Heidrick & Struggles(HSII) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the company Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Heidrick & Struggles International, Inc. and its subsidiaries, 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, goodwill, intangible assets, current assets/liabilities, line of credit, stock-based compensation, restructuring, income taxes, accumulated other comprehensive income, segment information, guarantees, and commitments and contingencies Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Item | March 31, 2022 (Unaudited) | December 31, 2021 | | :------------------------------------------------ | :------------------------- | :------------------ | | Current Assets | | | | Cash and cash equivalents | $267,986 | $545,225 | | Accounts receivable, net | $186,220 | $133,750 | | Total current assets | $535,602 | $745,388 | | Total Assets | $895,572 | $1,106,798 | | Current Liabilities | | | | Accrued salaries and benefits | $179,663 | $409,026 | | Total current liabilities | $339,719 | $534,694 | | Total Liabilities | $544,807 | $770,778 | | Total Stockholders' Equity | $350,765 | $336,020 | - Total assets decreased from $1,106,798 thousand at December 31, 2021, to $895,572 thousand at March 31, 2022, primarily driven by a significant reduction in cash and cash equivalents[9] - Total liabilities decreased from $770,778 thousand to $544,807 thousand, largely due to a decrease in accrued salaries and benefits[9] Unaudited Condensed Consolidated Statements of Comprehensive Income This section details the company's financial performance over a period, including total revenue, operating income, net income, and earnings per share Condensed Consolidated Statements of Comprehensive Income (in thousands, except per share amounts) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenue | $285,537 | $194,731 | | Operating income | $30,232 | $19,608 | | Net income | $18,467 | $14,832 | | Basic earnings per common share | $0.94 | $0.77 | | Diluted earnings per common share | $0.90 | $0.74 | | Cash dividends paid per share | $0.15 | $0.15 | - Total revenue increased by 46.6% year-over-year, from $194,731 thousand in Q1 2021 to $285,537 thousand in Q1 2022[10] - Net income grew by 24.5% year-over-year, from $14,832 thousand in Q1 2021 to $18,467 thousand in Q1 2022[10] - Diluted EPS increased from $0.74 to $0.90 year-over-year[10] Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity This section tracks the changes in the company's equity over a period, reflecting net income, dividends, and other comprehensive income/loss Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Item | Balance at Dec 31, 2021 | Net Income | Other Comprehensive Loss | Stock-based Compensation | Vesting of Equity Awards | Cash Dividends Declared | Dividend Equivalents | Balance at Mar 31, 2022 | | :-------------------------------- | :---------------------- | :--------- | :----------------------- | :----------------------- | :----------------------- | :---------------------- | :------------------- | :---------------------- | | Total Stockholders' Equity | $336,020 | $18,467 | $(1,082) | $3,698 | $(3,219) | $(2,940) | $(179) | $350,765 | - Total stockholders' equity increased from $336,020 thousand at December 31, 2021, to $350,765 thousand at March 31, 2022, primarily driven by net income, partially offset by cash dividends and other comprehensive loss[11] Unaudited Condensed Consolidated Statements of Cash Flows This section reports the cash generated and used by the company across operating, investing, and financing activities over a period Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(262,196) | $(142,571) | | Net cash provided by (used in) investing activities | $(6,052) | $17,854 | | Net cash used in financing activities | $(6,338) | $(6,162) | | Net decrease in cash, cash equivalents and restricted cash | $(277,257) | $(132,418) | | Cash, cash equivalents and restricted cash at end of period | $268,002 | $184,071 | - Net cash used in operating activities significantly increased to $(262,196) thousand in Q1 2022 from $(142,571) thousand in Q1 2021, primarily due to a decrease in accrued expenses related to bonus payments[13][160][161] - Investing activities shifted from providing $17,854 thousand in Q1 2021 to using $(6,052) thousand in Q1 2022, mainly due to increased purchases of marketable securities and investments and lower proceeds from sales[13][162][163] Unaudited Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, clarifying accounting policies and specific line items 1. Basis of Presentation of Interim Financial Information This note outlines the accounting principles and assumptions used in preparing the unaudited interim financial statements, adhering to SEC rules and U.S. GAAP - 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] 2. Summary of Significant Accounting Policies This note details the key accounting policies applied by the company, including revenue recognition, cost of services, and treatment of marketable securities - The Company's significant accounting policies are consistent with those in its 2021 Annual Report on Form 10-K, with specific details provided for revenue recognition, cost of services, R&D, marketable securities, restricted cash, EPS, reclassifications, and leases[16][17][18][19][20][21][22][23][24][25][26][27] Restricted Cash Reconciliation (in thousands) | Item | March 31, 2022 | March 31, 2021 | December 31, 2021 | December 31, 2020 | | :------------------------------------------ | :------------- | :------------- | :---------------- | :---------------- | | Cash and cash equivalents | $267,986 | $184,055 | $545,225 | $316,473 | | Restricted cash included within other non-current assets | $16 | $16 | $34 | $16 | | Total cash, cash equivalents and restricted cash | $268,002 | $184,071 | $545,259 | $316,489 | - The Company is evaluating the impact of ASU No. 2020-04, which provides temporary expedients for reference rate reform, with the effect not yet known or reasonably estimable[28] 3. Revenue This note details the company's revenue recognition policies across its Executive Search, On-Demand Talent, and Heidrick Consulting segments - Revenue from Executive Search is recognized over time, typically six months, based on estimated personnel time, with fixed retainers and variable 'uptick revenue' estimated at contract inception[29][30][31] - On-Demand Talent revenue is recognized over time as services are consumed, with the Company acting as the principal in third-party contractor transactions[33][34] - Heidrick Consulting revenue is recognized over time using input (time incurred) and output (sessions/assessments delivered) methods, with enterprise agreements for Culture Connect recognized ratably over the subscription period[35][36] Changes in Contract Balances (in thousands) | Item | March 31, 2022 | December 31, 2021 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Total contract assets | $41,073 | $36,942 | $4,131 | | Deferred revenue | $55,364 | $51,404 | $3,960 | - The Company recognized $51.1 million in revenue from contract liabilities at the beginning of Q1 2022 and $8.3 million from changes in estimates of variable consideration[42] 4. Credit Losses This note explains the methodology for estimating the allowance for credit losses and presents the activity in the allowance account - The Company's allowance for credit losses is based on historical collection experience, current/future economic conditions, and specific client reviews, with no significant impact from COVID-19[44] Allowance for Credit Losses Activity (in thousands) | Item | Amount | | :-------------------------- | :----- | | Balance at December 31, 2021 | $5,666 | | Provision for credit losses | $2,154 | | Write-offs | $(1,534) | | Foreign currency translation | $(8) | | Balance at March 31, 2022 | $6,278 | 5. Property and Equipment, net This note provides a breakdown of the company's property and equipment, net of accumulated depreciation, and related depreciation expense Property and Equipment, net (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Property and equipment, gross | $81,665 | $81,478 | | Accumulated depreciation | $(54,503) | $(54,393) | | Property and equipment, net | $27,162 | $27,085 | - Depreciation expense for the three months ended March 31, 2022 and 2021, was $1.8 million for both periods[47] 6. Leases This note describes the company's lease arrangements, including operating lease costs and key lease metrics like weighted average remaining term and discount rate - The Company's lease portfolio consists of operating leases for office space and equipment, with most office leases combining lease and non-lease components[48][50][52] - An incremental borrowing rate is used to determine the present value of lease payments, as most leases lack an implicit interest rate[49] Lease Cost Components (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $4,358 | $4,867 | | Variable lease cost | $1,161 | $1,228 | | Total lease cost | $5,519 | $6,095 | Operating Lease Metrics as of March 31 | Metric | 2022 | 2021 | | :------------------------------ | :------- | :------- | | Weighted Average Remaining Lease Term | 6.3 years | 5.9 years | | Weighted Average Discount Rate | 3.25 % | 3.44 % | 7. Financial Instruments and Fair Value This note discusses the company's financial instruments, their classification, fair value measurements, and the valuation techniques used - Marketable debt securities, primarily U.S. Treasury bills, are classified as available-for-sale, with unrealized gains/losses recognized in Accumulated other comprehensive income[54] Cash, Cash Equivalents and Marketable Securities (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Cash | $145,982 | $265,233 | | Money market funds | $28,026 | $80,798 | | U.S. Treasury securities | $93,978 | $199,194 | | Total | $267,986 | $545,225 | - The Company's U.S. non-qualified deferred compensation plan primarily consists of U.S. marketable securities and mutual funds, with an aggregate cost basis of $27.5 million at March 31, 2022[56] - Contingent consideration and compensation liabilities are valued using Level 3 inputs (discounted cash flow models) due to unobservable market inputs[60] 8. Goodwill and Other Intangible Assets This note provides a breakdown of goodwill by segment and other intangible assets, along with related amortization expense Goodwill by Segment (in thousands) | Segment | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Executive Search | $93,488 | $92,995 | | On-Demand Talent | $45,529 | $45,529 | | Total goodwill | $139,017 | $138,524 | - Goodwill increased slightly by $493 thousand, primarily due to foreign currency translation adjustments in the Americas segment[62] Other Intangible Assets, net (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Client relationships | $5,361 | $5,632 | | Trade name | $1,028 | $1,204 | | Software | $2,073 | $2,333 | | Total other intangible assets, net | $8,462 | $9,169 | - Intangible asset amortization expense for the three months ended March 31, 2022, was $0.8 million, a significant increase from $0.2 million in the prior year[63] 9. Other Current Assets and Liabilities This note details the components of other current assets and liabilities, highlighting significant changes such as the recognition of an earnout liability Other Current Assets (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Contract assets | $41,073 | $36,942 | | Other | $6,073 | $4,507 | | Total other current assets | $47,146 | $41,449 | Other Current Liabilities (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Earnout liability | $26,949 | $0 | | Other | $27,033 | $24,554 | | Total other current liabilities | $53,982 | $24,554 | - Other current liabilities significantly increased from $24,554 thousand to $53,982 thousand, primarily due to the recognition of a $26,949 thousand earnout liability[65] 10. Line of Credit This note describes the company's revolving credit facility, its terms, and the outstanding balance and compliance status - The Company has a committed unsecured revolving credit facility of $200 million, increased from $175 million, maturing on July 13, 2026[66] - As of March 31, 2022, and December 31, 2021, there were no outstanding borrowings, and the Company was in compliance with all covenants[67] 11. Stock-Based Compensation This note outlines the company's stock-based compensation plans, the expense recognized, and the unrecognized compensation expense for unvested awards - The Third A&R Program allows for grants of stock options, stock appreciation rights, and other stock-based compensation, with 447,946 shares remaining available for future awards as of March 31, 2022[68][69] Stock-Based Compensation Expense (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Salaries and benefits (includes cash-settled restricted stock units) | $2,904 | $5,461 | | Income tax benefit related to stock-based compensation | $790 | $1,453 | - Unrecognized compensation expense for unvested restricted stock units was $12.3 million (weighted average 2.6 years), for performance stock units was $7.5 million (weighted average 2.1 years), and for phantom stock units was $3.1 million (weighted average 2.5 years) as of March 31, 2022[72][75][79] 12. Restructuring This note details restructuring charges and accruals, primarily related to the 2020 Plan for real estate footprint reduction - The Company did not incur any restructuring charges in Q1 2022 and does not anticipate future charges under the 2020 Plan[82] Restructuring Charges (Reversals) by Segment (in thousands) - Three Months Ended March 31, 2021 | Type of Charge | Americas | Europe | Asia Pacific | Heidrick Consulting | Global Operations Support | Total | | :--------------- | :------- | :----- | :----------- | :------------------ | :------------------------ | :---- | | Employee related | $19 | $(52) | $(124) | $(44) | $7 | $(194) | | Office related | $3,676 | $0 | $0 | $366 | $0 | $4,042 | | Other | $3 | $0 | $0 | $0 | $10 | $13 | | Total | $3,698 | $(52) | $(124) | $322 | $17 | $3,861 | - The 2020 Plan charges primarily related to a reduction in real estate footprint, including a $5.7 million gain on lease termination in 2021[82] Changes in Restructuring Accrual (in thousands) - Three Months Ended March 31, 2022 | Item | Employee Related | Office Related | Other | Total | | :-------------------------- | :--------------- | :------------- | :---- | :---- | | Accrual balance at Dec 31, 2021 | $8,394 | $0 | $0 | $8,394 | | Cash payments | $(4,843) | $0 | $0 | $(4,843) | | Non-cash write-offs | $(34) | $0 | $0 | $(34) | | Exchange rate fluctuations | $(18) | $0 | $0 | $(18) | | Accrual balance at Mar 31, 2022 | $3,499 | $0 | $0 | $3,499 | 13. Income Taxes This note provides details on income before taxes, the income tax provision, and the effective tax rate, noting impacts from one-time items Income Tax Information (in millions) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Income before taxes | $27.9 | $22.8 | | Income tax provision | $9.4 | $7.9 | | Effective tax rate | 33.7% | 34.9% | - The effective tax rates for both periods were impacted by one-time items and the mix of income[84] 14. Changes in Accumulated Other Comprehensive Income This note details the changes in accumulated other comprehensive income, primarily driven by foreign currency translation adjustments Changes in Accumulated Other Comprehensive Income (AOCI) (in thousands) | Component | Balance at Dec 31, 2021 | Other Comprehensive Loss (net of tax) | Balance at Mar 31, 2022 | | :-------------------------- | :---------------------- | :------------------------------------ | :---------------------- | | Foreign Currency Translation | $4,294 | $(1,082) | $3,212 | | Pension | $(2,619) | $0 | $(2,619) | | Total AOCI | $1,675 | $(1,082) | $593 | - AOCI decreased from $1,675 thousand to $593 thousand, primarily due to a foreign currency translation adjustment loss of $1,082 thousand[85] 15. Segment Information This note provides financial performance data, including revenue and operating income, disaggregated by the company's operating segments - The Company operates in five segments: Executive Search (Americas, Europe, Asia Pacific), Heidrick Consulting, and On-Demand Talent[86] Revenue by Segment (in thousands) | Segment | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Executive Search | $242,549 | $179,618 | | On-Demand Talent | $23,381 | $0 | | Heidrick Consulting | $17,931 | $14,038 | | Total net revenue | $283,861 | $193,656 | Operating Income by Segment (in thousands) | Segment | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Executive Search | $50,308 | $34,940 | | On-Demand Talent | $(582) | $0 | | Heidrick Consulting | $(2,084) | $(4,710) | | Total operating income | $30,232 | $19,608 | 16. Guarantees This note discloses the company's outstanding letters of credit, primarily supporting office lease agreements, and the absence of related accrued liabilities - The Company has letters of credit totaling approximately $4.4 million as of March 31, 2022, primarily supporting office lease agreements, with no accrued liability as no default exists[91] 17. Commitments and Contingencies This note addresses the company's involvement in legal claims and litigation, with management assessing no material adverse impact on financial condition - The Company is involved in various legal claims and litigation in the ordinary course of business, but management believes their ultimate resolution will not materially adversely affect its financial condition, results of operations, or liquidity[92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the three months ended March 31, 2022, compared to the same period in 2021. It covers an executive overview of the business, key performance indicators, compensation model, second-quarter outlook, detailed results of operations by segment, liquidity and capital resources, and critical accounting policies. The discussion highlights significant revenue growth, improved operating income, and strategic investments in new services like On-Demand Talent, while also addressing cash flow dynamics and future expectations Executive Overview This section provides a high-level summary of Heidrick & Struggles' business model, global service offerings, and strategic focus areas - Heidrick & Struggles is a human capital leadership advisory firm offering executive search, consulting, and on-demand talent services globally[95] - Executive Search focuses on placing top-level senior executives, leveraging a relationship-based, data-driven approach with tools like Infinity Framework and Heidrick Connect[96][97][99] - On-Demand Talent provides independent professionals for interim leadership and project-based initiatives[101] - Heidrick Consulting offers leadership assessment, team/organization acceleration, digital innovation, diversity & inclusion, and culture shaping programs, with a focus on digital solutions[102][103][104] Key Performance Indicators This section identifies the primary financial and operational metrics used to measure the company's performance and drive strategic decisions - Primary financial and operational measures include net revenue, operating income, operating margin, Adjusted EBITDA, and consultant headcount[105] - Executive Search performance is also measured by confirmation trends, consultant productivity (annualized net revenue per consultant), and average revenue per search[105] - Revenue growth can improve operating margins as incremental revenue increases do not proportionally increase all costs[106] Our Compensation Model This section explains the company's consultant compensation structure, comprising fixed and variable components tied to revenue generation - Consultant compensation has fixed and variable components, with variable pay tied to net revenue generation through a tiered payout model[108] - The Company terminated cash bonus deferrals for consultants in 2020 and for management in 2021, now paying 100% of cash bonuses in the first quarter of the following year[111] Second Quarter 2022 Outlook This section provides the company's net revenue forecast for Q2 2022, considering various market and operational factors - The Company forecasts Q2 2022 net revenue between $290 million and $300 million[112] - This outlook considers factors like foreign conflicts, interest rates, COVID-19, new search confirmations, project volumes, consultant productivity/retention, and seasonality[112] Results of Operations This section provides a detailed analysis of the company's consolidated and segment-specific financial performance, including revenue, expenses, and operating income Consolidated Results of Operations (as a percentage of net revenue) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net revenue | 100.0 % | 100.0 % | | Salaries and benefits | 71.0 % | 73.0 % | | General and administrative expenses | 10.5 % | 14.1 % | | Cost of services | 6.3 % | 0.8 % | | Research and development | 1.6 % | — | | Operating income | 10.7 % | 10.1 % | | Net income | 6.5 % | 7.7 % | - Consolidated total revenue increased by $90.8 million (46.6%) to $285.5 million, primarily driven by a $90.2 million (46.6%) increase in net revenue[119][120] - Executive Search net revenue increased by $62.9 million (35.0%) to $242.5 million, due to a 23.1% increase in confirmed searches[120] - Heidrick Consulting net revenue increased by $3.9 million (27.7%) to $17.9 million, driven by a 56.2% increase in consulting engagements[120] - The acquisition of On-Demand Talent contributed $23.4 million to net revenue in Q1 2022[120] - Salaries and benefits expense increased by $60.1 million (42.5%) to $201.4 million, mainly due to higher bonus accruals from increased consultant productivity, but decreased as a percentage of net revenue from 73.0% to 71.0%[122][123] - General and administrative expenses increased by $2.4 million (8.9%) to $29.8 million, but decreased as a percentage of net revenue from 14.1% to 10.5%[124][125] - Cost of services significantly increased by $16.5 million to $18.0 million, primarily due to the On-Demand Talent acquisition[126] - Operating income increased to $30.2 million in Q1 2022 from $19.6 million in Q1 2021, despite a negative foreign exchange impact of $0.5 million[129] - Net non-operating income shifted from a $3.2 million income in Q1 2021 to a $2.4 million expense in Q1 2022, mainly due to a $2.2 million unrealized loss on the deferred compensation plan[130][132] Executive Search Segment Performance (in thousands) | Segment | Net Revenue (2022) | Net Revenue (2021) | Operating Income (2022) | Operating Income (2021) | | :-------------- | :----------------- | :----------------- | :---------------------- | :---------------------- | | Americas | $162,553 | $116,506 | $39,851 | $26,256 | | Europe | $49,745 | $37,643 | $5,403 | $4,540 | | Asia Pacific | $30,251 | $25,469 | $5,054 | $4,144 | - Americas Executive Search net revenue increased 39.5% due to a 22.8% rise in confirmations and higher average revenue per search[135] - Europe Executive Search net revenue increased 32.1% due to a 30.1% rise in confirmations, despite a negative foreign exchange impact of $2.7 million[139] - Asia Pacific Executive Search net revenue increased 18.8% due to a 14.5% rise in confirmations, despite a negative foreign exchange impact of $1.0 million[142] - On-Demand Talent reported $23.4 million in net revenue and an operating loss of $0.6 million in Q1 2022[146][148] - Heidrick Consulting net revenue increased 27.7% to $17.9 million, driven by a 56.2% increase in engagements, and its operating loss improved by $2.6 million to $(2.1) million[149][152] Liquidity and Capital Resources This section assesses the company's ability to meet its financial obligations, discussing cash balances, operational cash flow, and credit facilities - 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[155] - Cash, cash equivalents, and marketable securities decreased from $545.2 million at December 31, 2021, to $268.0 million at March 31, 2022[159] - Cash used in operating activities was $262.2 million in Q1 2022, primarily due to $383.1 million in cash bonus payments related to 2021 and prior year deferrals[160] - Cash used in investing activities was $6.1 million in Q1 2022, compared to $17.9 million provided in Q1 2021, reflecting increased purchases of marketable securities and capital expenditures[162][163] - Cash used in financing activities was $6.3 million in Q1 2022, mainly for dividend payments ($3.1 million) and employee tax withholdings on equity transactions ($3.2 million)[164] Application of Critical Accounting Policies and Estimates This section highlights the accounting policies that require significant management judgment and estimates, such as revenue recognition and goodwill impairment - Critical accounting policies involve significant estimates and assumptions, particularly for revenue recognition, income taxes, interim effective tax rate, and goodwill/intangible asset impairment[167] Recently Issued and Adopted Financial Accounting Standards This section references the notes to the financial statements for information on new and adopted accounting standards - Information on recently issued and adopted financial accounting standards is incorporated by reference from Note 2 of the Condensed Consolidated Financial Statements[168] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section analyzes the company's exposure to market risks, primarily foreign currency fluctuations, and quantifies their potential impact on financial results - The Company is exposed to currency market risk due to global operations in various currencies, though revenue and expenses are generally matched to reduce earnings risk[169] - A 10% change in the average exchange rate for foreign currencies would have increased or decreased net income by approximately $0.8 million for the three months ended March 31, 2022[169] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2022, and concluded they were effective[172] - There were no material changes to the Company's internal control over financial reporting during the three months ended March 31, 2022[173] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, and a list of exhibits filed with the report Item 1. Legal Proceedings This section refers to the detailed information on legal proceedings provided in the notes to the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 17, Commitments and Contingencies, in the Condensed Consolidated Financial Statements[174] Item 1A. Risk Factors This section confirms that there have been no material changes to the company's previously disclosed risk factors - There have been no material changes to the Company's risk factors from those set forth in its Annual Report on Form 10-K for the year ended December 31, 2021[175] Item 6. Exhibits This section lists all supplementary documents filed with the Form 10-Q, including employment agreements and certifications - The report includes exhibits such as employment agreements, management severance pay plans, certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[177] SIGNATURE This section contains the official signature of the registrant, certifying the filing of the report - The report is signed by Stephen A. Bondi, Vice President, Controller, and Chief Accounting Officer of Heidrick & Struggles International, Inc., on April 25, 2022[181]