improvements$40,635 $42,252 
Office furniture, fixtures and equipment13,748 14,933 
Computer equipment and software26,590 24,293 
Property and equipment, gross80,973 81,478 
Accumulated depreciation(53,679)(54,393)
Property and equipment, net$27,294 $27,085 

Depreciation expense for the three months ended June 30, 2022 and 2021 was $1.8 million and $1.7 million, respectively. Depreciation expense for the six months ended June 30, 2022 and 2021 was $3.6 million and $3.5 million, respectively.

6.    Leases

The Company's lease portfolio is comprised of operating leases for office space and equipment. The majority of the Company's leases include both lease and non-lease components, which the Company accounts for differently depending on the underlying class of asset. Certain of the Company's leases include one or more options to renew or terminate the lease at the Company's discretion. Generally, the renewal and termination options are not included in the right-of-use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal and termination options and when they are reasonably certain of exercise, includes the renewal or termination option in the lease term.

As most of the Company's leases do not provide an implicit interest rate, the Company utilizes an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company has a centrally managed treasury function and therefore, a portfolio approach is applied in determining the incremental borrowing rate. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a fully collateralized basis over a similar term in an amount equal to the total lease payments in a similar economic environment.

Office leases have remaining lease terms that range from less than one year to 11.0 years, some of which also include options to extend or terminate the lease. Most office leases contain both fixed and variable lease payments. Variable lease costs consist primarily of rent escalations based on an established index or rate and taxes, insurance, and common area or other maintenance costs, which are paid based on actual costs incurred by the lessor. The Company has elected to utilize the available practical expedient to not separate lease and non-lease components for office leases.

As part of the Company's 2020 Plan (as defined below), a lease component related to one of the Company's offices was abandoned and the useful life of the associated right-of-use asset was shortened to correspond with the cease-use date. As a result of the change in the useful life, approximately $3.5 million and $7.5 million of right-of-use asset amortization was accelerated and recorded in Restructuring charges in the Condensed Consolidated Statements of Comprehensive Income and Depreciation and amortization in the Condensed Consolidated Statements of Cash Flows during the three and six months ended June 30, 2021, respectively.

Equipment leases, which are comprised of vehicle and office equipment leases, have remaining terms that range from less than one year to 4.4 years, some of which also include options to extend or terminate the lease. The Company's equipment leases do not contain variable lease payments. The Company separates the lease and non-lease components for its equipment leases. Equipment leases do not comprise a significant portion of the Company's lease portfolio.

11



Lease cost components included within General and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Operating lease cost$4,485 $4,908 $8,843 $9,775 
Variable lease cost1,472 $1,077 2,633 2,305 
Total lease cost$5,957 $5,985 $11,476 $12,080 

Supplemental cash flow information related to the Company's operating leases is as follows for the six months ended June 30:
20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$9,590 $17,407 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$3,318 $898 

The weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, are as follows:
20222021
Weighted Average Remaining Lease Term
Operating leases6.3 years5.8 years
Weighted Average Discount Rate
Operating leases3.27 %3.41 %

The future maturities of the Company's operating lease liabilities as of June 30, 2022, for the years ended December 31 are as follows:
Operating Lease Maturity
2022$8,194 
202318,503 
202416,882 
20259,459 
20268,105 
Thereafter25,906 
Total lease payments87,049 
Less: Interest(8,509)
Present value of lease liabilities$78,540 

7.    Financial Instruments and Fair Value

Cash, Cash Equivalents and Marketable Securities

The Company's investments in marketable debt securities, which consist of U.S. Treasury bills, are classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument's underlying contractual maturity date. Unrealized gains and losses on marketable debt securities classified as available-for-sale are recognized in Accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheets until realized.

12



The Company's cash, cash equivalents, and marketable securities by significant investment category are as follows:
Cash and Cash Equivalents
Balance at June 30, 2022
Cash$138,271 
Level 1(1):
Money market funds69,537 
U.S. Treasury securities128,826 
Total Level 1198,363 
Total$336,634 

Cash and Cash Equivalents
Balance at December 31, 2021
Cash$265,233 
Level 1(1):
Money market funds80,798 
U.S. Treasury securities199,194 
Total Level 1279,992 
Total$545,225 

(1)Level 1 – Quoted prices in active markets for identical assets and liabilities.

Investments, Assets Designated for Retirement and Pension Plans and Associated Liabilities

The Company has a U.S. non-qualified deferred compensation plan that consists primarily of U.S. marketable securities and mutual funds. The aggregate cost basis for these investments was $27.7 million and $22.9 million as of June 30, 2022 and December 31, 2021, respectively.

The Company also maintains a pension plan for certain current and former employees in Germany. The pensions are individually fixed Euro amounts that vary depending on the function and the eligible years of service of the employee. The Company’s investment strategy is to support its pension obligations through reinsurance contracts. The BaFin—German Federal Financial Supervisory Authority—supervises the insurance companies and the reinsurance contracts. The BaFin requires each reinsurance contract to guarantee a fixed minimum return. The Company’s pension benefits are fully reinsured by group insurance contracts with ERGO Lebensversicherung AG, and the group insurance contracts are measured in accordance with BaFin guidelines (including mortality tables and discount rates) which are considered Level 2 inputs.

13



The following tables provide a summary of the fair value measurements for each major category of investments, assets designated for retirement and pension plans and associated liabilities measured at fair value:
Balance Sheet Classification
Fair ValueOther Current AssetsAssets Designated for Retirement and Pension PlansInvestmentsOther Current LiabilitiesRetirement and Pension Plans
Balance at June 30, 2022
Measured on a recurring basis:
Level 1(1):