Q1 2024 Heidrick & Struggles International Inc Earnings Call
Operator: Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the Heidrick & Struggles 2024 Q1 earnings conference call. All lines have been placed on mute to prevent any background noise.
Thank you for standing by my name is Pam and I will be your conference operator today at this time I would like to welcome everyone to the Heidrick <unk> struggles 'twenty 'twenty four Q1 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 followed by the number on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Suzanne Rosenberg, VP for Investor Relations. You may begin.
There will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I would now like to turn the conference over to Suzanne Rosenberg.
Suzanne Rosenberg: For Investor Relations you may begin.
Suzanne Rosenberg: Thank you, and welcome to our 2024 first quarter conference call. Joining me today is our CEO, Tom Monahan, and CFO, Mark Harris.
Suzanne Rosenberg: Thank you and welcome to our 2024 first quarter Conference call. Joining me today is our CEO, Tom Monahan and CFO Mark Harris, we posted our accompanying slides on the IR homepage of our website at Heidrick Dot Com and we encourage you to view the slides for additional content.
Suzanne Rosenberg: We posted our accompanying slides on the IR homepage of our website at Heidrick.com, and we encourage you to view these slides for additional context. 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. Reconciliations between these non-GAAP financial measures and the most comparable GAAP measures may be 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 included in today's press release. Tom, I'll now turn the call over to you.
Suzanne Rosenberg: Sure.
Suzanne Rosenberg: Please note that in the materials presented today, we may refer to non-GAAP financial measures that we believe provide additional insight into underlying result.
Suzanne Rosenberg: Reconciliations between these non-GAAP financial measures and the most comparable GAAP measures maybe found in the earnings press release also in our remarks, we may make certain forward looking statements.
Speaker Change: That you. Please refer to the Safe Harbor language also included in today's press release, Tom I'll now turn the call over to you.
Tom Monahan: Good afternoon, everyone, and thanks for joining us today. I'm incredibly excited to lead Heidrick & Struggles forward and build upon 71 years of client organizations are navigating a world of continued economic volatility and geopolitical complexity. More than ever before, driving great corporate performance requires discovering, accessing, evaluating, and enabling exceptional leadership. The urgency and importance of this need for companies in every industry around the world make for an ever-expanding addressable market. In this work, I'm also very pleased to be teaming with Tom Murray in his new role as president, in addition to his continued oversight of global executive search.
Tom Monahan: Thank you Suzanne.
Tom Monahan: Good afternoon, everyone and thanks for joining us today I'm incredibly excited to lead Heidrick <unk> struggles forward and build upon 71 years of impact.
Client organizations are navigating a world of continued economic volatility and geopolitical complexity.
Tom Monahan: Than ever before driving great corporate performance requires discovery accessing evaluating and enabling exceptional leadership.
Tom Monahan: Urgent PC and importance of this need.
Tom Monahan: Every industry around the world.
Tom Monahan: Ever expanding addressable market.
Tom Monahan: In the sports I'm also very pleased to be teaming with Tom Murray and his new role as President. In addition to his continued oversight of global executive search.
Tom Monahan: Tom and I have navigated the early onslaught of two Tom jokes effectively and are working quickly to get the company positioned for sustained growth and impact. Beyond sharing a first name, Tom and I share a far more important attribute.
Tom Monahan: Tom and I have navigated the early onslaught of two Tom's jerbs effectively and are working quickly to get the company positioned for sustained growth and impact.
Tom Monahan: The onshoring your first name, Tom and I share a far more important attribute both begin our heidrick journey as clients, we bring firsthand understanding of the clients' constructive we are committed to leveraging this experience with unmatched expertise of our people to create what we're calling client led growth together with our talented executive team.
Tom Monahan: We both began our Heidrick journey as clients, so we bring a first-hand understanding of the client's perspective. We are committed to leveraging this experience with the unmatched expertise of our people to create what we are calling client-led growth. Together, with our talented executive team, we are strongly positioned to create long-term shareholder value. Today, we appreciate the opportunity to bring you up to speed on the current performance of our business and the opportunities we see for greater growth, profitability, and impact in the future. I'll kick off the call with an overview of our first quarter performance.
Tom Monahan: We are strongly positioned to create long term shareholder value.
Tom Monahan: Today, we appreciate the opportunity to bring you up to speed in the current performance of our business and the opportunities, we see for greater growth profitability and impact in the future.
Speaker Change: I'll kick off the call with an overview of our first quarter performance next I will touch on some themes observations as well as our priority is to continue growing the scale and overall impact of our firm.
Tom Monahan: Next, I'll touch on some themes and observations, as well as our priorities to continue growing the scale and overall impact of our firm. Mark will then provide a more detailed discussion of our financial results and outlook for the second quarter, and will then open the call to your questions. Let me start with financial performance. Our clients continue to face a complex operating environment, which is likely to be the new normal across industries.
Speaker Change: Mark will then provide a more detailed discussion of our financial results and outlook for the second quarter.
We will then open the call for your questions.
Mark Robert Harris: Let me start with financial performance.
Mark Robert Harris: Our clients continue to face a complex operating environment, which is likely to be the new normal across industries.
Tom Monahan: While this creates a challenging environment for our clients to operate in, it also creates a permanently volatile world where the what's are ever less predictable, and so the who's and the how's are ever more important. It is a wonderful time to be in the who and how business. In most of our markets, economic growth continues to be solid, albeit at widely different levels. At the same time, a combination of still robust valuations and an uncertain monetary policy is creating real pressure in the C-suite. And, of course, many of our major markets are facing elections this year, sometimes exacerbating already pronounced divisions in the workplace and society.
Mark Robert Harris: While this creates a challenging environment for our clients to operate and it also creates a permanently volatile world, where the watch our ever less predictable and so the balloons and the house are ever more important.
Mark Robert Harris: It is a wonderful time to be in the who and how business in most of our markets economic growth continues to be solid, albeit it wildly different levels at the same time, a combination of still robust valuations and an uncertain monetary policy are creating real pressure in the C suite.
Mark Robert Harris: Of course, many of our major markets are facing elections this year.
Mark Robert Harris: Times, exacerbating already pronounced divisions in the workplace and society.
Tom Monahan: Turning to our financial performance, we are committed to transforming client value into shareholder value, and our results demonstrate this. In the first quarter, we delivered strong growth on the top line. Adjusted EBITDA margins were solid, even with the growing contribution from our recently accretive and attractive acquisitions of Atreus and B4Z. We also maintained a strong financial position with a pristine balance sheet, which includes no debt.
Mark Robert Harris: Turning to our financial performance, we are committed to transforming client value into shareholder value and our results demonstrate this.
Mark Robert Harris: In the first quarter, we delivered strong growth on the top line adjusted EBITDA margins were solid even with the growing contribution from our recently accretive and attractive acquisitions.
Mark Robert Harris: Curious and before is that we also maintained a strong financial position a pristine balance sheet, which includes no debt.
Tom Monahan: Let me now turn to our key priorities. While I'm new to Heidrick, I'm no stranger to the challenges faced by corporate leaders around the world or the importance of having the right talent to meet these challenges. As we have worked to set and reset corporate priorities, two themes have struck me. First, there is no question that our work serves a huge and growing market. The importance of developing sound human capital strategies and effectively executing on them will only grow.
Let me now turn to our key priorities.
Speaker Change: Im new to Heidrick I'm no stranger to the changes challenges faced by corporate leaders around the world or the importance of having the right talent to meet these challenges.
Speaker Change: As we have worked to set and reset corporate priorities. Two themes have struck me first there is no question that our work serves a huge.
Speaker Change: And growing market.
Speaker Change: Portance of developing sound human capital strategies, and effectively executing on them will only grow.
Tom Monahan: Importantly, our brand permission, outstanding client work, and the strong relationships we have with the very tops of organizations serve as an entree to expand our scope and create substantial value across the enterprise. Given the scale and importance of what we do, we have a major opportunity to grow our impact and our value for our clients, our people, and our shareholders. Second, we come to market with an incredible and strong collection of assets and expertise to support our growing client base.
Speaker Change: Potently, our brand permission outstanding client work and the strong relationships, we have with the very top of organizations serves as an entre to expand our scope and create substantial value across the enterprise.
Speaker Change: Given the scale and importance of what we do we.
Speaker Change: We have a major opportunity to grow our impact and our values.
Speaker Change: Our clients our people and our shareholders.
Speaker Change: Second we come to market with an incredible strong collection of assets and expertise to support our growing client base.
Tom Monahan: We bring a unique set of capabilities built upon a treasure trove of powerful intellectual property and advanced technology to all key dimensions of C-suite leadership. This includes executive search, assessment, succession planning, access to interim support, and tools to drive performance through executive development and culture.
Speaker Change: We bring a unique set of capabilities built upon a treasure trove of powerful intellectual property and advanced technology to all key dimensions of C. Suite leadership. This includes executive search assessment succession planning access to interim support and tools to drive performance through executive development.
Speaker Change: Culture incur.
Tom Monahan: Increasingly, we augment the work of our great teams with digital tooling. In a world as complicated as the one we now operate in, we always want to be agile in responding to client needs. But our team is focused on three important global objectives. First, to be the most trusted partner to the C-suite and board.
Speaker Change: Increasingly we augment the work of our great teams with digital tools.
Speaker Change: In a world as complicated as the one we now operate in.
Speaker Change: Always want to be agile in responding to client needs.
Tom Monahan: We will aim to continue growing our search and assessment capabilities and to find new ways to convert this expertise into ongoing client impact and more holistic revenue streams. The very nature of leadership is changing, and clients need help developing, accessing, and enabling talent in new ways. Each of the seismic events we've seen across the past five years has reshaped the way leaders must lead and changed how companies must develop and enable leaders. The pandemic changed the world of work forever.
Speaker Change: Team is focused on three important global objectives first to be the most trusted partner to the C suite and board.
Speaker Change: We will aim to continue growing our search and assessment capabilities and to find new ways to convert this expertise into ongoing client impact and more holistic revenue streams second.
Speaker Change: To help clients master the new world of leadership.
Speaker Change: The very nature of leadership is changing and clients need help developing accessing and enabling talent in new ways.
Speaker Change: Each of the seismic events, we've seen across the past five years has reshaped the way leaders must lead and change how companies must develop and enable leaders the pandemic changed the world of work forever.
Tom Monahan: The advent of Gen AI has only begun to reshape how companies organize and operate. Meanwhile, ongoing geopolitical dynamics have complicated international strategy for every client. Existing leaders need new support to lead in this environment, to change and grow how they lead, and companies need to shape the next generation of leaders and access talent in new ways. Our Heidrick Consulting and On-Demand Talent Assets are built to help clients in this now, more permanently complex world.
Speaker Change: Vinson Gen AI has only begun to reshape how companies organize and operate.
Speaker Change: Ongoing geopolitical dynamics have complicated international strategy for every clients existing leaders new support to lead in this environment to change and grow holiday lead and companies need to shape. The next generation of leaders and access talented new ways.
Speaker Change: Our heidrick consulting and on demand talent assets are built to help clients in this now.
More permanently complex world.
Tom Monahan: From leading assessment and development capabilities to helping leaders lift performance through cultural change, our Heidrick Consulting platform is well matched to client needs. And our on-demand talent business gives clients a new weapon in their performance arsenal. The ability to engage and leverage new sources of talent in a work world roiled by the aftermath of the pandemic and ongoing demographic change. Third, we aim to be a bionic innovator. We are pleased with the digitalization of our business, but understandably, not yet satisfied.
Speaker Change: Leading assessment and development capabilities to helping leaders lift performance through cultural change for Heidrick consulting platform as walnuts to client needs.
Speaker Change: And our on demand talent business gives clients, a new weapon and their performance Arsenal.
Speaker Change: The ability to engage and leverage new sources of talent and a work world roiled by the aftermath of the pandemic and ongoing demographic change.
Speaker Change: Third we aim to be a bionic innovator.
Speaker Change: We are pleased with the digitization of our business, but understandably not yet satisfied.
Tom Monahan: The needs of our clients and our people, and the richness of available technology, are changing far too quickly to be satisfied. The next horizon is compelling as we further develop into a tech-enabled service business and differentiate our services across all lines of business with a diversified portfolio of proprietary, data-enabled, and digital solutions. We have made important foundational investments, such as the Navigator platform, which we believe will allow us to roll out new offers quickly. We've already seen early success with the Next Generation Enterprise Assessment and Development Platform on Navigator and see more innovation to come.
Speaker Change: The needs of our clients and our people and the richness of available technology is changing far too quickly to be satisfied.
The next horizon is compelling.
Speaker Change: Further developed into a Texas Tech enabled service business and differentiate our services across all lines of business with a diversified portfolio of proprietary data enabled and digital solutions. We have made important foundational investments such as the navigator platform, which we believe will allow us to rollout new offers.
Quickly.
Speaker Change: We've already seen early success with next generation Enterprise assessment and development platform on navigator and see more innovation to come.
Tom Monahan: But this is just the beginning of a commitment to leveraging advances in technology and AI to improve the work of our elite colleagues and mine our rich intellectual property. It's obviously early days for Tom and me, but he, I, and our Management Committee colleagues know there is real work to do to accomplish these objectives. By doing this, we can drive client and shareholder value. A few early areas of focus stand out for us. Loosely, we call them Clarify, Simplify, and Amplify.
Speaker Change: But this is just the beginning of our commitment to leveraging advances in technology and AI to lift the work of our elite colleagues and buying our rich intellectual property.
Speaker Change: It's obviously early days for Tom and me, but he I and our management Committee colleagues no. There is real work to do to accomplish these objectives.
Speaker Change: By doing this we can drive client and shareholder value.
Speaker Change: A few early areas of focus standout for us.
Speaker Change: Loosely we call them clarify simplify and amplify.
Tom Monahan: Given our incredible people and wealth of resources, or perhaps because of their range, we have a significant opportunity to make Heidrick easy to work for and easy to work with. Getting this right will require us to first clarify how we operate. So our people can bring the best of Heidrick to bear on every client interaction. For example, in the near term, we see an opportunity to tighten our offering set of solutions in Heidrick Consulting and be incredibly precise about how we create value for our clients and achieve scale in core areas such as assessment.
Speaker Change: Given our incredible people and wealth of resources or perhaps because of their range. We have a significant opportunity to make heidrick easy to work for and easy to work with.
Getting this right will require us to first clarify how we operate.
Speaker Change: So our people can bring the best of Heidrick to bear on every client interaction.
For example, near term, we see an opportunity to tighter offerings set of solutions in heidrick consulting and be incredibly precise about how we create value for our clients and achieve scale in core areas such as assessments.
Tom Monahan: Second, simplify our message to clients and the market. Heidrick has an unrivaled richness of expertise and insight, which has grown rapidly for the past several years. But, as you can imagine, this exceptional breadth of offerings would make it harder for a client to easily access and understand all the ways we can drive performance.
Speaker Change: Second simplify our message to clients in the market.
Speaker Change: Hydro <unk> has an unrivaled richness of expertise and insight, which is growing rapidly for the past several years as you can imagine this exceptional breadth of offerings will make it harder for our clients to easily access and understand all the ways, we can drive performance.
Tom Monahan: Third, amplify the impact of what we do. We are going to be clear and consistent in telling our story with and for our clients. Done right, this work should enable us to accelerate our strategic impact on clients, grow the business more quickly, and expand margins consistently. One last note before I hand the call to Mark.
Speaker Change: Third amplified the impact of what we do.
Speaker Change: We are going to be clear and consistent in telling our story wind and for our clients.
Speaker Change: Done right. This work should enable us to accelerate our strategic impact on clients grow their business more quickly and expand margins consistently.
Speaker Change: One last note before I hand, the call to Mark.
Tom Monahan: Nothing we have accomplished or plan to accomplish in the future would be possible without the energy and commitment of our exceptional Heidrick colleagues globally. I recently attended our Global Consultants Conference, which wrapped up last week. It was a powerful experience to be with leaders from across the firm, from countries around the world, representing all our businesses and deep expertise in every facet of client problems. The energy was palpable, and the time together allowed me not only to meet many colleagues for the first time in person but also gave our teams the opportunity to strategize, collaborate, and clarify how we can better serve our clients.
Mark Robert Harris: Nothing we have accomplished or plan to accomplish in the future would be possible without the energy and commitment of our exceptional heidrick colleagues globally are.
Mark Robert Harris: I recently attended our global consultants conference that wrapped up last week. It was a powerful experience with leaders from across the firm from countries around the world representing all of our businesses and deep expertise in every facet of client problem.
Mark Robert Harris: Energy was palpable and the time together not only allowed me to meet many colleagues for the first time in person, but also gave our team has the opportunity to strategize collaborate and clarify how we can better serve our clients.
Tom Monahan: Any organization that has been a market leader for seven decades has a secret recipe for success. In our case, it's not so secret. The exceptionally talented people in our organization and the unique culture they have forged are an unmatched resource for client impact. I'm grateful to be part of it and take very seriously the responsibility to grow our people and nurture and protect our culture of impact. I will now hand the call over to Mark to provide a detailed review of our financial performance and outlook.
Mark Robert Harris: Any organization that has been a market leader for seven decades of the secret recipe for success in our case, it's not so secret the exceptionally talented people in our organization and the unique culture. They have forged our unmatched resource for client impact I'm grateful to be part of it and take very seriously the responsibility to grow up.
Mark Robert Harris: People and nurture and protect our culture of impact.
Mark Robert Harris: I will now hand, the call over to Mark to provide a detailed review of our financial performance and outlook.
Mark Robert Harris: Thank you, Tom, and good afternoon and evening to everyone on today's call. As Tom described, our clients are operating in a complex environment, feeling pressure at the C-suite and board level, and increasingly facing urgent human capital business needs. This led to our first quarter results, which reflect all of our businesses posting solid growth from the year-ago period. We further continue to generate strong top-line performance that met the high end of our guidance range and solid adjusted EBITDA margins while maintaining an enviable balance sheet position with zero debt.
Mark Robert Harris: Thank you, Tom and good afternoon, and evening to everyone on today's call.
Mark Robert Harris: As Tom described our clients are operating in a complex environment filling pressure at the C suite and board level and increasingly facing urgent human capital business needs.
Mark Robert Harris: This led to our first quarter results, which reflect all of our businesses posting solid growth from the year ago period.
Mark Robert Harris: We further continue to generate strong top line performance that met the high end of our guidance range and solid adjusted EBITDA margins.
Mark Robert Harris: Maintaining an enviable balance sheet position with zero debt.
Mark Robert Harris: From a macro point of view, we expect to have choppiness in our markets in 2024, given the influences causing an uncertain rate cut environment, coupled with geopolitical unrest in key parts of the world and the U.S. presidential election this November. Thus far, we are seeing some of that choppiness in our Asian and European markets, but, as our results demonstrate, the Americas have remained relatively isolated so far.
Mark Robert Harris: From a macro point of view, we expect to have choppiness in our markets in 2020 forward given the influence is causing an uncertain rate cut environment.
Mark Robert Harris: With geopolitical unrest in key parts of the world and the U S presidential elections in November thus.
Mark Robert Harris: Thus far we are seeing some of that choppiness in our Asian, and European markets, but as our results demonstrate the Americas have remained relatively isolated so far.
Mark Robert Harris: With this backdrop, we'll remain optimistic that 2024 will be comparable to the strong performance delivered in 2023. Before speaking to our first quarter results, let me remind everyone on today's call that these results include a full quarter of both Atreus and B4Z, whereas last year's quarter had two months of contribution from Atreus and none from B4Z. After this quarter, all acquisitions will be lapped and will be included in our full-segment results. Turning to our first-quarter results, on a consolidated basis, revenue was $265 million, or 11% above revenue in the first quarter of 2023, driven by all three business units – search, Heidrick Consulting, and OnDemand Talent.
Mark Robert Harris: With this backdrop, we remain optimistic that 2024 will be comparable to the strong performance delivered in 2023.
Mark Robert Harris: Adjusted EBITDA of $25.9 million improved slightly from $25.6 million in the first quarter of 2023, and adjusted EBITDA margin was 9.8% compared to 10.7% last year. I think it's important to call out that the first quarter adjusted EBITDA was primarily impacted by higher general and administrative expenses, which I'll discuss in a few moments, as well as costs associated with our global consultant conference that took place last week. Excluding the conference costs, adjusted EBITDA margin was 10.4%, as we've stated in past calls, while Atris and B4Z carry lower margins versus Executive CERC. Nevertheless, given the long-term high-growth businesses, even with lower margins, we expect more aggregate dollars flowing to the bottom line and thus should be EPS secretive. Now, let's turn to each of our businesses.
Speaker Change: Before speaking to our first quarter results, let me remind all on today's call that these results include a full quarter of both Andreas and before is that whereas last year's quarter had two months of contribution from address and none from before is that.
Speaker Change: After this quarter, all acquisitions will be lapped and we will be in our full segment results.
Mark Robert Harris: Executive search revenue increased 6% from the first quarter of 2023 to $201 million. Regionally, we saw revenue grow 7% in both the Americas and Europe, while Asia-Pacific was down 4%. On a constant currency basis, however, Europe was up 4%, and Asia-Pacific is centrally flat.
Speaker Change: Turning to our first quarter results on a consolidated basis revenue was $265 million or 11% above revenue in the first quarter of 2023, driven by all three business units search heidrick consulting and on demand talent adjust.
Speaker Change: Adjusted EBITDA of $25 9 million improved slightly from $25 $6 million in the first quarter of 2023, and adjusted EBIT margin was nine 8% compared to 10, 7% last year.
Speaker Change: I think it's important to call out that the first quarter. Adjusted EBITDA was primarily impacted by higher general and administrative expenses, which I will discuss in a few moments as well as costs associated from our global consultant conference that took place last week.
Speaker Change: Excluding the conference costs adjusted EBITDA margin was 10, 4%.
Speaker Change: As we stated in past calls while at <unk> and before is that carry lower margins versus executive search.
Speaker Change: Nevertheless, given the long term high growth businesses, even with lower margins, we expect more aggregate dollars flowing to the bottom line and thus should be EPS accretive.
Speaker Change: Now, let's turn to each of our businesses.
Speaker Change: Executive search revenue increased 6% from the first quarter 2000 $23 million to $201 million regions.
Regionally, we saw revenue grow 7% in both the Americas and Europe, While Asia Pacific was down 4%.
Speaker Change: On a constant currency basis, However, Europe was up 4% in Asia Pacific essentially flat.
Mark Robert Harris: Most of our practice groups exhibited growth over the period. We also saw consultant productivity annualized in the first quarter of $1.9 million compared to $1.8 million on the same basis in the year-ago quarter. Importantly, executive search generated profitability with adjusted EBITDA of $48.4 million compared to $47.8 million in the same quarter last year, or a margin of 24% compared to 25.1%. In on-demand talent, revenue was $38 million, up 22% compared to the first quarter of 2023, driven by the positive impact of our ACHES acquisition.
Speaker Change: Most of our practice groups exhibited growth over the period.
Speaker Change: We also saw consultant productivity annualized in the first quarter of $1 9 million compared to $1 8 million on the same basis in the year ago quarter.
Speaker Change: Importantly, executive search generated profitability with adjusted EBITDA of $48 4 million compared to $47 $8 million in the same quarter last year or a margin of 24% compared to 25, 1%.
Speaker Change: And on demand talent revenue was $38 million up 22% compared to the first quarter of 2023, driven by the positive impacts of our Entre acquisition.
Mark Robert Harris: Without the acquisition of Atreus, our revenue would have decreased by 8% as we experienced a market slowdown in the quarter as it relates to our legacy business driven by market dynamics. As you'll recall, we have several different offerings within this product line, some of which are not correlated with temporary staffing cycles, but a couple of offerings do, and thus are more exposed to those market dynamics. Over time, we expect this exposure to decrease as we deliver faster growth in areas of less acyclicality.
Speaker Change: Without the acquisition of address our revenue would have decreased by 8% as we experienced market slowed down in the quarter as it pertains to our legacy business driven by market dynamics.
Speaker Change: As Youll remember, we have several different offerings within this product line some of which are not correlated with temporary staffing cycles, but a couple of operating scale and thus are more exposed to those market dynamics.
Speaker Change: Over time, we expect this exposure to decrease as we deliver faster growth in areas of less of cyclicality.
Mark Robert Harris: Importantly, we're seeing demand increase in the Americas, and in the first quarter, we saw increases in total contract values reflecting longer duration projects, along with higher extension values. On-demand talent recorded an improved adjusted EBITDA loss of $0.9 million versus a loss of $1.3 million in the first quarter of 2023. We continue to see on-demand talent as a high-growth opportunity and an important complement to our search business to address our client needs, as we identify, prioritize, and execute key projects and programs to more rapidly scale this business.
Speaker Change: Importantly, we're seeing demand increase in the Americas and in the first quarter, we saw increases in total contract values, reflecting longer duration projects, along with higher extension values.
On demand talent recorded an improved adjusted EBITDA loss of $1 $9 million.
Speaker Change: Versus a loss of $1 3 million in the first quarter of 2023.
Speaker Change: We continue to see on demand talent as a high growth opportunity.
Speaker Change: And an important complement to our search business to address our clients' needs.
Speaker Change: As we identify prioritize and execute key projects and programs to more rapidly scale. This business, we expect future growth to come from both product and geographical perspective.
Mark Robert Harris: We expect future growth to come from both product and geographical perspectives. Heidrick Consulting's first quarter revenue grew 46% year-over-year to $26 million, primarily due to the acquisition of B4Z, along with growth of our legacy Heidrick Consulting business, driven by our leadership and culture purpose practices. Backing out the acquisition, we saw our legacy hydro consulting revenue increase 17%. Overall, Heidrick Consulting posted an improved adjusted EBITDA loss of $2 million versus a loss of $2.8 million in the first quarter of 2023.
Speaker Change: Heidrick consulting first quarter revenue grew 46% year over year to $26 million.
Speaker Change: Primarily due to the acquisition of before is that along with growth of our legacy Heidrick consulting business driven by our leadership and culture purpose practices.
Speaker Change: Backing out the acquisition, we saw our legacy Heidrick consulting revenue increased 17%.
Speaker Change: Overall heidrick consulting posted an improved adjusted EBITDA loss of $2 million versus a loss of $2 8 million in the first quarter of 2023.
Mark Robert Harris: We believe we have significant opportunities in our consulting product portfolio to drive a more consistent performance, and we look forward to sharing our progress as we work to increase the profitability and achieve greater scale in the most strategically important parts of this portfolio. Turning to operating expenses, including our recent acquisitions, we saw salary and benefits increase 9.8% from the first quarter of 2023. As a percentage of net revenue, salary benefits were 65.8% in the first quarter of 2024 versus 66.4% in the prior year quarter. Variable compensation increased $10.2 million in the quarter given the increase in production.
We believe we have significant opportunities in our consulting product portfolio to drive a more consistent performance and we look forward to sharing our progress as we work to increase the profitability and achieve greater scale and the most strategically important parts of this portfolio.
Speaker Change: Turning to operating expenses, including our recent acquisitions, we saw salary and benefits increased nine 8% from the first quarter of 2023 as.
Speaker Change: As a percentage of net revenue salary and benefits was 65, 8% in the first quarter of 2024 versus 66, 4% in the prior year quarter.
Speaker Change: Variable compensation increased $10 2 million in the quarter given the increase in production fix.
Mark Robert Harris: Fixed compensation increased $5.4 million versus last year, primarily due to base salary and talent acquisition and retention costs, partially offset by a decrease in retirement and benefits. General and administrative expenses increased $7 million to $41.4 million, or 15.6% of net revenue, versus $34.3 million, or 14.3% of net revenue in a year-ago period. The increase versus a year ago period is primarily due to business development travel, which includes our conference, office occupancy, and non-cash intangible amortization and accretion from our acquisitions, as we previously discussed.
Speaker Change: Fixed compensation increased $5 4 million versus last year, primarily due to base salary and talent acquisition and retention costs, partially offset by a decrease in retirement and benefits.
Speaker Change: General and administrative expenses increased $7 million to $41 4 million or 15, 6% of net revenue versus $34 3 million or 14, 3% of net revenue in a year ago period.
Speaker Change: The increase versus the year ago period. This is primarily due to the business development travel.
Which includes our conference.
Speaker Change: Office occupancy and noncash intangible amortization and accretion from our acquisitions as we've previously discussed.
Mark Robert Harris: Stripping out the costs related to the acquisitions and the conference to get a better sense of our baseline run rate, our G&A was approximately 14.1% of revenue in the first quarter of 2024 compared to 13.8% of revenue in the same quarter last year. We expect that G&A will remain slightly inflated while the intangible expenses run off over the next 24 to 36 months and come down to a more normalized level of around 14%.
Speaker Change: Stripping out the costs related to the acquisitions and the conference to get a better sense of our baseline run rate. Our G&A was approximately 14, 1% of revenue in the first quarter of 2024 compared to 13, 8% of revenue in the same quarter last year.
Speaker Change: We expect that G&A will remain slightly inflated while the intangible expenses run off over the next 24 to 36 months and come down to a more normalized level of around 14%.
Mark Robert Harris: Cost of services increased $4.6 million to $27.4 million in the first quarter of 2024 versus $22.8 million in the prior quarter, a 20.1% increase. This increase was due to the expansion of our on-demand talent business, which typically accounts for approximately 65% to 68% of the segment's revenue and cost of service. Finally, we continue to invest in the development of Heidrick Navigator and digital assets across our other business units of search and on-demand talent through R&D spending.
Speaker Change: Cost of services increased $4 6 million to $27 4 million in the first quarter of 2024 versus $22 $8 million in the prior year quarter, a 21% increase.
Speaker Change: This increase was due to the expansion of our on demand talent business, which typically has approximately 65% to 68% of the segment's revenue and cost of services.
Speaker Change: Finally, we continue to invest in development of Heidrick navigator and digital assets across our other business units of search and on demand talent through R&D spending.
Mark Robert Harris: R&D expense for the first quarter was $5.7 million, or 2.2% of net revenue, versus $5.5 million, or 2.3% of net revenue in the first quarter of 2023. Moving to bottom-line profitability, net income for the quarter was $14 million in diluted EPS of $0.67, which compares to net income of $15.6 million in diluted EPS of $0.76 in the same quarter last year. The primary reason for this decline was a meaningful higher tax rate of nearly 39% this quarter versus 32% last quarter. This increase was predominantly driven by the non-deductibility of acquisition earnings costs.
Speaker Change: R&D expense for the first quarter was $5 $7 million or two 2% of net revenue versus $5 5 million or two 3% of net revenue in the first quarter of 2023.
Speaker Change: Moving to Bottomline profitability net income for the quarter was $14 million in diluted EPS of <unk> 67, which compares to net income of $15 6 million and diluted EPS of <unk> 76.
Speaker Change: Same quarter last year.
Speaker Change: Primary reason for this decline was the meaningful higher tax rate of nearly 39% this quarter versus 32% last quarter.
Speaker Change: This increase was predominantly driven by the non deductibility of acquisition earn out thoughts for.
Mark Robert Harris: For comparative purposes, without the higher tax rate, Q1 2024's loaded EPS would have been $0.05 higher or $0.72, more in line with last year's quarterly performance. Moving forward, while we expect our rate in 2024 and 2025 to temporarily be around 38%, once these acquisition costs run off, we expect the tax rate to come back into the low 30% range, assuming no other statutory tax changes. As we look at our balance sheet, we ended the quarter in a strong cash position of $252.8 million, up $48.1 million from the $204.7 million at the end of March 2023. The year-over-year improvement was mainly driven by payments for the BTG earn-out and Atria's acquisition, which we did not have this year.
For comparative purposes with out the higher tax rate first quarter of 2024 diluted EPS would've been <unk> <unk> higher or <unk> 72.
Speaker Change: More in line with last year's quarterly performance.
Speaker Change: Moving forward, while we expect our rate in 'twenty, four and 2025 temporarily be around 38%. Once these acquisition costs run off we expect the tax rate to come back into the low 30% range, assuming no other statutory tax changes.
Speaker Change: As we look at our balance sheet, we ended the quarter in a strong cash position of $252 8 million up $48 $1 million from the $204 7 million at the end of March 2023.
Speaker Change: The year over year improvement was mainly driven by payments for the BTG earn out and <unk> acquisition, which we did not have this year.
Mark Robert Harris: This balance, coupled with our $200 million credit line, gives us nearly half a billion dollars of liquidity to execute on our strategic plan and return capital to our shareholders. Moving forward, while we continue to navigate a choppy macro environment, we still see good demand signals across our business. Therefore, we expect second-quarter revenue to be in the range between $255 and $275 million.
Speaker Change: This balance coupled with our $200 million credit line gives us nearly half a billion dollars of liquidity to execute on our strategic plan and return capital to our shareholders.
Speaker Change: Moving forward, while we continue to navigate a choppy macro environment, we still see good demand signals across our business. Therefore, we expect our second quarter revenue to be in the range between $255 to $275 million.
Mark Robert Harris: Our guidance contemplates executive search in the Americas to remain strong, albeit moderated from the Q1 levels, coupled with some slowdown in Europe and APAC given the operating environment. To conclude, I'd like to thank our teams around the world for a strong quarter and a great start to 2024. We believe we are extremely well positioned to continue to successfully navigate a rapidly changing global environment. As always, we remain committed to driving long-term profitable growth and delivering sustainable value to our shareholders. With that, Tom and I would be glad to take your questions.
Speaker Change: Our guidance contemplates executive search in the Americas to remain strong, albeit moderated from Q1 levels, coupled with some slowdown in Europe and APAC given the operating environment.
Speaker Change: To conclude I'd like to thank our teams around the world for a strong quarter and a great start to 2024, we believe we're extremely well positioned to continue to successfully navigate through a rapidly changing global environment.
Speaker Change: As always we remain committed to driving long term profitable growth and delivering sustainable value to our shareholders.
Speaker Change: With that Tom and I will be glad to take your questions.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are calling to ask a question and are listening via a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Tobey Sommer of Truist Securities. Please go ahead. Hey, good afternoon.
Tom: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the team.
Tom: I'd like to withdraw your question simply press Star one again.
Tom: Wanted to ask a question in our listening via a loudspeaker and Youre Dubai. Please pickup your handset and ensure that your phone is not on mute.
Tom: One asking your question again press star one to join the queue and your first question comes from the line of Tobey Sommer of true list Securities. Please go ahead.
Jasper Bibon: Hey, good afternoon. This is Jasper Bibon on behalf of Tobey.
Tobey O'Brien Sommer: Hey, good afternoon.
Tobey O'Brien Sommer: This is jasper bibb on for Tobey.
Jasper Bibon: I wanted to ask about search confirmation, up I think 11% over the fourth quarter. Historically, I'm pretty sure you get a bit of a seasonal tail there sequentially. So how would you characterize the new business trend versus your expectations for the first quarter?
Jasper Bibb: Wanted to ask about search confirmations.
Jasper Bibb: Think of 11% over the fourth quarter, historically, I'm pretty sure you're getting a bit of a seasonal tailwind there sequentially. So how would you characterize the new business trend versus your expectations for the first quarter.
Jasper Bibb: Okay.
Mark Robert Harris: In terms of the first quarter, yeah, I think we were a little bit surprised. Usually, in the fourth quarter, we drop off, as you rightly pointed out, and you have it hit you in December, and really, December becomes more of a shutdown month, so to speak.
Speaker Change: I'm just trying to jump on.
Speaker Change: In terms of the first quarter, Yes, I think we are alumina surprises in the fourth quarter, we drop off as you rightly pointed out you have in the United States Thanksgiving November holiday and in global you have.
Speaker Change: The other holidays that gets you into summer and relates to something that becomes more of a shutdown months. So to speak. So Q1 always usually has a pretty good strength to it in terms of our expectations. They were we came in much better than what we had expected.
Mark Robert Harris: So Q1 usually usually has pretty good strength to it. In terms of our expectations, we came in much better than we had expected. We were very happy in terms of the strength of the general market that we saw in the Americas. Europe was pretty much spot on in terms of what we expected, and Asia Pacific was a little bit behind what we expected. So overall, I just, you know, had a very good sense of what we were seeing.
Speaker Change: Very happy in terms of the strength of the general market that we saw in the Americas Europe was pretty much spot on in terms of what we expected and it was a little bit behind of what we expected. So overall had a very good sense.
Mark Robert Harris: We have similar expectations, which is in our guidance in terms of what we think we'll see in Q2, and I think Q3, as you rightly will know, it slows down a bit because the month of August in Europe, a lot of people take that time off, as well as the U.S., from mid-July to end of August. And then we run right back into Q4 of it really kind of slowing down, so to speak, because, again, not just the holidays but because most people, if they have open engagements, might want to wait until the bonus runs that kind of take off and curtail those as well as generally in terms of people not really looking at the same time. So it's just a typical Q4. Typically, it is slow. Although, again, in 21, that didn't hold up, but there were reasons for it.
Speaker Change: What we are saying we have similar expectations, which is in our guidance in terms of what we think we will see in Q2.
Jasper Bibon: Got it. And I'm curious if you could stratify what search demand might look like for CEO and board searches relative to the rest of the positions you refer.
Speaker Change: In Q3 as you rightly, we will know it slowed up a bit because the month of August in Europe, a lot of people take that time off as well as the US mid July and August.
Speaker Change: And then we run right back in Q4 of it really kind of slowing down so to speak because again not just the holidays, but because most people because they have open.
Speaker Change: Engagements might want to wait until the bonus runs that kind of take off and curtail those as well as generally in terms of people not really looking at the same time. So it's just a typical Q4 typically is slow although again in 'twenty, one that didn't hold up but there was maintenance line.
Speaker Change: Yes.
Speaker Change: Got it and then curious if you could stratify, what search demand might look like for <unk>.
Speaker Change: Seo and board searches relative to the rest of the positions here.
Jasper Bibon: in terms of positions or in terms of the market?
Speaker Change: In terms of the physicians are in terms of the market.
Jasper Bibon: I guess the market would be fair, yeah.
Speaker Change: I guess the market wouldn't be fair, yes, yes.
Mark Robert Harris: Yeah, I think that's it.
Speaker Change: Yes, I think Thats fair.
Mark Robert Harris: So I'd say that the board searches are pretty much at their pace of cadence that we normally would see in terms of how those are looking. So I don't think we've seen anything in the data that tells us that it's either higher or lower than what we normally see in the market. CEO practice, definitely a little bit stronger than we've seen historically and generally in the market that we're starting to kind of see come through.
Speaker Change: So I would say this.
Speaker Change: Imports searches are pretty much on their pace of cadence that we normally would see in terms of how those are looking so I don't think we've seen anything in the data that describes to us that it's either higher or lower.
Speaker Change: We normally see in market CEO practice definitely little bit stronger than we've seen historically and generally in the market that were starting to kind of see come through there's been some pretty good data on there in terms of time and seat as well as aging in the CEO suite. So we would expect that to kind of continue to have we expect it to.
Mark Robert Harris: There's been some pretty good data on there in terms of time and seat as well as aging in the CEO suite. So we would expect that to kind of continue to have, we expect it to have good strength as we think through 24. Again, some of the choppiness of the market can curtail that a bit, but right now, we're not seeing a lot of it at that level. And I think it's probably, again, downstream where it'd be more on the VP side of it that we're starting to see a little bit more of a slowdown, so to speak, than at the C level, at least as of right now.
Speaker Change: Have good strength as we think through 'twenty four against some of the Choppiness in the market can curtail that a bit but right now we're not seeing a lot of it at that level and I think it's probably again other ways downstream will it be more on the DP side of it that we're starting to see a little bit more of a slowdown so to speak and the.
Speaker Change: C level at least as of right now yes.
Tom Monahan: Yeah, just to add some color there, Mark, if you think of a CEO who's been in the seat for five years today, they've been through a pandemic, a spike in inflation, they've been through some stuff. So there is, I don't know whether it's dog years or whatever, but CEOs are feeling like their calendar in the chair understates the work they've had to do in the past cycle
Speaker Change: Yes, yes.
Speaker Change: Add some color there mark.
Speaker Change: If you think of as CEO has been in the seat for five years today, they've been through a pandemic a spike in inflation and then through some stuff. So there is.
Speaker Change: I don't know whether its dog years or.
Speaker Change: Whatever it is.
Speaker Change: You guys are feeling like Dave.
Speaker Change: Their calendar in share understates the.
Speaker Change: <unk> had to do.
Speaker Change: In the past cycle.
Speaker Change: Understood.
Jasper Bibon: Got it. Last one for me, I don't know. Do you give any color on R&D spending plans, what you're expecting over the balance of the year, just given where you are with the Heidrick Navigator progress?
Speaker Change: Got it.
Speaker Change: Last one for me I don't know.
Speaker Change: Do you have any color on R&D spending plans.
Speaker Change: You are expecting over the balance of the year, just given where you are with.
Speaker Change: The hydrogen navigator progress.
Mark Robert Harris: Our expectation is Q1 will maintain its kind of cadence through Q2, Q3, and Q4 at a similar level. I don't think we're going to see a major slow-down. And remember, it was kind of interesting when we had this conversation a couple of years ago. We'd say normally you would start to see that kind of curtail itself down, and we cautioned that with caution unless something new happens in the market that we need to invest our time in.
Speaker Change: Our expectation is Q1 will maintain its kind of taking through Q2, three and four at a similar level I don't think we're going to see a major slow often but remember it was kind of interesting. When we had this conversation a couple of years ago. We see normally you would start to see that kind of curtail itself down and we caution that with unless something new happens in the market.
Mark Robert Harris: And the reason I say that is because AI has become something that we are now obviously seriously putting our thoughts, energy, and money behind. So I say that until the next great one in two or three years. I mean, the technological advancement, especially if it applies to Heidrick, is pretty cool, and how we can use that in terms of gaining leverage into the company, into the business. So right now, I'd say maintain that pace.
Speaker Change: We invest our time and sale and the reason I say that is because AI has become something that we are now obviously seriously putting our thoughts energy and money behind so I would say that until the next two to three years I mean, the technology advancement, especially as it applies the heidrick is pretty cool and how we can use that in terms of gaining leverage into the company ends of the business.
Speaker Change: So right now as they maintain that cadence that's probably the right thing to do and then some whatever AI interesting.
Mark Robert Harris: That's probably the right thing to do. And then if some, whatever the next AI, interesting technological development that could be really applicable to our business, we're going to invest in it. We think it's really important for our investors to do that and maintain perfect performance at the same time.
Speaker Change: Technology development that can be really applicable to our business, we're going to invest in it. We think it's really important for our investors to do that and they are components at the same time.
Tom Monahan: The other point I'll make there is the same wind that... It complicates our life in terms of making sure we're deploying AI in service to our clients, hits our clients very hard, and that they're looking for new roles, new types of leadership, new ways of organizing. So this upheaval certainly has us working hard, but the good news is it does create some secular, long-term demand for people to think about the talent they need and how they organize to get after this operation.
Speaker Change: The other point I'll make there is the same win that.
Speaker Change: Complicates our life in terms of making sure we're deploying AI and service to our clients hits, our clients very hard and that Theyre looking for.
Speaker Change: <unk> roles, new types of leadership, new ways of working so this upheaval certainly has us working hard but the good news is it does create some secular long term demand for people to think about the talent they need and how they organize to get after this opportunity.
Jasper Bibon: That's helpful. Thanks for taking the questions.
Speaker Change: That's helpful. Thanks for taking my questions.
Speaker Change: Okay.
Kevin Mark Steinke: Your next question comes from Kevin Steinke with Barrington Research. Please go ahead.
Speaker Change: Yes.
Speaker Change: Your next question comes from Kevin Spanky with Barrington Research. Please go ahead.
Tom Monahan: Good afternoon, touch on the choppy environment you're seeing in Asia and Europe a bit more and what's leading to that choppiness. And, you know, it sounds like at this point, you expect America to be strong, but I guess you'd kind of be on the lookout to have that also start to impact Americans. But just any thoughts on the overall environment, overseas in the U.S. and globally.
Kevin Mark Steinke: Hi, good afternoon.
Kevin Mark Steinke: Maybe if you could just.
Kevin Mark Steinke: Touch on the.
Kevin Mark Steinke: Choppy environment Youre seeing in <unk>.
Kevin Mark Steinke: Asia, and Europe, a bit more than what's what's leading to the choppiness in it.
Kevin Mark Steinke: It sounds like at this point.
Kevin Mark Steinke: You expect Americas to be strong but.
Kevin Mark Steinke: I guess, you kind of beyond that as you look out.
Kevin Mark Steinke: That.
Kevin Mark Steinke: Also starts impact Americas, but just any.
Kevin Mark Steinke: Thoughts on the overall environment.
Kevin Mark Steinke: Overseas.
Kevin Mark Steinke: U S and globally.
Tom Monahan: Look, we're incredibly well-positioned with great teams in those regions, and we're very, as you would guess, very close to clients and what's going on there. And there's some real economic pain around the world right now. To state the obvious, you have geopolitical events, you have macroeconomic factors that are swinging around a lot, and those are hitting some markets more than others. We feel great about our position in those markets, we feel great about the teams on the ground, and we are going to compete for and drive value even in choppy markets. But I'd say on balance, the macro chop's a little higher outside the U.S. than it is inside the U.S. right now. Marc, anything you want to add there?
Kevin Mark Steinke: But we're incredibly well positioned with great teams in those regions. So we're very as you would guess very close to clients and what's going on there and there's some real economic chop around the world right now safety, obviously of geopolitical events you have macro macroeconomic factors that are swinging around a lot moshe hitting some.
Kevin Mark Steinke: Markets more than others.
We feel great about our position in those markets, we feel great about the teams on the ground.
We're going to compete for and drives value even in choppy markets. So.
Kevin Mark Steinke: I'd say on balance the macro shops are little higher outside the U S than it is inside the U S right now marketing and maybe one other.
Mark Robert Harris: Wall Street. Nothing to add. That's great.
Well nothing to add that's great.
Kevin Mark Steinke: Okay, I may have missed it, but maybe an update on the progress with Heidrick Navigator and, in addition to that, the kind of development roadmap for additional digital products and services in the future.
Kevin Mark Steinke: Okay.
Kevin Mark Steinke: Alright.
Kevin Mark Steinke: Obviously, but.
Kevin Mark Steinke: Maybe an update on.
Kevin Mark Steinke: Progress with Heidrick navigator and.
Then in addition to that.
Kevin Mark Steinke: It kind of the development roadmap for.
Additional.
Kevin Mark Steinke: <unk> products and services.
Kevin Mark Steinke: Sure.
Tom Monahan: That's a great way to think about the question, which is, Navigator is a terrific platform, which on its own obviously lets us intersect tightly with key client workflows, and it's built to be a platform on which other digital products can be launched. An easy example that Marc talked about was the enterprise assessment platform. We now have the ability to start to do assessments at scale, bring our IP to life regularly across broader populations, and that's really, really a great tool.
Speaker Change: That's a great way that's exactly how we think about the question, which is navigator is a terrific platform, which on its own obviously sooner sect tightly with key client workflows and it's built.
Speaker Change: B a platform on which other digital products can be launched an easy example that mark talked about was the enterprise assessment platform.
Speaker Change: We now have the ability to start to do assessments at scale bring our IP to life regularly across broader populations and that's really really a great tool so beyond that we're going to.
Tom Monahan: Beyond that, like anyone else, we probably can introduce new products faster than we can get them in front of our clients, so we're going to be thoughtful and measured around delivering that roadmap. But right now, we feel very good about the value propositions we're able to put in front of our clients, and we're tight. It's great because it's very consistent with what they expect of us, and it links us more tightly to their everyday work.
Speaker Change: Like anyone else, we probably can introduce new products faster than we can get them in front of our clients are going to be thoughtful and measured around delivering that roadmap, but right now we feel very good about the value props were able to put in front of clients and with tight is great. Because it's very consistent with what they expect of us that links us more tightly.
Speaker Change: Their everyday work.
Kevin Mark Steinke: Okay, great. And, you know, Mark, just on the cost of services line, you talked about that being tied to on-demand talent, and, you know, just at what point do you think you can maybe start to get some expense leverage on that line or, you know, what would be the catalyst to do so?
Speaker Change: Okay great.
Speaker Change: And.
Speaker Change: <unk> on the cost of services line.
Speaker Change: You talked about.
Speaker Change: That being tied to on demand talent.
Speaker Change: Just.
At what point do you think you can maybe start to get some.
Speaker Change: <unk> expense leverage on that line or what would be.
Be the catalyst to do so.
Mark Robert Harris: So, we started to get a little bit on that, Kevin. So, we started to see that, you know, it used to be 70 cents, and it's kind of come down to 65. And, you know, Atria really kind of helps us achieve that, because I think they've done some really interesting stuff. I think the question on the table really is, look, how can you really make a meaningful change, move the needle, especially as it pertains to, you know, increasing the margins of the business, so to speak?
Speaker Change: So we started to get a little bit.
Speaker Change: On that Kevin. So we started to see that continue to be 70, thats going to come down to $65 million in Austria really kind of helps us achieve exiting based on some really interesting stuff.
Speaker Change: Question on the table really is look how can you really make a meaningful change move the needle on especially as it pertains to <unk>.
Speaker Change: Kris the margins of the business so to speak in my commentary. There is scale is going to help considerably on the bottom line of things trying to get that EBITDA up in the double digits and I think the technology is the other angle and I don't think people should discount that the more we can evolve both in terms of their CRM and how we can integrate that across everything.
Mark Robert Harris: And my commentary there is that scale is going to help considerably on the bottom line of things, trying to get that EBITDA up in the double digits. And I think that technology is the other angle, and I don't think people should discount that. The more we can evolve both in terms of their CRM and how we can integrate that across everything that we do and make it one CRM, because right now, it's been through acquisition, so we still need to, you know, do that, and that's what you're starting to see in some of that R&D line item is really going to change the pace for us.
Speaker Change: That we do and make it one CRM through that right now it's been through acquisitions. So we still need to do that and Thats, what youre starting to see some of that R&D line item is really going to change the pace for us we've got great vision.
Mark Robert Harris: We've got great vision, you know, Tom Monahan, Tom Murray, myself, the team, Sonny Ackerman, et cetera, really starting to sit down and put pen to paper on what we think that's going to have to look like, as well as for Hydric Consulting, as well as in other parts of our businesses to come to one platform, one Hydric, and I think that's going to be important. I think that's going to get us there.
Speaker Change: Tom Monahan submarine myself, the team signing Ackerman et cetera, really sort of sit down and put pen on paper on what we think thats naphtha look like as well as heidrick consulting as well as in other parts of our business is to come to one platform, one heidrick and I think thats going to be important I think thats going to get us there.
Mark Robert Harris: And I don't think it's as far away as people would anticipate. I mean, again, when you do something like this, you'd expect a couple of years, two, three years of really getting all the bugs worked out, et cetera, making sure it's up and running and it's the machine that we want. And hopefully, it's got a really cool AI component to it. That's the other element that we're trying to think through. So I think that all comes together in the right way. I think that's where you're going to see a meaningful shift in that number.
Speaker Change: I think it's only as far away as people would anticipate I mean again when you do something like this.
Speaker Change: You would expect a couple of years two to three years of really getting all the bugs worked out et cetera insurance up and running and it's the machine that we won and hopefully it's got a really cool AI component to it that's the other element that we're trying to think through so I think that all comes together the right way Thats, where youre going to see a meaningful shift in that in that number.
Kevin Mark Steinke: Okay, thank you, and Tom, you articulated a... (inaudible)
Speaker Change: Okay. Thank you.
Speaker Change: Tom.
Speaker Change: Articulated.
A vision of growing the business more quickly and expanding margins consistently and you mentioned the phrase client led growth.
Speaker Change: I know early days, but.
Speaker Change: Any thoughts on how.
Speaker Change: That all ties together over.
Speaker Change: Over the longer term.
Tom Monahan: Sure. I mean, I expect our goal is to grow all our businesses, right? So I think, you know, obviously, we have a Maintaining our status as the most trusted partner to the board in the C-Suite is really important. That means growing search and tightly linking that to our executive assessment businesses. Those are top-of-the-house businesses, and we see huge opportunities to grow our on-demand talent and our Heidrick consulting areas. There's a lot going on here.
Speaker Change: Sure I mean, I expect our goal is to grow all of our businesses right. So I think obviously we have.
Speaker Change: Maintaining our status as the most trusted partner to the board and C. Suite is really important and that means growing search.
Speaker Change: And tightly linking that to our executive assessment businesses. Those are those are top of the house businesses, and we see huge opportunities to grow.
Speaker Change: Our on demand talent, and our heidrick consulting offering.
Speaker Change: A lot going on there the big the big simple headline is that the.
Kevin Mark Steinke: The client need, we have massive client need. I've never heard a company in my career in business say, we have all the right leaders in all the right roles doing all the right stuff. That's a thought bubble I've never heard any CEO articulate out loud. And when they look at the drivers of performance, they land invariably on people being the most important element of great performance. So there's huge market demand. We have an exceptional team globally.
Speaker Change: The client needs.
Speaker Change: Have massive client need yes, I've never heard of company.
Speaker Change: Caribbean business say, we have all the right leaders in all of the REIT rules doing all the right stuff.
Speaker Change: That's a thought.
Speaker Change: I've never heard any thought bubble I've never heard any CEO articulated out loud.
Speaker Change: And when they look at the drivers of performance they land in variably on people being the most important elements of great performance of the huge market demand we have exceptional.
Speaker Change: Exceptional team globally, we have incredible IP and our job in leadership.
Kevin Mark Steinke: We have incredible intellectual property, and our job in leadership is to just more routinely and reliably make it easy for clients to access more and more of our great talent, great advice, and great IP as they build their own businesses. And there's, as I said, by clarifying where exactly we're gonna play, simplifying work so our people can do their jobs more effectively, and then amplifying our great stories. We think we can really drive growth through all of this.
Speaker Change: We will routinely and reliably make it easy for clients to access more and more of that.
Speaker Change: Great talent, great advice, and great IP as they build their own businesses as I said through clarifying where exactly we're going to play simplifying.
Speaker Change: So our people can do their jobs more effectively and then amplifying our great stories, we think we can really drive growth in all our businesses.
Kevin Mark Steinke: Okay, well, thank you for the insight. I will turn it back over.
Speaker Change: Okay, well. Thank you for the insight I will turn it back over.
Speaker Change: Okay.
Marc Frye Riddick: Your next question comes from the line Marc Riddick with Sidoti. Please go ahead.
Speaker Change: Your next question comes from the line of Marc Riddick with Sidoti. Please go ahead.
Marc Frye Riddick: Hey, good evening.
Marc Frye Riddick: And Mark. Here we go. Sorry about that. So, I was sort of curious as to...
Marc Frye Riddick: Hello.
Marc Frye Riddick: Okay.
Tom Monahan: So I was sort of curious as to, with initial views, as to when you look into the client mix and industry verticals, are there any particular that kind of stand out to you as nearer term opportunities or ones that you feel as though you'd have a better chance of connecting and driving a greater market share with? Yeah, I would always say all of them because I think we've got tremendous teams in each of our vertical areas. We have the right to win!
Marc Frye Riddick: Sorry about that so I was sort of curious as to with.
Marc Frye Riddick: Initial views as to when you look into the client makes an industry verticals are there any particular that kind of standout to you is nearer term opportunities are ones that you feel as though you'd have a better chance of connecting and driving a greater market share with.
Yes.
Marc Frye Riddick: Okay.
Speaker Change: I would always say all of them.
Speaker Change: Got it.
Speaker Change: <unk> got tremendous teams in each of our vertical areas.
Tom Monahan: We have great teams. What I would say, I do think what we're seeing more and more often that gives Heidrick even more and more of a right to win is traditional boundaries between industries, get eroded a little bit and, therefore, our strength across the board—an example would be FinTech or direct-to-consumer technologies or advanced industrial technologies, where our ability to bring strength, let's say, in our technology areas, our depth in understanding AI, together with that vertical expertise, creates a huge winning value proposition.
Speaker Change: Got it.
Speaker Change: Every we have the right to win we have great teams, what I would say I do think what we're seeing more and more often that gives heidrick, even more and more of a right to win is traditional boundaries between industries.
Speaker Change: Get eroded a little bit and therefore, our strength across the board.
Speaker Change: Example, would be fintech or direct to consumer technologies or advanced industrial technologies.
Speaker Change: Where our ability to bring strength lets say in our technology areas, our depth and understanding AI together with that vertical expertise creates a huge winning value proposition. So I think we look at the world and say our scale and strength across our verticals enables us to create new combi.
Tom Monahan: So I think we look at the world and say our scale and strength across our verticals enable us to create new combinations and expertise that clients can't get anywhere else. So I think that will show up everywhere. Because, to state the obvious, in the same way I've never heard a CEO say they have all the right leaders doing all the right things in all the right places, I've also never heard a client CEO say anything like, yeah, we're deploying technology—or my leadership team has the right skills and capabilities to deploy technology across all of our platforms and resources. So we think our scale, our cross-border areas, our depth in our functional areas, but our ability to collaborate is going to open up tons of new opportunities. Excellent
Speaker Change: Nations and expertise that clients can't get anywhere else. So I think that will show up everywhere.
Speaker Change: To state the obvious in the same way I've never heard a CEO say.
They have all the right leaders doing all the right things in all the right places I've also not have never heard of client CEO say anything like yes, we're deploying technology.
Speaker Change: My leadership team has the right skills and capabilities to deploy technology across all of our platforms and resources. So we think our scale our cross areas our depth in our functional areas, but our ability to collaborate is going to open up tons of new opportunities.
Marc Frye Riddick: And then, as you join the chair and have the opportunity to meet folks, were there any particular key takeaway or two that you found in the beginning of your tenure that you would say has been a surprise, either positively or negatively? I wouldn't expect you to say negatively, but any particular surprises or standouts that have sort of struck you as you've begun your tenure? I mean, other than my great CFO partner, right, but you guys knew that the, yeah, I think, I think probably the, the big positive surprises to me are your culture isn't. And this is an incredibly collaborative culture.
Speaker Change: Excellent and then.
Speaker Change: As you as you.
Speaker Change: Yes join them.
Speaker Change: The chair and have the opportunity to meet folks were there any particular.
Speaker Change: Key takeaway or two that you've found in the beginning of your tenure that you would say it's been it had been a surprise either positively or negatively I wouldn't expect you to say negatively but.
Speaker Change: A little surprises are standouts that have sort of struck you as you've begun to your tenure here I mean.
Speaker Change: Other than my Great CFO partner right.
Speaker Change: Got it.
Speaker Change: But you guys knew that.
Speaker Change: Yes, I think that's probably the.
The big positive surprises to me are.
Speaker Change: Your culture is an asset.
Speaker Change: And this is.
Speaker Change: Incredibly collaborative culture, as we think about that and so my first question was GE, so often being able to crew.
Tom Monahan: And if we think about that answer to my first question, where I say, gee, so often being able to create a cocktail of the important Heidrick assets to meet a client need, whether that's across geographies, across practice areas, across expertise areas, you know, bringing together the best search person, the best assessment person in an area, being able to bridge a client need through on-demand talent, et ce The second thing is the scale of opportunity, which, again, we're aware of.
Speaker Change: Create a cocktail of.
Speaker Change: Important hydro assets to meet the client need whether that's across geographies across practice areas across expertise areas.
Speaker Change: Bringing together the best search person, the best assessments, posting and mirror being able to bridge a client need through on demand talent et cetera that collaborative culture is super Super important.
Speaker Change: Good thing is the scale of opportunity, which again.
Tom Monahan: If you just, you know, if you could be a fly on the wall of any leadership team or board meeting anywhere in the world, 25 to 40% of their time is spent talking about leadership and talent, and it therefore creates huge budgets, and creates huge opportunities, and we're going to see this internally. In a world where the what's are getting harder and harder to predict, the who's and the how's are becoming ever more important.
If you just if you could be a fly on the wall of any leadership team or board meeting anywhere in the world, 25% to 40% of their time is spent talking about leadership and talent.
Speaker Change: And.
Speaker Change: Therefore create huge budgets creates huge opportunities.
Speaker Change: We really see this internally as well.
Speaker Change: Whats are getting harder and harder to predict the who's in the house are ever more important.
Tom Monahan: Last week, a couple of weeks ago at our conference, you know, we looked at all the kind of IT predictions from mid-2022 and top IT trends and the most important things companies need to be worried about technology. In the middle of 2022, AI didn't show up on any of them.
Speaker Change: We were looking last week a couple of weeks.
Speaker Change: Conference.
Speaker Change: We looked at all the kind of predictions.
Speaker Change: Predictions from mid 2022, and top trends and most important things coming and going about technology in the middle of 2020, AI didn't show up on any of them.
Tom Monahan: And so, our ability to help companies put leadership teams in place, support them, get them working in effective ways, so they can handle massive volatility and change in the end market is a really unique asset. Third thing I'd say, two things that kind of travel together. One is we see an opportunity to make life easier for our teams serving clients by better productizing our offers and by putting in place clearer market messages so people know what Heidrick does and can do.
Speaker Change: And so our ability to help companies put leaderships teams in place to support them and get them working in effective ways. So they can handle massive volatility and change in the end market is a really unique asset.
Speaker Change: The thing I would say two things that kind of travel together one is.
Speaker Change: We see an opportunity to make life easier for our teams serving clients by better product diluting our offers by putting in place clearer market messages. So people know what heidrick does and can do so amping up.
Tom Monahan: So, amplifying the simplifying, clarifying, and simplifying on the front end to say, how is it easy for someone to understand what Heidrick can do for them and where we can really help? And then amplify, which is telling our story ever louder, so people know to call us first when they have the types of problems we can solve for them. Those would be my three big, all positive surprises. Much appreciated. Thank you very much.
Speaker Change: Simplifying.
Speaker Change: Clarifying and simplifying on the front end to say how is it easy for someone to understand.
What heidrick can do for them and where we can really help and then amplify which is telling our story ever more loudly. So people. So people know to call us first when they have the types of problems, we can solve for them.
Speaker Change: Three big all positive surprises.
Speaker Change: Much appreciate it thank you very much.
Tom Monahan: There are no questions. I will now turn the conference back over to Tom for his closing remarks.
Speaker Change: There are no questions I will now turn the conference back over to Tom for closing remarks.
Speaker Change: Okay.
Tom Monahan: Thank you everyone for dialing in this afternoon and evening. We really appreciate the chance to bring you up to speed on Heidrick & Struggles' performance year to date and look forward to keeping you up to date as we continue to organize to deliver outstanding client impact and convert that client impact into outstanding shareholders. Ladies and gentlemen, that concludes today's call. Thank you all.
Tom: Thanks, everyone for dialing in this afternoon and evening, we really appreciate the chance to bring up to speed on Heidrick <unk> struggles performance year to date and look forward to keeping you up to date as we continue to organize to deliver outstanding client impact and convert that client impact into outstanding shareholder value.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
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