Heidrick & Struggles(HSII) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights The company reported strong Q2 2025 financial results, exceeding expectations, with the CEO highlighting strategic focus and providing a positive Q3 2025 revenue outlook and dividend declaration Q2 2025 Financial Highlights Heidrick & Struggles reported strong second-quarter 2025 results, exceeding its outlook with significant revenue growth and improved profitability across all business segments, while also declaring a cash dividend Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Net Revenue | $317.2M | $278.6M | +13.9% | | Adjusted EBITDA | $33.9M | $28.8M | +17.7% | | Adjusted EBITDA Margin | 10.7% | 10.3% | +0.4 pp | | Adjusted Net Income | $18.1M | $14.1M | +28.4% | | Adjusted Diluted EPS | $0.85 | $0.67 | +26.9% | | Cash Dividend Declared | $0.15/share | N/A | N/A | CEO Commentary CEO Tom Monahan highlighted a strong first half of 2025, with Q2 results surpassing expectations despite macroeconomic uncertainty, focusing on client relationships, investing in professionals, and delivering shareholder value - CEO Tom Monahan noted a strong first half of 2025, with Q2 results exceeding the high end of their outlook, despite an uncertain macroeconomic environment[3] - The company is focused on growing differentiated, deep, and durable client relationships by meeting evolving client needs and investing in world-class professionals to create shareholder value[4] Q3 2025 Outlook & Dividend Heidrick & Struggles provided a revenue outlook for Q3 2025 and announced a quarterly cash dividend Q3 2025 Revenue Outlook | Metric | Q3 2025 Outlook | Q3 2024 (Year-Ago Period) | | :---------------- | :---------------- | :------------------------ | | Consolidated Net Revenue | $295M - $315M | $278.6M | - The Board of Directors declared a 2025 third quarter cash dividend of $0.15 per share, payable on August 28, 2025, to shareholders of record on August 14, 2025[4][13] - The Q3 2025 revenue outlook is subject to external factors such as foreign exchange rates, interest rates, foreign conflicts, inflation, and macroeconomic constraints, and is based on management's assumptions for new confirmations, projects, assignments, consultant productivity, and retention[14] Consolidated Financial Results Heidrick & Struggles achieved significant consolidated net revenue growth and improved profitability in both Q2 and H1 2025, driven by all business segments Q2 2025 Consolidated Performance Heidrick & Struggles achieved significant consolidated net revenue growth in Q2 2025, driven by all business segments, with a substantial increase in net income and adjusted EBITDA, and improved margins Q2 2025 Consolidated Financial Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Net Revenue | $317.2M | $278.6M | +13.9% | | Net Income | $21.1M | ($5.2M) | NM | | Diluted EPS | $0.99 | ($0.25) | NM | | Adjusted Net Income | $18.1M | $14.1M | +28.4% | | Adjusted Diluted EPS | $0.85 | $0.67 | +26.9% | | Adjusted EBITDA | $33.9M | $28.8M | +17.7% | | Adjusted EBITDA Margin | 10.7% | 10.3% | +0.4 pp | | Operating Income | $25.2M | ($4.2M) | NM | - The increase in consolidated net revenue was driven by year-over-year growth across all business lines: Executive Search, On-Demand Talent, and Heidrick Consulting[6] - Q2 2025 net income included acquisition-related earnout and contingent compensation fair value adjustments of $4.4 million[7] H1 2025 Consolidated Performance For the first half of 2025, Heidrick & Struggles reported strong consolidated net revenue growth and a significant increase in net income and diluted EPS compared to the prior year H1 2025 Consolidated Financial Performance | Metric | H1 2025 | H1 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Net Revenue | $600.8M | $543.8M | +10.5% | | Net Income | $34.4M | $8.9M | +286.5% | | Diluted EPS | $1.61 | $0.42 | +283.3% | | Operating Income | $41.5M | $12.1M | +242.9% | | Adjusted EBITDA | $63.0M | $54.7M | +15.2% | | Adjusted EBITDA Margin | 10.5% | 10.1% | +0.4 pp | - Salaries and benefits as a percentage of net revenue increased to 66.4% in H1 2025 from 64.8% in H1 2024[31] Segment Performance All business segments demonstrated robust revenue growth in Q2 and H1 2025, with On-Demand Talent and Heidrick Consulting showing significant profitability improvements Executive Search The Executive Search segment demonstrated robust revenue growth in both Q2 and H1 2025, with strong performance across all regions, although its Adjusted EBITDA margin saw a slight decrease in Q2 Executive Search Segment Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | H1 2025 | H1 2024 | Change (YoY) | | :----------------------- | :------ | :------ | :----------- | :------ | :------ | :----------- | | Net Revenue | $238.2M | $210.0M | +13.4% | $451.6M | $411.4M | +9.7% | | Adjusted EBITDA | $54.6M | $52.7M | +3.5% | $106.8M | $101.1M | +5.7% | | Adjusted EBITDA Margin | 22.9% | 25.1% | -2.2 pp | 23.7% | 24.6% | -0.9 pp | - Q2 2025 Executive Search revenue growth was driven by increases in all regions: Americas (+8.9%), Europe (+30.9%), and Asia Pacific (+12.0%)[9] On-Demand Talent The On-Demand Talent segment experienced strong revenue growth and a significant turnaround in profitability, moving from an Adjusted EBITDA loss in the prior year to positive Adjusted EBITDA in both Q2 and H1 2025 On-Demand Talent Segment Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | H1 2025 | H1 2024 | Change (YoY) | | :----------------------- | :------ | :------ | :----------- | :------ | :------ | :----------- | | Net Revenue | $47.9M | $41.9M | +14.3% | $90.4M | $79.8M | +13.4% | | Adjusted EBITDA | $1.0M | ($1.6M) | +163.1% | $1.4M | ($2.6M) | +156.0% | | Adjusted EBITDA Margin | 2.1% | (3.9)% | +6.0 pp | 1.6% | (3.2)% | +4.8 pp | Heidrick Consulting Heidrick Consulting also showed strong revenue growth and a notable improvement in profitability, shifting from an Adjusted EBITDA loss in the prior year to positive Adjusted EBITDA in Q2 2025, though remaining negative for H1 2025 Heidrick Consulting Segment Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | H1 2025 | H1 2024 | Change (YoY) | | :----------------------- | :------ | :------ | :----------- | :------ | :------ | :----------- | | Net Revenue | $31.2M | $26.8M | +16.6% | $58.8M | $52.6M | +11.8% | | Adjusted EBITDA | $0.6M | ($1.4M) | +139.8% | ($1.5M) | ($3.4M) | +55.0% | | Adjusted EBITDA Margin | 1.8% | (5.2)% | +7.0 pp | (2.6)% | (6.5)% | +3.9 pp | Financial Statements Detailed financial statements for Q2 and H1 2025 show strong revenue, improved net income, and changes in cash flow and balance sheet items Consolidated Statements of Comprehensive Income (Loss) The consolidated statements of comprehensive income (loss) provide detailed revenue, operating expenses, and net income figures for the three and six months ended June 30, 2025, compared to the prior year periods - For the three months ended June 30, 2025, total revenue was $321.9 million, with operating income of $25.2 million and net income of $21.1 million[27] - For the six months ended June 30, 2025, total revenue was $609.4 million, with operating income of $41.5 million and net income of $34.4 million[31] - Significant changes in operating expenses for Q2 2025 include a 17.6% increase in salaries and benefits and a 9.2% decrease in general and administrative expenses, alongside the absence of impairment and restructuring charges present in Q2 2024[27] Consolidated Balance Sheets The consolidated balance sheets present the company's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity Consolidated Balance Sheet Highlights | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total Assets | $1,141.0M | $1,194.2M | | Total Liabilities | $648.6M | $741.4M | | Stockholders' Equity | $492.5M | $452.8M | | Cash and Cash Equivalents | $211.2M | $515.6M | | Marketable Securities | $188.4M | $47.9M | | Accounts Receivable, net | $210.6M | $134.3M | | Accrued Salaries and Benefits (Current) | $251.7M | $353.5M | - Cash and cash equivalents decreased significantly from $515.6 million at December 31, 2024, to $211.2 million at June 30, 2025, while marketable securities increased from $47.9 million to $188.4 million[37] - Total liabilities decreased by approximately $92.8 million, primarily due to a reduction in accrued salaries and benefits[37] Consolidated Statements of Cash Flows The consolidated statements of cash flows detail the cash generated from or used in operating, investing, and financing activities for the three and six months ended June 30, 2025, and 2024 Cash Flow Highlights (Three Months Ended June 30) | Activity | Q2 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | | Net Cash from Operating Activities | $68.6M | $62.5M | | Net Cash Used in Investing Activities | ($77.3M) | ($119.9M) | | Net Cash Used in Financing Activities | ($4.1M) | ($4.1M) | | Net Decrease in Cash | ($0.7M) | ($62.9M) | Cash Flow Highlights (Six Months Ended June 30) | Activity | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | | Net Cash Used in Operating Activities | ($163.6M) | ($140.9M) | | Net Cash Used in Investing Activities | ($150.4M) | ($65.2M) | | Net Cash Used in Financing Activities | ($10.6M) | ($10.1M) | | Net Decrease in Cash | ($304.4M) | ($222.7M) | - The significant increase in net cash used in investing activities for H1 2025 was primarily due to higher purchases of marketable securities and investments ($296.2 million vs. $115.3 million in H1 2024)[41] Non-GAAP Financial Measures & Reconciliations The company provides non-GAAP financial measures like Adjusted Net Income and Adjusted EBITDA to offer additional insights into its financial performance and comparability Non-GAAP Definitions Heidrick & Struggles utilizes several non-GAAP financial measures, including adjusted net income, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin, and net revenue excluding the impact of exchange rate fluctuations (constant currency), to provide additional insights into its financial performance - Non-GAAP financial measures are used by management to monitor and evaluate financial results and allocate resources, and are considered useful for investors to evaluate comparability of financial information[18] - Adjusted net income and adjusted diluted EPS exclude goodwill impairment, restructuring charges, and earnout and acquisition contingent compensation fair value adjustments, net of tax[19] - Adjusted EBITDA refers to net income before interest, taxes, depreciation, and amortization, adjusted for earnout accretion, earnout fair value adjustments, contingent compensation, deferred compensation plan income/expense, reorganization costs, impairment charges, and restructuring charges[20] Adjusted Net Income Reconciliation The reconciliation of net income (loss) to adjusted net income details the specific adjustments made for non-GAAP reporting, primarily related to acquisition-related earnout and contingent compensation, impairment charges, and restructuring charges Adjusted Net Income Reconciliation (Q2 & H1 2025) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :---------------------------------------------------------------- | :------ | :------ | :------ | :------ | | Net Income (Loss) | $21,073 | ($5,157) | $34,379 | $8,875 | | Adjustments (Acquisition earnout/contingent comp, impairment, restructuring) | ($2,980) | $19,230 | ($2,095) | $19,230 | | Adjusted Net Income | $18,093 | $14,073 | $32,284 | $28,105 | | Adjusted Diluted EPS | $0.85 | $0.67 | $1.51 | $1.33 | - In Q2 2025, adjustments primarily involved a negative adjustment for acquisition-related earnout and contingent compensation fair value, contrasting with significant positive adjustments in Q2 2024 due to impairment and restructuring charges[35] Adjusted EBITDA Reconciliation Reconciliations of net income (loss) and operating income (loss) to Adjusted EBITDA are provided, detailing various non-operating and non-cash adjustments, as well as segment-specific adjustments, for both quarterly and year-to-date periods Consolidated Adjusted EBITDA Reconciliation (Q2 & H1 2025) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Net Income (Loss) | $21,073 | ($5,157) | $34,379 | $8,875 | | Operating Income (Loss) | $25,230 | ($4,183) | $41,458 | $12,091 | | Total Adjustments | $8,622 | $32,994 | $21,516 | $42,588 | | Adjusted EBITDA | $33,852 | $28,811 | $62,974 | $54,679 | | Adjusted EBITDA Margin | 10.7% | 10.3% | 10.5% | 10.1% | - Key adjustments for Adjusted EBITDA include depreciation, intangible amortization, earnout accretion and fair value adjustments, acquisition contingent compensation, deferred compensation plan income/expense, reorganization costs, impairment charges, and restructuring charges[43][45][47] - Segment-level Adjusted EBITDA reconciliations show that Executive Search consistently contributes the largest portion of Adjusted EBITDA, while On-Demand Talent and Heidrick Consulting have significantly improved their EBITDA performance, moving from losses to positive or reduced losses[45][47] Company Information & Forward-Looking Statements Heidrick & Struggles is a global leadership advisory firm, with forward-looking statements subject to various risks and contact information provided About Heidrick & Struggles Heidrick & Struggles International, Inc. is a global leadership advisory firm specializing in executive leadership and human capital solutions, with over 70 years of experience in identifying and developing outstanding leaders and teams - Heidrick & Struggles (Nasdaq: HSII) is a premier provider of global leadership advisory and on-demand talent solutions[2][16] - For over 70 years, the company has focused on driving superior client performance by leveraging expertise to help organizations discover and enable outstanding leaders and teams[16] Safe Harbor Statement The safe harbor statement clarifies that the press release contains forward-looking statements based on current expectations and assumptions, which are subject to various known and unknown risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are identified by words such as 'expects,' 'anticipates,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' 'outlook,' 'projects,' 'forecasts,' 'aim' and similar expressions[23] - Key risk factors include the ability to attract and retain qualified consultants, maintaining professional reputation, reliance on information systems, data security and privacy concerns, macroeconomic conditions, aggressive competition, foreign currency fluctuations, and geopolitical instability[23][24] - The company undertakes no obligation to update publicly any forward-looking statements[24] Contacts Contact information for investor relations and media inquiries is provided - Investors & Analysts contact: Vance Edelson (Vance.Edelson@icrinc.com)[25] - Media contact: Bianca Wilson, Global Director, Public Relations (bwilson@heidrick.com)[25]