Company Reiterates Second Quarter 2024 Outlook "Mark has been a valued member of our executive team over the past six years and made significant contributions during his tenure. He helped lead transformative financial management and discipline, while advancing our strategic direction and the overall growth of the company," stated Heidrick & Struggles' Chief Executive Officer Tom Monahan. "I am immensely appreciative of Mark for his partnership and wish him the very best in his next professional endeavor. Ou ...

About the Industry What's Shaping the Future of the Business Services Industry? Increased Adoption of Remote Work & Hybrid Models: The swift increase in remote work since the pandemic has led staffing agencies to prioritize flexible staffing solutions, including remote and hybrid models. These adaptations align with the desires of both clients and job seekers for improved work-life balance. With the continued prevalence of remote work, staffing agencies are expected to prioritize and meet evolving workplace ...

81% of US CEOs and board directors surveyed support direct engagement with employees beyond senior management. 70% of US CEOs and board directors surveyed say there has been increased operational involvement from the board. 33% of directors surveyed have increased their reliance on external experts to manage risk, with 30% adding specialized experts directly to their boards. CHICAGO, May 20, 2024 /PRNewswire/ -- Today, Heidrick & Struggles (Nasdaq: HSII), a premier provider of global leadership advisory and ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, revenue recognition, credit losses, property and equipment, leases, financial instruments, acquisitions, goodwill, other assets/liabilities, line of credit, stock-based compensation, restructuring, income taxes, and segment information for the three months ended March 31, 2024, and 2023 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (March 31, 2024 vs. December 31, 2023) (in thousands) | Item | March 31, 2024 (Unaudited) | December 31, 2023 | | :--------------------------------- | :-------------------------- | :------------------ | | **Current Assets** | | | | Cash and cash equivalents | $252,831 | $412,618 | | Marketable securities | — | $65,538 | | Accounts receivable, net | $172,953 | $133,128 | | Total current assets | $512,032 | $693,214 | | **Non-current Assets** | | | | Goodwill | $200,089 | $202,252 | | Total assets | $965,470 | $1,141,591 | | **Current Liabilities** | | | | Accrued salaries and benefits | $133,735 | $322,744 | | Total current liabilities | $251,878 | $438,691 | | **Total Liabilities** | $496,685 | $679,313 | | **Total Stockholders' Equity** | $468,785 | $462,278 | - Total assets decreased from **$1.14 billion** at December 31, 2023, to **$965.5 million** at March 31, 2024, primarily driven by a significant reduction in cash and cash equivalents and marketable securities[9](index=9&type=chunk) - Total liabilities decreased from **$679.3 million** to **$496.7 million**, largely due to a decrease in accrued salaries and benefits[9](index=9&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (Three Months Ended March 31, 2024 vs. 2023) (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue before reimbursements (net revenue) | $265,197 | $239,317 | | Total revenue | $269,098 | $242,119 | | Operating income | $16,274 | $17,771 | | Net income | $14,032 | $15,586 | | Basic EPS | $0.70 | $0.78 | | Diluted EPS | $0.67 | $0.76 | | Cash dividends paid per share | $0.15 | $0.15 | - Total revenue increased by **11.1%** to **$269.1 million** in Q1 2024 from **$242.1 million** in Q1 2023, however, net income decreased by **10.1%** to **$14.0 million** from **$15.6 million**[10](index=10&type=chunk)[124](index=124&type=chunk) - Diluted EPS decreased from **$0.76** in Q1 2023 to **$0.67** in Q1 2024[10](index=10&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (Three Months Ended March 31, 2024) (in thousands) | Item | Balance at Dec 31, 2023 | Net Income | Other Comprehensive Loss | Stock-based Compensation | Vesting of Equity Awards | Cash Dividends Declared | Dividend Equivalents | Balance at Mar 31, 2024 | | :--------------------------------- | :---------------------- | :--------- | :----------------------- | :----------------------- | :----------------------- | :---------------------- | :------------------- | :---------------------- | | Total Stockholders' Equity | $462,278 | $14,032 | $(4,091) | $2,644 | $(2,862) | $(3,018) | $(198) | $468,785 | - Total stockholders' equity increased from **$462.3 million** at December 31, 2023, to **$468.8 million** at March 31, 2024, primarily due to net income, partially offset by other comprehensive loss and cash dividends[11](index=11&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2024 vs. 2023) (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(203,424) | $(337,031) | | Net cash provided by investing activities | $54,712 | $228,078 | | Net cash used in financing activities | $(6,078) | $(43,199) | | Net decrease in cash, cash equivalents and restricted cash | $(159,787) | $(150,756) | | Cash, cash equivalents and restricted cash at end of period | $252,831 | $204,733 | - Net cash used in operating activities significantly decreased from **$(337.0) million** in Q1 2023 to **$(203.4) million** in Q1 2024, mainly due to a smaller decrease in accrued expenses related to bonus payments[14](index=14&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - Net cash provided by investing activities decreased substantially from **$228.1 million** in Q1 2023 to **$54.7 million** in Q1 2024, primarily due to lower proceeds from sales of marketable securities and the absence of a large acquisition in 2024[14](index=14&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) [Unaudited Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Unaudited%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Basis of Presentation of Interim Financial Information](index=9&type=section&id=1.%20Basis%20of%20Presentation%20of%20Interim%20Financial%20Information) - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with SEC rules and U.S. GAAP, requiring management estimates and assumptions that may differ from actual results[15](index=15&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The Company's significant accounting policies are consistent with those in its 2023 Annual Report on Form 10-K, with specific details provided for revenue recognition, cost of services, research and development, marketable securities, restricted cash, earnings per common share, and leases[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The FASB issued ASU No. 2023-09 (Income Taxes) and ASU No. 2023-07 (Segment Reporting), effective for annual periods beginning after December 15, 2024, and December 15, 2023 (interim periods after Dec 15, 2024) respectively, which the Company is currently evaluating for impact[28](index=28&type=chunk)[29](index=29&type=chunk) [3. Revenue](index=11&type=section&id=3.%20Revenue) - Executive Search revenue is recognized over approximately six months, based on estimated personnel time, with fixed retainers and variable 'uptick' revenue estimated at contract inception[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - On-Demand Talent and Heidrick Consulting revenues are recognized over time as services are provided, with On-Demand Talent using a right-to-invoice practical expedient and Heidrick Consulting using input methods (cost/time incurred)[35](index=35&type=chunk)[36](index=36&type=chunk) Contract Balances (March 31, 2024 vs. December 31, 2023) (in thousands) | Item | March 31, 2024 | December 31, 2023 | Change | | :------------------ | :------------- | :---------------- | :----- | | Total contract assets | $33,875 | $32,092 | $1,783 | | Deferred revenue | $47,377 | $45,732 | $1,645 | - The Company recognized **$31.2 million** in revenue from contract liabilities at the beginning of Q1 2024 and **$10.1 million** from changes in estimates of variable consideration[41](index=41&type=chunk) [4. Credit Losses](index=13&type=section&id=4.%20Credit%20Losses) - The allowance for credit losses on trade receivables increased to **$7.5 million** at March 31, 2024, from **$6.9 million** at December 31, 2023, with a provision for credit losses of **$1.9 million**[43](index=43&type=chunk)[44](index=44&type=chunk) [5. Property and Equipment, net](index=14&type=section&id=5.%20Property%20and%20Equipment,%20net) Property and Equipment, net (March 31, 2024 vs. December 31, 2023) (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Property and equipment, net | $40,452 | $35,752 | - Net property and equipment increased by **$4.7 million** to **$40.5 million** at March 31, 2024. Depreciation expense for Q1 2024 was **$2.5 million**, up from **$2.0 million** in Q1 2023[45](index=45&type=chunk) [6. Leases](index=14&type=section&id=6.%20Leases) Lease Costs (Three Months Ended March 31, 2024 vs. 2023) (in thousands) | Lease Cost Component | March 31, 2024 | March 31, 2023 | | :------------------- | :------------- | :------------- | | Operating lease cost | $5,637 | $4,525 | | Variable lease cost | $2,455 | $1,916 | | Total lease cost | $8,092 | $6,441 | - Total lease cost increased to **$8.1 million** in Q1 2024 from **$6.4 million** in Q1 2023. The weighted average remaining lease term for operating leases is **7.3 years** with a weighted average discount rate of **4.92%** as of March 31, 2024[51](index=51&type=chunk) [7. Financial Instruments and Fair Value](index=15&type=section&id=7.%20Financial%20Instruments%20and%20Fair%20Value) Cash, Cash Equivalents and Marketable Securities (March 31, 2024 vs. December 31, 2023) (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $252,831 | $412,618 | | Marketable securities | — | $65,538 | | Total | $252,831 | $478,156 | - The Company's U.S. non-qualified deferred compensation plan investments increased to **$54.8 million** at fair value as of March 31, 2024, from **$47.3 million** at December 31, 2023[54](index=54&type=chunk)[56](index=56&type=chunk) Level 3 Liabilities Reconciliation (Three Months Ended March 31, 2024) (in thousands) | Item | Earnout Compensation | Contingent Compensation | | :-------------------------- | :------------------- | :---------------------- | | Balance at December 31, 2023 | $(38,601) | $(18,878) | | Earnout accretion | $(466) | — | | Compensation expense | — | $(1,988) | | Payments | — | $4,821 | | Foreign currency translation | $812 | $491 | | Balance at March 31, 2024 | $(38,255) | $(15,554) | [8. Acquisitions](index=18&type=section&id=8.%20Acquisitions) - In Q1 2023, the Company acquired Atreus Group GmbH for **$33.4 million** (plus a **$12.1 million** adjustment in Q4 2023) and accrued an estimated **$32.0 million** earnout liability, recognizing **$62.4 million** in goodwill[60](index=60&type=chunk) - In Q2 2023, the Company acquired businessfourzero for **$9.5 million** (plus a **$2.2 million** adjustment in Q3 2023) and accrued an estimated **$4.3 million** earnout liability, recognizing **$7.1 million** in goodwill[61](index=61&type=chunk) [9. Goodwill and Other Intangible Assets](index=19&type=section&id=9.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill by Segment (March 31, 2024 vs. December 31, 2023) (in thousands) | Segment | March 31, 2024 | December 31, 2023 | | :---------------- | :------------- | :---------------- | | Executive Search | $93,007 | $93,234 | | On-Demand Talent | $107,082 | $109,018 | | Heidrick Consulting | $7,246 | $7,246 | | Total goodwill | $200,089 | $202,252 | - Total goodwill decreased by **$2.2 million** to **$200.1 million** at March 31, 2024, primarily due to foreign currency translation adjustments[62](index=62&type=chunk) Other Intangible Assets, net (March 31, 2024 vs. December 31, 2023) (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Client relationships | $13,330 | $14,752 | | Trade name | $1,679 | $1,998 | | Software | $3,296 | $4,092 | | Total other intangible assets, net | $18,305 | $20,842 | - Intangible asset amortization expense was **$2.3 million** in Q1 2024, up from **$1.9 million** in Q1 2023[64](index=64&type=chunk) [10. Other Current and Non-current Assets and Liabilities](index=21&type=section&id=10.%20Other%20Current%20and%20Non-current%20Assets%20and%20Liabilities) Other Current Assets (March 31, 2024 vs. December 31, 2023) (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :------------------ | :------------- | :---------------- | | Contract assets | $33,875 | $32,092 | | Other | $14,990 | $15,831 | | Total | $48,865 | $47,923 | Other Non-current Liabilities (March 31, 2024 vs. December 31, 2023) (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :------------------ | :------------- | :---------------- | | Earnout liability | $38,255 | $38,601 | | Other | $2,897 | $3,207 | | Total | $41,152 | $41,808 | [11. Line of Credit](index=21&type=section&id=11.%20Line%20of%20Credit) - The Company has a committed unsecured revolving credit facility of **$200 million**, maturing on July 13, 2026, with no outstanding borrowings as of March 31, 2024, and December 31, 2023[66](index=66&type=chunk)[68](index=68&type=chunk) - The interest rate benchmark for borrowings under the Amended Credit Agreement was changed from LIBOR to SOFR in February 2023[66](index=66&type=chunk) [12. Stock-Based Compensation and Common Stock](index=21&type=section&id=12.%20Stock-Based%20Compensation%20and%20Common%20Stock) - Stockholders approved an increase of **1,060,000 shares** for issuance under the Fourth A&R GlobalShare Program in May 2023, with **522,232 shares** remaining available as of March 31, 2024[69](index=69&type=chunk)[70](index=70&type=chunk) Stock-Based Compensation Expense (Three Months Ended March 31, 2024 vs. 2023) (in thousands) | Item | March 31, 2024 | March 31, 2023 | | :--------------------------------- | :------------- | :------------- | | Salaries and benefits (stock-based) | $3,441 | $2,597 | | Income tax benefit | $949 | $715 | - Unrecognized compensation expense for unvested restricted stock units is **$12.4 million** (weighted average **2.6 years**) and for performance stock units is **$11.1 million** (weighted average **2.7 years**) as of March 31, 2024[74](index=74&type=chunk)[78](index=78&type=chunk) - The Company has a share repurchase authorization of up to **$50 million**, with **$20.8 million** remaining available as of March 31, 2024. No common stock was repurchased in Q1 2023 or Q1 2024[84](index=84&type=chunk) [13. Restructuring](index=23&type=section&id=13.%20Restructuring) - The Company did not incur any restructuring charges under its 2020 Plan during the three months ended March 31, 2024, or 2023, and anticipates no future charges[85](index=85&type=chunk) [14. Income Taxes](index=24&type=section&id=14.%20Income%20Taxes) - The effective tax rate for Q1 2024 was **38.8%** on income before taxes of **$22.9 million**, compared to **31.7%** on **$22.8 million** in Q1 2023. The increase in 2024 was impacted by non-deductible earnout expenses and income mix[87](index=87&type=chunk) [15. Changes in Accumulated Other Comprehensive Income (Loss)](index=24&type=section&id=15.%20Changes%20in%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) Changes in Accumulated Other Comprehensive Income (Loss) (Three Months Ended March 31, 2024) (in thousands) | Component | Balance at Dec 31, 2023 | Other Comprehensive Income (Loss) before Reclassification | Balance at Mar 31, 2024 | | :-------------------------- | :---------------------- | :------------------------------------------------------ | :---------------------- | | Available for Sale Securities | $42 | $(33) | $9 | | Foreign Currency Translation | $647 | $(4,058) | $(3,411) | | Pension | $(560) | — | $(560) | | Total AOCI | $129 | $(4,091) | $(3,962) | - Accumulated other comprehensive income (loss) shifted from a gain of **$129 thousand** at December 31, 2023, to a loss of **$4.0 million** at March 31, 2024, primarily due to foreign currency translation adjustments[88](index=88&type=chunk) [16. Segment Information](index=24&type=section&id=16.%20Segment%20Information) - The Company operates five segments: Executive Search (Americas, Europe, Asia Pacific), On-Demand Talent, and Heidrick Consulting. Segment profitability is measured by Adjusted EBITDA[89](index=89&type=chunk)[90](index=90&type=chunk)[92](index=92&type=chunk) Revenue and Adjusted EBITDA by Segment (Three Months Ended March 31, 2024 vs. 2023) (in thousands) | Segment | Net Revenue 2024 | Net Revenue 2023 | Adjusted EBITDA 2024 | Adjusted EBITDA 2023 | | :---------------- | :--------------- | :--------------- | :------------------- | :------------------- | | Executive Search | $201,481 | $190,487 | $48,419 | $47,772 | | On-Demand Talent | $37,857 | $31,117 | $(921) | $(1,347) | | Heidrick Consulting | $25,859 | $17,713 | $(2,027) | $(2,795) | | Total Net Revenue | $265,197 | $239,317 | $25,868 | $25,627 | - Total Adjusted EBITDA increased slightly to **$25.9 million** in Q1 2024 from **$25.6 million** in Q1 2023, but Adjusted EBITDA margin decreased from **10.7%** to **9.8%**[93](index=93&type=chunk)[94](index=94&type=chunk) [17. Guarantees](index=26&type=section&id=17.%20Guarantees) - The Company has letters of credit totaling approximately **$4.8 million** as of March 31, 2024, primarily supporting office lease agreements, with no accrued liability as no default exists[95](index=95&type=chunk) [18. Commitments and Contingencies](index=26&type=section&id=18.%20Commitments%20and%20Contingencies) - The Company faces contingent liabilities from various pending claims and litigation in the ordinary course of business, but management believes the ultimate resolution will not materially adversely affect its financial condition[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three months ended March 31, 2024, compared to the same period in 2023, covering an executive overview, key performance indicators, compensation model, Q2 2024 outlook, detailed results of operations by segment, liquidity and capital resources, and critical accounting policies [Executive Overview](index=27&type=section&id=Executive%20Overview) - Heidrick & Struggles is a human capital leadership advisory firm offering executive search, consulting, and on-demand talent services globally, focusing on top-level senior executives[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - The Company expanded its On-Demand Talent presence in Europe through the Atreus Group GmbH acquisition in February 2023 and enhanced Heidrick Consulting with the businessfourzero acquisition in April 2023[106](index=106&type=chunk)[107](index=107&type=chunk) - Key performance indicators include net revenue, Adjusted EBITDA, Adjusted EBITDA margin, consultant headcount, confirmed search trends, consultant productivity, and average revenue per search[111](index=111&type=chunk) [Second Quarter 2024 Outlook](index=30&type=section&id=Second%20Quarter%202024%20Outlook) - The Company expects Q2 2024 consolidated net revenue to be between **$255 million** and **$275 million**, subject to external factors like foreign exchange rates, geopolitical conflicts, inflation, and macroeconomic conditions[119](index=119&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Consolidated Results of Operations (Three Months Ended March 31, 2024 vs. 2023) (in thousands) | Item (as % of net revenue) | 2024 | 2023 | | :------------------------- | :--- | :--- | | Revenue before reimbursements | 100.0% | 100.0% | | Total revenue | 101.5% | 101.2% | | Salaries and benefits | 65.8% | 66.4% | | General and administrative expenses | 15.6% | 14.3% | | Cost of services | 10.3% | 9.5% | | Operating income | 6.1% | 7.4% | | Net income | 5.3% | 6.5% | - Consolidated net revenue increased by **10.8%** to **$265.2 million** in Q1 2024, with foreign exchange positively impacting results by **$1.1 million**[125](index=125&type=chunk) - Executive Search net revenue increased by **5.8%** to **$201.5 million**, driven by an increase in average revenue per search (**$136k** in 2024 vs **$124k** in 2023)[125](index=125&type=chunk)[126](index=126&type=chunk) - On-Demand Talent net revenue surged by **21.7%** to **$37.9 million**, primarily due to increased project volume from the Atreus acquisition[125](index=125&type=chunk)[150](index=150&type=chunk) - Heidrick Consulting net revenue grew by **46.0%** to **$25.9 million**, boosted by the businessfourzero acquisition and more leadership assessment engagements[125](index=125&type=chunk)[155](index=155&type=chunk) - Consolidated salaries and benefits expense increased by **9.8%** to **$174.4 million**, mainly due to higher bonus accruals from increased consultant productivity[127](index=127&type=chunk) - Consolidated general and administrative expenses rose by **20.5%** to **$41.4 million**, attributed to increases in business development travel, office occupancy, IT, and intangible amortization[129](index=129&type=chunk) - Consolidated Adjusted EBITDA increased by **0.9%** to **$25.9 million**, but the Adjusted EBITDA margin declined from **10.7%** to **9.8%**[134](index=134&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company believes its cash balances, operational cash flow, and revolving credit facility are sufficient to finance operations for at least the next 12 months[163](index=163&type=chunk) - Cash, cash equivalents, and marketable securities decreased to **$252.8 million** at March 31, 2024, from **$478.2 million** at December 31, 2023[168](index=168&type=chunk) - Cash used in operating activities was **$203.4 million** in Q1 2024, a significant improvement from **$337.0 million** in Q1 2023, primarily due to lower bonus payments[169](index=169&type=chunk)[170](index=170&type=chunk) - Cash provided by investing activities decreased to **$54.7 million** in Q1 2024 from **$228.1 million** in Q1 2023, mainly due to reduced proceeds from marketable securities sales and no major acquisitions[171](index=171&type=chunk)[172](index=172&type=chunk) - Cash used in financing activities was **$6.1 million** in Q1 2024, down from **$43.2 million** in Q1 2023, as the prior year included a **$35.9 million** earnout payment[173](index=173&type=chunk)[174](index=174&type=chunk) [Application of Critical Accounting Policies and Estimates](index=39&type=section&id=Application%20of%20Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies involve significant estimates and assumptions related to revenue recognition, income taxes, interim effective tax rate, and assessment of goodwill and other intangible assets for impairment[179](index=179&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the Company's exposure to market risks, primarily currency market risk, due to its global operations, noting that revenue and expenses are generally matched in local currencies to reduce risk, but translation of foreign currency financial statements can cause fluctuations in asset and liability valuations - A **10%** change in average exchange rates for foreign currencies would have impacted net income by approximately **$0.4 million** for the three months ended March 31, 2024[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that the Company's management, including the principal executive and financial officers, evaluated the effectiveness of its disclosure controls and procedures as of March 31, 2024, and concluded they were effective, also stating that there were no material changes to internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2024[183](index=183&type=chunk) - No material changes to internal control over financial reporting occurred during the three months ended March 31, 2024[184](index=184&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the information on commitments and contingencies from Note 18 of the Condensed Consolidated Financial Statements, which addresses pending claims and litigation - Information regarding legal proceedings is incorporated from Note 18, Commitments and Contingencies, of the Condensed Consolidated Financial Statements[185](index=185&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the Company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the Company's risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2023[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities or use of proceeds to report[187](index=187&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various forms of stock unit participation agreements, certifications from the CEO and CFO, and Inline XBRL documents - The report includes exhibits such as Performance Stock Unit and Restricted Stock Unit Participation Agreements, CEO/CFO certifications (Sarbanes-Oxley Act), and Inline XBRL documents[188](index=188&type=chunk) SIGNATURE This section contains the signature of the registrant, duly authorized by Stephen A. Bondi, Vice President, Controller, and Chief Accounting Officer, on May 6, 2024, certifying the filing of the report - The report was signed on **May 6, 2024**, by Stephen A. Bondi, Vice President, Controller, and Chief Accounting Officer[192](index=192&type=chunk)

CHICAGO, May 6, 2024 /PRNewswire/ -- Heidrick & Struggles (Nasdaq: HSII), a premier provider of global leadership advisory and on-demand talent solutions, added one partner to its Executive Search business and a consultant in the Heidrick Consulting business in the Americas in February and March 2024. Stacy Hostetler joined Heidrick & Struggles' San Francisco office as a partner in the Healthcare & Life Sciences Practice, specializing in the medical device sector and its intersection with digital health. Pr ...

LONDON, May 6, 2024 /PRNewswire/ -- Heidrick & Struggles (Nasdaq: HSII), a premier provider of global leadership advisory and on-demand talent solutions, added a partner and principal to its Executive Search business and a principal in the Heidrick Consulting business in Europe and Israel in February and March 2024.    Dafna Alexander joined the Tel Aviv office as a partner in the Global Technology & Services Practice, bringing more than 25 years of experience in executive search and in managing human resou ...

CHICAGO, April 22, 2024 /PRNewswire/ -- Heidrick & Struggles (Nasdaq: HSII) today announced it will hold its quarterly conference call to discuss 2024 first quarter financial results on Monday, May 6, 2024, at 5:00pm ET. The conference call and accompanying slides will be publicly available via live webcast from the investor relations section of the Heidrick & Struggles website at www.heidrick.com.  To listen by phone dial +1-800-715-9871 or +1-646-307-1963, conference ID: 4805686.   The webcast will be ava ...

```markdown PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Heidrick & Struggles International, Inc. is a global human capital leadership advisory firm offering executive search, on-demand talent, and consulting services - **Heidrick & Struggles** is a human capital leadership advisory firm providing executive search, consulting, and on-demand talent services globally[13](index=13&type=chunk) - The company's service offerings include Executive Search (retained basis, focused on top-level senior executives), On-Demand Talent (providing independent talent for interim roles and projects), and Heidrick Consulting (leadership assessment, development, organizational design, culture shaping)[14](index=14&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) Net Revenue Contribution by Segment (2021-2023) | Segment | 2023 | 2022 | 2021 | | :------------------ | :---- | :---- | :---- | | Executive Search | | | | | Americas | **51 %** | **57 %** | **58 %** | | Europe | **16 %** | **16 %** | **17 %** | | Asia Pacific | **9 %** | **11 %** | **11 %** | | On-Demand Talent | **15 %** | **9 %** | **7 %** | | Heidrick Consulting | **9 %** | **7 %** | **7 %** | Percentage of Billings by Global Industry Practices (2021-2023) | Global Industry Practices | 2023 | 2022 | 2021 | | :------------------------ | :---- | :---- | :---- | | Financial Services | **26 %** | **27 %** | **27 %** | | Industrial | **24 %** | **20 %** | **20 %** | | Global Technology & Services | **19 %** | **23 %** | **23 %** | | Consumer Markets | **17 %** | **16 %** | **15 %** | | Healthcare & Life Sciences | **11 %** | **11 %** | **13 %** | | Social Impact | **3 %** | **3 %** | **2 %** | - The company employs **2,212** individuals as of December 31, 2023, with **503** consultants (**414** Executive Search, **89** Heidrick Consulting)[47](index=47&type=chunk) - DE&I commitments include **63%** women in the overall workforce, **27%** people of color in the U.S. workforce, **38%** women on the Board, and **31%** gender diverse Management Committee[53](index=53&type=chunk) [Item 1A. Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks, including operational challenges such as attracting and retaining qualified consultants, maintaining its professional reputation, and managing client off-limits arrangements - Operational risks include the failure to attract, integrate, develop, manage, retain, and motivate qualified consultants and senior leaders, and the inability to prevent consultants from taking clients to other firms[76](index=76&type=chunk)[78](index=78&type=chunk) - Maintaining professional reputation and brand name is critical, as dissatisfaction or loss of thought leadership can adversely affect new engagements and consultant hiring[79](index=79&type=chunk) - Legal and regulatory risks encompass claims for contractual breaches, employment-related laws, data security, data privacy (e.g., GDPR), and potential misclassification of on-demand independent contractors[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk) - Increased cybersecurity vulnerabilities and sophisticated attacks pose risks to systems, networks, solutions, services, and data, potentially leading to business disruption, reputational damage, and regulatory actions[92](index=92&type=chunk)[93](index=93&type=chunk) - Industry and general economic risks include adverse macroeconomic or labor market conditions (e.g., inflation, geopolitical instability like the wars in Ukraine and Israel/Gaza), aggressive competition, and currency fluctuations[94](index=94&type=chunk)[95](index=95&type=chunk)[98](index=98&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [Item 1B. Unresolved Staff Comments](index=22&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[112](index=112&type=chunk) [Item 1C. Cybersecurity](index=23&type=section&id=Item%201C.%20Cybersecurity) **Heidrick & Struggles** prioritizes cybersecurity risk management, confidentiality, and information security, employing a comprehensive program aligned with ISO 27001 - The company's cybersecurity program aligns with ISO 27001 framework, including regular system patching, multi-factor authentication, data encryption, and **24/7/365** security monitoring[114](index=114&type=chunk)[117](index=117&type=chunk) - Third-party service providers are engaged for vulnerability and penetration testing, and their compliance with security and privacy requirements is monitored annually[116](index=116&type=chunk)[118](index=118&type=chunk) - The CISO, with **24** years of information security experience and CISSP/CIPP/E certifications, leads the cybersecurity team and briefs the Audit & Finance Committee (AFC) and the Board at least twice a year[120](index=120&type=chunk)[121](index=121&type=chunk) - An incident response plan is in place for notification, classification, analysis, and communication of security incidents, with the CISO informed at all severity levels[122](index=122&type=chunk) [Item 2. Properties](index=24&type=section&id=Item%202.%20Properties) **Heidrick & Struggles**' corporate headquarters is in Chicago, Illinois, and it leases office space in **55** cities across **30** countries - Corporate headquarters is in Chicago, Illinois[123](index=123&type=chunk) - The company leases office space in **55** cities across **30** countries and does not own any real estate[123](index=123&type=chunk) [Item 3. Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) The company has contingent liabilities from various pending claims and litigation in the ordinary course of business, some involving substantial damages - Contingent liabilities exist from pending claims and litigation in the ordinary course of business[124](index=124&type=chunk) - Management believes the ultimate resolution of these matters will not have a material adverse effect on financial condition, results of operations, or liquidity[124](index=124&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to **Heidrick & Struggles** International, Inc - Not applicable[125](index=125&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) **Heidrick & Struggles**' common stock is listed on the Nasdaq Stock Market under the symbol "HSII" - Common stock is listed on the Nasdaq Stock Market under the symbol "HSII"[127](index=127&type=chunk) - As of March 1, 2024, there were **20,122,792** shares of common stock outstanding, held by **48** record holders[5](index=5&type=chunk)[128](index=128&type=chunk) Cash Dividends Paid Per Share | Year | Dividend Per Share | | :--- | :----------------- | | 2023 | **$0.60** | | 2022 | **$0.60** | | 2021 | **$0.60** | - The Board approved a quarterly dividend of **$0.15** per share in February 2024, payable March 21, 2024[133](index=133&type=chunk) - The company repurchased **36,000** shares for **$0.9 million** in 2023 under a **$50 million** authorization, with **$20.8 million** remaining available[135](index=135&type=chunk)[259](index=259&type=chunk) [Item 6. Reserved](index=26&type=section&id=Item%206.%20Reserved) This item is not applicable to **Heidrick & Struggles** International, Inc - Not applicable[136](index=136&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of **Heidrick & Struggles**' business, key performance indicators, and compensation model, followed by a detailed analysis of financial results for 2023 compared to 2022, and 2022 compared to 2021 [Executive Overview](index=27&type=section&id=Executive%20Overview) **Heidrick & Struggles** is a human capital leadership advisory firm offering executive search, on-demand talent, and consulting services globally - **Heidrick & Struggles** is a human capital leadership advisory firm offering executive search, on-demand talent, and consulting services globally[140](index=140&type=chunk)[146](index=146&type=chunk) - Key performance indicators include net revenue, Adjusted EBITDA, Adjusted EBITDA margin, consultant headcount, confirmed search trends, consultant productivity, and average revenue per search[147](index=147&type=chunk) - Consultant compensation has fixed and variable components, with variable compensation tied to net revenue generation and overall company performance. Cash bonus deferrals for consultants and management were terminated in **2020** and **2021**, respectively[153](index=153&type=chunk)[157](index=157&type=chunk) [2023 Overview](index=29&type=section&id=2023%20Overview) This section provides a high-level overview of the company's financial performance in 2023, highlighting key revenue and profitability metrics Consolidated Financial Highlights (2023 vs. 2022) | Metric | 2023 ($M) | 2022 ($M) | Change ($M) | Change (%) | | :-------------------------------------- | :-------- | :-------- | :---------- | :--------- | | Consolidated Net Revenue | **$1,026.9** | **$1,073.5** | **$(46.6)** | **(4.3)%** | | Executive Search Net Revenue | **$780.0** | **$901.9** | **$(121.9)** | **(13.5)%** | | On-Demand Talent Net Revenue | **$152.5** | **$91.3** | **$61.2** | **66.9%** | | Heidrick Consulting Net Revenue | **$94.3** | **$80.2** | **$14.1** | **17.6%** | | Adjusted EBITDA Margin | **12.2%** | **11.3%** | **0.9 pp** | | | Salaries and Benefits (% of net revenue)| **63.9%** | **68.7%** | **(4.8) pp** | | | General and Administrative (% of net revenue) | **15.2%** | **12.4%** | **2.8 pp** | | | Cost of Services (% of net revenue) | **10.6%** | **6.6%** | **4.0 pp** | | | Research and Development (% of net revenue) | **2.2%** | **1.9%** | **0.3 pp** | | | Cash, Cash Equivalents, Marketable Securities | **$478.2** | **$621.6** | **$(143.4)** | **(23.1)%** | - Executive Search productivity (annualized net revenue per consultant) decreased from **$2.3 million** in 2022 to **$1.9 million** in 2023[159](index=159&type=chunk) - On-Demand Talent revenue increase was primarily due to the acquisition of **Atreus** in February 2023. **Heidrick Consulting** revenue increase was primarily due to the acquisition of **businessfourzero** in April 2023[158](index=158&type=chunk) [2024 First Quarter Outlook](index=29&type=section&id=2024%20First%20Quarter%20Outlook) The company provides its consolidated net revenue expectations for the first quarter of 2024, noting various external factors that could influence actual results - The company expects **2024** first-quarter consolidated net revenue to be between **$245 million** and **$265 million**[162](index=162&type=chunk) - Outlook is subject to external factors such as foreign exchange, interest rates, foreign conflicts, inflation, and macroeconomic constraints on pricing[162](index=162&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section details the company's consolidated and segment-specific financial performance for 2023 compared to 2022, and 2022 compared to 2021, covering revenue, expenses, and profitability metrics Consolidated Statements of Comprehensive Income (2021-2023) | Metric (in thousands) | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------------- | :---------- | :---------- | :---------- | | Revenue before reimbursements | $1,026,864 | $1,073,464 | $1,003,001 | | Total revenue | $1,041,182 | $1,083,586 | $1,008,474 | | Salaries and benefits | $656,030 | $737,430 | $717,411 | | General and administrative expenses | $156,494 | $132,678 | $130,749 | | Cost of services | $109,039 | $70,676 | $52,785 | | Research and development | $22,698 | $20,414 | — | | Impairment charges | $7,246 | — | — | | Operating income | $75,357 | $112,266 | $98,264 | | Net income | $54,410 | $79,486 | $72,572 | | Diluted EPS | $2.62 | $3.86 | $3.58 | Adjusted EBITDA Reconciliation (2021-2023) | Metric (in thousands) | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------------- | :---------- | :---------- | :---------- | | Net income | $54,410 | $79,486 | $72,572 | | Operating income | $75,357 | $112,266 | $98,264 | | Total adjustments | $50,260 | $8,612 | $30,724 | | Adjusted EBITDA | $125,617 | $120,878 | $128,988 | | Adjusted EBITDA margin | **12.2%** | **11.3%** | **12.9%** | Segment Revenue and Adjusted EBITDA (2021-2023) | Segment (in thousands) | 2023 Revenue (in thousands) | 2022 Revenue (in thousands) | 2021 Revenue (in thousands) | 2023 Adj. EBITDA (in thousands) | 2022 Adj. EBITDA (in thousands) | 2021 Adj. EBITDA (in thousands) | | :-------------------------------- | :----------- | :----------- | :----------- | :--------------- | :--------------- | :--------------- | | Executive Search Americas | $522,988 | $612,881 | $581,440 | $173,358 | $164,193 | $154,087 | | Executive Search Europe | $166,379 | $176,275 | $170,312 | $22,246 | $22,150 | $20,219 | | Executive Search Asia Pacific | $90,678 | $112,766 | $117,008 | $11,070 | $19,813 | $19,442 | | On-Demand Talent | $152,506 | $91,349 | $66,636 | $1,434 | $(336) | $4,592 | | Heidrick Consulting | $94,313 | $80,193 | $67,605 | $(5,823) | $(6,444) | $(14,685) | - Consolidated net revenue decreased by **4.3%** in 2023, primarily due to a **13.5%** decrease in Executive Search net revenue, partially offset by significant growth in On-Demand Talent (**66.9%**) and **Heidrick Consulting** (**17.6%**) driven by acquisitions[158](index=158&type=chunk)[170](index=170&type=chunk) - Salaries and benefits decreased by **11.0%** in 2023, mainly due to lower variable compensation from decreased consultant productivity, despite an increase in average employees[172](index=172&type=chunk)[173](index=173&type=chunk) - General and administrative expenses increased by **18.0%** in 2023, driven by intangible amortization, earnout accretion, office occupancy, and IT costs[175](index=175&type=chunk) - A goodwill impairment charge of **$7.2 million** was recorded in **Heidrick Consulting** in 2023 due to a fair value shortfall after the **businessfourzero** acquisition[179](index=179&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity and capital resources are discussed, including cash balances, credit facilities, and cash flow activities from operations, investing, and financing - The company believes its cash balances, operational funds, and revolving credit facility will be sufficient for operations for at least the next **12** months[244](index=244&type=chunk) - A committed unsecured revolving credit facility was increased to **$200 million** in February 2023, maturing July 13, 2026. No outstanding borrowings as of December 31, 2023[246](index=246&type=chunk)[248](index=248&type=chunk) Cash, Cash Equivalents, and Marketable Securities (2022-2023) | Metric (in thousands) | 2023 (in thousands) | 2022 (in thousands) | Change ($M) | | :-------------------- | :---------- | :---------- | :---------- | | Total | $478,200 | $621,600 | $(143,400) | - Cash used in operating activities was **$26.8 million** in 2023, primarily due to a decrease in accrued expenses from bonus payments, partially offset by net income[250](index=250&type=chunk) - Cash provided by investing activities was **$133.6 million** in 2023, driven by proceeds from marketable securities maturities/sales, partially offset by new purchases, acquisitions, and capital expenditures[254](index=254&type=chunk) - Cash used in financing activities was **$53.5 million** in 2023, mainly for acquisition earnout payments, cash dividends, and employee tax withholdings on equity transactions[257](index=257&type=chunk) [Application of Critical Accounting Policies and Estimates](index=43&type=section&id=Application%20of%20Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the company's critical accounting policies and estimates, including revenue recognition, income taxes, goodwill impairment, other intangible assets, and contingent consideration valuation - Critical accounting policies include revenue recognition (estimating uptick revenue and progress over time), income taxes (deferred tax assets and liabilities, valuation allowances), goodwill impairment, other intangible assets and long-lived assets impairment, and contingent consideration valuation[264](index=264&type=chunk)[265](index=265&type=chunk)[272](index=272&type=chunk)[275](index=275&type=chunk)[278](index=278&type=chunk)[280](index=280&type=chunk) - Revenue from executive search and consulting is recognized over time based on estimated personnel time or cost incurred. Uptick revenue is estimated at contract inception using a portfolio approach[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[270](index=270&type=chunk) - Goodwill impairment tests are performed annually or when triggering events occur, using a discounted cash flow methodology with significant estimates for future market growth, revenue, costs, and discount rates[275](index=275&type=chunk)[276](index=276&type=chunk) [Recently Issued and Adopted Financial Accounting Standards](index=46&type=section&id=Recently%20Issued%20and%20Adopted%20Financial%20Accounting%20Standards) This section discusses recently issued and adopted financial accounting standards, including ASU No. 2023-09 (Income Taxes), ASU No. 2023-07 (Segment Reporting), and ASU No. 2020-04 (Reference Rate Reform) - FASB issued ASU No. **2023-09** (Income Taxes) and ASU No. **2023-07** (Segment Reporting) in December and November 2023, respectively, to expand disclosure requirements. The company is evaluating their impact[358](index=358&type=chunk)[359](index=359&type=chunk) - FASB issued ASU No. **2020-04** (Reference Rate Reform) in March 2020, providing temporary expedients for the transition from LIBOR. This guidance is not expected to have a material effect[360](index=360&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) **Heidrick & Struggles** is exposed to currency market risk due to its multinational operations, with approximately **41%** of net revenue generated outside the U.S - The company is exposed to currency market risk, with approximately **41%** of **2023** net revenue generated outside the United States[98](index=98&type=chunk)[282](index=282&type=chunk) - A **10%** change in average exchange rates for all foreign currencies would have increased or decreased **2023** net income by approximately **$1.5 million**[282](index=282&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements of **Heidrick & Struggles** International, Inc. for the years ended December 31, 2023, 2022, and 2021 - The independent registered public accounting firm (RSM US LLP) issued an unqualified opinion on the consolidated financial statements for the period ended December 31, 2023, and on the effectiveness of internal control over financial reporting[288](index=288&type=chunk)[289](index=289&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Critical audit matters included revenue recognition (estimates for progress over time and uptick revenue), valuation of the On-Demand Talent reporting unit for goodwill impairment testing (revenue growth, operating costs, discount rates), and valuation of **Atreus** Group GmbH earnout and contingent compensation liabilities (future revenue, operating expenses, volatility, discount rates)[293](index=293&type=chunk)[296](index=296&type=chunk)[301](index=301&type=chunk) Consolidated Balance Sheets (2022-2023) | Metric (in thousands) | Dec 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------- | :----------- | :----------- | | Total current assets | $693,214 | $823,819 | | Total non-current assets | $448,377 | $351,819 | | Total assets | $1,141,591 | $1,175,638 | | Total current liabilities | $438,691 | $588,477 | | Total non-current liabilities | $240,622 | $176,515 | | Total liabilities | $679,313 | $764,992 | | Total stockholders' equity | $462,278 | $410,646 | Consolidated Statements of Cash Flows (2021-2023) | Metric (in thousands) | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by (used in) operating activities | $(26,792) | $119,288 | $271,401 | | Net cash provided by (used in) investing activities | $133,599 | $(279,599) | $(21,259) | | Net cash used in financing activities | $(53,528) | $(15,685) | $(15,517) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $57,129 | $(189,770) | $228,770 | Goodwill by Segment (2022-2023) | Segment | Dec 31, 2023 ($M) | Dec 31, 2022 ($M) | | :------------------ | :---------------- | :---------------- | | Executive Search Americas | $91.74 | $91.38 | | Executive Search Europe | $1.49 | $1.45 | | On-Demand Talent | $109.02 | $45.53 | | Total goodwill | $202.25 | $138.36 | - Goodwill increased by **$63.9 million** in 2023, primarily due to the acquisitions of **Atreus** (**$62.4 million**) and **businessfourzero** (**$7.1 million**), partially offset by a **$7.2 million** impairment charge in **Heidrick Consulting**[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk)[400](index=400&type=chunk)[406](index=406&type=chunk) Other Intangible Assets, Net by Segment (2022-2023) | Segment | Dec 31, 2023 ($M) | Dec 31, 2022 ($M) | | :------------------ | :---------------- | :---------------- | | Executive Search Americas | $0.02 | $0.05 | | Executive Search Europe | $0.10 | $0.22 | | Executive Search Asia Pacific | — | $0.02 | | On-Demand Talent | $17.69 | $6.05 | | Heidrick Consulting | $3.04 | — | | Total other intangible assets, net | $20.84 | $6.33 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=85&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[467](index=467&type=chunk) [Item 9A. Controls and Procedures](index=85&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures as of December 31, 2023, concluding they were effective - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2023[469](index=469&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[472](index=472&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2023[474](index=474&type=chunk) [Item 9B. Other Information](index=86&type=section&id=Item%209B.%20Other%20Information) The company reported no other information for this item - No other information was reported[475](index=475&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection](index=86&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspection) The company reported no disclosures regarding foreign jurisdictions that prevent inspection - No disclosures regarding foreign jurisdictions that prevent inspection were reported[476](index=476&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=87&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding the company's directors, executive officers, and corporate governance is incorporated by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 23, 2024 - Information on directors, executive officers, and corporate governance is incorporated by reference from the **2024** Proxy Statement[479](index=479&type=chunk) [Item 11. Executive Compensation](index=87&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive officer and director compensation, as well as the compensation committee of the Board of Directors, is incorporated by reference from the 2024 Proxy Statement - Information on executive and director compensation and the compensation committee is incorporated by reference from the **2024** Proxy Statement[480](index=480&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=87&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the 2024 Proxy Statement - Information on security ownership is incorporated by reference from the **2024** Proxy Statement[481](index=481&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and right | Number of securities remaining available for future issuance under equity compensation plans | | :------------------------------------------ | :------------------------------------------------------------------------ | :----------------------------------------------------------------------- | :--------------------------------------------------------------------------- | | Equity compensation plans approved by stockholders | **926,366** | — | **1,028,212** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=87&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the **2024** Proxy Statement[484](index=484&type=chunk) [Item 14. Principal Accountant Fees and Services](index=87&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the **2024** Proxy Statement[485](index=485&type=chunk) PART IV [Item 15. Exhibit and Financial Statements](index=88&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statements) This section lists the consolidated financial statements and a comprehensive index of exhibits filed as part of the Form 10-K report - Includes an index to consolidated financial statements and a list of exhibits, many of which are incorporated by reference[487](index=487&type=chunk) [Item 16. Form 10-K Summary](index=91&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reported no Form 10-K summary for this item - No Form 10-K summary was reported[491](index=491&type=chunk) ```

Cautionary Statement Regarding Forward-Looking Information Non-GAAP Financial Measures & Currency Presentation Reconciliations of these non-GAAP financial measures with the most directly comparable measures calculated and presented in accordance with GAAP are provided in the appendix. All currency amounts presented in millions except for earnings per share data. Our Purpose & Vision • We help our clients change the world, one leadership team at a time. TM • Executive Search • Leadership Fourth Quarter 2023 ...

Financial Data and Key Metrics Changes - The company achieved over $1 billion in revenue for the year, with net revenue for Q4 2023 at over $253 million, a 7% increase year-over-year [28][49] - Adjusted EBITDA for Q4 was $35.8 million, a 37.9% improvement from $25.9 million in Q4 2022, resulting in a double-digit adjusted EBITDA margin of 14.1% [53][70] - Adjusted diluted EPS for the quarter was $0.72, down from $0.78 in the same quarter last year, primarily due to a higher tax rate [70] Business Line Data and Key Metrics Changes - Executive Search revenue decreased by 4.5% year-over-year to $184 million, with confirmations up 4% [54][37] - On-Demand Talent recorded revenue of $41.1 million, an increase of 83.7% compared to Q4 2022, achieving positive adjusted EBITDA of $0.8 million [59][55] - Heidrick Consulting's revenue grew by 35.8% year-over-year to $28.1 million, benefiting from both organic growth and the acquisition of B4Z [60][44] Market Data and Key Metrics Changes - The company noted a stabilization in demand, particularly for CEO and CHRO roles, with growth in confirmations across all practice groups [37][38] - The company is seeing growth in sectors such as life sciences and consumer practices, while banking and professional services are experiencing slowdowns [40][114] - The company highlighted a strong demand for interim executives, particularly in the CFO office, reflecting changing executive skill needs [42][40] Company Strategy and Development Direction - The company is focused on diversifying its solutions while scaling its search business, with non-search business contributing 24% of total revenue, up from 9% in 2018 [31][56] - The establishment of separate CEO and President roles aims to enhance focus on executing across businesses and expanding capabilities [11][10] - The company is optimistic about future growth, citing improving economic indicators and strong client engagement [36][33] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a potential return to a growth mindset in the second half of 2024, driven by improving economic conditions and client demand [34][33] - The company is preparing for continued challenges but is encouraged by resilience in the economic outlook and client interest in leadership advisory services [36][33] - Management emphasized the importance of leadership as a performance lever and the need for companies to treat their leadership pipeline as a strategic asset [6][6] Other Important Information - The company announced the planned retirement of President and CEO Krishnan Rajagopalan, with Tom Monahan set to take over the role [10][12] - The company has made significant strides in its digital offerings, with the Heidrick Navigator platform gaining traction among clients [45][4] - The company is committed to maintaining margin discipline while investing in growth opportunities [65][74] Q&A Session Summary Question: What is the outlook for the demand environment? - Management noted that while growth does not feel like 2021, there is no significant contraction, and clients are beginning to focus on transformation [80] - There are large forces such as AI and sustainability driving companies to rethink management and business models, which could fuel growth [81] Question: Can you comment on the sustainability of Heidrick Consulting's recent revenue growth? - Management indicated that the growth is supported by both organic growth and the integration of recent acquisitions, with a strong pipeline for future projects [92][94] Question: What is the status of the Heidrick Navigator and digital pipeline? - The company has signed a significant client for the Heidrick Navigator platform and is optimistic about ongoing discussions with other potential clients [102][95] Question: What are the expectations for G&A expenses in 2024? - Management expects G&A to rise by about 5% in 2024, with a target of maintaining it around 15-16% of revenue in the long term [103][102] Question: Which industry verticals are showing the most optimistic trends? - Management highlighted continued momentum in industrial and technology sectors, with signs of recovery in big tech and episodic hiring in financial services [106][114]