Q4 2020 Heidrick & Struggles International Inc Earnings Call
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[music].
Ladies and gentlemen, thank you for standing by and welcome to the Heidrick and struggles.
<unk> Q4, 'twenty 'twenty earnings conference call.
At the same all participants are in a listen only mode. After the speaker's presentation. There will be question and answer session to ask the question. During the session you will need to press star one on your telephone keypad.
If you require any further assistance.
You May press Star zero.
And without further Ado I would like to welcome.
On your speaker for today Ms Suzanne Rosenberg.
Ma'am the floor is yours.
Good afternoon, everyone and thank you for participating in Heidrick <unk> struggles 2000.
<unk> 'twenty fourth quarter conference call joining me on today's call is our president and CEO Krishnan radical pollen and Chief Financial Officer, Mark Harris, we of closer to our fourth quarter slides on the IR homepage of our website at Heidrick Dot com and we encourage you to view them for additional context, but we won't be referring to specific page numbers during our opening.
Since the March in our materials, we refer to non-GAAP financial measures that we believe provide additional insight into our underlying results a reconciliation between GAAP and non-GAAP financial measures can be found in the release also in our remarks, we will be making forward looking statements and ask that you. Please refer to the safe Harbor language.
Opening of contained in our news release Krishnan I'll now turn the call over to you.
Suzanne Thank you.
Good afternoon, everyone and thank you for taking the time to join our call.
By all accounts 2020 was an unprecedented year and I couldnt be more proud of our team's ability to meet the moment demonstrate resilience and.
Which cover two please.
It's often through challenging times that we prove what we're truly capable of and I'm. So proud of our of Heidrick team.
Our ability to advise and work with clients in new and different ways has enabled us to more than hold our own in this market, we never stopped innovating.
In some ways the pandemic was an accelerant.
Colombia adapted our tools faster, we created virtual solutions, you introduced brand new offerings.
In addition to our quick actions and pivot we were able to reduce our costs, while remaining committed to driving our strategic investments and diversification innovation data and tech enablement.
Importantly, the transformation journey, we embarked on several years ago positioned us very well as we entered the pandemic in early 2020.
Prior investments in products in it infrastructure Digitization of search side of our business and the build out of Heidrick consulting has led to higher value added differentiated.
Solutions for our clients and stickier relationships.
Together these factors enabled us outperformed the market last year performed better than we have historically different recessionary periods.
We ended 2020 with the very strong balance sheet.
No debt and the strongest liquidity.
Created firms history.
While near term visibility remains more limited the normal.
We began 2021 on our front foot and we will emerge from this pandemic because of an even stronger firm generating enhanced revenue growth profitability and cash flow.
Turning to today the world is still.
And varying levels of locked down but there is of light at the end of the tunnel with the vaccines being introduced and rolled out.
In 'twenty and 'twenty, one we will continue to transform our business investing in new ideas and broadened our capabilities and services with new technology and data driven offerings.
We are well positioned to take advantage of market.
And the committees and improving demand.
In many ways to pandemic has accelerated both demand and transformation not only in how our clients needs are evolving.
But also on how our firm operates.
Our clients are embracing the digital delivery of our services and we're seeing increased demand across a wide range of areas, including health care and life.
If sciences industrial and global Technology services <unk>.
Certainly functional work across technology risk compliance and finance remained strong as organizations continue to transform and reassess their business models the accelerated by the pandemic.
Diversity and inclusion or DNI.
The opportune sustainability remain important focus areas across all industry practices in the U S and globally.
We also see continued demand for diverse talent technology and sustainability at the board level.
In addition, an increasing number of clients are implementing our culture and inclusion solutions as they navigate the challenges of leading.
And of virtual environment.
Our clients are also seeking our leadership assessment and developing the capabilities to better understand how to operate in a highly volatile and distributed working environment.
Client feedback has been extremely positive and our team around the world as energized and driving collaborative projects and large scale.
L engagements across search and consulting.
We are bringing the full power of heidrick to our clients and effectively helping them accelerate their transformation using.
Some of our integrated suite of offerings.
The Great example of this is where the global advertising firm that we started working with is the search client.
We have since launch work with us.
The team inclusive leadership there.
We're now expanding into culture work and culture change.
And helping build the future ready top team.
This is the kind of deeper multifaceted journey, we want to take with our clients.
In addition to our client work what also stands out as the ongoing transformation of.
Of our own business as well as our resilience in the way, we adapted our business and the rapidly changing market.
First we continue to deliver a premium experience to our clients.
We seamlessly pivoted to virtual offerings and the way, we advise our clients as evidenced by the convening of more than 3000 leaders in virtual.
Clients from since March of 2020.
Despite the pandemic, we confirmed over 4500 assignments in search which is the only 6% lower than the previous year and demonstrates our strong capability to deliver work virtually.
We're leveraging our proprietary tools, including deployment of our infinity framework on more than 14.
Session thousand candidates and we're executing 100% of our engagements on heidrick connect globally.
Second we've created and delivered new offerings.
Last year, we launched our global the Eni practice, which goes beyond just hiring diverse leaders focusing on creating inclusive leaders cultures.
And organizations.
14th help companies accelerate their business performance.
We're uniquely positioned in the market because of our dedicated practice brings our search capabilities that help companies attract and hire of diverse leaders together with our consulting experience to help organizations develop and retain diverse talent and create inclusive workplace.
<unk> filters.
Using our a b C methodology, we're gaining traction and helping our clients move the needle on DNI.
Building diversity is a large part of many engagements.
Today in the Americas over 40% of our placements are diverse and that number of increases to approximately.
Nearly 60% at the board of director level.
We continue to innovate in the future of leadership assessment with our proprietary tools, including our agile leader potential tool our CEO of success profile tool and their new culture signature of assessment tool, which provides expanded insights on culture impact.
The place we have generated more than 100 pieces of the thought leadership across search.
In heidrick consulting, including written content videos and podcasts.
And third we've enhanced the way we operate for.
For example firm wide collaboration continues to improve subset of approximately 50% of heidrick consulting.
Revenue now comes from search introductions.
We've expanded our global strategic accounts program in executive search and Heidrick consulting.
We are leveraging our IP to create significant opportunities that are helping us drive of robust new business pipeline and grow our scale and target markets.
The new data capabilities.
The <unk>, including the new analytics warehouse, we are delivering enhanced dashboards and insights and were implementing new ways of working with the optimization of our global real estate footprint and the introduction of our flexible workspace.
Workspaces philosophy.
These are just some of the ways, we are driving our performance and transformation.
While near term economic visibility remains limited we are committed to capturing additional market share by going to market as one firm with an integrated value proposition to the.
And we have developed the clear executable strategy that allow us to propel our business forward in 2021 and beyond.
More specific.
Specifically this involves the broadening our capabilities and service offerings across search and consulting while moving into adjacent and complementary areas with an increasingly tech different approach.
We see technology as the underpinning for our expanded service offerings, allowing us to deliver our solutions in a more rapid.
Automated.
And scalable way.
Some of our new Tech enabled services and tools are already being embedded across our firm and in the coming quarters. We plan to make additional investments in both of our technology solutions and new service offerings.
As we think about the strategic capabilities, we are developing our focuses on leveraging our premium.
And our trusted relations at the top of organizations, we work with to deepen and broaden our client relationships.
<unk> of our clients on their most pressing the executive level issues and agendas and partner with them on their current and future talent development needs going well be on talent acquisition.
To meet these.
The objectives, we recently evolved our leadership structure for the future to address large scale opportunities, including the transformation of our global go to market strategy and the augmentation of our technology capabilities.
Through the lens of this new structure, we have on boarded the right talent to allow us to deliver on our three growth initiatives.
The branch include number one.
Gross scale and impact of both search and consulting.
Delivering a premium service experience and the heidrick way to clients.
The number to expand development of leadership solutions and capabilities to address new and ongoing client imperatives.
The number three invest in new product development and strategic expansion into adjacent and complementary areas with innovative tech driven offerings to drive future growth and shareholder value.
In addition to driving these growth initiatives are evolved leadership structure will further centralize our business operations the gain key efficient.
These drive synergies and strengthen our people management capabilities will also enable us to drive consistency across our practices and business lines further differentiate ourselves in the marketplace deepened.
Deepen client relationships and accelerate revenue growth as we provide our clients with the full suite of premium services and offer.
In summary, I again would like to express my appreciation to our team for their remarkable efforts during an extraordinary year for which no one had a playbook.
While the near term macro environment remains more uncertain than normal.
We are excited about 2021 and the opportunities we have ahead of us to drive our performance.
Fishing and transformation.
We will also continue to develop our people and our culture, the sharpen lens on diversity and inclusion and provide robust meaningful opportunities help all of our colleagues to grow and thrive at the firm.
Now, let me turn the call over to Mark to elaborate on the quarter.
Thank you Christian on and good afternoon, everyone and thank you for joining our call today.
Let me begin by extending my gratitude to our team around the world for the tremendous performance, we achieved last year. Despite the.
The extremely difficult market conditions, we faced in 2020, our performance allowed us to end the year on solid ground with a very good balance sheet with over $500 million.
<unk> no debt and continued excellent net cash inflows with nearly a 100 million dollar of increasing cash in Q4 alone.
That's the foundation of for Us to execute our strategy on 'twenty 'twenty, one as we continue to build new products and capabilities to address the client imperatives and expand and enhance the way we serve the executive.
The bookings.
Turning to our fourth quarter results as we have done since the second quarter of 2020, I will focus more on sequential trends as these are more meaningful than the year over Europe results given the ongoing pandemic.
Overall business trends improved sharply from the third quarter trough.
Fourth quarter net revenue increase.
Net of space all of 2% from the third quarter of 2000 $20 million to $161 million, which exceeded our guidance range.
The executive search net revenue was $146 3 million up 13, 2% sequentially on Heidrick consulting revenue was $14 $7 million up two 6%.
It also bears pointing.
Increased the heidrick consulting revenue annually was only down 7% from 2019, which shows great resilience during the economic downturn as we quickly pivoted from providing our services and traditional physical settings to seamless of virtual offerings.
An executive search you saw America is leading the way with revenue up 20.
Pointing out of side and Europe revenue up 11, 2%, but Asia Pacific revenue declined 12, 4%.
While economic uncertainty continues across the markets. We serve we are seeing a clear upward trend in the Americas and Europe spin.
Specifically in Europe, we're seeing some improvements in Denmark, Belgium.
Five and Italy, although we did see some softening in the U K, Switzerland, and Germany to the restoration of Lockdowns and.
And in Asia Pacific and China, Hong Kong, and Korea are showing positive trends, but overall the region is still a bit soft, particularly in Australia, India and Japan.
Heidrick consulting and.
France on the <unk> demonstrated by increased demand for talent assessment, our proprietary DNI methodology and digital delivery of our services across multiple leadership advisory solutions, resulting in larger engagements with our top clients.
We enter 2021 with the strong pipeline of new business and we look.
The year to building on this momentum and gaining scale in 2021.
On the cost side, we saw salary benefits increased 16, 3% from the third quarter of 2020.
Variable compensation increased $15 4 million sequentially due to the stronger revenue performance in the quarter and fixed compensation increased $1 5 million sequentially.
Look forward merrily due to stock compensation or the FERC compensation plan and retirement and benefits, partially offset by decreases in salaries and payroll taxes post restructuring.
General and administrative expenses decreased $2 $4 million or seven 9% sequentially to $27 4 million or 17.
Part of the percentage of revenue down 370 basis points sequentially compared to the 27 percentage of revenue in the third quarter of 2020.
Savings were primarily driven by office occupancy of professional fees, partially offset by increases in bad debt and the use of external third party consultants.
Moving forward, we will maintain a close watch.
On the marketplace continues to optimize our footprint and implement our real estate strategy.
We expect continued savings on G&A and believe we have the opportunity to further decrease these costs, primarily through lease renewals and right sizing offices, where it makes sense.
This aligns with our long term goal to drive G&A to below 18% of our revenue more consistently.
As you may recall during the third quarter, we implemented a restructuring plan to optimize future growth to improve profitability.
In connection with this plan and as anticipated we recorded a restructuring charge in the fourth quarter of $4 $3 million, primarily related to the real estate strategy.
Moving forward, we do expect additional restructuring charges pertaining to the real estate.
The first and second quarters of approximately $4 million of $5 million each quarter the.
These charges are accounting related to the specific timing of office closings.
Notably we've completed the first phase of our optimization with the 20% reduction in our current real estate footprint.
We'll continue with our real estate strategy, which consists of three objective.
The first match the footprint to the new expected normal.
Create an open collaborative environment, including unassigned workspaces to facilitate working from anywhere and third reduce our carbon footprint as part of our long term sustainability goals.
Removing the impact of the restructuring charge I just discussed adjusting operating income in the fourth.
But it was $12 $8 million or 29, 5% increase from the $9 9 million in the third quarter of 2020.
Adjusting operating margin was seven 9% versus six 9% sequentially of 100 basis points improvement.
This corresponded to adjusted EBITDA of $18 4 million on adjusted EBIT margin of 11 four.
Quarter, which was 40 basis points sequentially up from the third quarter and reflect strong performance given the pandemic related headwinds.
Our adjusted net income of the fourth quarter was $11 6 million compared to $7 7 million sequentially and our adjusted diluted earnings per share was <unk> 59 versus 39 sequentially.
Nearly four times our dividend.
Now, let me add some color in terms of our tax rates given the complexities around goodwill on restructuring deductibility.
Our tax on the fourth quarter of 2020 was 28, 7% before restructuring charges, which is the more normalized rate for the quarter.
In 2021, with our current footprint and current tax.
Rates, we expect our effective tax rate to remainder of the mid thirties, which is consistent with the annual 2020 tax rate of 34, 7% achieved before goodwill on restructuring charges.
Before turning to our balance sheet I now want to touch the brief on our annual performance.
One of the pandemic impacted growth around the world in 2020 and presented a different type of recession and we had.
Experience.
When we look at our peak to trough performance with Q1, largely unaffected, but only sort of two quarters to reach the bottom before we started improving in the fourth quarter and we ended the year relatively strong with the full year revenue only down 12, 1%.
Even with the macro economic headwinds.
We also generate of 11, 4% adjusted.
The EBITDA margin.
While near term visibility remains a bit uncertain, we do project continued upward trajectory from here.
Turning to our balance sheet, we ended 2020 with cash and marketable securities of $336 5 million compared to $332 $9 million at the end of 2019, which is an incredible accomplishment to end the year with more liquidity.
Historically started during a pre pandemic period.
In the fourth quarter alone, we increased our cash and marketable securities position by $98 $9 million.
Please remember our cash position builds up through the year as we accrue for bonuses in.
In January we paid $19 $9 million in compensation related to the portion of the consult.
And bonuses that were deferred prior to 2020 and in March of this year, we will pay out approximately $180 million of variable compensation related to last year's performance, even with these payments will have liquidity over $300 million, which demonstrates the outstanding balance sheet strength of positions heidrick incredibly well to explore opportunities in search consulting and potentially new areas.
<unk> outside of our core services, but of lines of our Premier human capital services strategy.
Last let me turn to the first quarter outlook.
Given the performance, we're seeing in our markets and looking at our models. We believe our first quarter revenue will be in the range of $160 million to $170 million of.
Of course this can also change materially if we see.
Areas spikes in COVID-19, or variance of the virus within countries, we operate in and.
And how those respective governments choose to respond or of government do not take necessary steps in the stimulus as well as other macro events or acute business events that are unforeseen the heidrick at this time.
In summary, our fourth quarter performance continues to reflect the impact of the patent.
The others, but clearly demonstrates the resilience of our teams are inc. Challenging conditions.
We remain focused on strong execution long term planning partnering with our clients and creating long term shareholder value.
With that we'd be glad to take your questions operator over to you.
As a reminder to ask.
Damaging you will need the press star one on your telephone keypad and if your question has been answered you May press the pound key to withdraw yourself from the queue. We will pause for just a moment to compile the Q&A roster.
Our first.
The question comes from the line of Josh Vogel from Sidoti Your line is open.
Thanks, and good afternoon Krishnan, Thanks for taking my questions.
Pretty impressive to see how the the business held up throughout 2020 looking forward to seeing with 'twenty one has in store.
First Scott.
I'm looking at SG&A and Mark you had a comment around.
Driving the business towards sub the 18%.
Can you give a little bit more timing when when we think about 2021 can we said this year.
If we take out the plan four to.
And then restructurings in Q1 and two we understand it.
Piece of expenses will come back, including some <unk>, but you know how should we think about a good level of SG&A spend this year.
Sure Josh and thanks for the compliment the so the G&A side of it.
Obviously, when we think about 18% or sub.
5 million of sent were more or less focused on kind of the constant revenue that we have fire to the pandemic, so really that $700 million revenue level.
707, I think we had 19 716, we had in the year before 2019.
But what do you think excuse me on.
And that's really where we kind of see it if you remember when you go back to those years.
They seem to run the 19 plus percent of <unk>.
<unk> of revenue for G&A, So going sub 18 is really we're going to see the real estate savings coming through.
Would expect travel to come back when I kind of give those guided numbers on.
And but what you probably won't see as travel coming back to what it was either so well we built in the vessel.
We could with our model is again, some coming back some not.
Some of the international travel being there's some noise and we probably won't see.
What I would say the new norm, which will still I would imagine be a fraction of what it was back in 2022 would be my best guess, when we really think the.
Economies in every single kind of spring.
Bring itself back into the forum at that point, we would expect again based on our strategy to have the revenue increase that would still be able to leverage that to at that 18% or sub 18% category.
I appreciate the insights there.
It's good to see the consulting business.
<unk>.
And especially as you pivoted and had seen success.
And of virtual remote environment.
Given the spending cuts and leaner cost structure in general is that moved the goalposts in with regard to a revenue level or target with the Inc.
Consulting needs to get to to be break even.
Kevin.
And my view of it is still very much hold constant even though we are doing it through an automated delivery service. The parts of that still doesn't go away is the human element and the amount of people power that we need to drive successful initiatives with our clients. So there'll be some savings so to speak but I would.
Still imagine in terms of the ramp up and the scale is still going to be in that 80 to 85, plus or minus $2 million of revenue, where we see the breakeven point and then obviously grabbing the scale from there. So I don't think youre going to see a tremendous shift I don't think its become auto bought on in terms of delivery that's not what we mean by that what you mean by that is.
We still have the same amount of people powered delivering those services through an automated means not fully automated in and of itself.
I Gotcha, and just a couple of quick ones around the executive search consultants being down about 20 year over year I'm. Just curious after we account for promotions interest mineral.
Sense of of this.
The call attrition usage during unprecedented global events is there any anything else there that drove the decline.
Yes, I mean, the the decline is primarily Krishnan here Josh.
The the decline of that for your question was really.
Driven by the restructuring and the.
And the cost take outs that we did our attrition has been at a really low level.
And on the beginning of this year, we've now promoted 17 new consultants.
Into the range. So we've got our partner promotion process underway right now.
And in strategic areas, we continue to hire in fact.
Just from the beginning of this year we've on boarded.
Already six new consultants.
We're optimistic on those fronts. So that's the number reflects the December 31, and where we were and we continue to look ahead positively into the market.
That's great and you answered my next and last question, but you know price.
Activity, you know as the Mercury run.
So around 1.8 to 1.9 billion today, you're at one five you just had some promotions and some hiring but do you still think.
Is that still a target of one eight to one.
$1 9 million for console products.
Yeah, It's Krishnan and Mark you can augment the yeah look I think that our aspiration is to get backs of about that 1% level I think that.
Our expansion into some geographies in places where.
That's going to be a bit more challenging.
<unk> will dampen that a bit I think at least the ramp up of it and as but as people come.
Come on board to our platform and the and they begin to perform we expect we can get back to those numbers.
Gotcha of Krishnan of Mark. Thank thank you again for taking my questions.
Thanks, Sean Thank you.
Our next.
Next question comes from the line of Tobey Sommer from true is securities. Your line is open.
Thank you.
To ask of margin question from sort of a different angle.
What do you think the.
Uh huh.
Sort of new.
EBIT down.
On the origin level should be.
This expansion is if we're fortunate enough to have a nice multi year expansion.
With revenue growth.
Does this EBITDA margin kind of compare to prior cycles do you think.
So we looked.
Looked at it from prior cycles, Debbie Ferre enough question.
Kind of when we back to you and you can go back to 2012, we published our EBIT margin of around 8%. So we are in the single digits during the the great financial crisis on.
At this time around we're about 11 points for the last quarter, which talks about being $11 four but on the year of $11 three.
So I think in terms of of Ferring true.
Through it I think was on again heck of a job.
Obviously, that's the adjusted EBITDA margin to speak too I.
I think what you're also asking is where does it go from here do we get back up to the 12, 513%, where we were on 18 19.
<unk> will be able to do that in terms of the new cost structure.
We would expect again more to the added on top of that in terms of the margin expansion and then as we start to get through our strategic initiatives, which is what the end goal is to further increase that margin expansion. Even further it's hard to give you on.
Scale on that right now, obviously, we want to be a little bit cough.
Cautious, we'll give you a little bit more on Q on Q2, as we're going through it but you can bet. That's primarily what we're really focused on which is new initiatives more profitability.
Enhanced value for our shareholders, and we think thats really going to pay off pretty well.
Our next question comes from the line of Brian win from Credit Suisse. Your line is open.
Hey, guys.
Brian on for Kevin Congrats on the quarter.
I appreciate it.
All of the comments here.
Consultant productivity.
I think that certainly came in ahead of what we were looking for so we're just sort of curious.
Just how you guys are thinking about sort of balancing the head count additions here as we move forward post pandemic versus.
Carrying forward kind of some of the.
Everything you've learned here just in the in the <unk>.
Service model.
Yes.
Let me, let me take that first and Mark if you want to add to that please do the work.
Thinking about this very strategically.
And our hiring model so.
We've got and we've identified target geographies and an expertise where we know we can.
Actual sort of too okay. So we look the hiring to those spaces.
And we've got our obviously, our normal normal promotion cycles as well so between those two things we're going to try to balance this thing and.
And as Mark said I think really.
Much of the growth still will be people driven in that.
Growing at least for search and for consulting.
Individuals' required yet will be more efficient in how we deliver okay.
And that's where we'll see some of the margin improvements come in as a result of that but it's not going to necessarily be.
Simply just on the headcount side there.
Mark do you want to add.
I would only add that keep in mind when we did the the downsizing time, we talked about that it was less than 10% of our work force. So we I think strategically got the right call that we felt like the market would come back on <unk>.
Quicker than.
And then I think what others had anticipated that was good we're on a productivity side about 20% off on.
On ORP productivity used to be so that means we have room for expansion based on the current cost structure that we have in place clearly, we're keeping a very close eye on both in terms of search and heidrick consulting and as we see the market on pickup we will appropriately scale of ourselves accordingly for it. So I think the the discipline has been there on.
Yes, we.
We would expect to see that investment I would expect that 2021 to be the net.
Expansion in Europe compared to the Covid 2020 year that we just went through.
But we'll obviously do it in a very disciplined.
The way and I think that's the the big takeaway that we have room, we'll expand when we think we're going to need to on.
To again make sure.
I'm not sort of all out.
Got you thanks, guys I appreciate that.
Well thank you.
Our next question comes from the line of Kevin Sankey from.
That would fountain research your line is open.
Hey, good afternoon.
So on your prepared comments you talked.
Wait a bit about moving into adjacent areas.
Vesting of new product development.
All of with the Tech enabled approach.
Just wondering if you could talk a little bit more about the types of the products you're looking.
Looking to build out.
And related to that.
What sort of margin profile, we should think about these.
Products and offerings having.
What sort of revenue model, perhaps sort of on opportunities for subscription based offerings for example.
Yeah, Yeah look let me, let me take the the first half of that.
Question <unk>.
Our technology investments and we're going to call on the text.
Solutions and its <unk>.
To remain number one focused on solving our clients' most critical problems, which is where the heidrick brand sits today. Okay. So we have to keep that in mind and we spent some time speaking with our clients.
To understand that we recognize.
With a lot of the work we've done.
Done now that with our IP.
The data will be going to gather the insights, we're driving and kind of an emerging platform that we're forming that we can leverage that to build solutions, but even products that help clients with.
Solving many of these issues so.
The Kevin.
Kevin the brand new ideas I won't go into those core competitive reason, but to give you. An example of where we're investing and creating technology solutions just in the areas that we've already discussed the as an example take DNI.
As an example take culture as an example, and.
We tend to work on.
Those issues with the C suite, okay, predominantly and Theres, a whole cascading of those solutions.
We can do to impact the entire organization and how do we do that deepen the impact of those offerings across the organization and some of those models.
We'll end up becoming.
<unk> subscription models as well.
So I think there is an opportunity to do that and obviously, we think that those models, Mark and maybe talk a little bit more than I can here, obviously, the higher margin as.
As well so that's the intent, but the Duke.
Gives you an idea of of some of what we're trying to tech enable the solutions that we already see out.
We're working on the appetite that that C suite has to want to expand on how we can help them do that.
Yeah.
Okay No that's helpful.
You know think thinking about heidrick consulting.
Yeah.
What sort of head count do you think you need to add to.
Get to kind of the E. The 85 million, where where you breakeven.
You have it sounds like you're not gonna have to add it.
If you're driving greater productivity of the consultants that the head count is not going to have the.
The ROE commensurate with revenue I guess is that fair way to think about it.
I think that's a reasonable.
Way to think about it in that.
We're trying to improve the productivity there as well primarily through focusing on <unk>.
Larger projects around larger clients adjourn.
And as we call those journeys.
Kind of trying to work on future ready leaders feature really cultures and organizations and driving the DNI offering as well. It's just those being three large umbrella. So I don't think that piece of it as a one for one we clearly do need to add capacity in there. So we're looking to.
To do that particularly.
And the areas of high growth. So we will be continuing to grow the head count, but I think it's fair to think that it's not a one for one to be able to drive that.
Okay. Good and then can you just talk a little bit more about Asia Pacific Obviously, you talked about.
The Americas and Europe standing out.
But some softness in a few countries you mentioned there is that just kind of market driven.
Or something something you wanted to address internally perhaps.
No it's on.
Just kind of it's mark.
We've looked at that we've looked at it from a market competitor mix etcetera, and I think what's going on in Asia Pacific.
Is there was the expectation for the most part of that Asia would rebound first and it actually debt and I think it's kind of faded out in the sense that one you still have some lockdowns going on on and like Singapore, Hong Kong too.
India was was very affected by the Covid virus and really slowed down in terms of of what was going on there.
So I think you'll have kind of what I'd call. The MNC slowed down so a lot of the bigger organizations have really kind of slowed themselves down what we're seeing pretty constant trends on them and others in Asia Pacific It doesn't feel like it's on.
On an.
The product issue within the heidrick, it definitely feels more of systemic within Asia Pacific on.
And we'll continue to kind of watch on that develops I would imagine as things get back to what I'd call normal on I use in abstracts with that I think Asia Pacific will accelerate because I think then decisions will.
It will be a little bit easier.
We target our.
Of our customers on our clients in Asia Pacific and that will maybe unlock it a bit more but it definitely feels like a lot of our on.
I'll use the word competitors, but a lot of businesses within Asia Pacific are experiencing the same thing that it. It rebounded initially quite nicely and then it's really kind of just flatten itself out of it in terms of getting.
Some of that can be attributed to COVID-19 and some of it can be attributed to decision still needing to go back to the U S of Europe.
In order to get decisions to be made in Asia Pacific on unlocking its value.
Okay. Thanks for taking the questions appreciate it.
Thank you.
The throw it in as the reminder, if you have questions. Please press star one.
Yes.
We have a follow up question coming from Tobey Sommer from Truest. Your line is open.
Thanks with respect to the deploying capital to further your strategy.
<unk>.
What are you seeing in terms of the.
The valuations given sort of the the snap back in <unk>.
Good day markets and capital markets just about every flavor.
No that's right on.
I'll try to answer it the way that I would hope to see it and then I probably turns you on that scale.
That's gonna be foreseen on.
And.
Again, let's assume scale that you know we properly venture off on the right technologies on the night on the way that we expect our strategy to play out in those verticals and the idea I would imagine at some point like we talked about and we'll use SaaS because that was thrown out earlier on the conversation if we have of scalable SaaS business.
And Thats generating SaaS type margins I'm imagining from your side. It would be you know the valuation would expand on a sum of the parts right that you have of SaaS business doing das you have the executive search business doing that heidrick consulting again, assuming scale et cetera would be off of the races in terms of its growth versus other growth et cetera.
And that's.
Hopefully how it would all kind of come back into the valuation methodology clearly we have the liquidity of the capacity to execute on our strategy.
So, it's not something where I feel like again, I don't need to go out and seek on.
Leverage or in Saint amounts of leverage or equity offerings, nothing that would impact the shareholder in that sense on because I think we do have.
Have a very strong balance sheet to be able to pivot ourselves on.
And to do it and execute it appropriately, but the valuation would hopefully come back in both from the execution. The way that we were able to do it on that is not really increasing equity to do it and we've got the balance sheet leverage if we so choose and then hopefully in and of itself. The the multiples that you would expect to see on those different parts of the.
Business on those journeys net would come back into the stock price.
Okay. Thank you.
Inc.
What you're seeing in may be expecting in terms of.
Not just the.
Cyclical growth as we come out of the.
The recession and didn't have any spacing, but maybe some.
On the potential secular drivers like.
The like retiring baby boomers.
Let's see I think some investor questions about.
The rejiggering of corporate supply chains as a result of the trade the speed in recent years, but now pandemic on top of that and what that could mean to our.
Demand for search.
Search of those consulting.
Yep.
Yeah.
I think look some of the.
We kind of like think about it over the course of the year.
Look we're going to see we believe we're going to see demand come back in.
Pretty much all of these areas.
All of the verticals that we operate in so.
That's just normal demand that we do think is going to come back but underlying that.
I think that there.
There's going to be some changes here that we can see I think we're gonna see.
You need to see some spikes in the work at the top in the board related work that we.
We do with teams such as <unk>.
Diversity with sustainability.
These are going to continue to drive demand.
At the top of the house, we think CEO level of activity is likely going to.
Go up a bit as well because.
Covid made changes at the top.
The difficult for employers as well as leaders.
But we think that Ah.
Our culture work.
<unk> is going to continue to rise you know this is a top concern of leaders how is their culture fared.
Over the last year.
You are really and we think that at a macro level.
All of the DNI work is going to continue to occur as well we do see.
Going back into your commentary you know link.
Linked a little bit to the CEO of the broader to the C suite.
We do see likely to more retirements that will happen in the upcoming year.
A lot of it because many leaders just wanted to stay with their.
Level, we're thinking about.
Retiring and just kind of now we will as the pandemic hopefully work our way out of it will feel more comfortable.
The teams are well set and be able to make their own personal decisions as well. So these are all themes that we do see out there.
Thanks.
The last question from me.
Are you seeing incremental demand as a result of.
The D N a noose around board kind of position.
And with.
With respect of DNI demand is it is.
Joining me she suite and executive positions.
True.
The teams so that's sort of.
Set out rotate rotation in terms of neighbor in the existing seats.
Yeah.
Let me take the second question.
And so.
I think what we're seeing there isn't necessarily a whole bunch of new.
Our position okay.
So positions have existed I think it's sort of as people begin to think the whole C suite succession planning how to think about the team how to think about <unk>.
Diversity on their team what the pipelines look like et cetera. So I think it's really people understanding the technology.
All of gene that diversity matters.
And how it impacts the overall performance of the team and trying to go there with that so.
It isn't necessarily new position. So there are a few.
The companies that may not have had them, but I don't consider those to be necessarily.
Everybody is kind of come up with this new title I mean.
I might give you. An example separately on at least in the last couple of years on sustainability.
<unk> established new roles to oversee sustainability I think on diversity inclusion that already happened five years ago, and whether they were successful or not is the question.
What was your first question again on let me come back to that one.
Yes.
I think you kind of adjusted in your from your answer to the second one thank.
Okay.
Great. Thank you.
Okay.
We have no further questions at this time I will now turn the call over back to Mr. Krishnan.
Krishna Roger of Gopro then.
Sir you may begin your final comments.
Thank you I'll just be brief here, but thank you everyone everyone for joining our call. We certainly appreciate it.
We're optimistic about the year ahead of an excited.
About the new initiatives that we've got in place and are going to be driving this year as well.
You've heard us talk about some of those on today's call.
We're still not out of the woods yet so please.
Be safe and we look forward to speaking with you on the next quarter as well. Thank you.
Thank you again for participating this concludes today's conference call you may now disconnect.
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