Core Insights - Heidrick & Struggles International, Inc. reported strong financial results for Q2 2025, with consolidated net revenue exceeding the high end of the outlook, driven by growth across all business segments [1][4][8] Financial Performance - Q2 2025 consolidated net revenue reached $317.2 million, a 13.9% increase from $278.6 million in Q2 2024 [4][25] - Adjusted EBITDA for Q2 2025 was $33.9 million, up from $28.8 million in Q2 2024, with an adjusted EBITDA margin of 10.7% compared to 10.3% in the prior year [6][8] - Adjusted net income for Q2 2025 was $18.1 million, an increase from $14.1 million in Q2 2024, resulting in adjusted diluted earnings per share of $0.85, up from $0.67 [5][8] Segment Performance - Executive Search segment net revenue was $238.2 million in Q2 2025, a 13.4% increase from $210.0 million in Q2 2024 [7][27] - On-Demand Talent segment net revenue increased by 14.3% to $47.9 million compared to $41.9 million in Q2 2024 [10][27] - Heidrick Consulting segment net revenue rose by 16.6% to $31.2 million from $26.8 million in the same period last year [11][27] Regional Performance - Revenue growth was observed across all regions: Americas up 8.9%, Europe up 30.9%, and Asia Pacific up 12.0% compared to Q2 2024 [9][27] Dividend Declaration - The Board of Directors declared a cash dividend of $0.15 per share for Q3 2025, payable on August 28, 2025 [13]

Industry Overview - The Zacks Staffing industry encompasses a wide range of human resources and workforce solutions, including recruitment, payroll administration, and organizational consulting services tailored for various sectors [2] - The industry is currently facing challenges due to a contraction in the manufacturing sector, which negatively impacts the demand for temporary workers [3] Current Trends - The staffing industry is expected to recover to pre-pandemic revenues, income, and cash flows despite the ongoing contraction in manufacturing [3] - There is an increased adoption of remote work and hybrid models, prompting staffing agencies to prioritize flexible staffing solutions to meet evolving workplace preferences [4] - Technology is increasingly being utilized in the staffing sector to enhance operations, with AI-driven tools and platforms improving the efficiency of attracting and onboarding talent [5] Market Performance - The Zacks Staffing Firms industry has underperformed compared to the broader sector and the S&P 500, declining 32% over the past year, while the S&P 500 grew by 15.9% [8] - The industry currently trades at an EV-to-EBITDA ratio of 6.53X, significantly lower than the S&P 500's 18.03X and the sector's 11.37X [11] Company Highlights - **Korn Ferry (KFY)**: This firm is leveraging its broad array of solutions and large-scale client engagements, with a focus on technology and AI investments. KFY's digital subscription and license business is enhancing revenue stability [14][15] KFY has a Zacks Rank 3 and a consensus estimate for its 2025 bottom line at $5.16, reflecting an 11% increase over the past 60 days [17] - **RCM Technologies (RCMT)**: RCMT is transitioning into an innovative company with a strong growth narrative in its healthcare segment, particularly in K-12 behavioral health. The company is also expanding in life sciences and engineering, supported by multi-year contracts [20][22] RCMT holds a Zacks Rank 3 with a consensus estimate for its 2025 bottom line at $2.2 [22] - **Heidrick & Struggles International (HSII)**: HSII focuses on value creation through effective leadership placement, supported by a diversified revenue model and zero debt. The company has a Zacks Rank 3 and a consensus estimate for 2025 EPS at $2.86 [25][27]

Core Insights - Heidrick & Struggles International, Inc. will host its quarterly conference call to discuss the financial results for the second quarter of 2025 on August 4, 2025, at 5:00 PM ET [1] - The conference call will be accessible via live webcast on the company's investor relations website, and a replay will be available approximately two hours after the call [2] - Heidrick & Struggles has over 70 years of experience in providing leadership advisory services, focusing on enhancing client performance through human capital leadership [3]

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1]. Group 1 - The investment strategy is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1].

Core Insights - Heidrick & Struggles International, Inc. announced participation in the Needham Technology, Media, & Consumer 1x1 Conference on May 12, 2025, with CEO Tom Monahan and CFO Nirupam Sinha hosting meetings throughout the day [1] Company Overview - Heidrick & Struggles is a leading provider of global leadership advisory and on-demand talent solutions, recognized as the world's foremost advisor on executive leadership [2] - The company has over 70 years of experience in delivering value to clients by leveraging expertise to help organizations discover and enable outstanding leaders and teams [2]

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 [19] - Adjusted EBITDA improved by $3.3 million to $29.1 million, with an adjusted EBITDA margin expanding by 50 basis points to 10.3% [19] - Adjusted net income for the quarter was $14.2 million, consistent with the previous year [26] 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% [22] - 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 [24] - Heidrick Consulting saw organic revenue increase 7% year-over-year to $28 million, with an adjusted EBITDA loss of $2.1 million [25] Market Data and Key Metrics Changes - Revenue increases were noted across regions: 6% in The Americas, 9% in Europe, and 1% in APAC [22] - 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 [10] - There is a commitment to growing executive search and assessment capabilities, which are central to the business [11] - The strategy includes continuous client engagement and innovation in products and services to meet evolving client needs [16][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current economic environment's complexity but emphasizes the company's resilience and ability to create value for clients [5][18] - The company is closely monitoring client activities and tone, anticipating potential caution in decision-making as the year progresses [8][36] - The outlook for Q2 revenue is expected to be between $285 million and $305 million, reflecting ongoing demand despite economic uncertainties [27] Other Important Information - The company ended the first quarter with a strong cash position of $325 million, up from $253 million in March 2024 [26] - The business model is characterized by zero debt, low capital expenditure, and a diversified revenue stream across geographies and industries [9] 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, current results do not reflect such trends, emphasizing the unique nature of each downturn [33][34] Question: Use of cash and acquisition pipeline - The company is managing cash flow for earn-out payments from past acquisitions while prioritizing organic investments and evaluating potential acquisition opportunities [37][38] Question: M&A activity as a driver of client demand - M&A activities create opportunities for the company to assist clients in leadership and cultural integration during transitions [42][43] Question: Profitability expectations for Heidrick Consulting and On Demand Talent - Both segments are expected to improve profitability, with consulting aiming for 11% to 13% growth and on-demand talent showing positive momentum [66] Question: Demand trends among different end markets - Demand has been broad-based across sectors, with financial services performing well alongside technology and consumer markets [70]

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]