Heidrick & Struggles(HSII) - 2025 Q1 - Quarterly Report

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]