First Quarter 2025 Results May 5, 2025 Cautionary Statement Regarding Forward-Looking Information This press release contains forward-looking statements within the meaning of the federal securities laws, including statements regarding guidance for the second quarter of 2025. 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 ...

Core Viewpoint - Heidrick & Struggles (HSII) reported quarterly earnings of $0.67 per share, matching the Zacks Consensus Estimate, with revenues of $283.58 million, exceeding expectations by 6.04% [1][2] Financial Performance - Earnings per share (EPS) for the quarter were $0.67, unchanged from the previous year, and the company has surpassed consensus EPS estimates three times in the last four quarters [1] - Revenues for the quarter were $283.58 million, compared to $265.2 million a year ago, and the company has topped consensus revenue estimates four times over the last four quarters [2] Market Performance - Heidrick & Struggles shares have declined approximately 10.4% since the beginning of the year, while the S&P 500 has decreased by 3.3% [3] - The company's current Zacks Rank is 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.70, with expected revenues of $278.07 million, and for the current fiscal year, the EPS estimate is $2.69 on revenues of $1.09 billion [7] - The staffing industry, to which Heidrick & Struggles belongs, is currently ranked in the bottom 9% of Zacks industries, which may impact stock performance [8]

Financial Data and Key Metrics Changes - First quarter revenue reached approximately $284 million, marking a 7% increase compared to Q1 2024 [22] - Adjusted EBITDA improved by $3.3 million to $29.1 million, with an adjusted EBITDA margin expanding by 50 basis points to 10.3% [22] - Adjusted net income for the quarter was $14.2 million, consistent with the previous year [28] Business Line Data and Key Metrics Changes - Executive Search revenue grew 6% to $213 million, with adjusted EBITDA of $52.3 million and an adjusted EBITDA margin of 24.5% [25][26] - On Demand Talent revenue increased 12% to $43 million, achieving adjusted EBITDA of $400,000 compared to a loss of $900,000 in the prior year [26] - Heidrick Consulting saw organic revenue increase 7% year over year to $28 million, but recorded an adjusted EBITDA loss of $2.1 million [27] Market Data and Key Metrics Changes - Revenue increases in Executive Search were noted across regions: 6% in The Americas, 9% in Europe, and 1% in APAC [25] - European performance was strong across various sectors, including technology, financial services, and industrials [62] Company Strategy and Development Direction - The company aims to be the most trusted leadership partner for the C-suite and board, focusing on leadership talent [12] - There is a commitment to grow executive search and assessment capabilities, which are seen as cornerstones of the enterprise [13] - The strategy includes staying close to clients and adapting to their changing needs, particularly in times of economic uncertainty [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current tumultuous operating environment but emphasized strong results and resilience [4][5] - There is a recognition that client caution may affect decision-making in the second half of the year [8] - The company remains confident in its ability to navigate the evolving landscape and drive long-term value for shareholders [30] Other Important Information - The company ended the first quarter with a strong cash position of $325 million, up from $253 million in March 2024 [28] - The second quarter revenue is expected to be within the range of $285 million to $305 million, compared to $279 million in Q2 2024 [29] Q&A Session Summary Question: Insights on past disruptions and their relevance to current circumstances - Management noted that while segments may slow during economic distress, they are not currently seeing this impact [35] - They highlighted the importance of their business attributes, such as no debt and a diversified business mix, in weathering economic storms [36][38] Question: Thoughts on cash usage and acquisition pipeline - Management indicated that cash flow is being managed to pay out earn-out payments from past acquisitions, while also prioritizing organic investments [40][41] Question: Trends in M&A activity and its impact on client demand - M&A activity creates opportunities for the company to engage with clients on leadership and cultural integration [45][46] Question: Profitability expectations for Heidrick Consulting and On Demand Talent - Management expects both segments to move towards profitability, with long-term guidance remaining intact [68] Question: Demand trends among different end markets, particularly financial services - Demand has been broad-based across sectors, with financial services performing well [73]

Revenue Performance - For the three months ended March 31, 2025, net revenue was 100% compared to 100% in the same period of 2024, with total revenue slightly decreasing from 101.5% to 101.4%[129] - Consolidated total revenue increased by $18.3 million, or 6.8%, to $287.4 million for the three months ended March 31, 2025, compared to $269.1 million for the same period in 2024[132] - Consolidated net revenue increased by $18.4 million, or 6.9%, to $283.6 million for the three months ended March 31, 2025, with Executive Search net revenue rising by $11.9 million, or 5.9%[133] - The Americas segment reported net revenue of $144.4 million, an increase of 5.7%, with a 3.6% rise in the number of executive search confirmations[146] - The Europe segment reported net revenue of $45.4 million, an increase of 9.4%, driven by a 7.5% increase in executive search confirmations[150] - The Asia Pacific segment reported net revenue of $23.6 million for the three months ended March 31, 2025, an increase of 1.2% compared to the prior year[154] - The On-Demand Talent segment reported net revenue of $42.6 million for the three months ended March 31, 2025, an increase of 12.4% compared to the prior year[158] - The Heidrick Consulting segment reported net revenue of $27.6 million for the three months ended March 31, 2025, an increase of 6.8% compared to the prior year[163] Operating Expenses and Profitability - Operating expenses increased to 95.6% of net revenue in Q1 2025 from 95.3% in Q1 2024, with salaries and benefits rising to 66.8% from 65.8%[129] - Net income for Q1 2025 was 4.7%, down from 5.3% in Q1 2024, indicating a decline in profitability[129] - Consolidated salaries and benefits expense increased by $15.1 million, or 8.6%, to $189.5 million for the three months ended March 31, 2025[135] - Consolidated general and administrative expenses increased by $0.1 million, or 0.1%, to $41.4 million for the three months ended March 31, 2025[137] - Consolidated cost of services increased by $2.6 million, or 9.6%, to $30.1 million for the three months ended March 31, 2025[139] - Research and development expenses increased by $0.7 million, or 11.8%, to $6.4 million for the three months ended March 31, 2025[141] - The compensation model for consultants ties a portion of their pay to net revenue generated, impacting overall compensation expense and operating margin[127] Key Performance Indicators - Adjusted EBITDA and Adjusted EBITDA margin are key performance indicators, with the potential for improvement as revenue increases without a proportional rise in operating costs[122] - Adjusted EBITDA was $29.1 million for the three months ended March 31, 2025, an increase of $3.3 million, or 12.6%, compared to $25.9 million for the same period in 2024[142] - Adjusted EBITDA margin improved to 10.3% for the three months ended March 31, 2025, compared to 9.8% for the same period in 2024[142] - Adjusted EBITDA for the On-Demand Talent segment improved to $0.4 million for the three months ended March 31, 2025, compared to an Adjusted EBITDA loss of $0.9 million in the prior year[162] - The Global Operations Support segment reported an Adjusted EBITDA loss of $16.9 million for the three months ended March 31, 2025, a decrease of $2.2 million compared to the prior year[170] Strategic Focus and Initiatives - The company is focused on expanding revenue streams beyond executive search through the One Heidrick strategy and the upcoming Heidrick Digital[120] - Heidrick Consulting has pivoted to create new digital solutions for leadership assessments and team acceleration, which can be delivered virtually[119] - The company emphasizes a data-driven approach in executive search, utilizing the Heidrick Leadership Framework and Heidrick Connect for enhanced client engagement[113] - The company employs over 500 consultants globally, leveraging their expertise to enhance leadership effectiveness for clients[110] Risks and Financial Position - The company faces various risks, including macroeconomic conditions, cybersecurity threats, and geopolitical instability, which could materially affect future performance[109] - Cash used in operating activities was $232.2 million for the three months ended March 31, 2025, primarily due to a decrease in accrued expenses of $199.3 million[177] - Cash, cash equivalents, and marketable securities totaled $324.7 million as of March 31, 2025, including $170.6 million held by foreign subsidiaries[176] - The company had no outstanding borrowings as of March 31, 2025, and was in compliance with financial covenants under the Amended Credit Agreement[175] - The company entered into a committed revolving credit facility of $100 million on March 17, 2025, with a maturity date extended to March 17, 2030[173] Currency and Foreign Operations - A 10% change in average exchange rates for foreign currencies could impact net income by approximately $0.6 million for the three months ended March 31, 2025[188] - The company operates in multiple regions including the Americas, Europe, and Asia Pacific, using various currencies[188] - Revenue earned in each country is generally matched with associated expenses, reducing currency risk to earnings[188] - Certain assets and liabilities are denominated in currencies other than the U.S. dollar, leading to potential valuation fluctuations[188] - Local currencies of subsidiaries are generally designated as functional currencies, affecting translation into U.S. dollars[188] - Financial information by segment is detailed in Note 15 of the Quarterly Report on Form 10-Q[188]

Financial Performance - Q1 2025 net revenue reached $283.6 million, a 6.9% increase year-over-year from $265.2 million in Q1 2024[4] - Adjusted EBITDA for Q1 2025 was $29.1 million, up from $25.9 million in Q1 2024, with an adjusted EBITDA margin of 10.3%[8] - Adjusted net income for Q1 2025 was $14.2 million, consistent with the prior year, resulting in adjusted diluted earnings per share of $0.67[7] - Net revenue for the three months ended March 31, 2025, was $283,578,000, an increase of $18,381,000 or 6.9% compared to $265,197,000 in 2024[27] - Total revenue for the same period was $287,442,000, reflecting a growth of $18,344,000 or 6.8% from $269,098,000 in 2024[27] - Net income for the three months ended March 31, 2025, was $13,306,000, a decrease of $726,000 or 5.2% from $14,032,000 in 2024[31] - Adjusted net income rose to $14,191,000, compared to $14,032,000 in 2024, indicating a stable performance despite the drop in net income[31] - Operating income for Q1 2025 was $16,228,000, slightly down from $16,274,000 in Q1 2024[37] Segment Performance - Executive Search segment net revenue increased by 5.9% to $213.4 million, driven by growth across all regions[9] - On-Demand Talent segment net revenue rose by 12.4% to $42.6 million, reflecting strong demand[10] - Heidrick Consulting segment net revenue grew by 6.8% to $27.6 million, indicating positive performance in consulting services[11] - Revenue breakdown for Q1 2025 included $213,390,000 from Executive Search, $42,564,000 from On-Demand Talent, and $27,624,000 from Heidrick Consulting[39] - Operating loss in the On-Demand Talent segment was $5,634,000 for Q1 2025, compared to a loss of $4,849,000 in Q1 2024[39] Expenses and Margins - Operating expenses increased to $271,214,000, up $18,390,000 or 7.3% from $252,824,000 in the previous year[27] - The company reported an operating margin of 5.7% for the three months ended March 31, 2025, compared to 6.1% in 2024[27] - Total adjustments to operating income in Q1 2025 amounted to $12,894,000, compared to $9,594,000 in Q1 2024[39] - Reorganization costs in Q1 2025 were $4,161,000, with no such costs reported in Q1 2024[37] Cash and Assets - Total current assets decreased to $595,150,000 from $772,977,000 as of December 31, 2024, a decline of $177,827,000[33] - Cash and cash equivalents at the end of the period were $211,944,000, down from $515,627,000 at the end of 2024, a decrease of $303,683,000[33] - Total liabilities decreased to $558,641,000 from $741,371,000, a reduction of $182,730,000[33] Future Outlook - The company expects Q2 2025 consolidated net revenue to be between $285 million and $305 million, influenced by macroeconomic factors[14] - Consultant productivity increased to $2.0 million per consultant, up from $1.9 million in the previous year[5] - Confirmations in Executive Search increased by 5.3%, contrasting with a 3.2% decline in the prior year[5] - The company continues to focus on market expansion and new product development as part of its strategic initiatives[39] Dividends - The Board of Directors declared a cash dividend of $0.15 per share, payable on May 29, 2025[13]

Core Insights - Heidrick & Struggles International, Inc. reported Q1 2025 financial results that exceeded the high end of their outlook, showcasing a resilient business model and strong client trust [2][6][8] - The company aims to navigate economic uncertainty by enhancing client partnerships and providing strategic advisory services [2][3] Financial Performance - Consolidated net revenue for Q1 2025 was $283.6 million, a 6.9% increase from $265.2 million in Q1 2024, with an 8.1% increase on a constant currency basis [6][10] - Adjusted EBITDA rose to $29.1 million, with an adjusted EBITDA margin of 10.3%, up from 9.8% in the previous year [9][12] - Adjusted net income was $14.2 million, with adjusted diluted earnings per share remaining stable at $0.67 compared to Q1 2024 [8][9] Segment Performance - Executive Search segment net revenue increased by 5.9% to $213.4 million, driven by growth across all regions: 5.7% in the Americas, 9.4% in Europe, and 1.2% in Asia Pacific [10][28] - On-Demand Talent segment net revenue grew by 12.4% to $42.6 million, reflecting strong demand [11][12] - Heidrick Consulting segment net revenue increased by 6.8% to $27.6 million, indicating solid performance in consulting services [12][28] Outlook and Dividends - The company anticipates Q2 2025 consolidated net revenue between $285 million and $305 million, compared to $278.6 million in the same period last year [6][15] - A cash dividend of $0.15 per share was declared, payable on May 29, 2025, to shareholders of record on May 15, 2025 [14][15]

Core Viewpoint - Heidrick & Struggles International, Inc. will host a quarterly conference call to discuss its financial results for the first quarter of 2025 on May 5, 2025, at 5:00 PM ET [1]. Group 1 - The conference call will be accessible via live webcast on the investor relations section of the Heidrick & Struggles website [2]. - Participants can join the call by phone using the numbers +1-800-715-9871 or +1-646-307-1963, with the conference ID: 4805686 [2]. - A replay of the webcast will be available approximately two hours after the call concludes [2]. Group 2 - Heidrick & Struggles is recognized as a leading advisor on executive leadership, providing human capital leadership advisory services for over 70 years [3]. - The company focuses on enhancing client performance by helping organizations identify and develop outstanding leaders and teams [3].

Core Insights - Heidrick & Struggles International, Inc. will participate in a fireside chat at the Sidoti Virtual Investor Conference on March 19, 2025, at 8:30 AM Eastern Time [1] - The presentation will be available via live webcast and replay on the company's investor relations website [1] - Management will also conduct virtual meetings throughout the day [1] Company Overview - Heidrick & Struggles is a leading provider of global leadership advisory and on-demand talent solutions [2] - The company has over 70 years of experience in delivering value through human capital leadership advisory services [2] - Heidrick & Struggles focuses on helping organizations discover and enable outstanding leaders and teams [2]

Group 1 - Heidrick & Struggles International, Inc. (NASDAQ: HSII) specializes in executive search and leadership consulting, assisting companies in finding and developing leadership talent [1] - The company has a long history, dating back to the mid-20th century, indicating its established presence in the industry [1] Group 2 - Grassroots Trading emphasizes providing objective and unbiased research, focusing on small- to mid-cap companies while also identifying opportunities in larger companies [1]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $276.2 million, marking a 9.1% increase compared to Q4 2023 [33] - Full year 2024 revenue was $1.1 billion, a 7% increase versus 2023 [34] - Adjusted EBITDA for Q4 was $26.1 million with a margin of 9.5% [34] - Adjusted net income for Q4 increased 54.2% to $22.9 million, with adjusted diluted EPS of $1.08 [46] Business Line Data and Key Metrics Changes - Executive Search revenue grew 10% to $225 million, with regional increases of 11.1% in Americas, 8.1% in Europe, and 7.6% in APAC [39] - On-Demand Talent revenue increased 3% to $42.3 million, despite a projected 10% drop in the broader temporary staffing market [42] - Heidrick Consulting saw a 11.5% year-over-year organic revenue increase to $31.3 million [44] Market Data and Key Metrics Changes - Strong performance noted across North America, with Europe showing more caution [61] - Consumer confidence in the consumer sector was less robust, but other sectors remained strong [62] Company Strategy and Development Direction - The company is focused on three strategic priorities: being a trusted leadership partner, helping clients lead transformation, and innovating for continuous client engagement [16][19][26] - The company aims to build differentiated, deep, and durable client relationships to create unrivaled value [29] Management's Comments on Operating Environment and Future Outlook - Management noted that volatility and change create opportunities for growth, with clients increasingly questioning their leadership effectiveness [55][56] - The company expects first quarter revenue to be between $263 million and $273 million, indicating a solid start for 2025 [50] Other Important Information - A non-cash goodwill impairment charge of $43.3 million was reported in Q4 related to the On-Demand Talent business [45] - The company ended Q4 with a strong cash position of $563 million, up $85 million from December 2023 [48] Q&A Session Summary Question: What are you hearing from customers about confidence in launching new products? - Management indicated that volatility creates opportunities, and clients are focused on ensuring they have the right leaders in place [55][56] Question: How are you managing internal sales generating headcount? - The company plans to grow headcount in line with projected revenue growth, leveraging technology and senior productivity [58] Question: Are there geographic or industry verticals showing strength or weakness? - Strong momentum was noted across North America, with some caution in Europe and less robust consumer confidence in the consumer sector [61][62] Question: What are the drivers for anticipated adjusted EBITDA margin expansion in 2025? - Expected margin expansion will come from non-search businesses as the company aligns offerings better with client needs [64][68] Question: Can you elaborate on the variable compensation impact in Heidrick Consulting? - Management noted that Q4 saw a catch-up in variable compensation, but they do not foresee material changes going forward [70] Question: Have you factored in any meaningful impact from currency into the first quarter 2025 revenue outlook? - No significant currency impact was factored into the 2025 outlook [72] Question: What is the current level of C-suite turnover? - Management indicated that C-suite turnover has been consistent, with no significant spikes or dips [76] Question: How do you view potential M&A opportunities? - Management stated that while M&A is always a factor, they are not counting on it to change their guidance range for the quarter [84]