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Heidrick & Struggles International Inc

Heidrick & Struggles Reports Third Quarter 2024 Results

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