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WKN: 920930 | ISIN: US4228191023 | Ticker-Symbol: HSI
Tradegate
12.04.24
10:40 Uhr
29,000 Euro
0,000
0,00 %
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HEIDRICK & STRUGGLES INTERNATIONAL INC Chart 1 Jahr
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HEIDRICK & STRUGGLES INTERNATIONAL INC 5-Tage-Chart
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28,40029,20012.04.
28,80029,00012.04.
PR Newswire
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Heidrick & Struggles International, Inc.: Heidrick & Struggles Reports Fourth Quarter and Full Year 2023 Results

2023 Annual Net Revenue Exceeds $1 Billion for Third Consecutive Year

Record Annual Net Revenue for On-Demand Talent and Heidrick Consulting

CHICAGO, Feb. 26, 2024 /PRNewswire/ -- Today Heidrick & Struggles International, Inc. (Nasdaq: HSII) ("Heidrick & Struggles", "Heidrick" or the "Company") announced financial results for its fourth quarter and year ended December 31, 2023.

Fourth Quarter Highlights:

  • Net revenue of $253.2 million increased 7% year over year
  • Adjusted EBITDA of $35.8 million increased 38% year over year
  • Adjusted EBITDA margin was 14.1%, 310 bps improvement year over year
  • Net income was $14.9 million and diluted earnings per share was $0.72

FY 2023 Highlights:

  • Net revenue of $1,026.9 million decreased 4% year over year
  • Adjusted EBITDA of $125.6 million increased 4% year over year
  • Adjusted EBITDA margin was 12.2%, 90 bps improvement year over year
  • Adjusted net income was $60.5 million and adjusted diluted earnings per share was $2.91

"We are very pleased with how we finished the year and what is reflected by our fourth quarter results, having delivered solid year over year growth in both revenue and adjusted EBITDA," stated Heidrick & Struggles' President and Chief Executive Officer, Krishnan Rajagopalan. "These results cap off an impressive year in which we made meaningful strides on our strategic goals of growing and diversifying our revenue. Our Diversified Solutions of On-Demand Talent, Heidrick Consulting, and our nascent Heidrick Digital grew 44% during 2023, and exited the year representing 27% of our fourth quarter revenue. Additionally, our full year consolidated adjusted EBITDA margins were 12%, and our free cash flow allowed us to invest in two key businesses. We also continued to invest in Heidrick Digital, which not only yielded our first customers for the Heidrick Navigator SaaS product, but also advanced our enterprise platform by digitally enabling our businesses."

Rajagopalan continued, "As a world-class leadership advisory firm, we believe we are well positioned to take advantage of improving market conditions to grow both revenue and profitability in 2024. We will continue to partner with our clients to provide them with the most comprehensive suite of services to help find them the world's best leaders, create diverse and inclusive cultures, and transform their teams to achieve the highest levels of profitability and performance."

2023 Fourth Quarter Results

Consolidated net revenue was $253.2 million in the 2023 fourth quarter compared to consolidated net revenue of $235.7 million in the 2022 fourth quarter. The Company experienced growth in On-Demand Talent and Heidrick Consulting, partially offset by declines in Executive Search in Asia Pacific and the Americas.

Adjusted EBITDA was $35.8 million in the 2023 fourth quarter compared to $25.9 million in the 2022 fourth quarter, and 2023 fourth quarter adjusted EBITDA margin was 14.1% compared to 11.0% in the 2022 fourth quarter.

2023 fourth quarter net income was $14.9 million compared to $16.0 million in the 2022 fourth quarter. This generated diluted earnings per share in the 2023 fourth quarter of $0.72, compared to $0.78 in the 2022 fourth quarter.

Executive Search net revenue was $184.0 million compared to net revenue of $192.7 million in the 2022 fourth quarter. However, executive search confirmations increased by 4.0% in the fourth quarter of 2023 when compared to the same period last year. Net revenue decreased 5.6%, or $10.7 million on a constant currency basis from the 2022 fourth quarter. Net revenue decreased 4.4% in the Americas (down 4.7% on a constant currency basis), was flat in Europe (down 4.9% on a constant currency basis), and decreased 11.8% in Asia Pacific (down 11.2% on a constant currency basis) when compared to the prior year fourth quarter.

The Company had 414 Executive Search consultants at December 31, 2023, compared to 390 at December 31, 2022. Productivity, as measured by annualized Executive Search net revenue per consultant, was $1.8 million compared to $2.0 million in the 2022 fourth quarter, reflecting a higher number of consultants combined with lower revenue. Average revenue per executive search was approximately $138,000 compared to $150,000 in the prior year period.

On-Demand Talent net revenue was $41.1 million, an increase of 83.7% compared to net revenue of $22.4 million in the 2022 fourth quarter, primarily due to the acquisition of Atreus Group GmbH ("Atreus").

Heidrick Consulting net revenue was $28.1 million compared to net revenue of $20.7 million in the 2022 fourth quarter due to organic growth coupled with the acquisition of businessfourzero. The Company had 89 Heidrick Consulting consultants at December 31, 2023, compared to 70 at December 31, 2022.

Consolidated salaries and benefits decreased $5.8 million, or 3.7%, to $151.0 million compared to $156.8 million in the 2022 fourth quarter. Year-over-year, fixed compensation expense increased $7.5 million due to increases in base salaries and payroll taxes, expenses related to the deferred compensation plan, talent acquisition and retention costs, and retirement and benefits, partially offset by decreases in stock compensation and separation costs. Variable compensation decreased $13.3 million due to lower bonus accruals related to decreased consultant productivity. Salaries and benefits expense was 59.7% of net revenue for the quarter compared to 66.5% in the 2022 fourth quarter.

General and administrative expenses increased $8.6 million, or 24.2%, to $44.1 million compared to $35.5 million in the 2022 fourth quarter. The increase was due to intangible amortization and accretion, bad debt, office occupancy, taxes and licenses, IT, marketing, and business development travel, partially offset by a decrease in professional fees. As a percentage of net revenue, general and administrative expenses were 17.4% for the 2023 fourth quarter compared to 15.1% in the 2022 fourth quarter.

The Company's cost of services was $30.2 million, or 11.9% of net revenue for the quarter, compared to $17.5 million, or 7.4% of net revenue in the 2022 fourth quarter. This increase is related to an increase in the volume of projects driven by the acquisitions of Atreus and businessfourzero.

The Company's research and development expenses were $6.0 million, or 2.4% of net revenue for the quarter compared to $6.1 million, or 2.6%, of net revenue for the fourth quarter 2022.

Adjusted EBITDA was $35.8 million compared to $25.9 million in the 2022 fourth quarter. Adjusted EBITDA margin was 14.1%, compared to 11.0% in the 2022 fourth quarter. In Executive Search, adjusted EBITDA was $54.7 million compared to $53.9 million in the prior year period. In On-Demand Talent, adjusted EBITDA was $0.8 million versus a loss of $1.4 million in the prior year period. In Heidrick Consulting, adjusted EBITDA was $1.0 million compared to a loss of $2.4 million in the prior year period.

Net income was $14.9 million and diluted earnings per share was $0.72, with an effective tax rate of 40.5%. This compares to net income of $16.0 million and diluted earnings per share of $0.78, with an effective tax rate of 29.9% in the 2022 fourth quarter.

Net cash provided by operating activities was $155.9 million, compared to $160.3 million in the 2022 fourth quarter. Cash, cash equivalents and marketable securities at December 31, 2023 was $478.2 million compared to $621.6 million at December 31, 2022, the decrease was due to earnout payments in 2023 related to the acquisition of Business Talent Group in 2021, as well as the acquisitions of Atreus and businessfourzero. 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 following year.

Fiscal 2023 Results

Consolidated net revenue decreased 4.3%, or $46.6 million, to $1,026.9 million compared to $1,073.5 million in 2022 (down 4.6%, or $49.5 million on a constant currency basis).

Executive Search net revenue decreased 13.5%, or $121.9 million, to $780.0 million from $901.9 million in 2022 (down 13.5%, or $121.6 million on a constant currency basis). In 2023, net revenue decreased 14.7% in the Americas, decreased 5.6% in Europe, and decreased 19.6% in Asia Pacific. All industry practices exhibited decline over the prior year with the exception of the Social Impact and Industrial practice groups. Productivity was $1.9 million, compared to $2.3 million in 2022. The average revenue per executive search was approximately $139,000 compared to $144,000 in 2022, while confirmations decreased 10.5%.

On-Demand Talent increased 66.9% to a record net revenue of $152.5 million compared to $91.3 million in 2022 (up 64.1% on a constant currency basis). The increase in net revenue was primarily due to the acquisition of Atreus.

Heidrick Consulting net revenue increased 17.6%, to a record $94.3 million from $80.2 million in 2022 (up 16.9% on a constant currency basis). The increase in net revenue was primarily due to the acquisition of businessfourzero.

Adjusted EBITDA was $125.6 million and adjusted EBITDA margin was 12.2%, compared to adjusted EBITDA of $120.9 million and adjusted EBITDA margin of 11.3% in 2022. In Executive Search, Adjusted EBITDA was $206.7 million compared to $206.2 million in the prior year. In On-Demand Talent, Adjusted EBITDA was $1.4 million versus a loss of $0.3 million in the prior year. In Heidrick Consulting, Adjusted EBITDA was a loss of $5.8 million compared to a loss of $6.4 million in the prior year.

Net income was $54.4 million and diluted earnings per share was $2.62, with an effective tax rate of 38.6%. This compares to net income of $79.5 million and diluted earnings per share of $3.86 with an effective tax rate of 31.0% in 2022. Excluding the goodwill impairment charges in 2023, adjusted net income was $60.4 million compared to $79.2 million in 2022 and adjusted diluted earnings per share was $2.91 compared to $3.84 in 2022, with adjusted effective tax rates of 37.0% and 31.0%, respectively, for the 2023 and 2022 periods.

Dividend

The Board of Directors declared a 2024 first quarter cash dividend of $0.15 per share payable on March 21, 2024, to shareholders of record at the close of business on March 8, 2024.

2024 First Quarter Outlook

The Company expects 2024 first quarter consolidated net revenue of between $245 million and $265 million, which may be impacted by external factors, such as the foreign exchange and interest rate environments, foreign conflicts, inflation and macroeconomic constraints on pricing actions. In addition, this outlook is based on the average currency rates in December 2023 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, and consultant retention along with the current backlog.

Quarterly Webcast and Conference Call

Heidrick & Struggles will host a conference call to review its fourth quarter results today, February 26, 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 (888) 440-4091 or (646) 960-0846, conference ID# 6106012. 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 net income, adjusted diluted earnings per share, adjusted effective tax rate, adjusted EBITDA, adjusted EBITDA margin, and net revenue excluding the impact of exchange rate fluctuations (referred to as constant currency). These measures are presented because management uses this information to monitor and evaluate financial results and allocate resources. 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 net income and adjusted diluted earnings per share are net income and diluted earnings per share excluding goodwill impairment and earnout fair value adjustments, net of tax.

Adjusted effective tax rate is effective tax rate excluding goodwill impairment and earnout fair value adjustments, net of tax.

Adjusted EBITDA refers to earnings before interest, taxes, depreciation, intangible amortization, earnout accretion, earnout fair value adjustments, acquisition contingent compensation, deferred compensation plan income and expense, reorganization costs, impairment charges, restructuring charges, and other non-operating income (expense).

Adjusted EBITDA margin refers to adjusted EBITDA as a percentage of net revenue in the same period.

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 first 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, leadership changes, our ability to attract, integrate, develop, manage and retain 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; the fact that our net revenue may be affected by adverse economic conditions; our clients' ability to restrict us from recruiting their employees; the aggressive competition we face; our heavy reliance on information management systems; 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; social, political, regulatory and legal risks in markets where we operate; any challenges to the classification of our on-demand talent as independent contractors; the impact of foreign currency exchange rate fluctuations; the fact that we may not be able to align our cost structure with net revenue; unfavorable tax law changes and tax authority rulings; our ability to realize our tax losses; the timing of the establishment or reversal of valuation allowance on deferred tax assets; any impairment of our goodwill, other intangible assets and other long-lived assets; our ability to execute and integrate future acquisitions; the fact that we have anti-takeover provisions that make an acquisition of us difficult and expensive; our ability to access additional credit; and the increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted cyber-related attacks that could pose a risk to our systems, networks, solutions, services and data. 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, VP, Investor Relations
[email protected]

Media:
Bianca Wilson, Director, Public Relations, Americas
[email protected]

Heidrick & Struggles International, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)






Three Months Ended

December 31,




2023


2022


$ Change


% Change

Revenue








Revenue before reimbursements (net revenue)

$ 253,162


$ 235,717


$ 17,445


7.4 %

Reimbursements

4,228


2,952


1,276


43.2 %

Total revenue

257,390


238,669


18,721


7.8 %









Operating expenses








Salaries and benefits

151,036


156,828


(5,792)


(3.7) %

General and administrative expenses

44,089


35,492


8,597


24.2 %

Cost of services

30,221


17,484


12,737


72.8 %

Research and development

5,952


6,067


(115)


(1.9) %

Reimbursed expenses

4,228


2,952


1,276


43.2 %

Total operating expenses

235,526


218,823


16,703


7.6 %









Operating income

21,864


19,846


2,018


10.2 %









Non-operating income (expense)








Interest, net

3,950


3,673





Other, net

(840)


(627)





Net non-operating income

3,110


3,046













Income before income taxes

24,974


22,892













Provision for income taxes

10,119


6,848













Net income

14,855


16,044













Other comprehensive income, net of tax

7,951


8,196













Comprehensive income

$ 22,806


$ 24,240













Weighted-average common shares outstanding








Basic

20,122


19,861





Diluted

20,670


20,499













Earnings per common share








Basic

$ 0.74


$ 0.81





Diluted

$ 0.72


$ 0.78













Salaries and benefits as a % of net revenue

59.7 %


66.5 %





General and administrative expenses as a % of net revenue

17.4 %


15.1 %





Cost of services as a % of net revenue

11.9 %


7.4 %





Research and development as a % of net revenue

2.4 %


2.6 %





Operating income margin

8.6 %


8.4 %





Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)




Three Months Ended December 31,


2023


2022


$
Change


%
Change


2023
Margin1


2022
Margin1

Revenue












Executive Search












Americas

$ 124,778


$ 130,561


$ (5,783)


(4.4) %





Europe

37,275


37,258


17


- %





Asia Pacific

21,912


24,838


(2,926)


(11.8) %





Total Executive Search

183,965


192,657


(8,692)


(4.5) %





On-Demand Talent

41,096


22,368


18,728


83.7 %





Heidrick Consulting

28,101


20,692


7,409


35.8 %





Revenue before reimbursements (net revenue)

253,162


235,717


17,445


7.4 %





Reimbursements

4,228


2,952


1,276


43.2 %





Total revenue

$ 257,390


$ 238,669


$ 18,721


7.8 %





























Adjusted EBITDA












Executive Search












Americas

$ 45,801


$ 44,103


$ 1,698


3.9 %


36.7 %


33.8 %

Europe

5,759


4,264


1,495


35.1 %


15.5 %


11.4 %

Asia Pacific

3,169


5,517


(2,348)


(42.6) %


14.5 %


22.2 %

Total Executive Search

54,729


53,884


845


1.6 %


29.7 %


28.0 %

On-Demand Talent

774


(1,430)


2,204


154.1 %


1.9 %


(6.4) %

Heidrick Consulting

1,025


(2,370)


3,395


143.2 %


3.6 %


(11.5) %

Total segments

56,528


50,084


6,444


12.9 %


22.3 %


21.2 %

Research and Development

(5,139)


(5,788)


649


11.2 %


(2.0) %


(2.5) %

Global Operations Support

(15,632)


(18,357)


2,725


14.8 %


(6.2) %


(7.8) %

Total operating income

$ 35,757


$ 25,939


$ 9,818


37.9 %


14.1 %


11.0 %













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)






Twelve Months Ended

December 31,




2023


2022


$ Change


% Change

Revenue








Revenue before reimbursements (net revenue)

$ 1,026,864


$ 1,073,464


$ (46,600)


(4.3) %

Reimbursements

14,318


10,122


4,196


41.5 %

Total revenue

1,041,182


1,083,586


(42,404)


(3.9) %









Operating expenses








Salaries and benefits

656,030


737,430


(81,400)


(11.0) %

General and administrative expenses

156,494


132,678


23,816


18.0 %

Cost of services

109,039


70,676


38,363


54.3 %

Research and development

22,698


20,414


2,284


11.2 %

Impairment charges

7,246


-


7,246


100.0 %

Reimbursed expenses

14,318


10,122


4,196


41.5 %

Total operating expenses

965,825


971,320


(5,495)


(0.6) %









Operating income

75,357


112,266


(36,909)


(32.9) %









Non-operating income (expense)








Interest, net

11,617


5,337





Other, net

1,697


(2,367)





Net non-operating income

13,314


2,970













Income before income taxes

88,671


115,236













Provision for income taxes

34,261


35,750













Net income

54,410


79,486













Other comprehensive income (loss), net of tax

4,318


(5,864)













Comprehensive income

$ 58,728


$ 73,622













Weighted-average common shares outstanding








Basic

20,029


19,758





Diluted

20,766


20,618













Earnings per common share








Basic

$ 2.72


$ 4.02





Diluted

$ 2.62


$ 3.86













Salaries and benefits as a % of net revenue

63.9 %


68.7 %





General and administrative expenses as a % of net revenue

15.2 %


12.4 %





Cost of services as a % of net revenue

10.6 %


6.6 %





Research and development as a % of net revenue

2.2 %


1.9 %





Operating income margin

7.3 %


10.5 %





Heidrick & Struggles International, Inc.

Segment Information

(In thousands)

(Unaudited)




Twelve Months Ended December 31,


2023


2022


$

Change


%
Change


2023
Margin1


2022
Margin1

Revenue












Executive Search












Americas

$ 522,988


$ 612,881


$ (89,893)


(14.7) %





Europe

166,379


176,275


(9,896)


(5.6) %





Asia Pacific

90,678


112,766


(22,088)


(19.6) %





Total Executive Search

780,045


901,922


(121,877)


(13.5) %





On-Demand Talent

152,506


91,349


61,157


66.9 %





Heidrick Consulting

94,313


80,193


14,120


17.6 %





Revenue before reimbursements (net revenue)

1,026,864


1,073,464


(46,600)


(4.3) %





Reimbursements

14,318


10,122


4,196


41.5 %





Total revenue

$ 1,041,182


$ 1,083,586


$ (42,404)


(3.9) %





























Adjusted EBITDA












Executive Search












Americas

$ 173,358


$ 164,193


$ 9,165


5.6 %


33.1 %


26.8 %

Europe

22,246


22,150


96


0.4 %


13.4 %


12.6 %

Asia Pacific

11,070


19,813


(8,743)


(44.1) %


12.2 %


17.6 %

Total Executive Search

206,674


206,156


518


0.3 %


26.5 %


22.9 %

On-Demand Talent

1,434


(336)


1,770


NM


0.9 %


(0.4) %

Heidrick Consulting

(5,823)


(6,444)


621


9.6 %


(6.2) %


(8.0) %

Total segments

202,285


199,376


2,909


1.5 %


19.7 %


18.6 %

Research and Development

(20,535)


(19,965)


(570)


(2.9) %


(2.0) %


(1.9) %

Global Operations Support

(56,133)


(58,533)


2,400


4.1 %


(5.5) %


(5.5) %

Total operating income

$ 125,617


$ 120,878


$ 4,739


3.9 %


12.2 %


11.3 %













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

December 31,


Twelve Months Ended

December 31,


2023


2022


2023


2022

Net income

$ 14,855


$ 16,044


$ 54,410


$ 79,486









Adjustments








Impairment charges, net of tax1

-


-


6,038


-

Earnout fair value adjustment, net of tax2

-


29


-


(320)

Total adjustments

-


29


6,038


(320)









Adjusted net income

$ 14,855


$ 16,073


$ 60,448


$ 79,166









Weighted-average common shares outstanding








Basic

20,122


19,861


20,029


19,758

Diluted

20,670


20,499


20,766


20,618









Earnings per common share








Basic

$ 0.74


$ 0.81


$ 2.72


$ 4.02

Diluted

$ 0.72


$ 0.78


$ 2.62


$ 3.86









Adjusted earnings per common share








Basic

$ 0.74


$ 0.81


$ 3.02


$ 4.01

Diluted

$ 0.72


$ 0.78


$ 2.91


$ 3.84









1

The Company recorded a goodwill impairment charge of $7.2 million in the Heidrick Consulting segment for the year ended December 31, 2023.

2

The Company recorded a fair value adjustment to increase the On-Demand Talent earnout by $0.1 million for the three months ended December 31, 2022. The Company recorded a fair value adjustment to reduce the On-Demand Talent earnout by $0.5 million for the year ended December 31, 2022.

Heidrick & Struggles International, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)






December 31,
2023


December 31,
2022





Current assets




Cash and cash equivalents

$ 412,618


$ 355,447

Marketable securities

65,538


266,169

Accounts receivable, net

133,128


126,437

Prepaid expenses

23,597


24,098

Other current assets

47,923


40,722

Income taxes recoverable

10,410


10,946

Total current assets

693,214


823,819





Non-current assets




Property and equipment, net

35,752


30,207

Operating lease right-of-use assets

86,063


71,457

Assets designated for retirement and pension plans

11,105


11,332

Investments

47,287


34,354

Other non-current assets

17,071


25,788

Goodwill

202,252


138,361

Other intangible assets, net

20,842


6,333

Deferred income taxes

28,005


33,987

Total non-current assets

448,377


351,819





Total assets

$ 1,141,591


$ 1,175,638





Current liabilities




Accounts payable

$ 20,837


$ 14,613

Accrued salaries and benefits

322,744


451,161

Deferred revenue

45,732


43,057

Operating lease liabilities

21,498


19,554

Other current liabilities

21,823


56,016

Income taxes payable

6,057


4,076

Total current liabilities

438,691


588,477





Non-current liabilities




Accrued salaries and benefits

52,108


59,467

Retirement and pension plans

62,100


48,456

Operating lease liabilities

78,204


63,299

Other non-current liabilities

41,808


5,293

Deferred income taxes

6,402


-

Total non-current liabilities

240,622


176,515





Total liabilities

679,313


764,992





Stockholders' equity

462,278


410,646





Total liabilities and stockholders' equity

$ 1,141,591


$ 1,175,638

Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)






Three Months Ended

December 31,



2023


2022

Cash flows - operating activities





Net income


$ 14,855


$ 16,044

Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization


5,076


2,779

Deferred income taxes


12,448


8,064

Stock-based compensation expense


3,499


4,998

Accretion expense related to earnout payments


457


-

Gain on marketable securities


(878)


(2,293)

Loss on disposal of property and equipment


17


16

Changes in assets and liabilities:





Accounts receivable


59,118


69,275

Accounts payable


1,526


(2,481)

Accrued expenses


54,668


65,306

Deferred revenue


3,657


(1,324)

Income taxes recoverable and payable, net


(13,309)


(7,945)

Retirement and pension plan assets and liabilities


796


(3,955)

Prepaid expenses


5,004


3,787

Other assets and liabilities, net


8,979


8,065

Net cash provided by operating activities


155,913


160,336






Cash flows - investing activities





Acquisition of business, net of cash acquired


(11,905)


-

Capital expenditures


(3,814)


(2,958)

Purchases of marketable securities and investments


(65,518)


(83,727)

Proceeds from sales of marketable securities and investments


48,183


143

Net cash used in investing activities


(33,054)


(86,542)






Cash flows - financing activities





Cash dividends paid


(3,154)


(3,123)

Net cash used in financing activities


(3,154)


(3,123)






Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash


6,442


9,308






Net increase in cash, cash equivalents and restricted cash


126,147


79,979

Cash, cash equivalents and restricted cash at beginning of period


286,471


275,510

Cash, cash equivalents and restricted cash at end of period


$ 412,618


$ 355,489

Heidrick & Struggles International, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)






Twelve Months Ended

December 31,



2023


2022

Cash flows - operating activities





Net income


$ 54,410


$ 79,486

Adjustments to reconcile net income to net cash used in operating activities:





Depreciation and amortization


18,508


10,603

Deferred income taxes


11,900


7,088

Stock-based compensation expense


10,830


16,689

Accretion expense related to earnout payments


1,554


820

Gain on marketable securities


(2,918)


(2,406)

Loss on disposal of property and equipment


209


392

Impairment charges


7,246


-

Changes in assets and liabilities, net of effects of acquisition:





Accounts receivable


6,913


4,522

Accounts payable


(131)


(5,731)

Accrued expenses


(145,118)


32,892

Deferred revenue


2,035


(7,237)

Income taxes recoverable and payable, net


(6,692)


(13,606)

Retirement and pension plan assets and liabilities


7,493


(479)

Prepaid expenses


1,233


(2,850)

Other assets and liabilities, net


5,736


(895)

Net cash provided by (used in) operating activities


(26,792)


119,288






Cash flows - investing activities





Acquisition of businesses, net of cash acquired


(49,858)


-

Capital expenditures


(13,433)


(11,134)

Purchases of marketable securities and investments


(140,982)


(269,824)

Proceeds from sales of marketable securities and investments


337,872


1,359

Net cash provided by (used in) investing activities


133,599


(279,599)






Cash flows - financing activities





Repurchases of common stock


(904)


-

Cash dividends paid


(12,537)


(12,466)

Payment of employee tax withholdings on equity transactions


(4,141)


(3,219)

Acquisition earnout payments


(35,946)


-

Net cash used in financing activities


(53,528)


(15,685)






Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash


3,850


(13,774)






Net increase (decrease) in cash, cash equivalents and restricted cash


57,129


(189,770)

Cash, cash equivalents and restricted cash at beginning of period


355,489


545,259

Cash, cash equivalents and restricted cash at end of period


$ 412,618


$ 355,489

Heidrick & Struggles International, Inc.

Reconciliation of Net Income to Adjusted EBITDA (Non-GAAP)

(In thousands)

(Unaudited)






Three Months Ended

December 31,


Twelve Months Ended

December 31,


2023


2022


2023


2022

Revenue before reimbursements (net revenue)

$ 253,162


$ 235,717


$ 1,026,864


$ 1,073,464









Net income

14,855


16,044


54,410


79,486

Interest, net

(3,950)


(3,673)


(11,617)


(5,337)

Other, net

840


627


(1,697)


2,367

Provision for income taxes

10,119


6,848


34,261


35,750

Operating income

21,864


19,846


75,357


112,266









Adjustments








Depreciation

2,550


1,991


9,113


7,394

Intangible amortization

2,526


788


9,395


3,209

Earnout accretion

457


-


1,554


820

Earnout fair value adjustments

-


43


-


(464)

Acquisition contingent consideration

3,223


914


11,934


3,885

Deferred compensation plan

3,823


2,357


6,132


(6,232)

Reorganization costs

1,314


-


4,886


-

Impairment charges

-


-


7,246


-

Total adjustments

13,893


6,093


50,260


8,612









Adjusted EBITDA

$ 35,757


$ 25,939


$ 125,617


$ 120,878

Adjusted EBITDA margin

14.1 %


11.0 %


12.2 %


11.3 %

Heidrick & Struggles International, Inc.

Reconciliation of Operating Income to Adjusted EBITDA by Line of Business (Non-GAAP)

(In thousands)

(Unaudited)




Three Months Ended December 31, 2023


Executive
Search


On-Demand
Talent


Heidrick
Consulting


Research &
Development


Global
Operations
Support


Total













Revenue before reimbursements (net
revenue)

$ 183,965


$ 41,096


$ 28,101


$ -


$ -


$ 253,162













Operating income (loss)1

49,086


(4,616)


(852)


(5,952)


(15,802)


21,864













Adjustments












Depreciation

1,310


74


247


754


165


2,550

Intangible amortization

28


2,060


438


-


-


2,526

Earnout accretion

-


399


58


-


-


457

Acquisition contingent compensation

640


1,543


1,040


-


-


3,223

Deferred compensation plan

3,665


-


94


59


5


3,823

Reorganization costs

-


1,314


-


-


-


1,314

Total adjustments

5,643


5,390


1,877


813


170


13,893













Adjusted EBITDA

$ 54,729


$ 774


$ 1,025


$ (5,139)


$ (15,632)


$ 35,757

Adjusted EBITDA margin

29.7 %


1.9 %


3.6 %


(2.0) %


(6.2) %


14.1 %














Three Months Ended December 31, 2022


Executive
Search


On-Demand
Talent


Heidrick
Consulting


Research &
Development


Global
Operations
Support


Total













Revenue before reimbursements (net
revenue)

$ 192,657


$ 22,368


$ 20,692


$ -


$ -


$ 235,717













Operating income (loss)1

49,214


(2,154)


(2,663)


(6,067)


(18,484)


19,846













Adjustments












Depreciation

1,434


51


132


248


126


1,991

Intangible amortization

58


630


100


-


-


788

Earnout accretion

-


-


-


-


-


-

Earnout fair value adjustments

-


43


-


-


-


43

Acquisition contingent compensation

914


-


-


-


-


914

Deferred compensation plan

2,264


-


61


31


1


2,357

Total adjustments

4,670


724


293


279


127


6,093













Adjusted EBITDA

$ 53,884


$ (1,430)


$ (2,370)


$ (5,788)


$ (18,357)


$ 25,939

Adjusted EBITDA margin

28.0 %


(6.4 %)


(11.5 %)


(2.5) %


(7.8) %


11.0 %













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 to Adjusted EBITDA by Line of Business (Non-GAAP)

(In thousands)

(Unaudited)




Twelve Months Ended December 31, 2023


Executive
Search


On-Demand
Talent


Heidrick
Consulting


Research &
Development


Global
Operations
Support


Total













Revenue before reimbursements (net
revenue)

$ 780,045


$ 152,506


$ 94,313


$ -


$ -


$ 1,026,864













Operating income (loss)1

190,009


(16,437)


(18,729)


(22,698)


(56,788)


75,357













Adjustments












Depreciation

5,238


400


754


2,073


648


9,113

Intangible amortization

173


7,797


1,425


-


-


9,395

Earnout accretion

-


1,381


173


-


-


1,554

Acquisition contingent compensation

3,089


5,687


3,158


-


-


11,934

Deferred compensation plan

5,885


-


150


90


7


6,132

Reorganization costs

2,280


2,606


-


-


-


4,886

Impairment charges

-


-


7,246


-


-


7,246

Total adjustments

16,665


17,871


12,906


2,163


655


50,260













Adjusted EBITDA

$ 206,674


$ 1,434


$ (5,823)


$ (20,535)


$ (56,133)


$ 125,617

Adjusted EBITDA margin

26.5 %


0.9 %


(6.2 %)


(2.0 %)


(5.5) %


12.2 %














Twelve Months Ended December 31, 2022


Executive
Search


On-Demand
Talent


Heidrick
Consulting


Research &
Development


Global
Operations
Support


Total













Revenue before reimbursements (net
revenue)

$ 901,922


$ 91,349


$ 80,193


$ -


$ -


$ 1,073,464













Operating income (loss)1

202,186


(3,361)


(7,155)


(20,414)


(58,990)


112,266













Adjustments












Depreciation

5,785


150


478


524


457


7,394

Intangible amortization

290


2,519


400


-


-


3,209

Earnout accretion

-


820


-


-


-


820

Earnout fair value adjustments

-


(464)


-


-


-


(464)

Acquisition contingent compensation

3,885


-


-


-


-


3,885

Deferred compensation plan

(5,990)


-


(167)


(75)


-


(6,232)

Total adjustments

3,970


3,025


711


449


457


8,612













Adjusted EBITDA

$ 206,156


$ (336)


$ (6,444)


$ (19,965)


$ (58,533)


$ 120,878

Adjusted EBITDA margin

22.9 %


(0.4 %)


(8.0 %)


(1.9 %)


(5.5 %)


11.3 %



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.

SOURCE Heidrick & Struggles International, Inc.

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