Heidrick & Struggles(HSII) - 2024 Q4 - Annual Report

Revenue Performance - Consolidated net revenue increased by $71.7 million, or 7.0%, to$ 1.1 billion in 2024 from $1.0 billion in 2023[144] - Executive Search net revenue was$ 818.4 million in 2024, an increase of $38.3 million, or 4.9%, compared to 2023[144] - On-Demand Talent net revenue was$ 168.3 million in 2024, an increase of $15.8 million, or 10.4%, compared to 2023[144] - Heidrick Consulting net revenue was$ 111.9 million in 2024, an increase of $17.6 million, or 18.6%, compared to 2023[144] - Total revenue increased by$ 74.5 million, or 7.2%, to $1.1 billion in 2024 from$ 1.0 billion in 2023[154] - Net revenue before reimbursements rose by $71.7 million, or 7.0%, to$ 1.1 billion in 2024, with Executive Search net revenue at $818.4 million, up 4.9%[155] Profitability Metrics - Adjusted EBITDA as a percentage of revenue was 10.1% in 2024, compared to 12.2% in 2023[146] - Adjusted EBITDA decreased to$ 111.2 million in 2024 from $125.6 million in 2023, with an adjusted EBITDA margin of 10.1%[151][154] - Consolidated Adjusted EBITDA was$ 111.2 million in 2024, a decrease of $14.4 million, or 11.4%, compared to$ 125.6 million in 2023[164] Expenses - Salaries and benefits expense as a percentage of net revenue was 65.1% in 2024, compared to 63.9% in 2023[146] - Salaries and benefits expense increased by $59.6 million, or 9.1%, to$ 715.6 million in 2024, representing 65.1% of net revenue[157][159] - General and administrative expenses rose by $10.5 million, or 6.7%, to$ 167.0 million in 2024, maintaining 15.2% of net revenue[160][161] - Cost of services increased by $9.9 million, or 9.1%, to$ 119.0 million in 2024, primarily due to higher project volumes[161] - Research and development expenses increased by $0.4 million, or 1.6%, to$ 23.1 million in 2024, focusing on technology-enabled products and services[162] Consultant Metrics - The number of Executive Search consultants increased to 418 in 2024 from 414 in 2023[145] - The number of Executive Search consultants increased to 418 in 2024 from 414 in 2023, with productivity rising to $2.0 million per consultant[156] - The average revenue per executive search increased to$ 146,000 in 2024 compared to $140,000 in the prior year[145] Regional Performance - The Americas segment reported net revenue of$ 556.9 million in 2024, an increase of 6.5% from $523.0 million in 2023, driven by a 7.1% increase in executive search confirmations[168] - Europe segment net revenue decreased by 0.8% to$ 165.0 million in 2024, attributed to a 9.7% decrease in executive search confirmations[172] - Asia Pacific segment reported net revenue of $96.4 million in 2024, an increase of 6.3% compared to$ 90.7 million in 2023, despite a 2.5% decrease in executive search confirmations[177] Cash and Financing - Combined cash, cash equivalents, and marketable securities increased to $563.5 million, up$ 85.4 million from $478.2 million at December 31, 2023[147] - For the year ended December 31, 2024, cash provided by operating activities was$ 150.4 million, reflecting net income net of non-cash charges of $80.1 million and accrued expenses of$ 47.0 million[200] - Cash used in investing activities for the year ended December 31, 2024, was $14.6 million, primarily due to capital expenditures of$ 26.3 million and purchases of available for sale investments of $163.6 million[202] - Cash used in financing activities for the year ended December 31, 2024, was$ 16.7 million, mainly due to cash dividend payments of $12.9 million[205] - The Company entered into an Amended Credit Agreement, increasing the committed unsecured revolving credit facility to$ 200 million from $175 million, with a maturity date of July 13, 2026[196] Impairment and Goodwill - The company recognized an aggregate goodwill impairment charge of$ 59.5 million in 2024, indicating potential volatility in future results due to market conditions and operating performance[224] - The accounting estimate related to goodwill impairment is critical, as assumptions are highly susceptible to changes in operating results and cash flows[225] - Changes in the business climate, market capitalization, and recent operating performance are monitored for potential triggering events that could lead to impairment charges[224] Fair Value and Contingent Considerations - The fair value of contingent consideration obligations is assessed based on expected future payments, influenced by revenue forecasts, operating expense forecasts, discount rates, and volatility[226] - The company uses a variation of the income approach, known as the real options method, to determine the fair value of contingent consideration[226] - The fair value of reporting units is impacted by overall market capitalization and stock price volatility[224] - The company updates its assumptions for fair value estimates annually to reflect information concerning its reportable segments[224]