Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Heidrick & Struggles International Inc (HSII, Financial) delivered a solid performance in the third quarter, with revenue growth of 6% and organic revenue growth of 5% year-to-date.
- The company's core executive search business showed excellent results, particularly in the Americas and Asia Pacific regions.
- The on-demand talent business achieved solid growth despite a slowdown in the broader temporary staffing space, highlighting HSII's unique market position.
- HSII's consulting segment saw a 20% increase in organic revenue year-over-year, driven by leadership assessment and development engagements.
- The company maintains a strong cash position of $409 million with no debt, providing financial flexibility to execute strategic plans and return capital to shareholders.
Negative Points
- The executive search business in Europe experienced a revenue decline of 3.3% or 5% on a constant currency basis.
- Adjusted EBITDA margin slightly decreased to 10.9% from 11.2% in the previous year, indicating room for improvement.
- The consulting segment, while showing revenue growth, still reported an adjusted EBITDA loss, highlighting ongoing challenges in achieving profitability.
- Salaries and benefits expenses increased by 9.5% from the prior year, impacting overall profitability.
- The company's effective tax rate is expected to be temporarily high at around 38% due to non-deductibility of acquisition earn-out costs.
Q & A Highlights
Q: Based on the confirmation data, it seems confirmations are slightly down sequentially. Is the market mostly driven by fee growth rather than volume? How did October shape up in light of the US election?
A: Confirmation growth remains strong, particularly in Asia Pacific and the Americas, with October showing robust confirmations. Despite the complex environment, client decisions have not frozen, as our services are essential for filling key executive roles. (Thomas Monahan, CEO; Steve Bondi, VP, Controller)
Q: Are you seeing customer decision-making that creates new roles, or is it more about turnover in existing roles?
A: While turnover from the "war for talent" has stabilized, new opportunities arise from economic shifts like AI, which create new roles and capabilities. Our team excels at staying ahead of client needs, converting these opportunities effectively. (Thomas Monahan, CEO; Steve Bondi, VP, Controller)
Q: In newer businesses adjacent to executive search, are you changing your management philosophy to focus more on profitability?
A: We aim for disciplined execution, focusing on profitable growth by scaling attractive offers where we have a competitive advantage. This approach ensures high performance in these businesses. (Thomas Monahan, CEO)
Q: Does your focus on organic growth imply less emphasis on acquisitions?
A: While we prioritize scaling our existing capabilities, we remain open to adding new capabilities through acquisitions. Our focus on organic growth reflects our rich and compelling client relationships. (Thomas Monahan, CEO)
Q: Regarding on-demand talent, what led to the trend of longer contracts and extensions?
A: This trend reflects our differentiated strategy in key roles and critical talent. Our value proposition is highly relevant, and recent leadership changes have positioned us for growth in these areas. (Thomas Monahan, CEO; Steve Bondi, VP, Controller)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
