PR Newswire
CHICAGO, Nov. 4, 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
[email protected]
Media:
Bianca Wilson, Director, Public Relations
[email protected]
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 | % | 2024 | 2023 | ||||||
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 | 2023 | ||||||
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, | December 31, | ||
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 | On-Demand | Heidrick | Research & | Global | Total | ||||||
Revenue before reimbursements (net | $ 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 | On-Demand | Heidrick | Research & | Global | Total | ||||||
Revenue before reimbursements (net | $ 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 | On-Demand | Heidrick | Research & | Global | Total | ||||||
Revenue before reimbursements (net | $ 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 | On-Demand | Heidrick | Research & | Global | Total | ||||||
Revenue before reimbursements (net | $ 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
