Q2 2022 Heidrick & Struggles International Inc Earnings Call
Good afternoon, and thank you for standing by welcome to the Heidrick <unk> struggles Q2, 2022 earnings conference call.
All lines have been placed on mute to prevent any background noise.
Should you require any assistance. Please press star zero on your telephone keypad and an operator will assist you.
During today's call there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by one on your telephone keypad.
I will now turn the conference over to Suzanne Rosenberg, Vice President Investor Relations. Please go ahead.
Yeah.
Thank you and welcome to our 2022 second quarter Conference call on today's call is our president and CEO Christian on radical pollen and Chief Financial Officer, Mark Harris, we posted our second quarter slides.
On the IR homepage of our website at Heidrick Dot Com and we encourage you to view the slides for additional context. Please.
Please note that in the materials presented today, we may refer to non-GAAP financial measures that we believe provide additional insight into underlying results a reconciliation between GAAP and non-GAAP financial measures maybe found in the earnings press release also in our remarks, we may make certain forward looking statements. We ask that you. Please refer to the safe Harbor language also can.
And in today's press release.
I'll turn the call over to Krishna.
Thank you Suzanne and good afternoon, everyone.
Let me begin with a brief recap of our financial highlights, which marked another stellar quarter of record results for our firm.
Today, we announced.
Consolidated net revenue of $299 million growing 15% over last year, and marking a new milestone.
The highest quarter of revenue in the company's history.
Growth was seen across all segments of our business and of note executive search delivered its highest revenue quarter ever.
Heidrick consulting reached its second highest level ever.
On demand talent posted revenue of more than $22 million, which puts us on an annual run rate of more than $90 million.
Important profitability was very strong record operating income and record earnings per share.
Leadership trends in the marketplace remains strong and we continue to see demand signals across each of our segments.
Well, we have no current indication of any significant contraction, we do expect some near term volatility given that we're in a new and very dynamic environment with inflation at multi decade highs.
Central banks raising rates faster than previously anticipated.
Commodity prices holding at or near highs continued uncertainty around COVID-19.
Rising strength of the U S dollar.
Importantly, we remain highly communicative with our clients.
As we actively monitor the horizon to respond quickly.
In the first half of the year in executive search, we saw frenzy 3600 confirmation, which.
Which is approximately 20% higher than our usual normalized pace and we expect that rate to moderate to a more sustainable levels by year end.
To be clear, we still expect to see strong growth.
Longer than the record years and experienced pre COVID-19 in 2018, and 2019, but again slower than the feverish pace, we have been experiencing at.
At the same time, we expect our non search businesses to continue their growth cycles.
And as Mark will soon discuss.
Our guidance for Q3 reflects overall continued strength.
Turning to our strategy, we are well positioned in the marketplace to serve our clients across a wide spectrum of new opportunities and challenges with our diversified set of executive search and advisory offerings.
With everything going on in the world today Geographics for Covid.
Resignation demands for Rachel and social Justice.
And ESG.
There is a simple thing.
The leadership responsibilities for boards and management teams.
Increasingly complex.
Companies are wrestling with the changing business model.
Finally, new ways of working while making stronger than ever commitments to purpose and.
In DNI.
Permanent shifts in the way people think about work and how they lead their organization, including unprecedented mobility and hybrid workplaces.
Need for agile leaders.
Identifying assessing and developing future ready leaders these.
These are just some of the seismic shifts that play.
Yeah, Hi, here is perfectly positioned to advise our clients on the full depth and breadth of these issues given our experience across a dynamic range of talent and human capital offerings. We.
We are bringing to the marketplace.
Our differentiated strategy of building a virtuous cycle of leadership offering.
As our clients evolving and most critical needs is working and resonating with our clients.
Each of these offerings drives interconnectivity through our one heidrick approach, while leveraging our unique combination of assets executive search on demand talent.
Heidrick consulting and new digital leadership solutions.
Each of these areas serious key client imperatives only continue to grow.
It's truly inspiring to see our team's tremendous efforts in executing our strategy yielding strong results like those reported today.
It's also clear we are building positive momentum for the future.
Business becomes increasingly diversifying and expanding cross collaboration opportunities that drive not only our clients' success.
But also create long term shareholder value.
At the center of this virtuous cycle is our trusted premium brand and the strength of our relationships and consultants, which gives us the permission to serve his leadership advisors, introducing new offerings and co create solutions with our clients.
During the second quarter, we held our global consultants conference in person for the first time in nearly three years.
This was an incredibly important event that brought our colleagues together under the theme of.
To reflect.
Reconnect and re imagine.
Our time spent the conference was critical as we came together and set in motion. The next stage of growth and diversification for our firm.
The energy and power of our one heidrick approach with cross collaboration between executive search and Heidrick consulting and on demand talent was palpable as we shared the latest developments across these businesses related to our data driven tech enabled solutions.
Previewed some of our digital leadership capabilities under development.
And dove deeper into how we can further serve our clients around the globe.
Now, let me turn to each of our segments to describe.
How we are creating value.
Starting with executive search.
Bears repeating is the largest segment of our business delivered its highest revenue quarter ever in company history.
We believe we continue to gain market share with outstanding trailing 12 month productivity.
Two 6 million per consultant.
All practices are significantly outperforming pre COVID-19 levels.
And none more so than our two largest practices financial services and global technology and services.
Additionally, we continue to see new business coming in at a brisk pace.
Functionally we are seeing a few key leadership roles to drive recent demand.
Ceos technology.
Technology officers.
HR officers and supply chain officers are all roles bearing significant new burdens and challenges brought on by the pandemic recovery and other macro factors.
Globally, we continue to efficiently groceries by optimizing our go to market strategy. Our account management model is working well.
Deepening client relationships in all industries.
Heidrick consulting posted $22 million in net revenue.
That was an impressive 31% higher than last year and Mark This segment's second highest revenue quarter in history.
These results are being driven by expanding our client relationships across multiple offerings and through our centers of excellence as we continue to increase our brand awareness and cross sell more of our offerings.
Importantly, our focus on delivering impactful solutions that develop future ready leaders organizations and cultures, including deep Eni are now driving multiyear engagements.
We're also winning more work with existing clients.
Our scale and profitability strategy includes building broader deeper and longer lasting relationships with our clients by offering the best of Heidrick.
We also intend to strategically invest in high growth geographies and solutions, including leveraging digitally enabled services and developing scalable service offering.
Taken together, we believe this strategy will enable us to continue growing the top line.
While also accelerating our margin expansion.
Turning to on demand talent revenue of $22 million was 19% higher than last year, driven by the internal sales team and referrals by our executive search and Heidrick consulting colleagues clients.
Our response continues to be overwhelmingly positive as companies look for more leadership liquidity.
Whether it's through on demand access to interim executive leaders for leadership on strategic project work.
Our fifth annual high end independent talent report issued in March only serves to amplify our positive view for this new segment.
You as CEO is already ranked labor shortages.
Number one external threat to their businesses.
Nearly 60% of leaders report that clothing skill gaps within their workforces has become high priority since the pandemic began.
This report highlighted.
Number one on.
On demand talent is on the <unk> agenda.
More than 70% of all requests are now coming from vps and above.
This was the first time that Dsos and President's tapped on demand talent more than any other buying group.
Number two.
Leadership continues to permeate the organization.
Overall request for interim leaders increased by 137% year over year.
Number three.
The demand for strategic expertise and hands on execution skills remained a top priority number four.
As this chart growing interest and skills associated business processes and workforce planning.
Heidrick is already the clear market leader in securing high end project, an interim on demand talent engagements.
On top of this the market has a high Tam with significant runway and we expect organic growth as the market and client awareness expands.
We expect growth to accelerate through the heidrick search channel as clients become more increasingly comfortable with the on demand talent model.
Building on our leadership position in this space, we're also reinvesting to fuel future growth given the accelerating market opportunity.
Typically additional investments we made in sales and marketing as well as geographic expansion outside the U S and UK and possible category expansion.
Before I conclude.
As I mentioned on our last call, we continue to invest in our digital assets for future growth here.
Here, we're developing new unique digital capabilities.
The insights and intelligence.
That can add scale helped bring visibility to our clients on key leadership and development topics, including succession mobility and diversity and transform how companies.
Port their leaders.
Client reception has been strong and we've been continuing to incorporate feedback and make enhancements and modifications following meaningful conversations with approximately 100 clients.
We are excited we are.
On track to begin beta testing with several clients shortly.
In closing our very strong results demonstrate that our diversification strategy is progressing in the right direction.
Long term, we expect growth to continue across our company with our non search businesses heidrick consulting on demand talent.
All assets plus other adjacencies still to come and to grow even faster than executive search leveraging this strength. We are excited to invest in new opportunities to further expand our best in class enterprise.
These factors coupled with our strong balance sheet and record results support our continued growth plans with significant opportunity ahead.
I am, especially proud of our amazing team of professionals around the world are power is our people and I. Thank the entire team for their hard work.
Dedication and contributions to heidrick <unk> future success.
With that I'll turn the call over to Mark.
Thank you Christian and good afternoon, everyone. Thank you for joining our call today.
Once again, our heidrick team around the world delivered very strong results driven by their focused execution and setting performance records in the process.
As of March point of reference our six month EPS of $2 eight is higher than most of our annual EPS achievements pre COVID-19.
As Chris indicated that we're very pleased with the second quarter market trends, but remain very focused on potential macro headwinds that may surface in the second half of 2022 and <unk>.
You will see that our third quarter guidance, which I'll discuss in a moment reflects moderation driven more by our high growth revenue levels of nearly $300 million in a quarter as opposed to any recessionary indications at this time.
Our models are showing some macro driven softness, but the primary driver related to the third quarter revenue guidance relates to historical summer holiday season, as travel restrictions have been lifted versus last year and many people and companies are slowing down in late July and August to take time off as well as the impact from the recent strengthening of the U S. Dollar.
To be clear when we talked about today is a moderation isn't around recession levels that we've seen in 2001 2007 or 2020.
There's a lot of momentum in our business with changes to our industry with June finishing on a high note with the highest confirmations total in the second quarter.
Now let me provide you some details on our record second quarter results.
On a consolidated basis net revenue in the quarter reached a record $298 7 million 14, 9% higher than last year's record of achievement.
This was near the high end of our guidance range and coupled with both the demand momentum we've seen thus far in July we're encouraged about the third quarter, which is reflected in our guidance.
Executive search net revenue was $253 9 million in the second quarter 13, 3% higher than in the prior year quarter.
From a regional perspective, the Americas was up 19, 4% led by the number and value of engagements Europe was up seven 2% and Asia Pacific was down six 5%.
However, given the strengthening of the U S dollar looking at Europe , and Asia on a constant currency basis shows is the true underlying performance with Europe , increasing by 20% driven by a strong increase in the number of engagements in Asia Pacific decreasing by one 4% driven by decrease the number of engagements offset by engagement value.
Consultant productivity of $2 6 million increase from $2 5 million in the first quarter of this year and $2 $4 million in the second quarter of last year and finished just behind the record $2 $7 million set in the fourth quarter of 2021.
A portion of this strength is due to the record high confirmation totals in the first quarter of 2022, which was up almost 15% versus the previous record set fourth quarter of 2021.
The strong performance in the second quarter of 2022.
As we've noted in prior quarters, we expect these heightened levels of productivity will modulate, but remained strong around 2 million per consultant overtime.
Turning to on demand talent once again, showing great strength with the second quarter revenue of $22 4 million.
This is generated by an increase in higher average project size, reflecting strategic initiatives to expand and penetrate key accounts along with an increase in project extensions.
Important to point out that this business does have some seasonality on a quarter to quarter basis, and typically has a stronger second half of the year than the first.
Looking at on demand talent. This way revenue was up 39% in the first half of 2022 to $45 $7 million when compared to the previous six month period.
At an annualized revenue rate of approximately $94 million on demand talent segment is rapidly growing and we are reinvesting to fuel future growth given the accelerating market opportunities we are seeing.
We expect to continue to invest in unmanned segment as long as the market conditions support this and we continue to gain market share. Therefore.
Therefore annualized EBITDA and bottom line performance from the first half would be approximately $2 million.
If you use EBITDA or p/e multiples the value of this part of our business could be missed for example, given our current EBIT trading multiples learning from low single digits. This was suggest the value of less than $10 million for a business of trailing 12 month revenue of $94 million.
Turning to Heidrick consulting this segment delivered its highest revenue quarter since the fourth quarter of 2016 with net revenue of $22 4 million.
This was an increase of 31% over the prior year period and up 25% sequentially.
This was driven by execution on our backlog and new client engagements.
Heidrick consulting is new business pipeline pipeline excuse me it remains strong and this segment continues to benefit from the collaborations with the company.
While also bringing new business opportunities the executive search and on demand talent segments.
Fact over 40% of the segment's second quarter revenue was driven by referrals from executive search.
All of this helped drive our performance expectations for the third quarter, which is embedded in our revenue guidance.
Now, let me turn to operating expenses.
As expected this level of revenue performance in the quarter, we saw salary and benefit increase the fixed compensation decreasing by $6 $6 million.
Primarily driven by the deferred compensation plan and RF shoes, partially offset by an increase in base salaries and payroll taxes.
Variable compensation increased $28 3 million and was driven by bonus accruals, primarily due to the strong production in the quarter.
Nevertheless, salary and benefits as a percentage of revenue improved 210 basis points versus the prior year quarter to 69, 5%.
General and administrative expenses were $35 2 million compared to $27 4 million in the 2021 SEC.
Second quarter.
As a percentage of net revenue general and administrative expenses were 11, 8% compared to 10, 5%.
As expected most of this increase was primarily due to the travel and other expenses related to our global consultants conference we held in May.
Turning to cost of services, we saw an increase to $17 4 million in the second quarter compared to $14 $7 million last year, mostly due to our on demand talent business and an increase in the volume of consulting engagements that require additional independent talent to deliver those tailored projects.
As a reminder, this line item is where we expense payments to independent consultants to perform high level project, an interim work and on demand talent.
And this is a percentage of revenue so as revenues continue to grow some of the cost of services.
As we continue to invest in our digital assets last quarter, we introduced research and development is a new expense category.
In the second quarter, we reported $4 $5 million on the slide on them.
Presenting one 5% of net revenues.
We expect R&D to grow modestly over the back half of the year to an annual run rate of approximately $20 million in 2020 to some capitalization in accordance with generally accepted accounting principles.
This capitalization will amortize upon product introduction into the market.
Our record setting performance on the topline translated to record levels of profitability, even as we continue to invest in research and development initiatives. We're very pleased to report the second quarter operating income of $33 9 million, an 18% increase from the prior year and an operating margin of 11, 3%.
Adjusted EBITDA in the second quarter was $36 $8 million and adjusted EBITDA margin was 12, 3%.
As a reminder, moving forward, we do expect some EBIT margin compression as our on demand talent business EBITDA margin of two 7% will initially be low as the segment continues its high growth and we reinvest in the business, but it will be accretive to our shareholders as this drops to the bottom line.
In short <unk>.
Though the margins of on demand talent will be lower than search that is expected to be accretive to earnings per share and we believe this margin compression is well worth it.
Turning to our tax rate, which has been consistent over the last two years in the low to mid 30% range. We saw our second quarter finished with a tax rate of 39%.
We anticipate these levels will continue into the second half of the year subject to any tax rule changes.
Adjusted net income in the second quarter of $24 1 million increased five 4% over the prior year.
And the diluted earnings per share of $1 19 reached an all time high now.
Now, let me turn to our strong balance sheet, we ended the quarter with cash and cash equivalents of $336 $6 million.
This marks an increase of $98 8 million or 41, 5% compared to the same period last year as.
As we've discussed before our cash position typically builds through the year as employee bonuses are accrued employee bonuses are paid out in the first quarter, along with the associated taxes and related costs.
Our strong cash position with no debt, along with $200 million credit facility gives us great strength and flexibility to invest and pursue continued growth both organic and inorganic.
Now, let me turn to the third quarter revenue guidance, where we disclosed the revenue range between 260 and $270 million.
While the revenue is coming off last quarter's historical revenue highs nearly $300 million.
Please keep in mind that our guidance range is still at an annualized revenue rate of nearly $1 1 billion.
Thus demonstrating the continued high performance of our business. In addition to my opening remarks, where I commented that will have some macro headwinds holiday travels and foreign exchange values imputed within our guidance can be further impacted by our disclosures in our 10-Q filings.
Our management team will continue to monitor those situations and move quickly. So we're well positioned to meet such challenges.
In closing, we're very pleased with our performance and we are greatly encouraged by the progress we've made.
On our diversification strategy.
Have an exciting road ahead of us as we continue our transformational journey and focus on accelerating the growth of both our search and non search businesses.
We remain focused on delivering a powerful interconnected suite of services across search and consulting on demand talent and digital capabilities, which in turn will give us some more sustainable and resilient business model in the future.
With that Chris and I are happy to take your questions operator over to you.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad. If you would like to remove yourself from the queue. You May press star one again.
One moment please.
Thank you.
First question comes from the line of Kevin Steinke of Barrington Research. Please go ahead.
Hey, good afternoon, everyone.
Hey, Kevin.
I wanted to just start out by.
Asking a little bit more about the macro trends youre seeing and what youre hearing from clients.
You noticed your you noted that youre focused on.
Potential macro headwinds in the second half but.
It doesn't sound like you've seen a lot of impact yet to your business could you just kind of elaborate on the puts and takes.
Youre seeing from a macro perspective currently.
Sure Kevin It's Krishnan here, thank you for that.
We said.
We're not seeing a significant contraction in this market, we're seeing demand signals across the board.
Our teams remain busy it's not the feverish pace.
And then it was <unk>.
Previously, but having said that.
Yes.
It's much much faster than 2018 2019.
We can look back on and then as our guidance points to as well, we've got a pretty strong forecast the non search businesses continue to grow as well and we're optimistic on that so that's what we're seeing in the marketplace right now.
Alright, great.
Yes.
You know you mentioned.
Trying to drive.
Yes average project size larger than the on demand talent segment.
And as well as.
Extending projects can you just talk a little bit more about.
That initiative in kind of the rationale and <unk>.
Success Youre seeing there.
Yes, absolutely yes so.
One of the things we are doing.
Very jointly with.
Search and consulting colleagues as going to market.
Now we are beginning to see examples.
And these are examples of where a client has.
Very critical search need.
And while we're filling that search need we're able to create.
On demand project as well so that ends up being.
Additional revenue and kind of and extends often beyond that they get used to that we have the.
Placement and will create projects and the projects create add on so it's very much working hand in hand.
To be able to do that.
Also.
I think getting much much better at creating project work as well and project work is where it is not simply.
In the interim placement, it's a defined problem that we're going after with one or multiple consultants and that often leads to additional revenue as well. So these are the kinds of things that we're doing in that space.
Pretend a positive future for us.
Yeah.
Okay. Good.
In terms of some of the.
Digital product development that youre investing in and working on currently you mentioned.
Starting to do some beta testing shortly.
We can use us update us on the timeline as to when products might.
They actually launch in.
Start contributing to revenue I believe less.
Last call you talked about maybe starting to contribute in 2023, but any.
Change or to that to that roadmap you have discussed before.
Yes look I still see it happening in 2023, we've got multiple clients. We are starting to work with and typically you learned through a cycle of doing that.
And so I think 23 is that right.
<unk> for when we will have.
<unk> available with multiple.
Multiple clients and revenue opportunity as well.
That's right.
Okay and the.
We had $4 $5 million of investment there on the research and development in line in the quarter about pretty similar to what you had in the first quarter. So should we kind of continue to think about that is the appropriate.
Quarterly run rate.
For for investment in the second half of the year.
Yes, Kevin Mark so jumping in I think we talked about a $20 million plus or minus revenue run rate. So it's definitely an approximation it could go up marginally.
A little bit, but most I think we are in the right ZIP code on that amount obviously, depending on the feedback that we're getting on the beta testing and the amount that we need to really look at in terms of any kind of <unk> on it could change that number but it's definitely in the in the zone of where we think we'd be striking.
Okay.
Just also on the general and administrative expenses.
Sorry, if I missed it but did you.
<unk>.
The amount.
On the.
Spent on the global consultants conference. So maybe we can kind of strip that out.
Think about.
Run rate for the second half of the year.
There was about <unk>.
They've kind of indication would be approximately around $4 million last quarter and I think it came in around $3 five so.
That would be the amount that we don't expect to see in Q3 and forward.
Okay.
Yes.
Great. So yeah I think.
I thought the consulting business.
Had a nice sequential increase there in terms of revenue.
And you mentioned a strong pipeline there.
Anything discernible that youre seeing in the market in terms of maybe it.
Positive step change in the environment.
Sure.
Your ability to execute internally.
That led to that nice sequential increase there.
Kevin It is a favorable environment.
So just think about where still we are definitely in a.
Or for talent, there's a lot of.
And over that occurred on <unk> companies.
Recognize that.
Not only attracting but keeping and developing talent is absolutely critical to our strategy and that becomes clearer in moments like this.
Sure.
Our heidrick consulting offering does a fantastic job of helping them.
Their future leaders as well.
And thinks about culture from the perspective of.
The return to office model and things like that so these are all things that I think are our favorable trends that will continue.
Throughout the year as well and we will continue to drive that model.
Okay, Great and just lastly, any any key takeaways you would highlight coming out of the.
Global Consultants conference I think you touched on it a bit but.
What.
What were the takeaways are the benefits you saw from bring your people together in that in that manner.
Yes look it was just amazing for the team to be together.
And reconnect in.
And many people hadn't seen each other in a while so collaboration I think is a huge element of.
Sure.
Our optimism that comes out of that.
I think number two understanding the breadth of the offerings.
And when.
When we say we had a conference I mean, all of our businesses were there.
Our on demand talent team was on the ground Heidrick consulting team was on the ground and we're able to kind of walk through some of what we're working on with our digital capabilities. So we created a lot of mind share with our consultants, which I think is going to be really positive for us as we move ahead. So that's the excitement in alignment as well as to why we're working on.
As things and why we're focused.
Okay. Thanks, a lot for taking the questions appreciate it before Kevin. Thank you. Thanks, Kevin.
Your next question comes from the line of Tobey Sommer of <unk> Securities. Please go ahead.
Thank you.
I wanted to start with confirmations in executive search could you remind us about.
This seasonality.
In your sort of any kind of seasonal pattern within the cadence of your quarters.
Yes, no problem I'll tell you what the theoretical answer is and then I'll tell you that all gets blown up between last year and this year.
So we usually see kind of Q1 coming slow out of the gate after the seasons.
Just trying to get things back on track Q2, and three are typically are very good quarters, usually it's.
Q2 in front in Q3 marginally.
As of last couple of years has been Q3 over Q2.
We typically see Q4 really kind of soften up a bit really kind of more focused on delivery you're trying to get people open across getting a lot of closures out we see a little bit more on the uptick side of it in Q4, and then we kind of roll rinse and repeat but I will tell you last couple of years. It has been a complete random walk it has not followed its normal path and for obvious reasons come.
Out of Covid, So and we still saw that this year I mean, the confirmation trends as an example has nearly 2000 coming out of Q1. This year. So the 8000 run rate that's ridiculous Lehigh.
And modulate back down to kind of last year's run rate in Q2.
So we still came in at the Q.
Q1, being so high and Thats, just very unique usually we don't see it that way so hard to get a trend out of it one way or the other until we kind of go back to what the new equal Arabian equilibrium is but.
That's historically, what we say.
So.
That's down I don't know, 15% or so sequentially.
Are you are you seeing anything in any particular.
<unk>.
Industry vertical that's driving that.
I know you mentioned financial services in the prepared remarks as a source of strength, usually that's a segment I.
I guess that we're all sort of personally acutely aware over hires in over fires throughout cycles. So any canary in the coal mine you could talk about.
I mean, I'll, let Chris kind of weigh in on this one I mean, the first comment I'd make is.
You're looking at the down 15%, but like I said when you look at Q1 versus Q2 Q1 was just.
The ridiculous number that is almost impossible to try to hold off right. So last year. We did about 6600 confirmations annually. So at an 8000 pace you can see how high that number was I think it just kind of came back down to really what 2021 levels worse, so totally anticipated and expected where we saw it in terms of the specific industries go into your.
Chen lighter in financial services to GTS industrial consumer quite strong health care life Sciences lighter.
Again, I don't know if I want to draw any conclusion, yet we came in very strong with those more inverted in Q1 versus Q2. So it could have just been the timing of the heat map versus necessarily a trend so keeping an eye on it for Q3, but Chris I don't know you want to add anything to that yes, no Mark I think you said well look we're going to keep.
Keep an eye on it.
So you heard me last I guess in the fourth quarter to say that we're running 100 miles an hour okay.
Which we were in and we actually ran a little faster after that which was the.
The first quarter. So I think things are modulating a bit then back to sustainable levels for the economy as well and that's what we're seeing.
I don't think its anything more than that right now that I could call out.
Okay. Thanks is there been a change in.
Upticks, either for the better or worse in Q2 versus earlier in the year.
Yes, we saw Q2 kind of do better in Q1, we saw a little bit more in terms of the completion side of it I'm going to able to execute on some of our backlog et cetera. So rolling in with a much bigger number you would expect the volume of that to be increase that's what we saw.
Again, we're still got a very good backlog in executive search side imagine on hopefully that trend continues into Q3 and Q4, but it's that was kind of the way you always have to look at it as almost a six months lag where you get a lot of confirmations in one place you would expect those.
140, 180 days to be worked themselves through the system and you would get that girth kind of coming through based on the amount of confirmations that came in earlier at the point of time. So it's just kind of a mathematical algorithm front or anything else kind of logarithm, if you will coming in.
Okay.
Shifting gears to on demand if I could.
Ask your question there.
You talked about favorable long term dynamics sort of a shift in the marketplace.
Makes sense to me to have higher demand in this area, how do I square that with what looks like.
Few quarters of sequential revenue declines.
Thanks.
Okay no problem.
Great question, Yes look.
I think if I take a step back we feel.
Really positive about the on demand business.
Last year for Heidrick represented about $66 million in revenue and we think that this year, it's going to be in excess of $90 million. There is some seasonality built into that business.
And then given its current scale and size is still a little bit choppy.
But as we scale I think youre going to see that trajectory change a bit as well so I acknowledged what youre, saying, there, but I think if you take a step back we're very optimistic on this.
Okay.
Last question from me.
<unk>.
How do you how are you feeling about the pace of your investments.
With external and internal you've got some development going on and we will learn more about that later in the year.
Internally, you've got some investments in adjacent businesses that are.
You're managing them more for growth.
And we have these macro headwinds does it make you want to tap the brakes pressed the accelerator how do you react.
Yes.
That's a terrific question I mean.
I think with some macro headwinds, we're very careful with.
Looking out into the marketplace in thinking about valuations and where they stand.
Where are we are continue to we're pretty optimistic if we think about this long term as to where the trends go for leadership and talent and we continue to kind of invest really.
But thoughtfully on in terms of the areas of growth that we know we can drive I mean, we think.
There's a lot more organically with on demand talent, particularly in the U S.
We think that there is some pockets of search where we need to continue to grow Heidrick consulting obviously has got a lot more headspace as well, particularly given these trends so it's a pretty balanced view, but.
I don't think were taken now our lens away from any one of these choices that we've got Mark maybe you could add.
Yes, I would only add that so if we look forward is obviously everything is a function of economics and structure. So if we can find something that really kind of fits within our return profile. We can get the structure. Right. Then we certainly will hit the button and also I think where people talk about recessionary headwinds.
I'm not predicting or to have a recession or not to have recession. My comment would be a recession of this type assuming it's a central bank recession theyre pretty shallow in pretty quick I don't think the opportunities in terms of any real price adjustments I think again companies could just said on the on the outside for just a very brief amount of time before the market kind of comes back I don't think this.
He is going to be a 2007 of the downfalls to 6600 or so.
To put things in perspective, I don't think its going to xiaomi off I don't think its going to change the pricing points, where I showed if I really like the company culture to fit in our strategic vision and I can get the economics and structure to pan itself out.
I'll hit that button all day long so it's not a problem.
Thank you.
Sure.
Okay.
Your next question comes from the line of Marc Riddick of Sidoti. Please go ahead.
Hi, good afternoon.
Mark Hey, Mark.
So I wanted to follow up on sort of with the commentary that you had as far as gathering together for the first time in quite some time I was wondering if you can sort of shift that to maybe what youre seeing with travel and in person meeting activity with your clients and maybe what youre seeing there with with their receptivity are you are you beginning to engage with them.
Sure not just as a back ended way of trying to get done what we think we're going to see higher travel and entertainment expenses, but really more a function of kind of what youre seeing from an in person.
Desirability from your clients.
Yes, let me, let me talk about sort of the.
The activity that we're seeing on that and Mark if you want to add to that as well, but we're definitely seeing a spike in that.
An upward trend.
And you can you can see that with our client conferences et cetera, everybody is trying to boost believes in culture and believes in getting their teams together is trying to do something like this so we definitely see that and we're seeing that in the search business.
In particular, where we're seeing now.
More meetings in person.
Our people flying in the final round of interviews now more and more so or being completed like that we're seeing that in consulting where our teams are spending more active time now with the clients rather than just doing all the assessments et cetera revise zoom. So there clearly is the trend line and it's not where it was before.
Okay to be clear and maybe searches divest example of that.
Much of the process it can be done.
Video type of format, but now the last sets of interviews are definitely reverting back to in person.
Mark I don't know.
Yeah.
I think it's all summarize I mean, we've seen a little pickup and as we talked about the G&A from the travel Unbilled travel and expense, but a lot of that pertains to the global conference. Our expectation is for it to really fall back down to kind of the levels. It was in Q1.
We're not seeing a lot of indication that it's really shifting from that that's still very much suppressed from the pre COVID-19 times. So it still feels like there's a little bit, especially on rightly points out people doing some travels et cetera, but I'd still say there is again given what's going on in the world a lot of people not really wanting to come necessarily together physically.
At least as of yet just a little bit more than usual, but.
Drink covet excuse me.
And then I was wondering if you could comment on maybe what you are seeing you sort of touched on it a little bit as far as CEO challenges and I was wondering if you talk a little bit about C suite activity and turnover that you might be seeing.
Now if you're seeing much of any of that.
Relative to maybe what your expectations were and how that might then either help or hinder the the pace of being able to introduce the digital capabilities. I mean are you seeing much in the way of a shifting of leadership in getting.
It's not to the same folks or are you beginning to see some musical chairs there. Thank you.
We've definitely seen as I referenced was five.
And growth in CEO searches over the.
Over the first half of this year.
Much of it driven by I think two things people.
Now.
I was feeling like they've seen their teams through COVID-19 and ready to make a change.
And number two just the change in the environment and people sort of deciding whether they want to be in that environment or not and companies deciding boards deciding as well so between all of that lots of change I mean, just look at the headlines and retail.
There seems to be so many CEO vacancies. So I think that for us represents not just the opportunity as youre, saying for search related activity, but for the introduction of.
The rest of heidrick as well as we work on those opportunities.
Part of our optimism as we look ahead and say that they are still positive signs of demand out there.
Okay.
Okay, Great and then the last thing for me I was wondering if you could sort of as you sort of looked at the.
The process of beginning beta testing with some some of these these opportunities I was wondering if.
Between the process of coming up with these capabilities and.
And beginning to beta tests have you sort of sound some.
Have opportunity shifted as to what you thought might be most.
Yes.
Clients would most react too or is it sort of similar to sort of what you thought might sort of get folks excited about six months ago. Thanks.
Yes.
I think it's a little bit early to make that call for us we're seeing we're seeing a wide range of opportunities that exist.
And so.
And how clients may want to use these capabilities through different lenses. Some we've seen the application for where.
Sort of highlighting the diversity side of the equation and the diversity pipeline has been the most important thing others, who are kind of interesting from mobility perspective, and perhaps others.
Purely from a succession perspective, so we're seeing a lot of different dimensions, and I think over the next six months, we're going to really figure out which of those dimensions.
<unk> out more or whether kind of the all risk.
And so all that I've just talked about three of the dimensions, but these are different angles people are coming at this from.
Alright, so I appreciate it thank you very much.
Thank you.
There are no further questions at this time I will turn the call back to Christian.
Thank you everyone for your continued support and most importantly, thank you again to our colleagues around the world.
What a great performance and demonstration of the implementation of our strategy.
We're very pleased with our progress and we're excited to continue our growth path. We look forward to updating you again in the next quarter. Thank you very much.
This concludes today's conference call you may now disconnect.
[music].
Yes.
Yes.
[music].
Yes.
Yes.
[music].
Yes.
Thanks.
[music].
Okay.
Yes.
[music].
Okay.
Sure.
Yes.
Thank you.
[music].