EX-99.1 2 hsii-20230930earningsrelea.htm EX-99.1 Document

Exhibit 99.1
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FOR IMMEDIATE RELEASE

Heidrick & Struggles Reports Third Quarter 2023 Results

Quarterly Revenue of $263M, 3% Year Over Year Growth

13th Consecutive Quarter of Double-Digit Adjusted EBITDA Margin


CHICAGO, October 25, 2023 – Today Heidrick & Struggles International, Inc. (Nasdaq: HSII) (“Heidrick & Struggles”, “Heidrick” or the “Company”) announced financial results for its third quarter ended September 30, 2023.

Third Quarter Highlights:

Net revenue of $263.2 million increased 3% year over year
Operating income of $22.1 million increased $8.6 million sequentially and operating margin was 8.4%
Adjusted operating income of $22.1 million increased $1.3 million sequentially and adjusted operating margin was 8.4%
Adjusted EBITDA of $32.3 million decreased $4.1 million sequentially and adjusted EBITDA margin was 12.3%
Net income was $15.0 million and diluted earnings per share was $0.73

“We are very pleased with our third quarter results, posting year over year revenue growth and another double-digit adjusted EBITDA margin quarter despite ongoing macro uncertainty,” stated Heidrick & Struggles’ President and Chief Executive Officer, Krishnan Rajagopalan. “These results reflect the benefits of our One Heidrick strategy, which is to bring the best permanent executive level and on-demand talent to our clients, and to help leadership and organizations be more effective through our diversified product offering. Our diversified solutions of On-Demand Talent, Heidrick Consulting, and soon to include Heidrick Digital, will continue to be an increasing percentage of our business, and now contribute nearly 25% of our revenues.”

2023 Third Quarter Results

Consolidated net revenue was $263.2 million in the 2023 third quarter compared to consolidated net revenue of $255.2 million in the 2022 third quarter. The Company experienced growth in On-Demand Talent, Heidrick Consulting, and Executive Search in Europe, partially offset by declines in Executive Search in Asia Pacific and the Americas.

On a sequential basis, 2023 third quarter operating income was $22.1 million compared to $13.6 million in the 2023 second quarter. Adjusted operating income was $22.1 million compared to $20.8 million in the 2023 second quarter, and adjusted operating margin was 8.4% compared to 7.7% in the 2023 second quarter. Adjusted operating income in the 2023 second quarter reflects the exclusion of a non-cash impairment charge of $7.2 million. Adjusted EBITDA was $32.3 million in the 2023 third quarter compared to $36.4 million in the 2023 second quarter, and 2023 third quarter adjusted EBITDA margin was 12.3% compared to 13.4% in the 2023 second quarter. 2023 third quarter net income was $15.0 million compared to $9.0 million in the 2023 second quarter. This generated diluted earnings per share in the 2023 third quarter of $0.73, compared to $0.44 in the 2023 second quarter. Adjusted net income of $15.0 million and adjusted diluted earnings per share of $0.73 in the 2023 third quarter were consistent with 2023 second quarter results.

Executive Search net revenue was $198.8 million compared to net revenue of $212.8 million in the 2022 third quarter reflecting a decrease in the volume of executive search confirmations. Net revenue decreased 7.9%, or $16.8 million on a constant currency basis from the 2022 third quarter. Net revenue decreased 7.9% in the Americas (down 8.1% on a constant currency basis), increased 8.4% in Europe (up 1.0% on a constant currency basis), and decreased 21.6% in Asia Pacific (down 19.8% on a constant currency basis) when compared to the prior year third quarter.

The Company had 417 Executive Search consultants at September 30, 2023, compared to 389 at September 30, 2022. Productivity, as measured by annualized Executive Search net revenue per consultant, was $1.9 million compared to $2.2 million in the 2022 third quarter, reflecting a higher number of consultants combined with lower



revenue. Average revenue per executive search was approximately $153,000 compared to $155,000 in the prior year period. The number of search confirmations decreased 5.1% compared to the year-ago period.

On-Demand Talent net revenue was $41.1 million, an increase of 76.6% compared to net revenue of $23.2 million in the 2022 third quarter, primarily due to the acquisition of Atreus Group GmbH (“Atreus”), partially offset by a decrease in the volume of legacy on-demand projects.

Heidrick Consulting net revenue was $23.3 million compared to net revenue of $19.1 million in the 2022 third quarter due to organic growth coupled with the acquisition of businessfourzero. The Company had 90 Heidrick Consulting consultants at September 30, 2023, compared to 72 at September 30, 2022.

Consolidated salaries and benefits decreased $4.3 million, or 2.5%, to $167.2 million compared to $171.5 million in the 2022 third quarter. Year-over-year, fixed compensation expense increased $9.2 million due to increases in base salaries and payroll taxes, expenses related to the deferred compensation plan, separation costs, and talent acquisition and retention costs, partially offset by decreases in stock compensation, and retirement and benefits. Variable compensation decreased $13.5 million due to lower bonus accruals related to decreased consultant productivity. Salaries and benefits expense was 63.5% of net revenue for the quarter compared to 67.2% in the 2022 third quarter.

General and administrative expenses increased $5.4 million, or 16.7%, to $37.6 million compared to $32.2 million in the 2022 third quarter. The increase was due to intangible amortization and accretion, increases in expenses related to office occupancy, and marketing, as well as the acquisitions of Atreus and businessfourzero, partially offset by a decrease in business development travel. As a percentage of net revenue, general and administrative expenses were 14.3% for the 2023 third quarter compared to 12.6% in the 2022 third quarter.

The Company’s cost of services was $30.7 million, or 11.7% of net revenue for the quarter, compared to $17.8 million, or 7.0% of net revenue in the 2022 third quarter. This related to an increase in the volume of On-Demand Talent projects driven by the acquisition of Atreus.

The Company’s research and development expenses were $5.6 million, or 2.1% of net revenue for the quarter compared to $5.4 million, or 2.1%, of net revenue for the third quarter 2022.

Operating income was $22.1 million for the quarter compared to $28.3 million in the 2022 third quarter. Operating income margin was 8.4% versus 11.1% in the 2022 third quarter. Adjusted operating income in the 2023 third quarter was $22.1 million and adjusted operating income margin was 8.4% compared to 2022 third quarter adjusted operating income of $27.8 million and adjusted operating margin of 10.9%. Adjusted operating income in the 2022 third quarter reflects an adjustment to exclude a reduction in the fair value of an On-Demand Talent earnout by $0.5 million.

Adjusted EBITDA was $32.3 million compared to $33.3 million in the 2022 third quarter. Adjusted EBITDA margin was 12.3%, compared to 13.0% in the 2022 third quarter. In Executive Search, adjusted EBITDA was $51.9 million compared to $51.5 million in the prior year period. In On-Demand Talent, adjusted EBITDA was a loss of $0.6 million versus income of $0.2 million in the prior year period. In Heidrick Consulting, adjusted EBITDA was a loss of $2.2 million compared to a loss of $5.2 million in the prior year period.

Net income was $15.0 million and diluted earnings per share was $0.73, with an effective tax rate of 37.5%. This compares to net income of $20.8 million and diluted earnings per share of $1.02, with an effective tax rate of 29.5% in the 2022 third quarter. Adjusted net income was $15.0 million and adjusted diluted earnings per share was $0.73, with an adjusted effective tax rate of 37.5% compared to 2022 third quarter adjusted net income of $20.5 million and adjusted diluted earnings per share of $1.00, which reflects the aforementioned earnout fair value adjustment.

Net cash provided by operating activities was $109.5 million, compared to $138.5 million in the 2022 third quarter. Cash, cash equivalents and marketable securities at September 30, 2023 was $334.0 million compared to $456.0 million at September 30, 2022 and $621.6 million at December 31, 2022. 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 year.

Dividend

The Board of Directors declared a 2023 fourth quarter cash dividend of $0.15 per share payable on November 21, 2023, to shareholders of record at the close of business on November 7, 2023.



2023 Fourth Quarter Outlook

The Company expects 2023 fourth quarter consolidated net revenue of between $240 million and $260 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 September 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, consultant retention, and the seasonality of the business along with the current backlog.

Quarterly Webcast and Conference Call

Heidrick & Struggles will host a conference call to review its third quarter results today, October 25, 2023 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 65 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 operating income, adjusted operating income margin, adjusted net income, adjusted diluted earnings per share, adjusted effective tax rate, adjusted EBITDA, adjusted EBITDA margin, and consolidated 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 trends. 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 operating income is operating income excluding goodwill impairment and earnout fair value adjustments.

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

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, equity-settled stock compensation expense, 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 fourth quarter of 2023 and the Company’s expectations regarding its One Heidrick strategy and associated investment initiatives. 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, 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; our clients’ ability to restrict us from recruiting their employees; our heavy reliance on information management systems; risks arising from our implementation of new technology and intellectual property to deliver new products and services to our clients; our dependence on third parties for the execution of certain critical functions; 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; any challenges to the classification of our on-demand talent as independent contractors; 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; the impacts, direct and indirect, of the COVID-19 pandemic (including the emergence of variant strains) or other highly infectious or contagious disease on our business, our consultants and employees, and the overall economy; the aggressive competition we face; the fact that our net revenue may be affected by adverse economic conditions including inflation, the impact of foreign currency exchange rate fluctuations; our ability to access additional credit; social, political, regulatory, legal and economic risks in markets where we operate, including the impact of the ongoing war in Ukraine and the conflict in Israel and the Gaza Strip and the risks of an expansion or escalation of those conflicts; unfavorable tax law changes and tax authority rulings; the timing of the establishment or reversal of valuation allowance on deferred tax assets; the fact that we may not be able to align our cost structure with net revenue; any impairment of our goodwill, other intangible assets and other long-lived assets; our ability to execute and integrate future acquisitions; and the fact that we have anti-takeover provisions that could make an acquisition of us difficult and expensive. 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, 2022, under the heading "Risk Factors" in Item 1A, as updated in Part II of our subsequent Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. 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:
Steven Horwitz, Interim Head of Investor Relations
shorwitz@heidrick.com

Media:
Nina Chang, Vice President, Corporate Communications
nchang@heidrick.com


Heidrick & Struggles International, Inc.
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
20232022$ Change% Change
Revenue
Revenue before reimbursements (net revenue)$263,160 $255,185 $7,975 3.1 %
Reimbursements4,736 3,086 1,650 53.5 %
Total revenue267,896 258,271 9,625 3.7 %
Operating expenses
Salaries and benefits167,219 171,473 (4,254)(2.5)%
General and administrative expenses37,564 32,189 5,375 16.7 %
Cost of services30,680 17,801 12,879 72.3 %
Research and development5,560 5,400 160 3.0 %
Reimbursed expenses4,736 3,086 1,650 53.5 %
Total operating expenses245,759 229,949 15,810 6.9 %
Operating income22,137 28,322 (6,185)(21.8)%
Non-operating income (expense)
Interest, net2,505 1,255 
Other, net(649)(43)
Net non-operating income1,856 1,212 
Income before income taxes23,993 29,534 
Provision for income taxes9,006 8,708 
Net income14,987 20,826 
Other comprehensive loss, net of tax(4,001)(5,454)
Comprehensive income$10,986 $15,372 
Weighted-average common shares outstanding
Basic20,076 19,816 
Diluted20,553 20,413 
Earnings per common share
Basic$0.75 $1.05 
Diluted$0.73 $1.02 
Salaries and benefits as a % of net revenue63.5 %67.2 %
General and administrative expenses as a % of net revenue14.3 %12.6 %
Cost of services as a % of net revenue11.7 %7.0 %
Research and development as a % of net revenue2.1 %2.1 %
Operating income margin8.4 %11.1 %


Heidrick & Struggles International, Inc.
Segment Information
(In thousands)
(Unaudited)
Three Months Ended September 30,
20232022$
Change
% Change
2023 Margin1
2022 Margin1
Revenue
Executive Search
Americas$132,320 $143,747 $(11,427)(7.9)%
Europe44,606 41,141 3,465 8.4 %
Asia Pacific21,888 27,919 (6,031)(21.6)%
Total Executive Search198,814 212,807 (13,993)(6.6)%
On-Demand Talent41,053 23,247 17,806 76.6 %
Heidrick Consulting23,293 19,131 4,162 21.8 %
Revenue before reimbursements (net revenue)263,160 255,185 7,975 3.1 %
Reimbursements4,736 3,086 1,650 53.5 %
Total revenue$267,896 $258,271 $9,625 3.7 %
Operating income (loss)
Executive Search
Americas$39,285 $39,741 $(456)(1.1)%29.7 %27.6 %
Europe8,519 5,652 2,867 50.7 %19.1 %13.7 %
Asia Pacific2,486 4,503 (2,017)(44.8)%11.4 %16.1 %
Total Executive Search50,290 49,896 394 0.8 %25.3 %23.4 %
On-Demand Talent(4,595)(276)(4,319)NM(11.2)%(1.2)%
Heidrick Consulting(4,075)(2,000)(2,075)(103.8)%(17.5)%(10.5)%
Total segments41,620 47,620 (6,000)(12.6)%15.8 %18.7 %
Research and Development(5,560)(5,400)(160)(3.0)%(2.1)%(2.1)%
Global Operations Support(13,923)(13,898)(25)(0.2)%(5.3)%(5.4)%
Total operating income$22,137 $28,322 $(6,185)(21.8)%8.4 %11.1 %


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)
Nine Months Ended
Setember 30,
20232022$ Change% Change
Revenue
Revenue before reimbursements (net revenue)$773,702 $837,747 $(64,045)(7.6)%
Reimbursements10,090 7,170 2,920 40.7 %
Total revenue783,792 844,917 (61,125)(7.2)%
Operating expenses
Salaries and benefits504,994 580,602 (75,608)(13.0)%
General and administrative expenses112,405 97,186 15,219 15.7 %
Cost of services78,818 53,192 25,626 48.2 %
Research and development16,746 14,347 2,399 16.7 %
Impairment charges7,246 — 7,246 100.0 %
Reimbursed expenses10,090 7,170 2,920 40.7 %
Total operating expenses730,299 752,497 (22,198)(2.9)%
Operating income53,493 92,420 (38,927)(42.1)%
Non-operating income (expense)
Interest, net7,667 1,664 
Other, net2,537 (1,740)
Net non-operating income (expense)10,204 (76)
Income before income taxes63,697 92,344 
Provision for income taxes24,142 28,902 
Net income39,555 63,442 
Other comprehensive loss, net of tax(3,633)(14,060)
Comprehensive income$35,922 $49,382 
Weighted-average common shares outstanding
Basic19,998 19,723 
Diluted20,716 20,558 
Earnings per common share
Basic$1.98 $3.22 
Diluted$1.91 $3.09 
Salaries and benefits as a % of net revenue65.3 %69.3 %
General and administrative expenses as a % of net revenue14.5 %11.6 %
Cost of services as a % of net revenue10.2 %6.3 %
Research and development as a % of net revenue2.2 %1.7 %
Operating income margin6.9 %11.0 %


Heidrick & Struggles International, Inc.
Segment Information
(In thousands)
(Unaudited)
Nine Months Ended September 30,
20232022$
Change
% Change
2023 Margin1
2022 Margin1
Revenue
Executive Search
Americas$398,210 $482,320 $(84,110)(17.4)%
Europe129,104 139,017 (9,913)(7.1)%
Asia Pacific68,766 87,928 (19,162)(21.8)%
Total Executive Search596,080 709,265 (113,185)(16.0)%
On-Demand Talent111,410 68,981 42,429 61.5 %
Heidrick Consulting66,212 59,501 6,711 11.3 %
Revenue before reimbursements (net revenue)773,702 837,747 (64,045)(7.6)%
Reimbursements10,090 7,170 2,920 40.7 %
Total revenue$783,792 $844,917 $(61,125)(7.2)%
Operating income (loss)
Executive Search
Americas$121,128 $123,842 $(2,714)(2.2)%30.4 %25.7 %
Europe12,663 15,661 (2,998)(19.1)%9.8 %11.3 %
Asia Pacific7,132 13,469 (6,337)(47.0)%10.4 %15.3 %
Total Executive Search140,923 152,972 (12,049)(7.9)%23.6 %21.6 %
On-Demand Talent(11,821)(1,207)(10,614)NM(10.6)%(1.7)%
Heidrick Consulting2
(17,877)(4,492)(13,385)NM(27.0)%(7.5)%
Total segments111,225 147,273 (36,048)(24.5)%14.4 %17.6 %
Research and Development(16,746)(14,347)(2,399)(16.7)%(2.2)%(1.7)%
Global Operations Support(40,986)(40,506)(480)(1.2)%(5.3)%(4.8)%
Total operating income$53,493 $92,420 $(38,927)(42.1)%6.9 %11.0 %


1 Margin based on revenue before reimbursements (net revenue).
2 Includes impairment charges of $7.2 million for the nine months ended September 30, 2023.





Heidrick & Struggles International, Inc.
Reconciliation of Net Income and Adjusted Net Income (Non-GAAP)
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net income$14,987 $20,826 $39,555 $63,442 
Adjustments
Impairment charges, net of tax1
— — 6,038 — 
Earnout fair value adjustment, net of tax2
— (350)— (350)
Total adjustments— (350)6,038 (350)
Adjusted net income$14,987 $20,476 $45,593 $63,092 
Weighted-average common shares outstanding
Basic20,076 19,816 19,998 19,723 
Diluted20,553 20,413 20,716 20,558 
Earnings per common share
Basic$0.75 $1.05 $1.98 $3.22 
Diluted$0.73 $1.02 $1.91 $3.09 
Adjusted earnings per common share
Basic$0.75 $1.03 $2.28 $3.20 
Diluted$0.73 $1.00 $2.20 $3.07 

1 The Company recorded a goodwill impairment charge of $7.2 million in the Heidrick Consulting segment for the nine months ended September 30, 2023.
2     The Company recorded a fair value adjustment to reduce the On-Demand Talent earnout by $0.5 million for the three and nine months ended September 30, 2022.


Heidrick & Struggles International, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30,
2023
December 31,
2022
Current assets
Cash and cash equivalents$286,429 $355,447 
Marketable securities47,560 266,169 
Accounts receivable, net189,442 126,437 
Prepaid expenses28,333 24,098 
Other current assets50,611 40,722 
Income taxes recoverable10,799 10,946 
Total current assets613,174 823,819 
Non-current assets
Property and equipment, net34,034 30,207 
Operating lease right-of-use assets65,412 71,457 
Assets designated for retirement and pension plans11,195 11,332 
Investments43,154 34,354 
Other non-current assets19,528 25,788 
Goodwill198,241 138,361 
Other intangible assets, net22,509 6,333 
Deferred income taxes33,999 33,987 
Total non-current assets428,072 351,819 
Total assets$1,041,246 $1,175,638 
Current liabilities
Accounts payable$18,966 $14,613 
Accrued salaries and benefits264,625 451,161 
Deferred revenue41,502 43,057 
Operating lease liabilities20,994 19,554 
Other current liabilities33,171 56,016 
Income taxes payable12,709 4,076 
Total current liabilities391,967 588,477 
Non-current liabilities
Accrued salaries and benefits48,598 59,467 
Retirement and pension plans57,351 48,456 
Operating lease liabilities55,832 63,299 
Other non-current liabilities40,985 5,293 
Deferred income taxes7,365 — 
Total non-current liabilities210,131 176,515 
Total liabilities602,098 764,992 
Stockholders’ equity439,148 410,646 
Total liabilities and stockholders’ equity$1,041,246 $1,175,638 


Heidrick & Struggles International, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
September 30,
20232022
Cash flows - operating activities
Net income$14,987 $20,826 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization4,740 2,583 
Deferred income taxes(6,994)(730)
Stock-based compensation expense3,559 4,209 
Accretion expense related to earnout payments455 275 
Gain on marketable securities(346)(113)
Loss on disposal of property and equipment61 67 
Changes in assets and liabilities:
Accounts receivable7,785 20,030 
Accounts payable1,257 694 
Accrued expenses76,113 91,867 
Deferred revenue(2,165)(4,386)
Income taxes recoverable and payable, net9,205 2,453 
Retirement and pension plan assets and liabilities294 179 
Prepaid expenses(1,136)(1,967)
Other assets and liabilities, net1,659 2,477 
Net cash provided by operating activities109,474 138,464 
Cash flows - investing activities
Acquisition of business, net of cash acquired(2,204)— 
Capital expenditures(2,805)(3,940)
Purchases of marketable securities and investments(47,781)(180,739)
Proceeds from sales of marketable securities and investments21,571 226 
Net cash used in investing activities(31,219)(184,453)
Cash flows - financing activities
Cash dividends paid(3,149)(3,120)
Acquisition earnout payments(2,038)— 
Net cash used in financing activities(5,187)(3,120)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash(4,414)(12,031)
Net increase (decrease) in cash, cash equivalents and restricted cash68,654 (61,140)
Cash, cash equivalents and restricted cash at beginning of period217,817 336,650 
Cash, cash equivalents and restricted cash at end of period$286,471 $275,510 


Heidrick & Struggles International, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
20232022
Cash flows - operating activities
Net income$39,555 $63,442 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization13,432 7,824 
Deferred income taxes(548)(976)
Stock-based compensation expense7,331 11,691 
Accretion expense related to earnout payments1,097 820 
Gain on marketable securities(2,040)(113)
Loss on disposal of property and equipment192 376 
Impairment charges7,246 — 
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable(52,205)(64,753)
Accounts payable(1,657)(3,250)
Accrued expenses(197,698)(32,414)
Deferred revenue(1,622)(5,913)
Income taxes recoverable and payable, net6,617 (5,661)
Retirement and pension plan assets and liabilities6,697 3,476 
Prepaid expenses(3,771)(6,637)
Other assets and liabilities, net(3,243)(8,960)
Net cash used in operating activities(180,617)(41,048)
Cash flows - investing activities
Acquisition of businesses, net of cash acquired(37,953)— 
Capital expenditures(9,619)(8,176)
Purchases of marketable securities and investments(75,464)(186,097)
Proceeds from sales of marketable securities and investments289,689 1,216 
Net cash provided by (used in) investing activities166,653 (193,057)
Cash flows - financing activities
Repurchases of common stock(904)— 
Cash dividends paid(9,383)(9,343)
Payment of employee tax withholdings on equity transactions(4,141)(3,219)
Acquisition earnout payments(37,984)— 
Net cash used in financing activities(52,412)(12,562)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash(2,642)(23,082)
Net decrease in cash, cash equivalents and restricted cash(69,018)(269,749)
Cash, cash equivalents and restricted cash at beginning of period355,489 545,259 
Cash, cash equivalents and restricted cash at end of period$286,471 $275,510 


Heidrick & Struggles International, Inc.
Reconciliation of Net Income and Operating Income to Adjusted EBITDA (Non-GAAP)
(In thousands)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Revenue before reimbursements (net revenue)$263,160 $255,185 $773,702 $837,747 
Net income 14,987 20,826 39,555 63,442 
Interest, net(2,505)(1,255)(7,667)(1,664)
Other, net649 43 (2,537)1,740 
Provision for income taxes9,006 8,708 24,142 28,902 
Operating income22,137 28,322 53,493 92,420 
Adjustments
Stock-based compensation expense2,927 3,778 6,254 10,804 
Depreciation2,387 1,785 6,563 5,403 
Intangible amortization2,353 799 6,869 2,421 
Earnout accretion455 276 1,097 820 
Earnout fair value adjustments— (507)— (507)
Acquisition contingent consideration3,268 911 8,711 2,971 
Deferred compensation plan(1,427)(2,102)2,309 (8,589)
Reorganization costs176 — 3,572 — 
Impairment charges— — 7,246 — 
Total adjustments10,139 4,940 42,621 13,323 
Adjusted EBITDA$32,276 $33,262 $96,114 $105,743 
Adjusted EBITDA margin12.3 %13.0 %12.4 %12.6 %


Heidrick & Struggles International, Inc.
Reconciliation of Operating Income to Adjusted EBITDA by Line of Business (Non-GAAP)
(In thousands)
(Unaudited)
Three Months Ended September 30, 2023
Executive SearchOn-Demand TalentHeidrick ConsultingResearch & DevelopmentGlobal Operations SupportTotal
Revenue before reimbursements (net revenue)$198,814 $41,053 $23,293 $— $— $263,160 
Operating income (loss)1
50,290 (4,595)(4,075)(5,560)(13,923)22,137 
Adjustments
Stock-based compensation881 146 89 1,804 2,927 
Depreciation1,288 125 156 655 163 2,387 
Intangible amortization40 1,869 444 — — 2,353 
Earnout accretion— 397 58 — — 455 
Acquisition contingent compensation649 1,559 1,060 — — 3,268 
Deferred compensation plan(1,370)— (34)(22)(1)(1,427)
Reorganization costs111 65 — — — 176 
Total adjustments1,599 4,022 1,830 722 1,966 10,139 
Adjusted EBITDA$51,889 $(573)$(2,245)$(4,838)$(11,957)$32,276 
Adjusted EBITDA margin26.1 %(1.4)%(9.6)%(1.8)%(4.5)%12.3 %
Three Months Ended September 30, 2022
Executive SearchOn-Demand TalentHeidrick ConsultingResearch & DevelopmentGlobal Operations SupportTotal
Revenue before reimbursements (net revenue)$212,807 $23,247 $19,131 $— $— $255,185 
Operating income (loss)1
49,896 (276)(2,000)(5,400)(13,898)28,322 
Adjustments
Stock-based compensation1,250 469 57 1,996 3,778 
Depreciation1,373 46 89 166 111 1,785 
Intangible amortization71 628 100 — — 799 
Earnout accretion— 276 — — — 276 
Earnout fair value adjustments— (507)— — — (507)
Acquisition contingent compensation911 — — — — 911 
Deferred compensation plan(2,021)— (52)(28)(1)(2,102)
Total adjustments1,584 449 606 195 2,106 4,940 
Adjusted EBITDA$51,480 $173 $(1,394)$(5,205)$(11,792)$33,262 
Adjusted EBITDA margin24.2 %0.7 %(7.3 %)(2.0)%(4.6)%13.0 %

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)
Nine Months Ended September 30, 2023
Executive SearchOn-Demand TalentHeidrick ConsultingResearch & DevelopmentGlobal Operations SupportTotal
Revenue before reimbursements (net revenue)$596,080 $111,410 $66,212 $— $— $773,702 
Operating income (loss)1
140,923 (11,821)(17,877)(16,746)(40,986)53,493 
Adjustments
Stock-based compensation2,204 15 268 211 3,556 6,254 
Depreciation3,928 326 507 1,319 483 6,563 
Intangible amortization145 5,737 987 — — 6,869 
Earnout accretion— 982 115 — — 1,097 
Acquisition contingent compensation2,449 4,144 2,118 — — 8,711 
Deferred compensation plan2,220 — 56 31 2,309 
Reorganization costs2,280 1,292 — — — 3,572 
Impairment charges— — 7,246 — — 7,246 
Total adjustments13,226 12,496 11,297 1,561 4,041 42,621 
Adjusted EBITDA$154,149 $675 $(6,580)$(15,185)$(36,945)$96,114 
Adjusted EBITDA margin25.9 %0.6 %(9.9 %)(2.0 %)(4.8)%12.4 %
Nine Months Ended September 30, 2022
Executive SearchOn-Demand TalentHeidrick ConsultingResearch & DevelopmentGlobal Operations SupportTotal
Revenue before reimbursements (net revenue)$709,265 $68,981 $59,501 $— $— $837,747 
Operating income (loss)1
152,972 (1,207)(4,492)(14,347)(40,506)92,420 
Adjustments
Stock-based compensation3,418 20 738 147 6,481 10,804 
Depreciation4,351 99 346 276 331 5,403 
Intangible amortization232 1,889 300 — — 2,421 
Earnout accretion— 820 — — — 820 
Earnout fair value adjustments— (507)— — — (507)
Acquisition contingent compensation2,971 — — — — 2,971 
Deferred compensation plan(8,254)— (228)(106)(1)(8,589)
Total adjustments2,718 2,321 1,156 317 6,811 13,323 
Adjusted EBITDA$155,690 $1,114 $(3,336)$(14,030)$(33,695)$105,743 
Adjusted EBITDA margin22.0 %1.6 %(5.6 %)(1.7 %)(4.0 %)12.6 %

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.