Q2 2024 Heidrick & Struggles International Inc Earnings Call
Krista: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Heidrick & Struggles 2nd Quarter 2024 Earnings Conference Call.
Thank you for standing by my name is Krista and I will be your conference operator today at this time I would like to welcome everyone to the Heidrick <unk> struggles second quarter 'twenty 'twenty four earnings conference call.
Krista: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star followed by the number 1 on your telephone keypad. And if you'd like to withdraw that question, again press star 1. Thank you. I will now turn the conference over to Suzanne Rosenberg, Vice President of Investor Relations. Suzanne, you may begin.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. Please press star followed by the number one on your telephone keypad and if you'd like to withdraw that question I got and press Star one.
Speaker Change: Thank you I will now turn the conference over to Suzanne Rosenberg, Vice President of Investor Relations Suzanne you may begin.
Suzanne Rosenberg: Thank you, and welcome to our 2024 second quarter conference call. Joining me today is our CEO, Tom Monahan, and CFO, Mark Harris.
Suzanne Rosenberg: Thank you and welcome to our 2024 second 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 these slides for additional context. Please note that in the materials presented today.
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. Tom, I'll now turn the call over to you.
Suzanne Rosenberg: 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.
Speaker Change: So 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.
Speaker Change: Tom I'll now turn the call over to eat them.
Tom Monahan: Thank you, Suzanne, and greetings to everyone joining our second quarter call. Today, I'm eager to update you on our robust performance and the work we are doing to drive client and investor value. In the quarter, we generated solid top-line growth, which exceeded the high end of the outlook range we provided on our last call. Our results underscore both the need for corporations to discover, assess, and enable exceptional leadership talent and the outstanding work of our team.
Tom: Thank you Suzanne.
Tom: Greetings to everyone, joining our second quarter call.
Tom: Today I am eager to update you on our robust performance and the work, we're doing to drive client and investor value.
Speaker Change: The quarter, we generated solid top line growth.
Which exceeded the high end of the outlook range, we provided last call.
Speaker Change: Our results underscore both the need for corporations to discover Seth and then enable exceptional leadership talent and the outstanding work of our teams.
Tom Monahan: We also took important steps to position the company for sustained growth and impact. I want to recognize the dedication of our colleagues who contribute to the success of our clients and our company, day in and day out.
Speaker Change: We also took important steps to position the company for sustained growth and impact I want to recognize the dedication of our colleagues who contribute to the success of our clients and our company.
And day out.
Tom Monahan: Importantly, we've leveraged our current momentum to move quickly in resetting key aspects of our operation. Tom Murray, myself, and the rest of our leadership team have keyed in on three levers of performance: compelling leadership, clear, strong value propositions, and client alignment. Let me share a bit more about each.
Speaker Change: Fortunately, we've leveraged our current momentum.
Speaker Change: And resetting key aspects of our operations.
Speaker Change: Tom Murry myself and the rest of our leadership team for keeping on three levers of provokes compelling leadership.
Speaker Change: Clear strong value proposition and client alignment.
Speaker Change: Sure a bit more about each.
Tom Monahan: First, we have made a series of leadership changes to put great new leaders on top of each of our non-search business areas. Last quarter, we welcomed Sunny Ackerman to lead our on-demand talent business. More recently, we asked Clara Skinner to step out of her Europe and Africa leadership role to lead Heidrick Consulting with a clear mandate for growth, impact, and profitability. With this move, we have asked Jenny Hibbert to expand her portfolio beyond global go-to-market integration to include Europe and Africa.
Speaker Change: First we have made a series of leadership changes to put great new leaders on top of each of our non search business areas.
Speaker Change: Last quarter, we welcomed <unk> to lead our on demand talent more recently, we ask Claire Skinner, let's step at it for Europe, and Africa leadership role to lead Heidrick consulting.
Speaker Change: Their mandate for growth impact and profitability.
Speaker Change: With this move we have asked Jenny Hibbert to expand our portfolio beyond global go to market integration to include Europe and Africa.
Tom Monahan: Second, we have begun the process of tightening and amplifying our core value propositions outside of CERC. Notably, Heidrick Consulting has been focused on its core strengths with an emphasis on assessment, leadership, and performance solutions. Third, we have realigned how we engage clients and transform our entire business, particularly in our emerging digital area. To do this, we've realigned the teams and products into our global go-to-market team to ensure tight links between our powerful digital tools and our outstanding professional teams globally.
Speaker Change: Second we have begun the process of tightening and amplify our core value propositions outside of search.
Speaker Change: Notably Heidrick consulting has been focused on its core strength with an emphasis on assessment leadership and performance solutions.
Speaker Change: We have realigned how we engage clients and transform our entire business, particularly in our emerging digital areas to affect this we've realigned the team some products into our global go to market team to ensure tight links between our powerful digital tools and our outstanding professional teams globally.
Tom Monahan: We've also realigned our technology, data, and R&D assets to better support the digital enablement of all our work. Finally, we've asked Dan Ryan to step up into a newly created role entitled Global Managing Partner, Client Coverage, and Development. One of Heidrick's signature assets is our access to the sea, but we see even more opportunities to have at-scale impact at this level. With apologies to Lin-Manuel Miranda, Dan's role is to ensure that our colleagues globally are always in the, quote, room where it happens, end quote, whether that be in client boardrooms or key events and forums. Effecting all of this change quickly did require us to conduct a small reduction in force during the second quarter.
Speaker Change: Also realigned our technology data and R&D assets to better support the digital enablement of all our work.
Dan Ryan: Finally, we'd ask Dan Ryan to step off into a newly created role entitled Global managing partner client coverage in development.
Dan Ryan: One of Heidrick signature assets is our access to the C suite, but we see even more opportunities to have at scale impact at this level.
Speaker Change: With apologies to Lin Manuel Miranda <unk> role is to ensure that our colleagues globally are always in the quote room, where it happens.
Whether that be in client boardrooms or key events and forums.
Speaker Change: Affecting all of this change quickly did require us to conduct a small reduction enforced during the second quarter.
Tom Monahan: Mark will share more detail in a minute, but I want to stress that we do not take such decisions easily or lightly. In a quest for tighter alignment between our teams and our objectives, we said goodbye to some very capable colleagues who played a key role in building Hydro. That said, we wanted to err on the side of speed and focus.
Speaker Change: Mark will share more detail in a minute.
Mark: To stress that we do not take such decisions easily or lightly.
Mark: Our quest for tight alignment between our team and our objectives, we said goodbye to some very capable colleagues, who played a key role in building heidrick.
That said, we wanted to err on the side of the speed and focus we know that heidrick near and mid term growth will come from our ability to clarify what we do for clients simplify work for our people and amplify our message in the marketplace.
Tom Monahan: We know that Heidrick's near and mid-term growth will come from our ability to clarify what we do for clients, simplify work for our people, and amplify our message in the marketplace. I'm highly confident that these moves will enable us to accomplish these three objectives and, more importantly, accelerate growth and returns from our investments and thus enable us to create substantial value for clients, colleagues, and shareholders. At our first ever Investor Day on December 3rd in New York City, you'll have the opportunity to meet many of our new leaders firsthand and learn more about our solutions and impact.
Mark: I'm highly confident that these moves will enable us to accomplish these three objectives and more importantly accelerate growth and returns from our investments and also enable us to create substantial value for clients colleagues and shareholders.
At our first ever Investor Day on December 3rd in New York City, you'll have the opportunity to meet many of our new leaders firsthand and learn more about our solutions and impact.
Tom Monahan: Let me quickly highlight our second quarter performance before Mark provides more detail. Despite a mixed economic environment and varying decision-making conditions in the near term, our overall business is thriving. Our strong top-line performance reflects contributions from each of our businesses. Our core executive search business delivered excellent results, led by the Americas region. On-demand talent grew its revenue despite a slowdown in the broader temporary staffing space, and Heidrick Consulting Games were accompanied by strong confirmation increases. As importantly, overall second quarter top-line growth translated into robust profitability as we delivered a strong, adjusted EBITDA performance.
Speaker Change: Let me quickly highlight our second quarter performance before Mark provides more detail.
Mark: Quite a mixed economic environment and varying decision, making conditions in the near term our overall business is thriving.
Mark: Strong top line performance reflects contributions from each of our businesses.
Mark: Our core executive search business delivered excellent results led by the Americas region.
On demand talent grew its revenue despite the slowdown in the broader temporary staffing space.
Mark: <unk> consulting gains were accompanied by strong confirmation increases.
Mark: As importantly, overall second quarter top line growth translated into robust profitability as we delivered a strong adjusted EBITDA performance.
Tom Monahan: Stepping back to assess our quarterly performance, we continue to benefit from strong underlying demand drivers, reflecting favorable long-term secular trends for our business, and our strategic initiatives will further amplify these trends. Every action we take at Heidrick links to one critical goal, creating unmatched economic value for our clients, colleagues, and investors. We have a huge opportunity to help clients and a unique set of assets that give us a right to win. It's our job to convert those assets into value for our stakeholders. We are blessed with the unique opportunity to accomplish great things.
Mark: Stepping back to assess our quarterly performance, we continue to benefit from strong underlying demand drivers, reflecting favorable long term secular trends for our businesses and our strategic initiatives will further amplify these trends.
Speaker Change: Every action, we take at Heidrick links to one critical goal, creating unmatched economic value for our clients colleagues and investors, we have a huge opportunity to help clients and a unique set of assets, which give us the right to win.
Speaker Change: It's our job to convert those assets into value for our constituents.
Speaker Change: We are blessed with a unique opportunity to accomplish this objective we know that the single most important lever for corporate and organizational performance white leaders, leading in the right way.
Tom Monahan: We know that the single most important lever for corporate and organizational performance is having the right leaders leading in the right way. The opportunity to help clients accomplish this is massive, and it grows every day with our world-class professional colleagues, supported by our distinctive brand, powerful technology, and valuable intellectual property. We have a strong platform to grow in scale and impact. We've set three strategic priorities to accomplish. First, to be the most trusted leadership partner to the C-suite and board.
Speaker Change: The opportunity to help us accomplish this is massive and it grows every day.
Speaker Change: With our World class professional colleagues supported by our distinctive brand powerful technology and valuable intellectual property, we have a strong platform to grow in scale and impact.
Speaker Change: We set three strategic priorities to accomplish this first to be the most trusted leadership partner to the C suite and board.
Tom Monahan: We will continue to grow our search and executive assessment capability. We'll find new ways to convert this expertise into ongoing client impact and a more holistic revenue stream. In particular, we're seeing more clients treat leadership and succession as an ongoing corporate discipline, rather than a periodic bout of emergency surgery. We're calling this leadership assurance, as companies invest consistently across time with the discipline and rigor of financial assurance processes.
Speaker Change: We will continue to grow our search and executive assessment capabilities and will find new ways to convert this expertise into ongoing client impact and more holistic revenue streams.
Speaker Change: In particular, we're seeing more clients treat leadership succession is an ongoing corporate discipline, rather than a periodic bouts of emergency surgery.
Speaker Change: We're calling this leadership assurance as companies invest consistently across time, and the discipline and rigor financial assurance processes.
Tom Monahan: You see evidence of this focus and our strong performance in the executive search business year to date. The very nature of leadership talent is changing, and clients need to change their leadership strategies to reflect that. 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. The advent of Gen AI has begun to reshape how companies operate and organize. Ongoing geopolitical dynamics have complicated international strategies for every single client.
Speaker Change: You see evidence of this focus on our strong performance in the executive search business year to date.
Speaker Change: Second to help clients master the new world of leadership.
Speaker Change: The very nature of leadership talent is changing and clients need to change the leadership strategies to reflect that.
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.
Speaker Change: The pandemic change the world of work Forever.
Speaker Change: <unk> Gen AI has begun to reshape how companies operate organize ongoing geopolitical dynamics have complicated international strategies for every single client existing leaders new support to lead in this environment to change and grow the way it may lead and companies need to shape. The next generation of leaders and access talent.
Tom Monahan: Existing leaders need new support to lead in this environment, to change and grow the way they do, and companies need to shape the next generation of leaders and access talent in a new way. Our Heidrick Consulting and on-demand talent assets are built to help clients in this now permanently complex world. From world-class assessment and development capabilities to help leaders lift performance through cultural change, our Heidrick consulting platform is well-matched to client needs.
Speaker Change: In many ways.
Speaker Change: Our heidrick consulting and on demand talent assets are built to help clients and is now permanently complex world.
Speaker Change: From World Class assessment and development capabilities to help 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 their performance Arsenal.
Tom Monahan: 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. You see evidence of this focus through strength in the on-demand talent business against welfare headwinds in the temporary and contingent labor space. To be a Bionic Innovator. As I've said, we are pleased with the digitization of our business, but understandably, not yet satisfied. The needs of our clients and people, and the richness of available technology, are changing far too quickly to be satisfied.
Speaker Change: Ability to engage and leverage new sources of talent and a workload royal by the aftermath of the pandemic and ongoing demographic change.
Speaker Change: Evidence of this focus through strength in the on demand talent business against a well trade headwinds and the temporary and contingent labor space.
Speaker Change: Third.
Speaker Change: To be a bionic innovator.
Speaker Change: As I've said.
Speaker Change: Pleased with the Digitization of our business, but understandably not yet satisfied the needs of our clients and people and the richness of available technology are changing too far too quickly to be satisfied. The next horizon is compelling as we further develop into a tech enabled services business and differentiate our services across all lines of business for the day.
Tom Monahan: The next horizon is compelling, as we further develop into a tech-enabled services 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 will allow us to roll out new offers quickly. We've also seen success with a next-generation enterprise assessment and development solution on the Navigator platform, and we see more innovation to come.
Speaker Change: <unk> portfolio of proprietary data enabled and digital solutions, we have made important foundational investments.
Speaker Change: Such as the navigator platform, which will allow us to roll out new offers quickly.
Speaker Change: We've also seen success with a next generation enterprise assessment and development solution on the navigator platform 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 lift the work of our world-class colleagues and mine our rich IP. Underneath these strategic pillars is a deep commitment to building a culture of excellence, entrepreneurship, and collaboration. Tom and I know that our most important responsibility as leaders is to make Heidrick the place where the best people can do their best work. In conclusion, what holds true for our clients also applies to us.
Speaker Change: But this is just the beginning of our commitment to leveraging advances in technology and AI to.
Speaker Change: To lift the work of our World class colleagues and mine are rich IP.
Speaker Change: Underneath these strategic pillars, the deep commitment to building a culture of excellence entrepreneurship and collaboration.
Speaker Change: Common items that are most important responsibility as leaders is to make hydrogen the place where the best people can do their best work.
Speaker Change: In conclusion.
Speaker Change: It is true for our clients also applies to us.
Tom Monahan: Our ability to create value for clients, investors, and colleagues is contingent on having exceptional leaders who set strategy and drive outcomes for our most critical corporate priorities. The proactive moves we implemented during the second quarter will enable us to achieve our future growth plans by fostering innovation, enhancing efficiency, and improving overall performance. We accomplished a great deal in a relatively short time, setting us up for the next phase of growth.
Speaker Change: Our ability to create value for clients investors and colleagues is contingent on having exceptional leadership strategy and drive outcomes for our most critical corporate priorities.
Speaker Change: Proactive moves we implemented during the second quarter will enable us to achieve our future growth plans by fostering innovation enhancing efficiency and improving overall performance.
Speaker Change: We accomplished a great deal in a relatively short time and set us up for the next phase of growth.
Tom Monahan: In addition to delivering positive client impact and value, last month, our firm celebrated the sixth annual Global Day of Service, which unites our offices around the world to give back to the communities where we live and work. The energy around this event was just incredible, and I am thrilled that this year we experienced the highest level of firm impact and engagement thus far. Our employees volunteered their time and talents, exemplifying the true spirit of the firm, embodying our core values, and demonstrating our commitment to creating positive change for our clients and beyond.
Speaker Change: In addition to delivering positive client impact and value last month, our firm celebrated sixth annual global day of service, which unites our offices around the world to get back to the communities, where we live and work.
Speaker Change: The energy around this event was just incredible.
Speaker Change: Thrilled that this year, we experienced the highest level of firm impact and engagement thus far.
Please volunteered their time and talents exemplifying the true spirit of the firm.
Speaker Change: Getting our core values and demonstrating our commitment to creating positive change for our clients and beyond.
Tom Monahan: Before I hand it over to Mark, I want to say that I appreciate not only his years of service and excellent stewardship of our finances, but also that he agreed to stay on and assist with the transition as Tom, Larry, and I completed our new organizational platform for Heidrick & Struggles. Finance is the backbone of corporate integrity. And as Mark embarks on his next adventure, I am confident that we will identify the next world-class CFO to help create unmatched value for clients, colleagues, and shareholders. With that, I'll now hand the call over to Mark to provide a detailed review of our financial performance and outlook.
Mark: Before I hand, it over to Mark I want to say that I appreciate not only his years of service and excellent stewardship of our finances, but also to the agreed to stay on and assist with the transition as Tom already and I completed our new organizational platform provider.
Speaker Change: Finance is the backbone of corporate integrity and as Mark embarks on his next adventure.
Speaker Change: And that we will identify the next world class CFO to help create unmatched value for clients colleagues and shareholders.
Speaker Change: With that I'll now hand, the call over to Mark to provide a detailed review of our financial performance and outlook.
Mark Robert Harris: Thank you, Tom, for the very kind words. That was unexpected but very appreciated.
Mark: Thank you Tom for the very kind words that was unexpected but very appreciate it.
Mark Robert Harris: So on the call today, good morning, afternoon, and evening. We appreciate you joining us today. Today, I'll provide you with a thorough review of our second quarter results, which reflect strong top-line performance across all of our businesses that allowed us to exceed the high end of our guidance range and achieve a solid adjusted EBITDA performance in the quarter. However, before doing so, let me begin with two standout items in our quarterly results.
Mark: So on the call today, good morning afternoon and evening, we appreciate you joining us today.
Mark: Today I'll provide you with a thorough review of our second quarter results, which reflect strong top line performance across all of our businesses.
Mark: US to exceed the high end of our guidance range and achieved a solid adjusted EBITDA performance in the quarter.
Mark Robert Harris: First, during the second quarter of 2024, we recorded a non-cash, one-time goodwill impairment of $16.2 million related to both our on-demand talent and our search businesses. As I will discuss in more detail later in my prepared remarks, the main culprit was higher interest rates that moved our discount rate to 16.25%, well above our more reasonable WAC and discount rates used in our acquisition. Regardless, we had to take a partial impairment to ensure conformity to accounting principles, an issue which I would imagine other companies are facing as well.
However, before doing so let me begin with two standout items in our quarterly results.
Mark Robert Harris: Second, we also recorded a one-time restructuring charge of $6.9 million related to leadership changes and the reduction in force mentioned earlier to align with the new growth strategy implemented in the second quarter. Therefore, my comments today will adjust for these unusual items in both periods so they're on a like-to-like basis and give you a better indication of the true underlying operating performance of the business. One last point.
Mark: First during the second quarter of 2024, we recorded a noncash onetime goodwill impairment of $16 $2 million related to both our on demand talent and our search businesses.
Mark: As I will discuss in more detail later in my prepared remarks, the main culprit with higher interest rates that moved our discount rate to 16, 5% well above our more reasonable whack and discount rates used in our acquisitions.
Mark: Irrespective we.
Mark: We had to take a partial impairment to ensure conformity to accounting principles on issue, which I would imagine other companies are facing as well.
Mark: Second we also recorded a one time restructuring charge of $6 $9 million related to leadership changes and our reduction in force mentioned earlier to align to the new growth strategy implemented in the second quarter.
Mark: Therefore, my comments today will adjust for these unusual items in both periods. So they are on a like for like basis and give you a better indication of the true underlying operating performance of the business.
Mark Robert Harris: Results for the quarter are fully organic, as both the second quarter 2024 and the year ago period now include the full quarter results of both Atreus and Business 4.0. Looking at our performance on a consolidated basis, second quarter revenue was $279 million, or 3% above second quarter 2023 results, driven by all of our businesses. Adjusted EBITDA of $28.8 million compares to $34.9 million in the second quarter of 2023, and the adjusted EBITDA margin was 10.3% compared to 12.9% last year.
One last point results for the quarter are fully organic as both the second quarter of 2024 and the year ago period. Now include the full quarter results of both <unk> and business for zero.
Mark: Looking at our performance on a consolidated basis second quarter revenue was $279 million or 3% above second quarter 2023 results driven by all of our businesses.
Mark: Adjusted EBITDA of $28 8 million compares to $34 9 million in the second quarter of 2023, and adjusted EBIT margin was 10, 3% compared to 12, 9% last year.
Mark Robert Harris: While adjusted EBITDA performance appears to be underperforming at similar revenue levels as last year, it's important to call out that the second quarter of 2024 adjusted EBITDA was impacted by higher general and administrative expenses related to our April Global Consultant Conference and a dual London lease as we're moving offices. Excluding these two non-recurring items for comparative purposes, the adjusted EBITDA margin would have been 12%, with a smaller difference due to a combination of regional performance and product mix. Now, let's turn to each of our businesses for further details.
Mark: While adjusted EBITDA performance appears to be underperforming at similar revenue levels as last year, it's important to call out the second quarter of 2024, adjusted EBITDA was impacted by higher general and administrative expenses related to our April global consultant conference and a dual London lease as we're moving offices. Excluding these two nonrecurring.
Mark: Items for comparative purposes, adjusted EBITDA margin would have been 12% with a smaller difference due to a combination of our regional performance and product mix now, let's turn to each of our businesses for further details.
Mark Robert Harris: In executive search, revenue grew 1.5% from the second quarter of 2023 to $210 million. Looking at our regional performance, we saw revenues increase in the Americas and Asia-Pacific of 6.1% and 0.7%, respectively, while Europe was down 12% given the current operating environment I commented on in the previous quarter. On a constant currency basis, Europe was down 11.7% and Asia-Pacific was up 3.3%.
Mark: An executive search revenue grew one 5% from the second quarter of 2000 $23 million to $210 million.
Mark: At our regional performance, we saw revenues increase in the Americas, and Asia Pacific up six, 1% and 7% respectively. While Europe was down 12% given the current operating environment I commented on in previous quarter.
Mark: On a constant currency basis, Europe was down 11, 7% and Asia Pacific was up three 3%.
Mark Robert Harris: Last quarter, most of our practice groups experienced growth over the period, and we also saw consultant productivity annualized in the second quarter of $2 million compared to $1.9 million on the same basis in the year-ago quarter, which is within the long-term range of $1.8 to $2 million we have commented on previously. We're also very pleased with Executive Search maintaining strong profitability with adjusted EBITDA at $52.7 million compared to $53.2 million in the same quarter last year, for a margin of 25.1% compared to 25.7%.
Mark: Last quarter, most of our practice groups experienced growth over the period.
Mark: <unk> for the consumer and industrial practices.
Mark: We also saw consultant productivity annualized in the second quarter of $2 million compared to $1 $9 million on a sustained basis and the year ago quarter, which is within our long term range of one $8 million to $2 million. We have commented on previously.
Mark: We're also very pleased with executive search maintaining strong profitability with adjusted EBITDA of $52 7 million compared to $53 2 million in the same quarter last year for a margin of 25, 1% compared to 25, 7%.
Mark Robert Harris: Excluding the two non-recurring costs, the second quarter of 2024 adjusted EBITDA would have been $56.5 million, and the adjusted EBITDA margin would have been 26.9%, over 100 basis points better than the second quarter of 2023. Turning to on-demand talent, revenue was $42 million, up 7% compared to the second quarter of 2023. While we've had several different product offerings with on-demand talent, we're particularly pleased with the top-line performance given the market dynamics we are seeing and the comparative temporary staffing space. Over time, we expect to deliver faster growth in areas with less cyclicality, which should slingshot us onto the growth curve.
Mark: Excluding the two nonrecurring costs second quarter 2024, adjusted EBITDA would have been $56 5 million and adjusted EBIT margin would have been 26, 9% over 100 basis points better than the second quarter of 2023.
Mark: Turning to on demand talent revenue was $42 million up 7% compared to the second quarter of 2023.
Speaker Change: While we've had several different product offerings with an on demand talent, we're particularly pleased with the top line performance given the market dynamics, we are seeing in the comparative temporary staffing space.
Speaker Change: Over time, we expect to deliver faster growth in areas with less cyclicality.
Speaker Change: What should slingshot us onto the growth curve.
Mark Robert Harris: Currently, we are seeing demand increase in the Americas, and in the second quarter, we saw increases in total contract values reflecting longer-duration projects, along with higher extension values. On-demand talent recorded an adjusted EBITDA loss of $1.6 million versus a gain of $2.6 million in the second quarter of 2023. The year-over-year difference, as adjusted EBITDA, was primarily related to geographical and product mix, coupled with external professional fees for the implementation of global standardized systems to streamline on-demand talent' operational performance. Let me reiterate, the growth potential for on-demand talent continues to expand as companies increasingly internalize on-demand talent across all areas of their operations.
Speaker Change: Currently we are seeing demand increase in the Americas and in the second quarter, we saw increases in total contract values, reflecting longer duration projects, along with higher extension values.
Speaker Change: On demand talent recorded adjusted EBITDA loss of $1 6 million versus a gain of $2 6 million in the second quarter of 2023.
Speaker Change: The year over year differences adjusted EBITDA was primarily related to geographical and product mix, coupled with external professional fees for the implementation of global standardized systems to streamline on demand talent operational performance.
Speaker Change: Let me reiterate the growth potential for on demand talent continues to expand as companies increasingly internalize on demand talent across all areas of their operations.
Mark Robert Harris: With a new leader and a plan in place, we have streamlined the business and made changes to the model to improve operating efficiency while fostering innovation in our products and services as we pivot and accelerate growth. Looking at Hydra Consulting, we saw second quarter revenue grow 6% year-over-year to $27 million, driven by an increase in leadership assessment and development engagements, along with some of our newer offerings that came to us through our Business 4.0 acquisition. We adjusted it, but the loss was $1.4 million versus a loss of $1.7 million in the second quarter of 2023.
Speaker Change: With a new leader and a plan in place we have streamlined the business and made changes to the model to improve operating efficiency, while fostering innovation in our products and services as we pivot and accelerate growth looking at Heidrick consulting we saw second quarter revenue will grow 6% year over year to $27 million driven by increase in leadership assessment and development engagements.
Speaker Change: Along with some of our newer offerings that came to us through our business four zero acquisition.
Speaker Change: Adjusted EBITDA loss was $1 4 million versus a loss of one $7 million in the second quarter of 2023.
Mark Robert Harris: Excluding the two non-recurring costs, Q2 2024 adjusted EBITDA would have been a loss of $0.8 million, a 50% reduction compared to the prior year period. This was driven by confirmations growing 19% and continued strong demand for leadership solutions, with our late-stage pipeline full of higher-margin, attractive offers. Now with new leadership, along with a nimble organizational structure, Hydra Consulting is focused on its core strengths as we refine and simplify our solution.
Speaker Change: Excluding the two nonrecurring costs second quarter 2024, adjusted EBITDA would've been a loss of <unk> 8 million.
A 50% reduction compared to the prior year period.
This was driven by confirmations growing 19% and continued strong demand for leadership solutions with our late stage pipeline full of higher margin attractive offerings.
Speaker Change: Now with new leadership, along with nimble organizational structure Heidrick consulting is focused on its core strength as we refine and simplify our solutions.
Mark Robert Harris: Turning to operating expenses, salary and benefits increased 1% from the prior quarter. As a percentage of net revenue, selling benefits were 63.8% versus 66% in the year-ago period. Fixed compensation decreased $3 million in the second quarter of 2024, partially reflecting the reduction in force we implemented during the quarter.
Speaker Change: Turning to operating expenses salary and benefits increased 1% from the prior quarter.
Speaker Change: As a percentage of net revenue salary and benefits was 63, 8% versus 66% in the year ago period.
Speaker Change: Fixed compensation decreased $3 million in the second quarter of 2024 partial effective reduction in force we implemented during the quarter.
Mark Robert Harris: General and administrative expenses increased $5.9 million to $46.4 million, or 16.7% of net revenue compared to 14.9% of net revenue, in the second quarter of 2023. The increase versus a year ago period is primarily due to the two non-recurring expenses I cited earlier. In addition, second quarter G&A included a fair value earn out adjustment due to the enhanced performance of an acquisition, which is excluded from our adjusted results.
Speaker Change: General and administrative expenses increased $5 9 million to $46 4 million or 16, 7% of net revenue compared to 14, 9% net revenue in the second quarter of 2023.
Speaker Change: The increase versus the year ago period is primarily due to the two nonrecurring expenses I cited earlier.
Speaker Change: In addition, second quarter G&A included a fair value earn out adjustment due to the enhanced performance of an acquisition, which is excluded from our adjusted results to get a better sense of our G&A base run rate. Excluding these costs G&A would have been 14, 6% of net revenue compared to 14, 9% in the second quarter of 2023.
Mark Robert Harris: To get a better sense of our GNA-based run rate, excluding these costs, GNA would have been 14.6% of net revenue, compared to 14.9% in the second quarter of 2023. We continue to expect G&A to remain slightly inflated while the earn-out expenses run off over the next 24 to 36 months and down to a more normalized level of approximately 14% given our revenue expectations for that time frame. Turning to the cost of services, we saw an increase of $4.4 million to $29.7 million in the second quarter of 2024 versus $25.3 million in the previous quarter, a 17% increase.
Speaker Change: Turning to expect G&A will remain slightly inflated while the earn out expenses run off over the next 24 to 36 months and down to a more normalized level of approximately 14% given our revenue expectations for that timeframe.
Speaker Change: Turning to cost of services, we saw an increase of $4 4 million to $29 $7 million in the second quarter of 2024 versus $25 3 million in the previous quarter, a 17% increase.
Mark Robert Harris: This increase primarily reflects our on-demand talent business, which typically accounts for approximately 65 to 68 percent of the segment's revenue and cost of services. As discussed, the increase in the second quarter of 2024 was due to geographic and product mix in the period. Lastly, we remain focused on progressing the development of our digital product portfolio, including Heidrick Navigator and Assessments, while advancing our enterprise platform through digital enhancement. R&D spend for the second quarter was $5.6 million, or 2% of net revenue, versus $5.7 million, or 2.1% of net revenue, in the second quarter of 2023.
Speaker Change: This increase primary reflects our on demand talent business, which typically has approximately 65% to 68% of the segment's revenue and cost of services.
Speaker Change: As discussed the increase in the second quarter of 2024 was due to geographic and product mix in the period.
Lastly, we remain focused on progressing the development of our digital product portfolio, including hijacked navigator and assessments, while advancing our enterprise platform through digital enhancements.
Speaker Change: R&D spend for the second quarter was $5 6 million or 2% of net revenue versus $5 7 million or two 1% of net revenue in the second quarter of 2023.
Mark Robert Harris: The spending is consistent with our prior quarters, and for the full year, we continue to expect R&D to be approximately $25 million. Moving on to bottom-line profitability, adjusted net income for the quarter was $14.1 million, and adjusted diluted EPS was $0.67, which compares to adjusted net income of $15 million and adjusted diluted EPS of $0.73 in the same quarter last year. On a pro forma basis, excluding the two non-recurring costs, our EPS would have been $0.81 per share.
The spending is consistent with our prior quarters and for the full year, we continue to expect R&D to be approximately $25 million.
Speaker Change: Moving on to bottom line profitability adjusted net income for the quarter was $14 $1 million and adjusted diluted EPS was <unk> 67, which.
Speaker Change: Which compares to adjusted net income of $15 million and adjusted diluted EPS of <unk> 73 in the same quarter last year.
Speaker Change: On a pro forma basis, excluding the two nonrecurring costs, our EPS would've been <unk> 81 per share.
Mark Robert Harris: As a reminder, moving forward, we expect our tax rate in 2024 and 2025 to temporarily be around 38% driven by the non-deductibility of acquisition earn out costs. However, once these acquisition costs run off, we expect our tax rates to be back in the low 30% range, assuming no other statutory tax changes.
Speaker Change: As a reminder, moving forward, we expect our tax rate in 2024, and 2025 temporarily be around 38% driven by the non deductibility of acquisition earn out Pos. However, once these acquisition costs run off we expect our tax rate to be back in the low 30% range, assuming no other statutory tax changes.
Mark Robert Harris: Now we'll turn to the balance sheet. We ended the second quarter with a strong cash position of $296.9 million, up $58 million from $239 million at the end of June 2023. The year-over-year improvement was mainly driven by payments for earnouts and acquisitions, which we did not have this year. 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 their associated tax and related costs.
Speaker Change: Now I'll turn to the balance sheet. We ended the second quarter with a strong cash position of $296 9 million up $58 million from the $239 million at the end of June 2023.
Speaker Change: The year over year improvement was mainly driven by payments for earn outs on acquisitions, which we did not have this year.
Speaker Change: As we've discussed before our cash position typically builds through the year as employee bonuses are accrued.
Speaker Change: Employee bonuses are paid out in the first quarter, along with the associated tax and related costs.
Mark Robert Harris: Our strong cash position with no debt, along with our $275 million accordion credit facility, or over half a billion dollars of liquidity, gives us great strength and flexibility to execute our strategic plan and return capital to shareholders. Moving forward, while we continue to navigate a choppy macro environment, we still see good demand signals across our business lines. Therefore, we expect third-quarter revenue to range between $260 million and $280 million.
Speaker Change: Our strong cash position with no debt along with our $275 million accordion credit facility are over half a billion dollars of liquidity gives us great strength and flexibility to execute our strategic plan and return of capital to shareholders.
Speaker Change: Moving forward, while we continue to navigate choppy macro environment, we still see good demand signals across our business lines. Therefore, we expect third quarter revenue to range between $260 million and $280 million.
Mark Robert Harris: Our guidance anticipates continued strong performance in executive search, coupled with a continued slowdown in Europe and potential volatility in APAC given the operating environment, along with stronger performances in both Hydra Consulting and on-demand talent businesses. In closing, as this is my last earnings call with Heidrick & Struggles, I want to say what a pleasure it's been to work for such an iconic company and with such a terrific team. I first came to Heidrick in early 2018 and can honestly say that it's been a privilege to work with such dedicated and outstanding professionals.
Speaker Change: Our guidance anticipates continued strong performance in executive search coupled with a continued slowdown in Europe and potential volatility in APAC, given the operating environment, along with stronger performances in both heidrick consulting and on demand talent businesses.
Speaker Change: In closing as this is my last earnings call with Heidrick <unk> struggles I wanted to say what a pleasure it's been to work for such an iconic company and with such a terrific team at.
Speaker Change: First came to heidrick in early 2018, and can honestly say that it's been a privilege to work with such dedicated and outstanding professionals.
Mark Robert Harris: The people at Heidrick are truly world-class, and I thoroughly enjoyed the entirety of my tenure with the firm. I hope I played at least a small role in setting the company up for even greater success, and I see bright days ahead for Heidrick & Struggles under the leadership of both Tom Monahan and Tom Murray with the support of the team, including a world-class finance and IT group. With that, operator, if you could please open the lines, Tom and I would be happy to take questions.
The people at Heidrick are truly world class and are thoroughly enjoying the entirety of my tenure with the firm.
Speaker Change: Perfect play at least a small role in setting the company up for even greater success on a say a bright days ahead for heidrick <unk> struggles under the leadership of both Tom Monahan in summary, with the support of the team, including a world class Finance 19 groups.
With that operator, if you could please open the lines and Tom and I would be happy to take questions.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again press star 1. Your first question comes from Tobey Sommer with Truist Securities. Please go ahead. Thank you very much.
Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue and if you'd like to withdraw that question again press star one.
Speaker Change: First question comes from Tobey Sommer with <unk> Securities. Please go ahead.
Speaker Change: Okay.
Tobey O'Brien Sommer: Thank you very much. The first one I wanted to ask was on-demand talent. I think the profitability improved or the losses narrowed based on efforts on both sides in terms of getting better revenue growth and expense management. Where is that aiming at and how are you managing that business for margin and profit going forward? Sheetalby.
Speaker Change: Thank you very much.
Tobey O'Brien Sommer: First one I wanted to ask was on demand talent.
Thank you.
Speaker Change: Profitability improved with the losses narrowed based on.
Speaker Change: On both sides in terms of getting better revenue growth and expense management, where is that and how are you managing that business for margin and profit.
Speaker Change: Going forward.
Tobey O'Brien Sommer: Hey, Tobey.
Tom Monahan: Let's talk a little bit about how we're thinking. Obviously, we're pleased that, in a pretty difficult economic environment, OET really performed well on the top line, and obviously, we're focused now on getting it to strength on the bottom line. You know, we're pleased it's holding up in a world where peers are coming under real pressure. We do see our way to, I'd say, high single-digit margins, and we'd expect to see that across six to eight quarters, give or take.
Tobey O'Brien Sommer: Let's talk a little bit about how we're thinking of obviously, we're pleased enough pretty difficult economic environment.
Tobey O'Brien Sommer: That ODT really performed well on the top line, our focus now and getting it to strength on the bottom line.
Tobey O'Brien Sommer: It's holding up well in a world where peers are coming under real pressure.
Tobey O'Brien Sommer: We do see our.
Tobey O'Brien Sommer: Our way too I'd say high single digit margins.
Tobey O'Brien Sommer: We would expect to see it across six to eight quarters give or take this will come from really two buckets scaling key solution areas and benefits from the integration of the atrium.
Tom Monahan: This will come from really two buckets, scaling key solutions and Benefits from the Integration of Atria. So, with those two, you know, with those two important pathways to profitability, the growth we showed in the quarter was particularly important, and the progress we continue to make on integrating HRAs was particularly important. But I think the top-line performance shows that we're meeting a real and distinct market need right now in what otherwise is a tough time. Thanks.
Tobey O'Brien Sommer: So with those two.
Tobey O'Brien Sommer: With those two important pathways to profitability the growth we showed in the quarter was critically important and the progress we continue to be on integrating atria through appropriate important but I think I think the topline performance shows that we're meeting their real and distinct market need right now.
Speaker Change: Otherwise, it's a tough time for that sector.
Tom Monahan: In your conversations on the executive search side with multinational companies, what is, Demand-like, we've heard some reticence and elongation of decision-making timelines, particularly on the multinational side. Is that consistent or inconsistent with what you've experienced? Yeah, it's funny.
Speaker Change: Thanks.
Speaker Change: In your conversations on the executive search side with multinational companies.
Speaker Change: Demand like we've heard some reticence, an elongation of the decision making.
Speaker Change: Lines.
Speaker Change: Particularly on the multinational side, because that consistent or inconsistent with what you've experienced.
Tom Monahan: This is a double-edged sword for us, right? We have 1,400 clients in 65 countries, so you can safely imagine each one of them is a snowflake with its own issues consuming the C-suite. There are a few basic themes coming out.
Speaker Change: Yeah.
Speaker Change: Is this is a double edged sword for us right.
Speaker Change: 1400.
Speaker Change: Clients in 65 countries. So you can basically imagine each one of them is a snowflake with its own issues consuming the C suite.
Speaker Change: Definitely.
Speaker Change: Basic themes coming out I don't think any of them.
Tom Monahan: I don't think any of them are necessarily headwinds or mitigants to our work. First, there is the political and geopolitical, No surprise. Elections across the world. Give or take, nearly half the world is going to vote this year, and that creates near-term societal divisions, and the near- and mid-term start to change how people are thinking about the global economy. You know, obviously, one of the issues on the ballot in a lot of countries, by implication, is what's our role as a nation in the global economy, involving trade policy, investment policy, all that stuff, so that comes up a lot.
Speaker Change: Necessarily headwinds or mitigates to our work.
Speaker Change: First there is political and geopolitical uncertainty that's no surprise.
Speaker Change: Elections across the world.
Speaker Change: Give or take nearly half the world is going to this year and.
Speaker Change: And that creates near term.
Speaker Change: Since this iron divisions.
Speaker Change: Near and mid term start to change how people are thinking about.
Speaker Change: The global economy, obviously, one of the issues on the ballot and a lot of countries site I application is whats the role with our role as a nation in the global economy trade policy investment polyol lifestyle.
Speaker Change: Shows up a lot.
Speaker Change: Sure.
Tom Monahan: You know, and that changes less whether they need lots of great new leadership and more of the agility and mindset of the new leaders they're putting in place, elevating, or bringing in. Second, this is going to be completely unsurprising, a massive technology-driven remake.
Speaker Change: And that change is less whether they need lots of great new leadership and more kind of the agility and mindset.
Speaker Change: New leaders they are putting in place elevated or bringing in a second.
Speaker Change: It would be completely unsurprising, a massive technology driven re making it work.
Tom Monahan: It's obviously... stimulated by the AI revolution, but again, it was already there, intense client focus on having the right people and the right organization to capture the benefits of technology broadly in AI, in particular. And third, you know, there is this demographic reality that is out there that even as labor markets have cooled a little bit, people are confronting the reality that in most every market we serve, critical talent is scarce due to skill mixes, due to geography, due to the difficulty of moving people around.
Speaker Change: It's obviously still.
Speaker Change: Stimulated by the AI Revolution, but again it was already there intense client focus on having the right people the right organization to capture the benefits of technology broadly and Gen II in particular.
Speaker Change: And third there is this demographic reality it is out there that even as labor markets accruals a little bit.
Speaker Change: People are confronting this the reality at most every market. We serve critical talent is scarce due to skill mix as to geography due to the.
Speaker Change: Difficulty of moving people around.
Speaker Change: This is due to demography factors beyond company's control.
Tom Monahan: Due to demographics, factors beyond companies' control, demand is going to exceed supply for the talent they need to lead and grow their businesses. Though it's a complex operating environment, we really see those dynamics as long-term tailwinds for our business, and we really feel we're uniquely positioned to help them confront those challenges. And last one for me, and I'll get back in the queue. Could you give us an update on Navigator, where that stands in terms of actual dollars and cents?
Speaker Change: Demand is going to exceed supply for the talent they need to lead and grow their businesses. So yes.
Speaker Change: So it's a complex operating environment.
Speaker Change: <unk>.
Speaker Change: We really see those dynamics actually being long term tailwind for our business and we really feel we're uniquely positioned to help them confront those challenges.
Speaker Change: And last one from me and I'll get back in the queue could you give us an update on navigator, where that stands from a from an actual sort of dollars and cents perspective.
Tobey O'Brien Sommer: I know it still might be a little bit early, but...
Speaker Change: I know it might be a little bit early but if you could speak to how youre going to manage that for growth versus profitability, how youre solving.
Speaker Change: For that that'd be helpful.
Tom Monahan: If you could speak to how you're going to manage that for growth versus profitability, how you're solving for that, that would be helpful. Sure, and Tobey, as you know, we're not talking about the actual size of the Navigator product, per se, but let me kind of pull back and talk about our philosophy on digital more broadly. Um, like every one of our clients, as I just said, we're making investments in technology platforms that scale our impact on clients. We see an enormous opportunity for technology to already infuse key parts of our work and will continue to do so more and more.
Speaker Change: Sure Tobey as you know we're not.
Speaker Change: Talking about the actual size of the navigator product per se, but let me kind of pull back and talk about our philosophy on digital more broadly.
Tom Monahan: This investment really takes two forms. One is, just call it straightforward digital enablement of our core business through new tools which enable our great teams to perform at the highest level. We think we can move even faster here.
Speaker Change: Yes like every one of our clients is just like you said, we're making investments in technology platforms at scale or impact on clients, we see enormous opportunity for technology to already infuses key parts of our work and we'll continue to do so more and more.
Speaker Change: It really takes two forms one is.
Speaker Change: Just call it straightforward digital enablement of our core business through new tools, which enable our great teams to perform at the highest level.
Speaker Change: We can move even faster here there are tremendous data assets at the core of our business. There are workflows that are repeatable or things.
Tom Monahan: There are tremendous data assets at the core of our business. There are processes that are repeatable. There are things that make this an exciting place to put resources. The second is new solutions that connect our work directly to clients. We've already built a great platform for launching these solutions, which we've christened Navigator, and we're already in marketing with two beta solutions that target different but closely related client needs. One is our digital assessment platform, and the second is our leadership intelligence platform.
Speaker Change: Make this an exciting place to put resources in energy.
Speaker Change: The second news new solutions that connect our work directly to clients.
Speaker Change: We've already built a great platform for launching new solutions, which Chris and navigator and we're already in market with two beta solutions.
Speaker Change: <unk>.
Speaker Change: The target different but closely related client needs. One is our digital assessment platform. The second is our leadership intelligence platform. They both resonate with clients, but right now digital assessment is closer to existing client workflows. So therefore, it should be easier shorter sales cycle leadership intelligence, which is the core of the navigator.
Tom Monahan: They both resonate with clients, but right now, digital assessment is closer to existing client workflows, so it's just an easier, shorter sales cycle. Leadership intelligence, which is at the core of the Navigator platform, is a really powerful AI-based tool that really gets client attention, but since it's a brand-new category for them, it faces a longer and more complex sales cycle. So if you think of the two products right now, it is quicker to market with our digital assessment platform, but we see such great interest in the leadership intelligence platform on the Navigator platform that we think there's a huge opportunity there. Back to my previous point, clients are learning to reorganize themselves around some of the new tools and technology, and that's every bit as true for leadership and succession processes inside the HR office.
Speaker Change: Platform is a really powerful AI based tool it really catches client attention.
Speaker Change: Since it's a brand new category for them.
Speaker Change: Spaces longer and more complex sales cycle. So you didn't look the two products.
Speaker Change: Right now it is quicker to market with our digital assessment platform, but we see such great interest in the <unk>.
Speaker Change: Leadership intelligence platform on the navigator platform that.
Speaker Change: We think there's huge opportunity there we're just.
Speaker Change: Back to my previous point clients are learning to reorganize and software and some of the new tools and technology and that's every bit as true for leadership in succession processes inside the HR organization.
Tom Monahan: So we're excited about these investments, which allow us to invest against both client impact and value for investors. And we're sure we'll earn a great return from these investments. But, and of course, you know that I won't miss the shameless plug, say that we're going to be demoing some of our coolest stuff at our investor day. Of course, we can only do that for those who come live. So there are a lot of good reasons to be in New York in December, but I think this is one of them.
Speaker Change: What about these investments.
Speaker Change: Allows us to invest.
Speaker Change: Invest against both client impact on value for investors and we're sure will earn a great return from these investments.
Speaker Change: And of course.
Speaker Change: You know that I want Mr Shameless plug.
Speaker Change: We're going to be demo ing some of our coolest stuff at our Investor day.
Speaker Change: Of course, we can only do that for those income losses.
Speaker Change: There are a lot of good reasons to be in New York in December but I think this is one of the best.
Speaker Change: Thank you.
Kevin Mark Steinke: Your next question comes from the line of Kevin Steinke with Barrington Research. Please go ahead.
Speaker Change: Your next question comes from the line of Kevin Spanky with Barrington Research. Please go ahead.
Tom Monahan: Good afternoon. You've talked about, in your prepared remarks, realigning how you engage with clients, particularly on the digital side. I was wondering if you could maybe just delve into that a little bit more, provide a little bit more color on what you're doing there and what you hope to accomplish.
Kevin Mark Steinke: Hey, good afternoon.
Speaker Change: You talked about in your prepared remarks, realigning, how you engage with clients.
Speaker Change: Particularly.
Kevin Mark Steinke: On the digital side wondering if you could maybe just delve into that a little bit more provide a little bit more color on what youre doing there and what you hope to accomplish.
Speaker Change: Okay.
Kevin Mark Steinke: Sure. I mean, it's pretty straightforward, actually.
Speaker Change: Sure.
Pretty straightforward actually.
Tom Monahan: [inaudible] It won't come as any surprise that the places we have the greatest receptivity to our innovative platforms in the digital space under the Navigator banner are the places where we already have great relationships. You know, we understand the companies. We understand their succession and leadership development processes. We know the people, and we get a running start. Now that since we don't do business with every company everywhere on the face of the earth, we have to be great both at leveraging our existing relationships to get clients onto our platforms and using our digital products as a point of the spear to introduce Heidrick to them so other service lines can come in behind it.
Speaker Change: We.
Speaker Change: It won't come as any surprise that.
Speaker Change: The place we have the greatest receptivity to our innovative platforms in the digital space under the navigator banner replaces where we already have great relationships.
Speaker Change: We understand the companies who understand their succession and leadership development processes, we know the people and we get a running start.
Speaker Change: Since we don't do business with every company everywhere in the face of Europe, we have to be great growth.
Speaker Change: Leveraging our existing relationships to get clients onto our platforms and go use our digital products as a point of the spear to introduce heidrick to them. So our other service lines can come in behind it but.
Tom Monahan: But in the near term, we saw an opportunity to link the work of our digital products and go-to-market teams around our existing global go-to-market platform, which is focused very much on integrating our solutions in ways that our great teams and our different businesses can put them to work, and they can flow seamlessly into the conversations we're having with customers. So this was a great opportunity to accelerate what we were already seeing as the most important and most compelling market dynamics.
Speaker Change: In the near term, we saw an opportunity to link the work of our digital products and go to market teams around.
Speaker Change: Around our existing global go to market platform, which is focused very much on integrating our solutions in ways that are great teams in our different businesses can put them to work and they can flow seamlessly into the conversations we're having with customers. So this was a great opportunity to accelerate what we're already seeing as the most important and most compelling market dynamics.
Kevin Mark Steinke: Okay, great. And I guess that would probably be directly tied to your comments about looking to accelerate the growth and returns from your recent investments or recent investment cycle. Are you primarily talking about the digital products there? What other investments are you looking to accelerate growth and returns from?
Speaker Change: Okay, Great and I guess that would.
Speaker Change: <unk>.
Speaker Change: Probably be directly tied to your comments about looking to.
Speaker Change: Accelerate the growth and returns from from <unk>.
Speaker Change: Recent investments our recent investment cycle are you.
Speaker Change: Primarily talking about the digital.
Speaker Change: Alex there or.
Speaker Change: <unk>.
Speaker Change: What other investments are you looking to accelerate growth and returns from.
Tom Monahan: Look, I would also point out, as I just responded in the previous question, the buildout of our ODT platform has been an area of investment focus, and obviously, we have a highly responsive product area. And as we continue to see growth there, we see an opportunity to accelerate profitably there. And certainly in hydroconsulting, we see opportunity by scaling our most powerful value propositions within the hydroconsulting portfolio. We see opportunity to arrive at scale economies in portions of that portfolio fast.
Speaker Change: Look I would also put.
Speaker Change: As I just responded in a previous question the Buildout of our OTT platform has been an area of investor and investment focus and obviously, we have a highly resolute product area and as we continue to see growth there, we see an opportunity to.
Speaker Change: Accelerating our profitability, there and certainly in heidrick consulting we see opportunities by scaling our most powerful value propositions within the heidrick consulting portfolio, we see opportunity to arrive at scale economics and portions of that portfolio faster.
Kevin Mark Steinke: Okay, thanks. And then, yeah, just circling back on on-demand talent. It had some pretty nice growth this quarter, the second quarter. And he talked about the kind of market backdrop there that the headwind facing that particular part of the market. But you know, in the last few quarters, you're kind of tracking along with the market, and here in the second quarter, it seems like maybe you decoupled a bit, you know, and had a positive variance. So I don't know if there's anything more in particular you'd want to highlight there, just in terms of what seems like, you know, a bit of an outperformance relative to the way the market is trending.
Speaker Change: Okay. Thanks, and then.
Speaker Change: Yes, just circling back on on demand talent.
Speaker Change: Hits.
Speaker Change: Pretty nice growth this quarter in the second quarter.
Speaker Change: And you.
Speaker Change: Talks about.
Speaker Change: Kind of a market backdrop there.
Speaker Change: <unk> facing that particular.
Speaker Change: Part of the <unk>.
Speaker Change: Part of the market, but.
Speaker Change: Seems like.
Speaker Change: Last few quarters, you are kind of tracking along with the market.
Speaker Change: Here here in the second quarter it seems like maybe you.
Speaker Change: Decoupled a bit.
Speaker Change: Uh huh.
Speaker Change: The positive variance so I don't know if theres anything more.
Speaker Change: In particular, you would want to highlight there just in terms of.
Speaker Change: What seems like a bit of an outperformance relative to where the market is trending.
Tom Monahan: Well, obviously, it was mostly because Tom Murray and I were new in the leadership chair and just kidding, obviously. Now, you know, look, I think if you think about on-demand talent, the real news isn't at the macro level. It's at the value proposition by value proposition level. So think about, you know, if you look inside the on-demand talent portfolio, there's a series of use cases that are tightly tied to really urgent client needs.
Tom Monahan: Yes, well, obviously, we're mostly because as Tom already and I being new leadership share in just kidding obviously.
Yes look I think give you about on demand talent the real news isn't at the macro level exit the value proposition by value proposition levels to think about yes. If you look inside the on demand talent portfolios series of use cases that are tightly tied to really urgent client need the most.
Tom Monahan: The most, the easiest example, you have sort of an interim chief information security officer. No leadership team is going to want to wake up and say, "our chief information security officer quit." We don't have one. So the ability to kind of tap our team and get, you know, a great interim executive for information security or finance, et cetera, critical project talent. If you're a big pharma company and you've got a drug you've got to get to market, you want a team in place that's done it three times.
Tom Monahan: The easiest example, sort of interim Chief information Security Officer.
Speaker Change: No leadership team is going to want to wake up and say, our chief information Security Officer quick.
Speaker Change: Don't have one.
Speaker Change: The ability to kind of tap our team and get.
Speaker Change: Great interim executive for.
Speaker Change: Sure.
Speaker Change: Score.
Speaker Change: Information security or finance et cetera critical project talent, if you're a big pharma company and you've got a drug you got to get to market team in place has done that three times again, so I think we we create power in our model not so much.
Tom Monahan: Again, I think we create power in our model not so much in the number of use cases we serve, although we do serve a number of them, but the specificity and value we create when we target known workflows, target known pain points, and create a solution that no one else has.
Speaker Change: Number of use cases, we serve we do serve a number of them, but the specificity and value we create when we target known workflows target known pain points and creative solution that no one else has.
Kevin Mark Steinke: Right. I understand. Thanks.
Speaker Change: Alright understood. Thanks, and then just lastly.
Kevin Mark Steinke: And then just lastly, If you had talked about the last quarter or two, some choppiness in the overall macro environment, and demand environment, it sounds like that's pretty much the case or what you're continuing to see. Obviously, you put up some solid performance here in the second quarter and a good outlook for the third quarter, but just any changes in how you would characterize the overall macro environment from what you've been seeing over the last quarter?
Speaker Change: As we had talked about last quarter or two some choppiness in the.
Speaker Change: Overall macro environment demand environment, it sounds like Thats.
Speaker Change: Pretty much the case of whats youre continuing to see.
Speaker Change: Obviously, you put up some solid performance here in the second quarter and a good outlook for the third quarter.
Speaker Change: In any case.
And how you would characterize the.
Speaker Change: The overall macro environment from what you've been seeing.
Speaker Change: Over the last quarter or two.
Tom Monahan: Well, I think it's very consistent through the years so far, you know, there are always pockets of real strength and pockets of, you know, chops, either by industry, by geography. It's worth remembering that it's choppy, but our teams are really exceptional at finding client need. And Lord knows clients have more needs when times are complex than they do when times are simple.
No I think it's very consistent through the year. So far there are always pockets of real strength in pockets chops either.
Speaker Change: By industry by.
Speaker Change: By Geo.
Speaker Change: It's worth remembering that it's.
Speaker Change: It's choppy, but our teams are <unk>.
Speaker Change: Really exceptional at finding client need.
Speaker Change: Lord knows clients have more need when times are complex and they do.
Speaker Change: Times Theres the bulk so it's testament to our team's being out there doing great work. It is also worth noting the long term macro headwinds behind this business are incredibly powerful.
Tom Monahan: So it's testament to our teams being out there doing great work. But it is also worth noting that the long-term macro headwinds behind this business are incredibly powerful. The single most important lever for great corporate performance is great talent, great leadership, great leaders in the right roles doing the right thing. And as more and more companies are aware that we're entering an era where the who is more important, the who and how are more important than the what, we've got a great opportunity to grow this business and grow our impact and create value for, first and foremost for clients, but then for colleagues and shareholders.
Speaker Change: The single most important lever for great corporate performance is.
Speaker Change: Is great talent, great leadership, great leaders in the right roles doing the right thing and as more and more companies are aware of that.
Speaker Change: We're entering an era, where.
The who is more important to who and how we're more important number one.
Speaker Change: We've got a great opportunity to grow this business and grow impacting create value for first and foremost for clients, but then for colleagues and shareholders as well.
Kevin Mark Steinke: Okay, thanks for the comments. I'll turn it over. I appreciate it.
Speaker Change: Okay. Thanks for the comments ill turn it over I appreciate it.
Operator: Again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from Mark Riddick on Sidoti. Please go ahead.
Speaker Change: Again, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Your next question comes from Marc Riddick with Sidoti. Please go ahead.
Marc Frye Riddick: Hey, good evening.
Speaker Change: Yes.
Marc Frye Riddick: Just wanted to start. First of all, Mark, thank you for everything. It's been a pleasure working with you, and I certainly appreciate all the help that you've given over the time that we've had the chance to work together. Best for everything moving forward there. Thank you, Mark.
Speaker Change: So I just wanted to just wanted to start first of all Mark. Thank you for everything that's been a pleasure working with you in the.
Speaker Change: Certainly appreciate all the help that you've given over the time that we've had the chance to work together.
Speaker Change: And.
For everything moving forward there.
Speaker Change: Mark.
Marc Frye Riddick: I did want to touch a little bit on one of the things you had commented on. I think if I caught this right, as far as R&D is concerned, you were looking at that being around $25 million for the year. That seems as though that would be a little bit of a pickup in the back half. Is there anything we should be thinking about there? Anything as far as the timing of what you're working on? Anything lumpy? How should we be thinking about the timing of that R&D spend for the remainder of the year?
Speaker Change: I did want to touch a little bit on one of the things you had made the comment I think if I caught this right as far as R&D, we're looking at.
Speaker Change: That being around $25 million for the year that it seems as though that would be a little bit of a pick up in the back half is there anything we should be think about their anything as far as timing of what youre working on anything lumpy, how should we be thinking about the timing of that R&D spend for the remainder of the year.
Mark Robert Harris: Sure, I'll try to weigh in on that one, Mark. So, we've been running around, you know, between five and five and a half in the first half of the year. So, caught a lot more. It's also going to be a very marginal increase in the second half of the year. The second half, as we start to launch some of the projects which we have done, will start to bleed through. So, we've been capitalizing some on the balance sheet.
Speaker Change: So I'm trying to weigh in on that one mark so we've been running around between five and five five in the first half of the year. So call. It a lender. It's also going to be a very marginal increase in the second half of the year. The second half as we start to launch some of the projects.
We have done we will start to bleed through so we've been capitalizing some on the balance sheet.
Mark Robert Harris: And when we launch it, then that amortization will have to start flowing through the P&L. So, that's where you'll see a little bit of a pickup. So, keep in mind, it won't really be cash that we'll be hitting. It'll be more just an amortization on the balance sheet.
Speaker Change: And when we launch it then that amortization will have to start flowing through the P&L. So that's where you'll see a little bit of pickup so keep in mind. It won't really be cash that will be hitting it'll be modest and amortization on the balance sheet.
Marc Frye Riddick: Right. Okay. All right.
Speaker Change: Right, Okay, alright that makes sense and then the other is more bigger picture.
Marc Frye Riddick: And then there is the bigger picture, and I sort of wanted to touch on the decision to host an Investor Day. It certainly is nice to see, but I was wondering if you maybe could touch a little bit on that and the thoughts behind that. I know you've made some commentary on that, but certainly, you know, with all the uncertainty that's out there and what have you, I just wanted to sort of get a sense of maybe the thought process around Investor Day. It's certainly appreciated, but I just wanted to get some thoughts as to why.
Speaker Change: I wanted to touch on the decision to host an investor day.
Speaker Change: Certainly is nice to see but I was wondering if maybe you could touch a little bit on that and the thoughts behind that I know you've made some some commentary on that but certainly with all the uncertainty that's out there and what have you I just wanted to sort of get a sense of maybe the thought process around the investor day. It certainly appreciate but I just wanted to get some thoughts as to the.
Speaker Change: The why.
Tom Monahan: Sure, I think there are three reasons why, you know, I think it's always a good day for an investor day. I love, we love communicating with our shareholders about what we're doing and, you know, giving you a real look at the business. I think there are three reasons, but, you know, now's a good time.
Speaker Change: Sure I think there are three reasons.
Speaker Change: In my mind, its always a good day for an Investor day outlook can we love communicating with our shareholders around what we're doing.
Speaker Change: Giving you a real look at the business I think there are three reasons, but.
Speaker Change: Now is a good time.
Tom Monahan: You know, I'll lay it out, which is that I think you can't help but be impressed by the quality of our leadership. And I'm excited to have our leaders up in front of that room sharing how they're building our business and creating value for our clients. And that's very exciting.
Speaker Change: Yes.
Speaker Change: I'll lay them out which is I think you can't help but be impressed by the quality of our leadership I'm excited to have our leaders up in front of that room sharing how they are building, our business and creating value for our clients and thats very exciting.
Tom Monahan: Secondly, you know, we've done a set of, we've created a set of newer businesses that the traditional quarterly format doesn't let us get into as much detail about. So our ability to just kind of unpack them a little bit more, get down, as I was saying just now, to the use case level. What client problems do we solve? And why are those, why are those problems so valuable for us to solve them? It's a real thing; it's something you do more in an investor-based format than you can do in a normal quarterly call.
Speaker Change: Secondly, we've done a set we've created a set of newer businesses.
Speaker Change: The traditional quarterly format doesn't let us get into as much detail about our ability to just kind of unpack them a little bit more get down assessing just now get down to the use case level, what client problems do we solve and wire those.
Speaker Change: Why are those.
Speaker Change: Problem is so valuable for us to solve them is.
Speaker Change: Something you do more in Investor day format that you can do in a normal quarterly call and third as I mentioned, we have invested in some.
Marc Frye Riddick: And third, as I mentioned, we have invested in some innovative technology tools and platforms, both for our own use and for direct client use. And really, the only way to showcase those is to gather people in a room and let them see them live. So I think for those three reasons, the chance to engage with our exceptional leadership team, and the chance to get a little deeper into the client pain points that we solve.
Speaker Change: Innovative technology tools and platforms, both for our own use and for direct client use it and really the only way to showcase those is to gather people in a room and let them see them life. So I think for those three reasons chance to engage with our exceptional leadership team chance to get a little deeper into the client pain points that we saw and a chance to kind of put fingers on it.
Marc Frye Riddick: And a chance to kind of put fingers on keyboards and see what we do with our R&D and digital investment. So I think we'll have a compelling day, and I think it should be a great opportunity for us to take you a little deeper into that.
Speaker Change: <unk> and see what we do with our R&D and digital investments. So I think we'll have a compelling day and I think it should be should be a great opportunity for us, particularly well deeper into the business.
Speaker Change: Okay.
Tom Monahan: Sounds good. I'm looking forward to it. Thank you very much.
Speaker Change: Sounds good looking forward to it thank you very much.
Marc Frye Riddick: Your next question comes from the line of Tobey Sommer with Truist Securities. Please go ahead. I just wanted to ask...
Speaker Change: Your next question comes from the line of Tobey Sommer with <unk> Securities. Please go ahead.
Tobey O'Brien Sommer: I just wanted to ask a question on the executive search business forward close out here. The head counts are down a little bit sequentially, and it looks kind of like a mid single-digit decline sequentially in search confirmation and productivity is more modest. How do we think about that particular business on a sequential basis? For Revenue Within the Guide.
Tobey O'Brien Sommer: I just wanted to ask a question on the executive search business forward close out here.
Speaker Change: Head Count's down a little bit sequentially, it looks kind of like a mid single digit.
Speaker Change: Decline sequentially in search confirmations and productivity is more modest how do we think about that particular business on a sequential basis for revenue within the guide.
Mark Robert Harris: Tobey, I'll try to answer that for you. So I think we see it in a couple different ways. Please always remember that Q1 is when we do our promotions. So it's not uncommon at Q2 we'll start to drag down a little bit. And I think you've absolutely hit it right, which is just a little bit of downward motion.
Speaker Change: So we will try to answer that for you.
Speaker Change: I think we see it in a couple of different ways. Please always remember in Q1 is when we do our promotions. So it's not uncommon that Q2 will start to drag down a little bit and I think youre absolutely had it right, which is just a little bit of a downward motion and we would expect in Q3 and Q4, it probably that bring in some talent as well so I would say neutral to better in terms of the <unk>.
Mark Robert Harris: We would expect in Q3 and Q4 probably to bring in some talent as well, so I would say neutral to better in terms of the headcount. I would also comment on the productivity. Again, coming at the very high end of that $1.8, $2.0 million range is starting to show a little bit of heat overall.
Speaker Change: Head Count I would also comment on the productivity again coming at the very high end of that 182.0 2.0 million dollar range is starting to show a little bit of heat overall, what's really generating that is again the strength in the Americas, which is obviously, where we get the more upside.
Tobey O'Brien Sommer: And what's really generating that is, again, the strength in America, which is obviously where we get the more upsized agreements. So, nothing to worry about. It was nice to see Asia Pacific show some good growth. So, congratulations to that region. They've done a really good job of embracing what they had to in the greater China region and really taking advantage of other parts of it.
Speaker Change: <unk>.
Speaker Change: It is.
Speaker Change: We'd see that come in a lot harder with Europe falling down those two moves generally would make it overall on the average hotter, which is why sometimes I don't trust averages, but that is what we're saying so I just think it's just normal course of stuff. There is nothing in there that we look at the data in terms of all of our locations that it's just an interesting time for the Americas to be so bloody hot in Europe.
Speaker Change: Coming down a bit, but we would expect Europe to be more or less modulating in terms of what we saw in Q2. So nothing to worry about it was nice to see Asia Pacific showed some good pickup so congratulations to that region they've done a really good job of.
Speaker Change: Bracing, what they had to in the greater China region, and really taken advantage in other parts of it.
Speaker Change: Thank you.
Operator: And that concludes our question and answer session. I will now turn the call back over to Tom Monahan for his closing remarks.
Speaker Change: And that concludes our question and answer session I will now turn the call back over to Tom Monahan for closing remarks.
Tom Monahan: Well, we'll just extend our collective thanks to everyone for dialing in and listening today. We're excited to share the story of our work here at Heidrick & Struggles to accomplish the most important objective we have, which is to create unmatched value for our clients, our colleagues, and our investors. And it wouldn't be me if I didn't make one more shameless plug for our December Investor Day. And if you haven't gotten an invitation yet or haven't blocked it in your calendar, please do so. And if you need any details, just reach out to us, and we'll get you all patched in. Thanks so much.
Tom Monahan: We just extended our collected thanks to everyone for dialing in and listening today, we're excited to share the story.
Tom Monahan: Our work here at Heidrick <unk> struggles to accomplish the most important objective, we have which is to create unmatched value for our clients our colleagues and our investors and it wouldn't be me if I didn't make one more shameless plug for our.
Tom Monahan: December Investor Day, and if you haven't gotten if you haven't gotten your invitation yet or haven't blocked in your calendar. Please do so.
Tom Monahan: If you need details just reach out to us.
Speaker Change #100: We'll get you all patched here thanks, so much.
Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: [inaudible]
Speaker Change #101: This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change #100: Yes.
Speaker Change #100: [music].
Speaker Change #100: Yes.
Speaker Change #100: Okay.
Speaker Change #100: [music].
Speaker Change #100: Yes.