• Revenue: $276.2 million in Q4, a 9.1% increase compared to Q4 2023.
• Adjusted EBITDA: $26.1 million with a 9.5% margin in Q4.
• Full Year Revenue 2024: $1.1 billion, marking a 7% increase from 2023.
• Full Year Adjusted EBITDA 2024: $111.2 million with a 10.1% margin.
• Salaries and Benefits: Increased 19.4% from the prior year quarter; 65.3% of net revenue in Q4.
• General Administrative Expenses: Improved by $4.7 million or 10.5% versus the prior year period.
• Executive Search Revenue: Grew 10% to $225 million in Q4.
• On-Demand Talent Revenue: Increased 3% to $42.3 million in Q4.
• Hydra Consulting Revenue: Increased 11.5% to $31.3 million in Q4.
• Adjusted Net Income Q4: Increased 54.2% to $22.9 million.
• Adjusted Diluted EPS Q4: $1.08 with an adjusted effective tax rate of 22.8%.
• Cash Position: $563 million at the end of Q4, up $85 million from December 2023.
• Q1 2025 Revenue Outlook: Expected to be within a range of $263 million to $273 million.

• Warning! GuruFocus has detected 3 Warning Sign with HSII.

Release Date: March 03, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Heidrick & Struggles International Inc (NASDAQ:HSII) reported a 9.1% increase in fourth-quarter revenue compared to Q4 2023, reaching $276.2 million.
• The company achieved a solid adjusted EBITDA of $26.1 million with a margin of 9.5%, indicating strong profitability.
• Executive search revenue grew by 10%, with strong performance across all regions, particularly in financial services, healthcare, life sciences, industrial, and global technology sectors.
• Hydra Consulting saw a 11.5% year-over-year increase in revenue, driven by leadership assessment and development engagements.
• The company ended the fourth quarter with a strong cash position of $563 million, providing financial flexibility for future growth initiatives.

Negative Points

• Salaries and benefits increased by 19.4% from the prior year quarter, impacting overall expenses.
• The on-demand talent segment reported an adjusted EBITDA loss of $1.2 million, highlighting challenges in the temporary staffing space.
• Hydra Consulting experienced an adjusted EBITDA loss of $1.8 million due to increased variable compensation costs.
• A non-cash impairment charge of $43.3 million was recorded in the fourth quarter related to the on-demand talent business.
• The company anticipates a temporarily higher tax rate of around 35% in 2025 due to non-deductibility of acquisition earnout costs.

Q & A Highlights

Q: What are you hearing from customers about confidence in launching new products and entering new markets amidst political and economic uncertainty? A: Thomas Monahan, CEO: Volatility and change create opportunities for us. Clients are questioning if they have the right leaders and strategies. By staying close to clients and understanding their needs, we can convert these challenges into growth for our business.

Q: How are you managing your internal sales-generating headcount across different businesses? A: Thomas Monahan, CEO: We plan to grow headcount in line with the revenue growth targets set at our investor day. While technology and senior productivity provide leverage, new headcount is essential for growth.

Q: Are there any geographic or industry verticals showing particular strength or weakness? A: Nirupam Sinha, CFO: We've seen strong performance across the board, especially in North America. Europe is slightly more cautious, but overall, industry performance remains robust, with consumer confirms being slightly less robust.

Q: Can you discuss the drivers of anticipated adjusted EBITDA margin expansion in 2025? A: Nirupam Sinha, CFO: Margin expansion is expected primarily from non-search businesses as we refine offerings to better align with client needs. We aim for consistent performance and leverage shared corporate costs.

Q: Have you factored any meaningful impact from currency into the first quarter of 2025 revenue outlook? A: Nirupam Sinha, CFO: No significant currency impact has been factored into the 2025 outlook, as there was minimal impact at the end of 2024.

Q: Are you seeing any trends in C-suite turnover, and how does it compare to historical levels? A: Thomas Monahan, CEO: C-suite turnover remains consistent with historical levels. Our teams are effectively engaging with clients and winning business, maintaining strong client relationships.

Q: How might changes in US federal government spending impact your business? A: Thomas Monahan, CEO: Federal spending is immaterial to our business. However, changes create opportunities as clients reassess their needs, often requiring new skills and leadership, which we can support.

Q: How does potential M&A activity factor into your fourth-quarter guidance? A: Thomas Monahan, CEO: M&A activity is not a significant factor in our guidance. While there's optimism for regulatory relief, interest rates remain high, affecting deal attractiveness. However, clients are adapting to operate under these conditions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.