UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-25837
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
36-2681268
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
233 South Wacker Drive, Suite 4900, Chicago, Illinois 60606-6303
(Address of principal executive offices) (Zip Code)
(312) 496-1200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange On Which Registered
Common Stock, $.01 par value
HSII
The Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer," “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated Filer
☒
Non-Accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15. U.S. C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s Common Stock held by non-affiliates (excludes shares held by executive officers, directors and beneficial owners of 10% or more of the registrant’s
outstanding Common Stock) on June 28, 2024 was approximately $527,101,000 based upon the closing market price of $31.58 on that date of a share of Common Stock as reported on the Nasdaq
Global Stock Market. As of February 27, 2025, there were 20,409,835 shares of the Company’s Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 22, 2025, are incorporated by reference into Part III of this Form 10-K.
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
9
Item 1B.
Unresolved Staff Comments
17
Item 1C.
Cybersecurity
17
Item 2.
Properties
18
Item 3.
Legal Proceedings
18
Item 4.
Mine Safety Disclosures
19
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
20
Item 6.
Reserved
21
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
36
Item 8.
Financial Statements and Supplementary Data
37
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
75
Item 9A.
Controls and Procedures
75
Item 9B.
Other Information
76
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
76
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
77
Item 11.
Executive Compensation
77
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
77
Item 13.
Certain Relationships and Related Transactions, and Director Independence
77
Item 14.
Principal Accountant Fees and Services
77
PART IV
Item 15.
Exhibit and Financial Statements
78
Item 16.
Form 10-K Summary
81
Signatures
82
2
PART I
ITEM 1. BUSINESS
Overview
Heidrick & Struggles International, Inc. (“Heidrick & Struggles”) is a human capital leadership advisory firm providing executive search, consulting and
on-demand talent services to businesses and business leaders worldwide to help them to improve the effectiveness of their leadership teams. When we use the
terms “Heidrick & Struggles,” “the Company,” “we,” “us” and “our,” in this Form 10-K, we mean Heidrick & Struggles International, Inc. a Delaware
corporation, and its consolidated subsidiaries. We provide our services to a broad range of clients through the expertise of over 500 consultants located in
major cities around the world. Heidrick & Struggles and its predecessors have been leadership advisors for more than 70 years. Heidrick & Struggles was
formed as a Delaware corporation in 1999 when two of our predecessors merged to form Heidrick & Struggles.
Our service offerings include the following:
Executive Search. We partner with our clients - respected organizations across the globe - to help them build and sustain the best leadership teams in the
world, with a specialized focus on the placement of top-level senior executives. Through our unique relationship-based, data-driven approach, we help our
clients find the right leaders, set them up for success, and accelerate their and their team’s performance.
We believe focusing on top-level senior executives offers several competitive advantages including access to and influence with key decision makers,
increased potential for recurring search and consulting engagements, higher fees per search, enhanced brand visibility, and a leveraged global footprint.
Working at the top of client organizations also facilitates the attraction and retention of high-caliber consultants who desire to serve top industry executives
and their leadership needs. Our executive search services derive revenue through the fees generated for each search engagement, which generally are based on
the annual compensation for the placed executive. We provide our Executive Search services primarily on a retained basis.
We employ a global approach to executive search built on better insights, more data and faster decision making facilitated by the use of our Heidrick
Leadership Framework and Heidrick Connect. Our Heidrick Leadership Framework allows clients to holistically evaluate a candidate's pivotal experience and
expertise, leadership capabilities, agility and potential, and culture fit and impact, thereby allowing our clients to find the right person for the role. We
supplement our Heidrick Leadership Framework through a series of additional online tools including our Leadership Accelerator, Leadership Signature and
Culture Signature assessments. Heidrick Connect, a completely digital, always available client experience portal, allows our clients to access talent insights for
each engagement, including the Heidrick Leadership Framework and other internally developed assessment tools. In response to working remotely, our
Executive Search teams employed Heidrick Connect to operate effectively and efficiently while engaging virtually with our clients. Additionally, we have
introduced upgrades to Heidrick Connect, resulting in greater flexibility, increased productivity and the ability to deliver more insights to our clients.
The executive search industry consists of several thousand executive search firms worldwide. Executive search firms are generally separated into two
broad categories: retained search and contingency search. Retained executive search firms fulfill their clients’ senior leadership needs by identifying
potentially qualified candidates and assisting clients in evaluating and assessing these candidates. Retained executive search firms generally are compensated
for their services regardless of whether the client employs a candidate identified by the search firm and are generally retained on an exclusive basis. Typically,
retained executive search firms are paid a retainer for their services equal to approximately one-third of the estimated first year compensation for the position
to be filled. In addition, if the actual compensation of a placed candidate exceeds the estimated compensation, executive search firms often are authorized to
bill the client for one-third of the excess. In contrast, contingency search firms are compensated only upon successfully placing a recommended candidate.
We are a retained executive search firm. Our search process typically consists of the following steps:
•
Analyzing the client’s business needs in order to understand its organizational structure, relationships and culture, advising the client as to the
required set of skills and experiences for the position, and identifying with the client the other characteristics desired of the successful candidate;
•
Selecting, contacting, interviewing and evaluating candidates on the basis of experience and potential cultural fit with the client organization;
3
•
Presenting confidential written reports on the candidates who potentially fit the position specification;
•
Scheduling a mutually convenient meeting between the client and each candidate;
•
Completing reference checks on the final candidate selected by the client; and
•
Assisting the client in structuring compensation packages and supporting the successful candidate’s integration into the client team.
On-Demand Talent. Our on-demand services provide clients seamless on-demand access to top independent talent, including professionals with deep
industry and functional expertise for interim leadership roles and critical, project-based initiatives. Our unique model delivers the right independent talent on
demand by blending proprietary data and technology with a dedicated Talent Solutions team. In February 2023, we acquired Atreus Group GmbH ("Atreus"),
a leading provider of executive interim management in Germany, allowing us to establish and grow our on-demand talent presence in continental Europe. The
On-Demand Talent segment represented approximately 15% of our net revenue in 2024.
Heidrick Consulting. We partner with organizations through Heidrick Consulting to unlock the power of their people. Our tools and experts use data and
technology designed to bring science to the art of human capital development and organizational design. Our services allow our clients to accelerate their
strategies and the effectiveness of individual leaders, teams and organizations as a whole. In April 2023, we acquired businessfourzero, a next generation
consultancy specializing in developing and implementing purpose-driven change, which complements our existing culture shaping services to offer a broader,
more robust set of leadership advisory solutions.
Heidrick Consulting offers our clients impactful approaches to human capital development through a myriad of solutions, ranging from leadership
assessment and development, team and organization acceleration, digital acceleration and innovation, diversity and inclusion advisory services, and culture
shaping. Applying our deep understanding of the behaviors and attributes of leaders across many of the world’s premier companies, we guide our clients as
they build a thriving culture of future-ready leadership. These premium services and offerings, which complement our Executive Search expertise,
significantly contribute to our ability to deliver a full-service human capital consulting solution to our clients.
Our consulting services generate revenue primarily through the professional fees generated for each engagement which are generally based on the size of
the project and scope of services. Our Heidrick Consulting teams have pivoted to create new digital solutions for Leadership Assessments, Team Acceleration,
and Organization and Culture Acceleration that can be delivered virtually. The Heidrick Consulting segment represented approximately 10% of our net
revenue in 2024.
Organization
Our organizational structure, which is arranged by geography, service offering and industry and functional practices, is designed to enable us to better
understand our clients’ cultures, operations, business strategies, industries and regional markets for leadership talent.
Geographic Structure. We provide senior-level executive search and consulting services to our clients worldwide through a network of 63 offices in 30
countries. Each office size varies; however, major locations are staffed with consultants, research associates, administrative assistants and other support staff.
Administrative functions are centralized where possible, although certain support and research functions are situated regionally because of variations in local
requirements.
Information by Geography. We operate our Executive Search services in three geographic regions, each of which is reported as a separate reporting
segment: the Americas (which includes the countries in North and South America); Europe (which includes the continents of Europe and Africa); and Asia
Pacific (which includes Asia and the region generally known as the Middle East). Our On-Demand Talent and Heidrick Consulting reporting segments operate
globally.
Americas Executive Search. As of December 31, 2024, we had 215 consultants in our Americas segment. The largest offices in this segment, as defined
by net revenue, are located in New York, Boston, and Chicago.
Europe Executive Search. As of December 31, 2024, we had 124 consultants in our Europe segment. The largest countries in this segment, as defined by
net revenue, are the United Kingdom, Germany, and France.
4
Asia Pacific Executive Search. As of December 31, 2024, we had 79 consultants in our Asia Pacific segment. The largest countries in this segment, as
defined by net revenue, are Australia, the United Arab Emirates, and China (including Hong Kong).
On-Demand Talent. The largest countries in this segment, as defined by net revenue, are the Germany, the United States, and the United Kingdom.
Heidrick Consulting. As of December 31, 2024, we had 85 consultants in our Heidrick Consulting segment. The largest countries in this segment, as
defined by net revenue, are the United States, the United Kingdom, and United Arab Emirates.
The relative percentages of net revenue attributable to each segment were as follows:
Year Ended December 31,
2024
2023
2022
Executive Search
Americas
51 %
51 %
57 %
Europe
15 %
16 %
16 %
Asia Pacific
9 %
9 %
11 %
On-Demand Talent
15 %
15 %
9 %
Heidrick Consulting
10 %
9 %
7 %
For financial information relating to each segment, see Note 18, Segment Information, in the Notes to Consolidated Financial Statements.
Global Industry Practices. Our executive search and consulting businesses operate in six broad industry groups listed below. These industry categories
and their relative sizes, as measured by billings for 2024, 2023, and 2022, are as follows:
Percentage of Billings
Global Industry Practices
2024
2023
2022
Financial Services
26 %
26 %
27 %
Industrial
23
24
20
Global Technology & Services
20
19
23
Consumer Markets
16
17
16
Healthcare & Life Sciences
12
11
11
Social Impact
3
3
3
100 %
100 %
100 %
Within each broad industry group are a number of industry sub-sectors. Consultants often specialize in one or more sub-sectors to provide clients with
market intelligence and candidate knowledge specific to their industry. For example, within the Financial Services sector, our business is diversified amongst a
number of industry sub-sectors including Asset & Wealth Management, Consumer & Commercial Finance, Commodities, Corporate and Transaction Banking,
Global Markets, Hedge Fund, Infrastructure, Investment Banking, Insurance, Private Equity Investment Professionals and Real Estate.
We service our clients with global industry interests and needs through unified global executive search teams who specialize in industry practices. This
go-to-market strategy allows us to leverage our global diversity and market intelligence and is designed to provide better client service. Each client is served
by one global account team, which we believe is a key differentiator from our competition.
Global Functional Practices. Our Executive Search consultants also specialize in searches for specific “C-level” functional positions, which are roles that
generally report directly to the chief executive officer.
Our Global Functional Practices include Chief Executive Officer & Board of Directors; Human Resources Officers; Financial Officers; Digital Officers;
Technology Officers; Legal, Risk, Compliance & Government Affairs; Marketing, Sales and Strategy Officers and Supply Chain and Operations Officers.
5
Our team of Executive Search consultants may service clients from any one of our offices around the world. For example, an executive search for a chief
financial officer of an industrial company located in the United Kingdom may involve an executive search consultant in the United Kingdom with an existing
relationship with the client, another executive search consultant in the United States with expertise in our Industrial practice and a third executive search
consultant with expertise in recruiting chief financial officers. This same industrial client may also engage us to perform skill-based assessments for each of its
senior managers, which could require the expertise of one of our leadership advisory consultants trained in this service.
Client Base
For many of our clients, our global access to and knowledge of regional and functional markets and candidate talent is an important differentiator of our
business. Our clients generally fall into one of the following categories:
•
Fortune 1000 companies;
•
Major U.S. and non-U.S. companies;
•
Middle market and emerging growth companies;
•
Private equity firms;
•
Governmental, higher education and not-for-profit organizations; and
•
Other leading private and public entities.
Clients and Marketing
Our consultants market the firm’s executive search and consulting services through two principal means: targeted client calling and industry networking
with clients and referral sources. These efforts are supported by proprietary databases, which provide our consultants with information as to contacts made by
their colleagues with particular referral sources, candidates and clients. In addition, we benefit from a significant number of referrals generated by our
reputation for high quality service and successfully completed assignments, as well as repeat business resulting from our ongoing client relationships.
In support of client calling and networking, the practice teams as well as individual consultants also author and publish articles and white papers on a
variety of leadership and talent topics and trends around the world. Our consultants often present research findings and talent insights at notable conferences
and events as well. Our insights are sometimes acknowledged by major media outlets and trade journalists. These efforts aid in the marketing of our services
as well.
Either by agreement with the clients or to maintain strong client relationships, we may refrain from recruiting employees of a client, or possibly other
entities affiliated with that client, for a specified period of time but typically not more than one year from the commencement of a search. We seek to mitigate
any adverse effects of these off-limits arrangements by strengthening our long-term relationships, allowing us to communicate our belief to prospective clients
that we can conduct searches effectively notwithstanding certain off-limits arrangements.
No single client accounted for more than 2% of our net revenue in 2024, and none more than 1% in 2023 and 2022. As a percentage of total revenue, our
top ten clients in aggregate accounted for approximately 7% in 2024, 7% in 2023 and 6% in 2022.
Information Management Systems
We rely on technology to support our consultants and staff in the search process. We employ a global approach to executive search built on better insights,
more data and faster decision making facilitated by the use of our proprietary Heidrick Leadership Framework and Heidrick Connect. Our Heidrick
Leadership Framework allows clients to holistically evaluate a candidate's pivotal experience and expertise, leadership capabilities, agility and potential, and
culture fit and impact, thereby allowing our clients to find the right person for the role. We supplement our Heidrick Leadership Framework through a series of
additional online tools including our Leadership Accelerator, Leadership Signature and Culture Signature assessments. Heidrick Connect, a completely digital,
always available, client experience portal allows our clients to access talent insights for each engagement, including the Heidrick Leadership Framework and
other proprietary assessment tools. In response to working remotely, our Executive Search teams employed Heidrick Connect to operate effectively and
efficiently while engaging
6
virtually with our clients. Additionally, we have introduced upgrades to Heidrick Connect, resulting in greater flexibility, increased productivity and the ability
to deliver more insights to our clients.
Our consulting business’ proprietary Web-based system, Culture Connect, is integral to the culture-shaping process. This technology platform enables our
consultants to administer, analyze and interpret online Corporate Culture Profiles™ surveys to develop clarity around team and organizational need and
desired outcomes. In addition, we gather data using our online Culture Impact Survey™ to determine which culture-shaping concepts are being utilized by
individuals and the team as a whole. Our Heidrick Consulting teams have pivoted to create new digital solutions for Leadership Assessments, Team
Acceleration, and Organization and Culture Acceleration that can be delivered virtually.
Competition
The executive search industry is highly competitive. While we face competition to some degree from all firms in the industry, we believe our most direct
competition comes from four established global retained executive search firms that conduct searches primarily for the most senior-level positions within an
organization. In particular, our competitors include Egon Zehnder International, Korn Ferry, Russell Reynolds Associates, and Spencer Stuart. To a lesser
extent, we also face competition from smaller boutique firms that specialize in certain regional markets or industry segments and online firms. Additionally,
our clients or prospective clients may decide to perform executive searches using in-house personnel. Each firm with which we compete is also a competitor in
the marketplace for effective search consultants.
Overall, the search industry has relatively few barriers to entry; however, there are higher barriers to entry to compete with global retained executive
search firms that can provide leadership consulting services at the senior executive level. At this level, clients rely more heavily on a search firm’s reputation,
global access and the experience level of its consultants. We believe that the segment of executive search in which we compete is more quality-sensitive than
price-sensitive. As a result, we compete on the level of service we offer, reflected by our client services specialties and, ultimately, by the quality of our search
results. We believe that our emphasis on senior-level executive search, the depth of experience of our search consultants and our global presence enables us to
compete favorably with other executive search firms.
Competition in the leadership consulting markets in which we operate is highly fragmented, with no universally recognized market leaders.
Seasonality
There is no discernible seasonality in our business, although as a percentage of total annual net revenue, the first quarter is typically the lowest. Revenue
and operating income have historically varied by quarter and are hard to predict from quarter to quarter. In addition, the volatility in the global economy and
business cycles can impact our quarterly revenue and operating income.
Human Capital
As a premier provider of global leadership advisory services, our success is driven by our world class team of colleagues. We have intentionally built
teams with deep expertise, distinctive capabilities and a shared commitment to exceptional client service, ensuring we bring the best insights and solutions to
those we serve. By cultivating a culture of inclusion, collaboration and excellence - investing in development across the phases of our employees’ career
progression - we attract and retain top talent and empower them to help clients solve their most difficult leadership challenges.
Our Global Footprint. As of December 31, 2024, we employed 2,201 individuals, represented on geographic basis by 1,152 in the Americas, 745 in
Europe and Africa, and 304 in Asia Pacific and the Middle East. Within our operating segments, we employed 652 individuals in the Americas, 424 in Europe
and Africa, 240 in Asia Pacific and the Middle East, 225 in On-Demand Talent, 319 in Heidrick Consulting and 341 in Global Operations Support. Our
headcount includes 503 consultants (418 focused on Executive Search and 85 focused on Heidrick Consulting), 565 associates and engagement managers, and
1,133 other search, consulting, on-demand talent, support, and Global Operations Support employees. As of December 31, 2024, women represented 64% of
our global workforce and people of color represented 26% of our workforce in the United States.
Talent Development and Management. We are committed to the professional development of our employees and promoting a continuous learning culture
within our firm. Our learning and development programs have been created with the goal of building and/or enhancing internal leadership, business
development, account management, client service, and leadership skills among our employees. In 2024, we delivered over 650 hours of instructor-led,
facilitated training to our
7
colleagues globally, and employees completed over 6,400 self-paced courses. Our programming was deployed in both virtual and in-person formats and
includes live and on-demand eLearning. These programs are regularly updated to align with our evolving strategic priorities, shifting client needs and
employee feedback.
For instance, in 2024, we launched One Heidrick Learning, a global virtual learning series to develop soft and hard skills, share knowledge across our
client solution areas, and provide opportunities for employees to connect with colleagues at all levels across the globe. As part of our talent management
framework, we conduct a mid-year review and a thorough performance review process at year-end, as well as periodic talent reviews across the organization,
which are designed to track performance, agree on development needs, cultivate succession potential for leadership roles and identify broader talent gaps.
Additionally, we encourage our employees to explore internal career mobility opportunities, offering additional options with their career path and development
opportunities within the firm.
Culture and Engagement. We are collectively focused on fostering a culture that brings a spectrum of ideas and experiences to our work and empowers
our colleagues to collaborate across geographies and solution areas for their own enrichment and for the benefit of our clients. By integrating principles of
inclusive leadership and fostering a sense of belonging and engagement, we believe we cultivate wide-ranging ideas and perspectives and improve business
outcomes. At its core, this approach is about getting the best out of everyone, across the whole organization. We design our inclusion and belonging initiatives
to improve employee engagement and satisfaction, accelerate our business strategy and ultimately drive sustainable growth and employee retention.
A key component of our employee engagement strategy is our voice of the employee survey. These surveys offer employees the opportunity to regularly
and anonymously comment on their experience at Heidrick & Struggles. We use the tool to evaluate various areas of the employee experience and we leverage
the results to evaluate and inform programming opportunities, development needs and managerial performance. Data from the surveys is shared anonymously
with key leaders across geographies, practices and businesses, and leaders are encouraged to engage with their teams on the themes reflected in the survey
results. In 2024, we conducted three firm-wide surveys with a total aggregate employee participation of 85%.
Employee Total Rewards and Well-Being. We are committed to supporting our employees both professionally and personally as they continue to navigate
a rapidly changing world. We are committed to compensating our employees fairly at all levels, based on demonstrated capabilities and achievements,
experience and superior performance, irrespective of gender, race, or other demographic factors. We regularly benchmark our compensation practices against
industry standards and best practices to ensure that we remain competitive. Our competitive global benefits are tailored to each country we operate in,
reflecting local market standards and cultural needs. Our benefits strategy focuses on the overall well-being of our colleagues and their families, offering
support across physical, emotional, financial, and social dimensions. One of the objectives of our benefits program is to help our employees in their efforts to
manage their professional and personal lives in a way that is sustainable over the long-term. We learned from our engagement surveys that employees highly
value some flexibility and choice in the way they work – as a result, we crafted a hybrid approach to their work, which allows employees to work remotely
part of the time (with variations depending upon location and role) and promotes purposeful time in the office together. We believe stronger bonds are formed
in person and that bringing teams together with intentionality facilitates development and collaboration in support of our go-to-market strategy.
Participation in our Geographic Communities. We are proud members and enthusiastic participants in supporting the communities where we live and
work. Our Global Philanthropic Committee provides a coordinated, global approach to supporting philanthropic causes and endeavors that impact our
employees, clients and communities. In 2024, employees participated in our 6th Global Day of Service where over 900 colleagues in over 45 offices around
the world donated over 4,000 hours to and raised funds for over 50 non-profit organizations. We also support our employees who bring attention to
philanthropic causes and organizations that they engage with independently.
Regulation
We are subject to the U.S. securities laws and general corporate and commercial laws and regulations of the locations which we serve. These include
regulations regarding anti-bribery, privacy and data protection, intellectual property, data security, data retention, personal information, economic or other
trade prohibitions or sanctions, and classification of workers as employees or independent contractors, which is especially relevant to our On-Demand Talent
segment. In particular, we are subject to federal, state, and foreign laws regarding privacy and protection of people's data. Foreign data protection, privacy, and
other laws and regulations can be more restrictive than those in the United States. Most notably, certain aspects of our business are subject to the EU's and
UK's General Data Protection Regulation ("GDPR"). We have a global privacy program to facilitate our ongoing efforts to comply with global privacy
regulations, including GDPR and other rapidly emerging privacy and data protection laws in countries such as Brazil and China, or states in the U.S such as
California. U.S. federal and state and
8
foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be
subject to change.
Available Information
We maintain an Internet website at http://www.heidrick.com. We make available free of charge through the investor relations section of our website annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934 ("Exchange Act"), as well as proxy statements, as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). Also posted on our website, and available in
print upon request of any shareholder to our Investor Relations Officer, are our certificate of incorporation and by-laws, charters for our Audit and Finance
Committee, Human Resources and Compensation Committee and Nominating and Board Governance Committee, our Director Independence Standards, our
Corporate Governance Guidelines, our Policy on Resolution of Conflicts of Interest for Directors and Executive Officers, our Related Party Transactions
Policy, our Misconduct Clawback Policy, our Policy on Recoupment of Incentive Compensation, our Insider Trading Policy, and our Code of Ethics governing
our directors, officers and employees. Within the time period required by the SEC, we will post on our website any amendment to the Code of Ethics and any
waiver applicable to any executive officer, director or senior financial officer.
In addition, our website includes information concerning purchases and sales of our equity securities by our officers and directors, as well as disclosure
relating to certain non-GAAP financial measures (as defined in the SEC’s Regulation G) that we may make public orally, telephonically, by webcast, by
broadcast or by similar means from time to time. The information contained on or accessible through our website or any other website that we may maintain is
not incorporated by reference into and is not part of this Form 10-K or any other report filed with the SEC.
Our Investor Relations Officer can be contacted at Heidrick & Struggles International, Inc., 233 South Wacker Drive, Suite 4900, Chicago, Illinois,
60606, Attn: Investor Relations Officer, telephone: 312-496-1200,
e-mail: InvestorRelations@heidrick.com.
ITEM 1A. RISK FACTORS
In addition to other information in this Form 10-K, the following risk factors should be carefully considered in evaluating our business because such
factors may have a material impact on our business, operating results, cash flows and financial condition. The risks and uncertainties described below are not
the only ones we face. Additional risks and uncertainties of which we are unaware, or that we currently believe are not material, may also become important
factors that adversely affect our business.
Company Risks
Operational Risks
Any failure to attract, integrate, develop, manage, retain and motivate qualified consultants and senior leaders could cause our business, financial
condition and results of operations to suffer.
Our success depends upon our ability to attract, develop, integrate, manage, retain and motivate quality consultants with the skills and experience
necessary to fulfill our clients’ needs and achieve our operational and financial goals. We must be able to successfully hire, develop, retain and motivate
appropriate numbers of talented people with diverse skills in order to serve clients across the globe, respond quickly to rapid and ongoing changes in demand,
technology, industry and the macroeconomic environment, and continuously innovate to grow our business. Our ability to hire, develop, retain and motivate
qualified consultants could be impaired by any diminution of our reputation, disparity in compensation relative to our competitors, modifications to our total
compensation philosophy or competitor hiring programs. If we cannot attract, hire, develop and retain qualified consultants, our business, financial condition
and results of operations may suffer. Our future success also depends upon our ability to integrate newly hired consultants successfully into our operations, to
manage the performance of our consultants, and to train and incentivize them to introduce new services and solutions to clients. Failure to successfully
integrate newly hired consultants or to manage the performance of our consultants could affect our profitability by causing operating inefficiencies that could
increase operating expenses and reduce operating income. Our ability to integrate, train and motivate our consultants and senior leaders in a manner that
protects and enhances our culture could be negatively impacted by the Company’s current hybrid work arrangements, and hybrid and remote working
arrangements have also expanded the pool of other firms that may compete with us for our consultants and consultant candidates. There is also a risk that
unanticipated
9
turnover in senior leadership could stall Company activity, interrupt strategic vision or lower productive output, any of which may adversely affect our
business, financial condition and results of operations. As a result, any failure to attract, integrate, develop, manage, retain and motivate qualified consultants
and senior leaders could cause our business, financial condition and results of operations to suffer.
We may not be able to prevent our consultants from taking our clients with them to another firm, which could adversely affect our business, financial
condition and results of operations.
Our success depends upon our ability to develop and maintain strong, long-term relationships with our clients. Although we work on building these
relationships between our firm and our clients, in many cases one or two consultants have primary responsibility for a client relationship. When a consultant
leaves one executive search firm and joins another, clients who have established relationships with the departing consultant may move, and in the past have
moved, their business to the consultant’s new employer. We may also lose, and in the past have lost, clients if the departing consultant has widespread name
recognition or a reputation as a specialist in executing searches in a specific industry or management function. If we fail to retain important client relationships
when a consultant departs our firm, our business, financial condition and results of operations may be adversely affected.
Any inability to maintain our professional reputation and brand name could adversely affect our business, financial condition and results of
operations.
We depend on our overall professional reputation and brand name recognition to retain existing and secure new client relationships, and to hire and retain
qualified consultants. Our success also depends on the individual reputations of our consultants. We obtain many of our new engagements from existing
clients or from referrals by those clients. A client who is dissatisfied with our work can adversely affect our ability to secure new engagements. In turn, the
clients with which we choose to work can impact our reputation. If any factor, including the poor performance of our personnel or consultants, the loss of
relevant thought leadership, various evolving trends related to market standards and stakeholder expectations, or the actual or perceived action or position of
one of our consultants or clients, hurts our reputation or brand name, we may experience difficulties in competing successfully for both new engagements and
qualified consultants, and we may experience decreased demand for our services. Failure to maintain our professional reputation and brand name could
adversely affect our business, financial condition and results of operations.
Because certain of our clients have arrangements that restrict us from recruiting their employees, we are constrained in our ability to fill or obtain
new executive search assignments in certain cases, which could impact demand for our services and affect our results of operations or financial
condition.
Clients frequently require us to refrain from recruiting certain of their employees when conducting executive searches on behalf of other clients. These
restrictions often have time and/or geographic limitations. The specific duration and scope of the off-limits arrangements depend on the length of the client
relationship, the frequency with which the client engages us to perform searches, the number of assignments we have performed for the client and the potential
for future business with the client.
Client restrictions on recruiting their employees create constraints on our ability to fulfill certain executive searches. Additionally, if a prospective client
believes that we are overly restricted from recruiting the employees of our existing clients, these prospective clients may not engage us to perform their
executive searches. As a result, our business, financial condition and results of operations may suffer.
We rely heavily on information management systems, and if such systems experience disruptions or other failures, are not expanded and diversified
in a cost-effective and timely manner or are found to infringe the intellectual property rights of third parties, it may adversely affect the operation of
our business, results of operations and financial condition.
Our success depends upon our ability to store, retrieve, process and manage substantial amounts of information. To achieve our goals, we must ensure that
our information management systems continue to function properly, while also improving and upgrading them. Our information management systems are
subject to the risk of failure, damage, interruption, obsolescence, inadequacy and breach. Further, we may be unable to license, design and implement, in a
cost-effective and timely manner, improved information systems that allow us to compete effectively and can handle the increased demands of the planned
expansion and diversification of our business. In addition, business process reengineering efforts may result in a change in
10
software platforms and programs. Such efforts may result in an acceleration of depreciation expense over the shortened expected remaining life of the
software and present transitional problems. If it were determined or alleged that our information management systems infringe the intellectual property rights
of third parties, we could face increased costs or our ability to use such systems, or to derive all of the intended benefits from them, could be delayed, impaired
or blocked if we are unable to license such intellectual property or remedy the infringement. Problems or issues with our proprietary search system or other
factors may result in interruptions or loss in our information processing capabilities which may adversely affect our business, financial condition and results of
operations.
We are investing in new technology and intellectual property for the introduction of new products and services to our clients. Our inability to
successfully implement these new technologies, products and services could negatively affect our business, profitability and reputation.
We continue to invest in new technology and intellectual property to enhance the products and services we offer to penetrate new markets and increase
our client base. The development of new technology and intellectual property is subject to a number of risks including customer acceptance, intellectual
property infringement, obsolescence, increased expenditures for research and development and privacy and ethical considerations. The success of new product
and service introductions depends on a number of factors, including timely and effective development and market acceptance, and can be negatively impacted
by various factors such as quality issues, the risk of exposure or misuse of confidential client information or other deficiencies and the risk that our
competitors beat us to market with similar or more highly regarded products and services. The development and introduction of new products and services
may prove disruptive to our operations by placing additional demands on our employees and management team and on our information, financial, marketing,
administrative and operational systems, processes and controls. There can be no assurance that we will successfully develop new technology and intellectual
property and effectively manage future introductions and transitions of products and services. The development and management of intellectual property also
exposes us to the risk of potential misappropriation of or failure to otherwise protect our intellectual property. Furthermore, as we develop new technology
intended to allow us to derive greater insights from our data or data entrusted to us by clients, there is a risk that such technology may not be designed or
operate to produce the types or quality of results that will enable us to succeed as the market for our products and services continues to evolve, and a risk that
our new products and services will not find market acceptance due to changes in clients' needs, technology, competitive pressures, or other external factors. If
our new products and services are not successfully implemented or received by our clients, our business, financial condition and results of operations, as well
as our professional reputation, could be adversely affected.
We are dependent on third parties for the execution of certain critical functions and the failure or inability to perform on the part of one or more of
these third parties could materially and adversely affect our reputation and our business.
We do not maintain all of our technology infrastructure, and we have outsourced certain other critical applications and business processes to external
providers, including cloud-based services. The failure or inability to perform on the part of one or more of these critical suppliers or partners could cause
significant disruptions and increased costs. We are also dependent on security measures that some of our third-party vendors are taking to protect their own
systems and infrastructures. If our third-party vendors do not maintain adequate security measures, do not require their sub-contractors to maintain adequate
security measures, do not perform as anticipated and in accordance with contractual requirements, or become targets of cyber-attacks, we may experience
operational difficulties, increased costs or the exposure or inappropriate use of certain data with which we are entrusted, any of which could materially and
adversely affect our reputation and our business.
Legal, Regulatory and Compliance Risks
We face the risk of claims, including relating to alleged breaches of contractual obligations and employment-related or other laws and regulations in
the services we perform for our clients, which could result in significant liabilities.
We are exposed to potential claims with respect to the executive search process and the other services we perform for our clients. A client could assert a
claim for violations of off-limits arrangements, breaches of confidentiality agreements or professional malpractice. In addition, candidates for an executive
search and on-demand talent assignment could assert claims against us. Possible claims include failure to maintain the confidentiality of the candidate’s
employment or placement search or personal data or for unlawful discrimination or other violations of the employment laws or malpractice. The growth and
development of our other business lines bring with it the potential for similar claims as well as new types of claims from clients and client employees,
including claims of intellectual property infringement. In various countries, we are subject to data protection laws impacting the processing of candidate and
client employee information. We maintain professional liability insurance in amounts and coverage that we believe are adequate; however, we cannot
guarantee that our insurance will cover all
11
claims or that coverage will always be available. Significant liabilities in excess of, or otherwise outside, our insurance coverage could have a negative impact
on our business, financial condition and results of operations.
Data security, data privacy and data protection laws, such as GDPR, and other evolving regulations and cross-border data transfer restrictions, may
limit the use of our services and adversely affect our business.
Legal requirements relating to the collection, storage, handling, use, disclosure, transfer, and security of personal data continue to evolve, and regulatory
scrutiny in this area is increasing around the world. As a result, we are or may become subject to a variety of laws and regulations in the U.S. and abroad,
which may require us to make changes to our approach to services, solutions and/or products so as to enable the Company and/or our clients to meet new legal
requirements. Although we have a global data privacy program that is designed to address the requirements applicable to our international business, ongoing
efforts to comply with GDPR and other rapidly emerging privacy and data protection laws in countries such as Brazil and China, or states in the U.S. such as
California, has increased the complexity of our compliance operations, and could in the future entail substantial expenses, and divert resources from other
initiatives and projects. The enactment of more restrictive laws, rules or regulations could lead to more onerous obligations in our contracts, limiting our
storage, transfer and processing of data and, in some cases, make it more difficult and costly to meet client expectations, or lead to significant fines, penalties
or liabilities for noncompliance, any of which could adversely affect our business, financial condition and results of operations.
In addition, due to the uncertainty and potentially conflicting interpretations of these laws, it is possible that such laws and regulations may be interpreted
and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure
by us to comply with applicable laws or satisfactorily protect personal information could result in governmental enforcement actions, litigation, or negative
publicity, any of which could inhibit sales of our services, solutions and/or products in certain locations.
There may be adverse tax, legal, and other consequences if the independent contractor classification of our on-demand independent talent is
challenged.
We classify the interim talent available through On-Demand Talent primarily as independent contractors. In general, any time a court or administrative
agency determines that we or our clients have misclassified an on-demand consultant as an independent contractor, we or our clients could incur tax and other
liabilities for failing to properly withhold or pay taxes on the consultant’s compensation as well as potential wage and hour and other liabilities depending on
the circumstances and jurisdiction. For on-demand talent who are classified as employees, some jurisdictions impose licensing and other requirements. If a
court or administrative agency determines that we have failed to comply with these requirements, we could be subject to fines, revocation of licensure, or
other penalties.
We may become subject to administrative inquiries and audits concerning the taxation and classification of our on-demand consultants. There is often
uncertainty in the application of worker classification laws, and consequently there is risk to us and to clients that independent contractors could be deemed to
be misclassified under applicable law. The tests governing whether a service provider is an independent contractor or an employee are typically highly fact
sensitive and vary by governing law. Laws and regulations that govern the status and classification of independent contractors are also subject to change as
well as to divergent interpretations by various authorities, which can create uncertainty and unpredictability.
A misclassification determination, allegation, claim, or audit involving our on-demand consultants creates potential exposure for clients and for us,
including but not limited to reputational harm and monetary exposure arising from or relating to failure to withhold and remit taxes, unpaid wages, and wage
and hour laws and requirements (such as those pertaining to minimum wage and overtime); claims for employee benefits, social security contributions, and
workers’ compensation and unemployment insurance; claims of discrimination, harassment, and retaliation under civil rights laws; claims under laws
pertaining to unionizing, collective bargaining, and other concerted activity; and other claims, charges, or other proceedings under laws and regulations
applicable to employers and employees, including risks relating to allegations of joint employer liability. Such claims could result in monetary damages
(including but not limited to wage-based damages or restitution, compensatory damages, liquidated damages, and punitive damages), interest, fines, penalties,
costs, fees (including but not limited to attorneys’ fees), criminal and other liability, assessment, injunctive relief, or settlement, all of which could adversely
impact our business and results of operations.
12
Increased cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks could pose a risk to our systems, networks,
solutions, services and data.
Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks could pose a risk to the security of our
systems and networks and the confidentiality, availability and integrity of our data. Cybersecurity risks are constantly evolving as cybercriminals are
becoming more sophisticated and launching larger and more effective attacks that are becoming more difficult to defend against, including attacks involving
the malicious use of artificial intelligence. Cybersecurity threats range from ransomware, to attacks from more advanced and persistent sources, such as
organized cybercriminals, to improper conduct by our employees. Furthermore, the Company's hybrid work arrangements may make it more vulnerable to
targeted activity from cybercriminals or other nefarious actors and may increase the risk of cybersecurity incidents or other security breaches, including
because hybrid work arrangements involve reliance on cloud technology and remote connectivity features which have been increasingly targeted by threat
actors. As described in Part I, Item 1C. Cybersecurity, we have an incident response program in place designed to detect and respond to cybersecurity
incidents. However, we have, from time to time, experienced threats to and infringement of our data, policies and systems in the ordinary operation of our
business, and we remain vulnerable to additional known or unknown threats. We also have access to sensitive, confidential or personal data or information that
is subject to privacy and security laws, regulations and client-imposed controls. Despite our efforts to protect sensitive, confidential or personal data or
information, we may be vulnerable to security breaches, theft, lost data, employee errors and/or malfeasance that could potentially lead to the compromising
or other unauthorized use of sensitive, confidential or personal data or information, improper use of our systems or networks, or unauthorized access, use,
disclosure, modification or destruction of information. In addition, a cybersecurity incident could result in other negative consequences, including disruption
of our business operations for sustained periods of time, damage to our reputation or competitiveness, significant remediation costs, increased compliance
costs, and litigation or regulatory action, which could result in fines and/or penalties, any of which could result in a negative impact to our business, results of
operations and financial condition. Further, cybersecurity incidents affecting our clients could interrupt the operation of their businesses in a manner that could
reduce or delay our clients’ demand for our services, which could impact our results of operations.
Industry and General Economic Risks
Our net revenue and operating expenses may be affected by the impact of adverse macroeconomic or labor market conditions, including the impacts
of inflation and effects of geopolitical instability, on demand for our services.
Demand for our services is affected by global macroeconomic conditions and the general level of economic activity and strength of the labor markets in
the geographic regions in which we and our clients operate. During periods of slowed economic activity, many companies hire fewer permanent employees,
reduce the levels at which they compensate their employees (which generally reduces the amount of revenue we generate as a result of a successful
placement), choose to rely on their own human resources departments rather than third-party search firms to find talent or cut back on human resource
initiatives or consulting engagements, all of which could negatively affect our financial condition and results of operations, including specifically our net
revenue and operating expenses. We also may experience more competitive pricing pressure during periods of economic decline or unfavorable labor market
conditions. If unfavorable changes in economic conditions occur, or if there are prolonged weaknesses in the labor markets in which we and our clients
operate, including as a result of structural changes in workforce requirements in response to emerging technologies such as artificial intelligence, our business,
financial condition and results of operations could suffer. Accelerated and pronounced economic pressures, such as the recent inflationary cost pressures, may
negatively impact our expense base by increasing the costs we pay, including for services and employees, and may negatively impact revenues if our efforts to
compensate for higher costs by raising our prices cause clients to reduce the volume of business they do with us or reduce our ability to attract new clients.
Geopolitical instability, including actions by the new U.S. presidential administration and Congress, may also cause employers to reduce hiring and otherwise
limit new strategic initiatives, which may also affect the demand for our services and ultimately impact our results of operations and financial condition.
We face aggressive competition and if we are unable to meet these competitive challenges, our business, financial condition and results of operations
may be materially and adversely affected.
The global executive search industry is highly competitive and fragmented. We compete with other large global executive search firms, smaller specialty
firms and, more recently with online firms and social media. Specialty firms may focus on regional or functional markets or on particular industries to a
greater extent than we do. Some of our competitors may possess greater resources, greater name recognition and longer operating histories than we do in
particular markets or practice areas, or be willing to reduce their fees or agree to alternative pricing practices in order to attract clients and increase market
share. Our competitors may be further along in the development and design of technological solutions to meet client requirements,
13
including solutions involving generative artificial intelligence or other emerging technologies, and our new products and services could encounter significant
competition from more mature participants in those areas. We may also face increasing competitive pressure as a result of our clients leveraging such
technologies in-house to perform all or a portion of the services we offer in a manner that ultimately decreases the demand for our services, which could in
turn require us to reduce our fees.
There are limited barriers to entry into the search industry and new search firms continue to enter the market. Executive search firms that have a smaller
client base than we do may be subject to fewer off-limits arrangements. In addition, our clients or prospective clients may decide to perform executive
searches using in-house personnel. Also, as online firms continue to evolve, they may develop offerings similar to or more expansive than ours, thereby
increasing competition for our services or more broadly disrupting the executive search industry. As a result, we may not be able to continue to compete
effectively with existing or potential competitors and we may not be able to implement our leadership strategy effectively.
Additionally, our on-demand talent and consulting services likewise face aggressive competition. We compete with other firms which offer services
competitive with those we offer. Certain of these competitors may have more resources than we do and may be able to innovate and provide services faster
than we can.
Our inability to meet these competitive challenges could have an adverse effect on our business, financial condition and results of operations.
A significant currency fluctuation between the U.S. dollar and other currencies could adversely impact our operating income.
With our operations in the Americas, Europe and Asia Pacific, we conduct business using various currencies. In 2024, approximately 41% of our net
revenue was generated outside the United States. We do not enter into hedging transactions relating to our exposure to currency fluctuations. As we typically
transact business in the local currency of our subsidiaries, our profitability may be impacted by the translation of foreign currency financial statements into
U.S. dollars. Significant long-term fluctuations in relative currency values, in particular an increase in the value of the U.S. dollar against foreign currencies,
could have an adverse effect on our financial condition and results of operations. Currency fluctuations positively impacted our net revenues less than 0.1%
and positively impacted our operating income by 0.6% for the year ended December 31, 2024.
Our ability to access additional credit could be limited, which may negatively impact our business.
Banks can be expected to strictly enforce the terms of our credit agreement. Although we are currently in compliance with the financial covenants of our
revolving credit facility, a deterioration of economic conditions may negatively impact our business resulting in our failure to comply with these covenants,
which could limit our ability to borrow funds under our credit facility or from other borrowing facilities in the future. In such circumstances, we may not be
able to secure alternative financing or may only be able to do so at significantly higher costs.
General Risk Factors
Our multinational operations may be adversely affected by social, geopolitical, regulatory, legal, economic and weather-related or other natural
disaster risks, and if we are unable to quickly and completely recover from any associated disruption to our business, we may experience financial
losses and reputational damage.
We generate substantial revenue outside the United States. We offer our services through a network of offices in 30 countries around the world excluding
our affiliates. Our ability to effectively serve our clients is dependent upon our ability to successfully leverage our operating model across all of these and any
future locations, maintain effective management controls over all of our locations to ensure, among other things, compliance with applicable laws, rules and
regulations, and instill our core values in all of our personnel at each of these and any future locations. We are exposed to the risk of changes in social,
political, legal and economic conditions inherent in our operations, which could have a significant impact on our business, financial condition and results of
operations. In addition, we conduct business in countries where the legal systems, local laws and trade practices are unsettled and evolving. Commercial laws
in these countries are sometimes vague, arbitrary and inconsistently applied. Under these circumstances, it is difficult for us to determine at all times the exact
requirements of such local laws. If we fail to comply with local laws, our business, financial condition and results of operations could suffer. In addition, the
global nature of our operations poses challenges to our management, and financial and accounting systems. Failure to meet these challenges could adversely
affect our business, financial condition and results of operations.
14
Our inability to quickly and completely recover should we experience a disaster or other business continuity problem could result in material financial
loss, loss of human capital, regulatory actions, reputational harm or legal liability. Natural disasters and unusual weather conditions, pandemic outbreaks,
terrorist acts, global political events and other serious catastrophic events could disrupt business and otherwise materially adversely affect the Company’s
business and financial condition. For instance, natural disasters or unusual weather conditions, which have increased in frequency and severity as a result of
changing climate patterns, may reduce our consultants’ and other employees’ ability to travel or damage or impair access to our data servers that we use to
provide consistent services to our clients.
The ongoing war in Ukraine has had a number of adverse effects for businesses including a worsening of economic conditions in Europe and more
broadly, heightened cybersecurity threats, volatility in foreign exchange rates, inflationary pressures and disruptions in energy, food and commodity markets.
Following Russia’s invasion of Ukraine, we ceased our operations in Russia, which represented an immaterial amount of our total revenue. Additionally,
conditions in Israel and the Gaza strip may adversely affect our business, especially our operations in Tel Aviv, which also represented an immaterial amount
of our total revenue. Continued instability involving Israel and the Gaza strip, including any further hostilities, political instability, terrorist activities or the
interruption of trade or transport may adversely affect our business, financial condition and results of operations.
There is substantial uncertainty about the future impact of these conflicts and the response of the international community on regional economies and the
global economy generally, including the risk that the conflicts could escalate or expand, and the risk of a continuation or escalation of the effects described
above, and heightened geopolitical instability generally. Any of these events or trends could have a material adverse effect on our business and operating
results, particularly our European, Asia Pacific and Middle East operations, as well as on the business and operations of our clients, which could, in turn,
affect demand for our services. In addition, the continuation or extent to which the Russia-Ukraine war or the conflict in Israel and the Gaza strip may
intensify or expand could exacerbate or heighten many of the other risk factors described in this section.
Unfavorable tax law changes and tax authority rulings may adversely affect our results.
We are subject to income taxes in the United States and in various foreign jurisdictions. Domestic and international tax liabilities are subject to the
allocation of income among various tax jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings among countries
with differing statutory tax rates, or changes in the valuation allowance of deferred tax assets or tax laws. The amount of income taxes and other taxes are
subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. authorities. If these audits result in assessments different from
amounts recorded, future financial results may include unfavorable tax adjustments.
We may not be able to generate sufficient profits to realize the benefit of our net deferred tax assets.
We establish valuation allowances against deferred tax assets when there is insufficient evidence that we will be able to realize the benefit of these
deferred tax assets. We reassess our ability to realize deferred tax assets as facts and circumstances dictate. If after future assessments of our ability to realize
the deferred tax assets we determine that a lesser or greater allowance is required, we record a reduction or increase to the income tax expense and the
valuation allowance in the period of such determination. The uncertainty surrounding the future realization of our net deferred tax assets could adversely
impact our financial condition and results of operations.
We may not be able to align our cost structure with net revenue, which could adversely affect our business, financial condition and results of
operations.
We must ensure that our costs and workforce continue to be in proportion to demand for our services. Failure to align our cost structure, including cost
increases due to inflationary pressures and higher labor costs due to recent historically low levels of unemployment, and headcount with net revenue could
adversely affect our business, financial condition and results of operations. Changes in our mix of revenue also affect our profitability, and as we continue to
diversify our businesses, it places additional pressure on our ability to appropriately align our cost structure and headcount with our operations, which could
adversely affect our operating margins and our ability to invest in future growth.
We have experienced, and may in the future experience impairment of our goodwill, other intangible assets and other long-lived assets, which could
have an adverse impact on our business, financial condition and results of operations.
15
In accordance with generally accepted accounting principles, we perform assessments of the carrying value of our goodwill at least annually, and we
review our goodwill, other intangible assets and other long-lived assets for impairment whenever events occur or circumstances indicate that a carrying
amount of these assets may not be recoverable. These events and circumstances include a significant change in business climate, attrition of key personnel,
changes in financial condition or results of operations, a prolonged decline in our stock price and market capitalization, competition, and other factors. In
performing these assessments, we must make assumptions regarding the estimated fair value of our goodwill and other intangible assets. These assumptions
include estimates of future market growth and trends, forecasted revenue and costs, capital investments, discount rates, and other variables. If the fair market
value of one of our reporting units or other long-term assets is less than the carrying amount of the related assets, we would be required to record an
impairment charge. We recognized an aggregate goodwill impairment charge of $59.5 million in 2024. Due to continual changes in market and general
business conditions, we cannot predict whether, and to what extent, our goodwill and long-lived intangible assets may be impaired in future periods. Any
resulting impairment loss could have an adverse impact on our business, financial condition and results of operations.
Our ability to execute and integrate future acquisitions, if any, could negatively affect our business and profitability.
Our future success may depend in part on our ability to complete the integration of acquisition targets successfully into our operations, including our
recent acquisitions of Business Talent Group and Atreus. The process of executing and integrating an acquired business subjects us to a number of risks,
including:
•
diversion of management attention;
•
failure to successfully further develop the acquired business;
•
amortization of intangible assets, adversely affecting our reported results of operations;
•
inability to retain and/or integrate the management, key personnel and other employees of the acquired business;
•
inability to properly integrate businesses resulting in operating inefficiencies;
•
inability to establish uniform standards, disclosure controls and procedures, internal control over financial reporting and other systems, procedures
and policies in a timely manner;
•
inability to retain the acquired company’s clients;
•
exposure to legal claims for activities of the acquired business prior to acquisition; and
•
inability to generate revenues to offset any new liabilities assumed and expenses associated with an acquired business.
If our acquisitions are not successfully executed and integrated, our business, strategic position, financial condition and results of operations, as well as
our professional reputation, could be adversely affected.
We have anti-takeover provisions that could make an acquisition of us difficult and expensive.
Anti-takeover provisions in our Certificate of Incorporation, our By-laws and the laws of Delaware, our jurisdiction of incorporation, make it difficult and
expensive for someone to acquire us in a transaction which is not approved by our Board of Directors. Some of the provisions in our Certificate of
Incorporation and By-laws include:
•
limitations on stockholder actions; and
•
the ability to issue one or more series of preferred stock by action of our Board of Directors.
These provisions could discourage an acquisition attempt or other transaction in which stockholders could receive a premium over the then-current market
price for the common stock.
16
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We consider cybersecurity risk management, confidentiality and information security to be critical to our corporate visions and values. We employ a
combination of people, technical safeguards and processes to manage these risks and protect information for which we are responsible. Our security program,
policies, standards, processes, tools and talent are aligned with the purpose of preventing and mitigating any potential cybersecurity incidents and data
leakage.
We have a program in place designed to detect and respond to cybersecurity incidents. Our Chief Information Security Officer (“CISO”) and the
cybersecurity team are responsible for defining, implementing and administering appropriate measures to protect information across the Company.
Cybersecurity risks are also identified and considered when conducting our annual Enterprise Risk Management (“ERM”) exercise. Pursuant to our ERM
program, material cybersecurity risks are identified, assigned to an individual owner with the organization, reviewed twice annually with the CISO, Chief
Legal Officer and Corporate Secretary, and Chief Information Officer and tracked to evaluate containment and mitigation efforts on a go-forward basis. As
further described below, management also reviews and discusses the ERM program with the Audit & Finance Committee (“AFC”) of our Board of Directors
(“Board”), as well as the full Board, at least annually.
Some key safeguards we have undertaken to assess, identify and manage material risks from cybersecurity threats include, but are not limited to:
•
Engaging an independent audit firm to conduct a System and Organization Controls (“SOC”) 2 audit of the Company in 2024;
•
Designing information security policies based on the International Organization Standardization (“ISO”) 27001 framework;
•
Maintaining well-documented processes to provide and remove access, for security incident response, for IT change control and for secure software
development lifecycle;
•
Conducting regular system patching;
•
Conducting frequent, independent third-party vulnerability and penetration testing;
•
Providing access on a “need to know” basis applied with “least privilege” principle;
•
Requiring multi-factor authentication for system access;
•
Protecting the use of data centers with physical and environmental controls;
•
Encrypting data at rest and in transit;
•
Requiring regular, independent SOC 1 and/or SOC 2 audits for key SaaS providers;
•
Requiring third-parties to have information risk management processes;
•
Requiring regular security awareness training, including annual online security awareness training, for all users of our systems, which covers topics
like phishing, social engineering, mobile and device security and protection of sensitive information;
•
Testing awareness by sending regular test phishing emails;
•
Monitoring security 24/7/365; and
•
Providing for system redundancy and resilience to help ensure business continuity.
We regularly engage third party service providers to assist with management of cybersecurity risks. For instance, as noted above, we engage third parties
to conduct frequent, independent vulnerability and penetration testing of our systems. In addition, in 2023 and 2024, we engaged Grant Thornton LLP to
conduct a SOC 2 audit of our systems and controls. Further, our enterprise level IT general controls are audited annually by our independent registered public
accounting firm.
We also monitor and oversee risks from cybersecurity threats associated with all third-party service providers that handle data or information for us. In
connection with engaging any third-party service provider that will handle data or information for
17
us, we review its internal controls, require that it fill out our security and/or privacy questionnaires and ensure there is appropriate contractual language
regarding data privacy, security, and confidentiality. For example, we require all third-party service providers that handle personal data to sign data privacy
addenda. We also annually audit compliance of those third-party service providers with these requirements, including through a review of their SOC 1 and/or
SOC 2 audits, have them update our security and/or privacy questionnaires and, as appropriate, we conduct on-site audits for certain significant third-party
service providers.
We face a number of cybersecurity risks in connection with our business. To date and to our knowledge, we have not experienced a material cybersecurity
incident, and cybersecurity threats have not had a material impact on our business strategy, results of operations, or financial condition. However, we have,
from time to time, experienced threats to and infringement of our data, policies and systems in the ordinary operation of our business. For more information
about the cybersecurity risks we face, see the risk factors in Part I, Item 1A. Risk Factors entitled “Increased cybersecurity vulnerabilities, threats and more
sophisticated and targeted cyber-related attacks could pose a risk to our systems, networks, solutions, services and data.” and “We are dependent on third
parties for the execution of certain critical functions and the failure or inability to perform on the part of one or more of these third parties could materially and
adversely affect our reputation and our business.”.
Governance
The AFC, comprised entirely of independent directors, assists the Board in its responsibilities of ensuring that the Company has established, documented
and maintained, and periodically reevaluates, its processes with respect to cybersecurity. Our CISO briefs the AFC on cybersecurity matters, including on the
evolving threat landscape and the Company’s enhanced efforts in light of emerging risks, no less than twice per year, and in 2024, our CISO provided
cybersecurity updates to the AFC two times during the course of the year. In addition to formal updates provided to the AFC, our CISO maintains regular
communication throughout the year with members of the AFC on these issues. The chair of the AFC also briefs the full Board on cybersecurity matters
discussed amongst the AFC. Furthermore, and as discussed above, cybersecurity risks are also reviewed and discussed with the AFC and the full Board as part
of the annual ERM assessment.
Our CISO has experience managing a risk-based, effective, practical and appropriately-sized cybersecurity program that aligns with our strategic business
objectives and leads our cybersecurity team, which is responsible for assessing and managing the Company’s material risks from cybersecurity threats. Our
CISO has 29 years of experience in the technology domain and 25 years of experience in information security. Our CISO is also a CISSP (Certified
Information Systems Security Professional) and a CIPP/E (Certified Information Privacy Professional/Europe).
We have a specifically outlined incident response plan that documents the requirements of notification, classification, analysis and communication of
security incidents, including cybersecurity incidents, based on the identified severity level. The CISO is informed of incidents at all severity levels pursuant to
the incident response plan. The incident response plan also includes initial steps to convene the response team, contain the incident, consider insurance
notification requirements, determine the type of incident and escalation, consider the communications protocol and consider involving law enforcement. In
addition, the CISO is informed of potential cybersecurity incidents through the Company’s IT incident response system, which contains security logs that are
reviewed by the Company’s 24/7/365 security operations center, and through the Company’s enterprise incident response system, which involves both daily
reports of potential issues and alerts that may be initiated by an employee or former employee of the Company.
ITEM 2. PROPERTIES
Our corporate headquarters is located in Chicago, Illinois. As of December 31, 2024, we have leased office space in 57 cities in 30 countries around the
world. All of our offices are leased. We do not own any real estate. We believe our existing facilities are in good operating condition and are suitable for our
current needs. We do not anticipate significant difficulty replacing such facilities or locating additional facilities to accommodate future growth.
ITEM 3. LEGAL PROCEEDINGS
We have contingent liabilities from various pending claims and litigation matters arising in the ordinary course of our business, some of which involve
claims for damages that may be substantial in amount. Some of these matters are covered by insurance. Based upon information currently available, we
believe the ultimate resolution of such claims and litigation will not have a material adverse effect on our financial condition, results of operations or liquidity.
18
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
19
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market for our Common Stock
Our common stock, $0.01 par value, is listed on the Nasdaq Stock Market under the symbol “HSII”.
Holders of Record
As of February 14, 2024, we had 45 holders of record of our common stock and 20,409,835 shares of common stock outstanding. A greater number of
holders of our common stock are beneficial holders, whose shares are held by banks, brokers, and other financial institutions.
Performance Graph
We have presented below a graph which compares the cumulative total stockholder return on our common shares with the cumulative total stockholder
return of the Standard & Poor’s SmallCap 600 Index and the Standard & Poor’s Composite 1500 Human Resource and Employment Services Index. The S&P
Composite 1500 Human Resource & Employment Services Index includes 13 companies in related businesses, including Heidrick & Struggles. Cumulative
total return for each of the periods shown in the performance graph is measured assuming an initial investment of $100 on December 31, 2019.
The stock price performance depicted in this graph is not necessarily indicative of future price performance. This graph will not be deemed to be filed as
part of this Form 10-K, and will not be deemed to be incorporated by reference by any general statement incorporating this Form 10-K into any filing by us
under the Securities Act of 1933 or the Exchange Act, except to the extent we specifically incorporate this information by reference.
Assumes $100 invested on December 31, 2019 in HSII or index, including reinvestment of dividends.
Index Data - Copyright Standard and Poor's, Inc. Used with permission. All rights reserved.
20
Dividends
From September 2007 through December 2018, we paid a quarterly cash dividend of $0.13 per share as approved by our Board of Directors. In 2019, we
began paying a quarterly cash dividend of $0.15 per share as approved by our Board of Directors. In 2024, the total cash dividend paid was $0.60 per share.
In February 2025, our Board of Directors approved a quarterly dividend of $0.15 per share on our common stock which will be paid on March 27, 2025,
to shareholders of record as of March 13, 2025. Any future dividends will continue to be declared at the discretion of our Board of Directors.
In connection with the quarterly cash dividend, we also pay a dividend equivalent on outstanding restricted stock units. The amounts related to the
dividend equivalent payments for restricted stock units are accrued over the vesting period and paid upon vesting. In 2024 and 2023, we paid $0.7 million and
$0.5 million, respectively, in dividend equivalent payments.
Stock Repurchase Program
On February 11, 2008, we announced that our Board of Directors authorized management to repurchase shares of our common stock with an aggregate
purchase price of up to $50 million (the "Repurchase Authorization"). We may from time to time and as business conditions warrant purchase shares of our
common stock on the open market or in negotiated or block trades. No time limit has been set for completion of this program. During the year ended
December 31, 2023, the Company repurchased 36,000 shares of common stock for $0.9 million. There were no purchases of shares of our common stock in
2024 or 2022, and prior to the 2023 purchases, the most recent purchase of the Company's shares of common stock occurred during the year ended December
31, 2012. As of December 31, 2024, we have purchased 1,074,670 shares of our common stock pursuant to the Repurchase Authorization for a total of $29.2
million and $20.8 million remains available for future purchases under the Repurchase Authorization.
ITEM 6. RESERVED
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as other sections of this Annual Report on Form 10-K
contain forward-looking statements within the meaning of the federal securities laws. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. Forward-looking statements are not historical facts or guarantees of future performance, but instead represent only
our beliefs, assumptions, expectations, estimates, forecasts and projections regarding future events, many of which, by their nature, are inherently uncertain
and outside our control. Forward-looking statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," “outlook,” "projects," "forecasts," "aim," and similar expressions. These statements include statements other than historical information
or statements of current condition and may relate to our future plans and objectives and results. By identifying these statements for you in this manner, we are
alerting you to the possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial
condition indicated in these forward-looking statements. Important factors that could cause our actual results and financial condition to differ from those
indicated in the forward-looking statements include, among others, those discussed under the Section heading “Risk Factors” in Part I, Item 1A of this Annual
Report on Form 10-K.
Factors that may cause actual outcomes and results to differ materially from what is expressed, forecasted or implied in the forward-looking statements
include, among other things, our ability to attract, integrate, develop, manage, retain and motivate qualified consultants and senior leaders; our ability to
prevent our consultants from taking our clients with them to another firm; our ability to maintain our professional reputation and brand name; our clients’
ability to restrict us from recruiting their employees; our heavy reliance on information management systems; risks arising from our implementation of new
technology and intellectual property to deliver new products and services to our clients; our dependence on third parties for the execution of certain critical
functions; the fact that we face the risk of liability in the services we perform; the fact that data security, data privacy and data protection laws and other
evolving regulations and cross-border data transfer restrictions may limit the use of our services and adversely affect our business; any challenges to the
classification of our on-demand talent as independent contractors; the fact that increased cybersecurity requirements, vulnerabilities, threats and more
sophisticated and targeted cyber-related attacks could pose a risk to our systems, networks, solutions, services and data; the fact that our net
21
revenue may be affected by adverse macroeconomic or labor market conditions, including impacts of inflation and effects of geopolitical instability; the
aggressive competition we face; the impact of foreign currency exchange rate fluctuations; our ability to access additional credit; social, political, regulatory,
legal and economic risks in markets where we operate, including the impact of the ongoing war in Ukraine and the conflict in Israel and the Gaza strip, the
risks of an expansion or escalation of those conflicts and our ability to quickly and completely recover from any disruption to our business; the impact from
actions by the new U.S. presidential administration and Congress; unfavorable tax law changes and tax authority rulings; our ability to realize the benefit of
our net deferred tax assets; the fact that we may not be able to align our cost structure with net revenue; any impairment of our goodwill, other intangible
assets and other long-lived assets; our ability to maintain an effective system of disclosure controls and internal control over our financial reporting and
produce accurate and timely financial statements; our ability to execute and integrate future acquisitions; and the fact that we have anti-takeover provisions
that make an acquisition of us difficult and expensive. We caution the reader that the list of factors may not be exhaustive. The forward-looking statements
contained in this Annual Report on Form 10-K speak only as of the date hereof. We undertake no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for years 2024 and 2023. For the
discussion of changes from 2023 to 2022 and other financial information related to 2022, refer to "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February
27, 2023.
Executive Overview
Our Business
We are a human capital leadership advisory firm providing executive search, on-demand talent and consulting services.
Our Executive Search services help our clients build leadership teams by facilitating the recruitment, management and development of senior executives.
We believe focusing on top-level services offers us several advantages that include access to and influence with key decision makers, increased potential for
recurring search consulting engagements, higher fees per search, enhanced brand visibility and a leveraged global footprint, which create added barriers to
entry for potential competitors. Working at the top of client organizations also allows us to attract and retain high-caliber consultants.
Our On-Demand Talent business is a market-leader in sourcing high-end, on-demand independent talent and provides clients seamless on-demand access
to top independent talent, including professionals with deep industry and functional expertise for interim leadership roles and critical, project-based initiatives.
As a complement and extension of our search services, we partner with organizations through Heidrick Consulting to provide advisory services related to
leadership assessment and development, organization and team effectiveness, and culture shaping. Our tools and experts use data and technology designed to
bring science to the art of human capital development and organizational design. Our services allow our clients to accelerate their strategies and the
effectiveness of individual leaders, teams and organizations as a whole.
Heidrick Consulting offers our clients impactful approaches to human capital development through a myriad of solutions, ranging from leadership
assessment and development, team and organization acceleration, digital acceleration and innovation, diversity and inclusion advisory services, and culture
shaping. Applying our deep understanding of the behaviors and attributes of leaders across many of the world’s premier companies, we guide our clients as
they build a thriving culture of future-ready leadership. These premium services and offerings, which complement our Executive Search expertise,
significantly contribute to our ability to deliver a full-service human capital consulting solution to our clients.
We provide our services to a broad range of clients through the expertise of over 500 consultants located in major cities around the world. Our Executive
Search services are provided on a retained basis. Revenue before reimbursements of out-of-pocket expenses (“net revenue”) consists of retainers and indirect
expenses billed to clients. Typically, we are paid a retainer for our executive search services equal to approximately one-third of the estimated first-year
compensation for the position to be filled. In addition, if the actual compensation of a placed candidate exceeds the estimated compensation, we often are
authorized to bill the client for one-third of the excess. Indirect expenses are calculated as a percentage of the retainer with certain dollar limits per search.
22
The Company has five operating segments. The executive search business operates in the Americas, Europe (which includes Africa) and Asia Pacific
(which includes the Middle East), and the Heidrick Consulting and On-Demand Talent businesses operate globally.
Key Performance Indicators
We manage and assess our performance through various means, with primary financial and operational measures including net revenue, Adjusted
EBITDA (defined below; non-GAAP) and Adjusted EBITDA margin (non-GAAP). These non-GAAP financial measures should be considered in addition to,
and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP (defined below). Executive Search and Heidrick
Consulting performance is also measured using consultant headcount. Specific to Executive Search, confirmed search (confirmation) trends, consultant
productivity and average revenue per search are used to measure performance. Productivity is as measured by annualized Executive Search net revenue per
consultant.
Revenue is driven by market conditions and a combination of the number of executive search engagements, consulting projects, on-demand projects and
the average revenue per search or project. With the exception of compensation expense and cost of sales, incremental increases in revenue do not necessarily
result in proportionate increases in costs, particularly operating and administrative expenses, thus creating the potential to improve Adjusted EBITDA and
Adjusted EBITDA margins.
The number of consultants, confirmation trends, number of searches or projects completed, productivity levels and the average revenue per search or
project will vary from quarter to quarter, affecting net revenue, Adjusted EBITDA and Adjusted EBITDA margin.
The Company evaluates performance and allocates resources based on the chief operating decision maker’s review of (1) net revenue and (2) net income
before interest, taxes, depreciation and amortization, as adjusted, to the extent they occur, for earnout accretion, earnout fair value adjustments, contingent
compensation, deferred compensation plan income or expense, certain reorganization costs, impairment charges and restructuring charges ("Adjusted
EBITDA"). Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue in the same period.
Consolidated and the subtotal of Executive Search Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and have
limitations as analytical tools. They should not be viewed as a substitute for financial information determined in accordance with United States (“U.S.”)
generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for analysis of the Company’s results as
reported under GAAP. In addition, they may not necessarily be comparable to non-GAAP performance measures that may be presented by other companies.
We believe the presentation of these non-GAAP financial measures provides meaningful supplemental information and a more complete understanding of
our ongoing operating results, including underlying trends. These non-GAAP financial measures are used by management in their financial and operating
decision making because management believes they reflect our ongoing business in a manner that allows for meaningful period-to-period comparison and
evaluation. We also believe that these non-GAAP financial measures, when considered together with our GAAP financial measures, provide management and
investors with additional information for comparison of our operating results with the operating results of other companies.
Our Compensation Model
At the consultant level, there are fixed and variable components of compensation. Individuals are rewarded for their performance based on a system that
directly ties a portion of their compensation to the amount of net revenue for which they are responsible. A portion of the reward may be based upon
individual performance against a series of non-financial measures. Credit towards the variable portion of a consultant’s compensation is earned by generating
net revenue for winning and executing work. Each quarter, we review and update the expected annual performance of all consultants and accrue variable
compensation accordingly. The amount of variable compensation that is accrued for each consultant is based on a tiered payout model. Overall Company
performance determines the amount available for total variable compensation. The more net revenue that is generated by the consultant, the higher the
percentage credited towards the consultant’s variable compensation and thus accrued by the Company as expense.
The mix of individual consultants who generate revenue can significantly affect the total amount of compensation expense recorded, which directly
impacts operating margin. As a result, the variable portion of the compensation expense may fluctuate significantly from quarter to quarter. The total variable
compensation is discretionary and is based on Company-wide financial targets approved by the Human Resources and Compensation Committee of the Board
of Directors.
23
Historically, a portion of the Company’s consultant and management cash bonuses were deferred and paid over a three-year vesting period. The portion of
the bonus was approximately 15% depending on the employee’s level or position. The compensation expense related to the amounts being deferred was
recognized on a graded vesting attribution method over the requisite service period. This service period began on January 1 of the respective fiscal year and
continued through the deferral date, which coincided with the Company’s bonus payments in the first half of the following year and for an additional three-
year vesting period. The deferrals were recorded in Accrued salaries and benefits within both Current liabilities and Non-current liabilities in the
Consolidated Balance Sheets.
In 2020, the Company terminated the cash bonus deferral for consultants and, in 2021, terminated the cash bonus deferral for management. The Company
now pays 100% of the cash bonuses earned by consultants and management in the first half of the following year. Consultant and management cash bonuses
earned prior to 2020 and 2021, respectively, were paid under the terms of the cash bonus deferral program. The deferrals were recorded in Accrued salaries
and benefits within both Current liabilities and Non-current liabilities in the Consolidated Balance Sheets. The final cash bonus deferrals were paid during the
year ended December 31, 2023.
2024 Overview
Consolidated net revenue increased $71.7 million, or 7.0%, to $1.1 billion in 2024 from $1.0 billion in 2023. Foreign exchange rates positively impacted
results by $0.4 million, or less than 0.1%. Executive Search net revenue was $818.4 million in 2024, an increase of $38.3 million, or 4.9%, compared to 2023.
The increase in Executive Search net revenue was primarily due to an increase in the average revenue per executive search compared to the prior year. On-
Demand Talent net revenue was $168.3 million in 2024, an increase of $15.8 million, or 10.4%, compared to 2023. The increase in On-Demand Talent
revenue was primarily due to an increase in the volume on-demand projects and the timing of the Atreus acquisition in February 2023. Heidrick Consulting
net revenue was $111.9 million in 2024, an increase of $17.6 million, or 18.6%, compared to 2023. The increase in Heidrick Consulting revenue was primarily
due to an increase in leadership assessment and development consulting engagements compared to the prior year and the timing of the businessfourzero
acquisition in April 2023.
The number of Executive Search and Heidrick Consulting consultants was 418 and 85, respectively, as of December 31, 2024, compared to 414 and 89,
respectively, as of December 31, 2023. Executive Search productivity, as measured by annualized net Executive Search revenue per consultant, was $2.0
million and $1.9 million for the years ended December 31, 2024, and 2023, respectively. Executive search confirmations increased 0.1% in 2024 compared to
2023. The average revenue per executive search increased to $146,000 in 2024 compared to $140,000 in the prior year.
Adjusted EBITDA as a percentage of revenue was 10.1% in 2024, compared to 12.2% in 2023. The change in Adjusted EBITDA was primarily due to
increases in salaries and benefits expense, general and administrative expense, and cost of services, partially offset by an increase in net revenue of $71.7
million. Salaries and benefits expense as a percentage of net revenue was 65.1% in 2024, compared to 63.9% in 2023. General and administrative expense as a
percentage of net revenue was 15.2% in 2024, and 2023. Cost of services expense as a percentage of net revenue was 10.8% in 2024, compared to 10.6% in
2023. Research and development costs as a percentage of net revenue was 2.1% in 2024, compared to 2.2% in 2023.
We ended the year with combined cash, cash equivalents, and marketable securities of $563.5 million, an increase of $85.4 million compared to $478.2
million at December 31, 2023. We pay the majority of bonuses in the first half of the year following the year in which they were earned. Employee bonuses
are accrued throughout the year and are based on the Company’s performance and the performance of the individual employee. We expect to pay
approximately $317.8 million in bonuses related to 2024 performance in March and April 2025.
24
Results of Operations
The following table summarizes, for the periods indicated, the results of operations (in thousands, except per share data):
Year Ended December 31,
2024
2023
2022
Revenue
Revenue before reimbursements (net revenue)
$
1,098,573
$
1,026,864
$
1,073,464
Reimbursements
17,103
14,318
10,122
Total revenue
1,115,676
1,041,182
1,083,586
Operating expenses
Salaries and benefits
715,628
656,030
737,430
General and administrative expenses
166,995
156,494
132,678
Cost of services
118,950
109,039
70,676
Research and development
23,055
22,698
20,414
Impairment charges
59,478
7,246
—
Restructuring charges
6,939
—
—
Reimbursed expenses
17,103
14,318
10,122
Total operating expenses
1,108,148
965,825
971,320
Operating income
7,528
75,357
112,266
Non-operating income (expense)
Interest, net
14,422
11,617
5,337
Other, net
8,702
1,697
(2,367)
Net non-operating income
23,124
13,314
2,970
Income before taxes
30,652
88,671
115,236
Provision for income taxes
21,924
34,261
35,750
Net income
$
8,728
$
54,410
$
79,486
Weighted-average common shares outstanding
Basic
20,293
20,029
19,758
Diluted
21,188
20,766
20,618
Earnings per common share
Basic
$
0.43
$
2.72
$
4.02
Diluted
$
0.41
$
2.62
$
3.86
Cash dividends paid per share
$
0.60
$
0.60
$
0.60
25
The following table summarizes, for the periods indicated, our results of operations as a percentage of revenue before reimbursements (net revenue):
Year Ended December 31,
2024
2023
2022
Revenue
Revenue before reimbursements (net revenue)
100.0 %
100.0 %
100.0 %
Reimbursements
1.6
1.4
0.9
Total revenue
101.6
101.4
100.9
Operating expenses
Salaries and benefits
65.1
63.9
68.7
General and administrative expenses
15.2
15.2
12.4
Cost of Services
10.8
10.6
6.6
Research and development
2.1
2.2
1.9
Impairment charges
5.4
0.7
—
Restructuring charges
0.6
—
—
Reimbursed expenses
1.6
1.4
0.9
Total operating expenses
100.9
94.1
90.5
Operating income
0.7
7.3
10.5
Non-operating income (expense)
Interest, net
1.3
1.1
0.5
Other, net
0.8
0.2
(0.2)
Net non-operating income
2.1
1.3
0.3
Income before income taxes
2.8
8.6
10.7
Provision for income taxes
2.0
3.3
3.3
Net income
0.8 %
5.3 %
7.4 %
Note: Totals and subtotals may not equal the sum of individual line items due to rounding.
26
The following table sets forth, for the periods indicated, a reconciliation of Adjusted EBITDA to net income:
December 31,
2024
2023
2022
Revenue before reimbursements (net revenue)
$
1,098,573
$
1,026,864
$
1,073,464
Net income
8,728
54,410
79,486
Interest, net
(14,422)
(11,617)
(5,337)
Other, net
(8,702)
(1,697)
2,367
Provision for income taxes
21,924
34,261
35,750
Operating income
7,528
75,357
112,266
Adjustments
Depreciation
10,782
9,113
7,394
Intangible amortization
8,075
9,395
3,209
Earnout accretion
1,926
1,554
820
Earnout fair value adjustments
438
—
(464)
Acquisition contingent consideration
10,815
11,934
3,885
Deferred compensation plan
5,257
6,132
(6,232)
Reorganization costs
—
4,886
—
Impairment charges
59,478
7,246
—
Restructuring charges
6,939
—
—
Total adjustments
103,710
50,260
8,612
Adjusted EBITDA
$
111,238
$
125,617
$
120,878
Adjusted EBITDA margin
10.1 %
12.2 %
11.3 %
The Company has five operating segments. The executive search business operates in the Americas, Europe (which includes Africa) and Asia Pacific
(which includes the Middle East), and the Heidrick Consulting and On-Demand Talent businesses operate globally (See Note 18, Segment Information).
Revenue and Adjusted EBITDA, by segment, are as follows:
December 31,
2024
2023
2022
Revenue
Executive Search
Americas
$
556,944
$
522,988
$
612,881
Europe
165,018
166,379
176,275
Asia Pacific
96,396
90,678
112,766
Total Executive Search
818,358
780,045
901,922
On-Demand Talent
168,325
152,506
91,349
Heidrick Consulting
111,890
94,313
80,193
Revenue before reimbursements
1,098,573
1,026,864
1,073,464
Reimbursements
17,103
14,318
10,122
Total revenue
$
1,115,676
$
1,041,182
$
1,083,586
Adjusted EBITDA
Executive Search
Americas
$
174,260
$
173,358
$
164,193
Europe
14,793
22,246
22,150
Asia Pacific
13,327
11,070
19,813
Total Executive Search
202,380
206,674
206,156
On-Demand Talent
(1,984)
1,434
(336)
Heidrick Consulting
(6,237)
(5,823)
(6,444)
Total segments
194,159
202,285
199,376
Research and development
(19,016)
(20,535)
(19,965)
Global Operations Support
(63,905)
(56,133)
(58,533)
Total adjusted EBITDA
$
111,238
$
125,617
$
120,878
27
Year ended December 31, 2024, compared to year ended December 31, 2023
Total revenue. Consolidated total revenue increased $74.5 million, or 7.2% to $1.1 billion in 2024 from $1.0 billion in 2023. The increase in total revenue
was primarily due to the increase in revenue before reimbursements (net revenue).
Revenue before reimbursements (net revenue). Consolidated net revenue increased $71.7 million, or 7.0%, to $1.1 billion in 2024 from $1.0 billion in
2023. Foreign exchange rates positively impacted results by $0.4 million, or less than 0.1%. Executive Search net revenue was $818.4 million in 2024, an
increase of $38.3 million, or 4.9%, compared to 2023. The increase in Executive Search net revenue was primarily due to an increase in the average revenue
per executive search compared to the prior year. On-Demand Talent net revenue was $168.3 million in 2024, an increase of $15.8 million, or 10.4%, compared
to 2023. The increase in On-Demand Talent revenue was primarily due to an increase in the volume of on-demand projects and the timing of the Atreus
acquisition in February 2023. Heidrick Consulting net revenue was $111.9 million in 2024, an increase of $17.6 million, or 18.6%, compared to 2023. The
increase in Heidrick Consulting revenue was primarily due to an increase in leadership assessment and development consulting engagements compared to the
prior year and the timing of the businessfourzero acquisition in April 2023.
The number of Executive Search and Heidrick Consulting consultants was 418 and 85, respectively, as of December 31, 2024, compared to 414 and 89,
respectively, as of December 31, 2023. Executive Search productivity, as measured by annualized net Executive Search revenue per consultant, was $2.0
million and $1.9 million for the years ended December 31, 2024, and 2023, respectively. Executive search confirmations increased 0.1% in 2024 compared to
2023. The average revenue per executive search increased to $146,000 in 2024 compared to $140,000 in the prior year.
Salaries and benefits. Consolidated salaries and benefits expense increased $59.6 million, or 9.1%, to $715.6 million in 2024, from $656.0 million in
2023. Fixed compensation increased $6.8 million due to increases in base salaries and payroll taxes, stock-based compensation, and talent acquisition and
retention costs, partially offset by decreases in separation costs, retirement and benefits, and deferred compensation plan expenses. Variable compensation
increased $52.8 million due to due to higher bonus accruals related to increased consultant productivity. Foreign exchange rate fluctuations negatively
impacted salaries and benefits expenses by $0.3 million, or less than 0.1%.
In 2024, we had an average of 2,195 employees, compared to an average of 2,208 employees in 2023.
As a percentage of net revenue, salaries and benefits expense was 65.1% in 2024, compared to 63.9% in 2023.
General and administrative expenses. Consolidated general and administrative expenses increased $10.5 million, or 6.7%, to $167.0 million in 2024 from
$156.5 million in 2023. The increase in general and administrative expenses was due to increases in office occupancy costs, expenses related to information
technology, business development travel, professional fees, hiring fees, and marketing expenses, partially offset by decreases in bad debt, intangible
amortization, external third-party consultants, insurance and bank fees, taxes and licenses, and communication services costs. Foreign exchange rate
fluctuations negatively impacted general and administrative expenses by $0.3 million, or 0.2%.
As a percentage of net revenue, general and administrative expenses were 15.2% in 2024, and 2023.
Cost of services. Consolidated cost of services increased $9.9 million, or 9.1%, to $119.0 million in 2024, from $109.0 million in 2023. The increase in
cost of services was primarily due to an increase in the volume of On-Demand and consulting projects. Foreign exchange rate fluctuations negatively impacted
cost of services by $0.3 million, or 0.3%.
Research and development. Due to the rapid pace of technological advances and digital disruption many of our clients are experiencing, we believe our
ability to compete successfully depends increasingly upon our ability to provide clients with timely and relevant technology-enabled products and services. As
such, we are focused on developing new technologies to enhance existing products and services, and to expand the range of our offerings through research and
development (“R&D”), licensing of intellectual property and acquisition of third-party businesses and technology. The benefits from our R&D efforts will be
utilized to develop and enhance new and existing services and products across our current offerings in Executive Search, Heidrick Consulting, On-Demand
Talent and for products and services in new segments that we may embark upon in the future from time to time, such as our new Heidrick Navigator platform.
Consolidated R&D expense increased $0.4 million, or 1.6%, to $23.1 million in 2024, from $22.7 million in 2023. R&D expense consists of payroll,
employee benefits, stock-based compensation, other employee expenses and third-party professional fees associated with new product development.
28
Impairment charges. During the three months ended June 30, 2024, as a result of the Company's mid-year forecasting process, it was determined that a
reduction in the On-Demand Talent reporting unit forecast was required. Due to the reduction in the forecasted results for the reporting unit, in addition to the
6% passing margin in the most recent impairment analysis conducted as of October 31, 2023, the Company determined that it was more likely than not that
the fair value of the reporting unit was less than its carrying value. As a result, the Company identified a triggering event and performed an interim goodwill
impairment evaluation during the three months ended June 30, 2024. Based on the results of the 2024 interim impairment evaluation, the Company determined
that the goodwill within the On-Demand Talent and Europe reporting units were impaired, which resulted in impairment charges of $14.8 million and
$1.5 million, respectively, during the three months ended June 30, 2024. In October 2024, the Company performed its annual goodwill impairment analysis,
and determined that goodwill within the On-Demand Talent reporting unit was impaired, which resulted in an impairment charge of $43.3 million to write-off
goodwill related to the excess of book value compared to fair value. In 2023, the Company acquired businessfourzero and recorded approximately $7.1
million of goodwill in the Heidrick Consulting reporting unit. Due to the inclusion of goodwill in a reporting unit with a pre-existing fair value shortfall, the
Company evaluated the recent and anticipated future financial performance of the Heidrick Consulting reporting unit and determined that it was more likely
than not that the fair value of the reporting unit was less than its carrying value. As a result, the Company identified a triggering event and performed an
interim goodwill impairment evaluation during the three months ended June 30, 2023. Based on the results of the of the impairment evaluation, the Company
recorded an impairment charge of $7.2 million in Heidrick Consulting to write-off all of the goodwill associated with that reporting unit. The impairment
charges are recorded within Impairment charges in the Consolidated Statement of Comprehensive Income (Loss) for the twelve months ended December 31,
2024, and 2023, respectively, and the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2024, and 2023, respectively. The
impairment was non-cash in nature and did not affect our current liquidity, cash flows, borrowing capability or operations, nor did it impact the debt covenants
under our credit agreement.
Adjusted EBITDA. Consolidated Adjusted EBITDA was $111.2 million in 2024, a decrease of $14.4 million, or 11.4%, compared to $125.6 million in
2023. Adjusted EBITDA margin was 10.1% in 2024, compared to 12.2% in 2023.
Net non-operating income. Net non-operating income was $23.1 million in 2024, compared to $13.3 million in 2023.
Interest, net was $14.4 million of income in 2024, compared to $11.6 million in 2023, with the increase primarily due to a higher volume of short-term
investments and an increase in interest on cash balances on bank accounts.
Other, net was $8.7 million of income in 2024, compared to $1.7 million in 2023. The increase is primarily due to foreign exchange gains in the current
year as compared to foreign exchange losses in the prior year, partially offset by a decrease in unrealized gains on the deferred compensation plan. The
Company's investments, including those held in the Company’s deferred compensation plan, are recorded at fair value.
Income taxes. See Note 16, Income Taxes.
Executive Search
Americas
The Americas segment reported net revenue of $556.9 million in 2024, an increase of 6.5% from $523.0 million in 2023. The increase in net revenue was
due to a 7.1% increase in the number of executive search confirmations. All practice groups exhibited growth in revenue over the prior period. Foreign
exchange fluctuations negatively impacted net revenue by $1.2 million or 0.2%. There were 215 Executive Search consultants as of December 31, 2024,
compared to 213 as of December 31, 2023.
Salaries and benefits expense increased $32.4 million, or 10.4%, in 2024, compared to 2023. Fixed compensation increased $0.1 million due to increases
in stock-based compensation, and talent acquisition and retention costs, partially offset by decreases in base salaries and payroll taxes, retirement and benefits,
and the deferred compensation plan. Variable compensation increased $32.4 million due to higher bonus accruals related to increased consultant productivity.
General and administrative expenses decreased $1.9 million, or 4.0%, in 2024, compared to 2023, due to decreases in bad debt, the use of external third-
party consultants, marketing, and taxes and licenses, partially offset by increases in expenses related to information technology, professional fees, business
development travel, and office occupancy costs.
The Americas reported Adjusted EBITDA of $174.3 million in 2024, an increase of $0.9 million, or 0.5%, compared to $173.4 million in 2023. Adjusted
EBITDA margin was 31.3% in 2024, compared to 33.1% in 2023.
29
Europe
The Europe segment reported net revenue of $165.0 million in 2024, a decrease of 0.8% from $166.4 million in 2023. The decrease in net revenue was
due to a 9.7% decrease in the number of executive search confirmations, partially offset by an increase in the average revenue per executive search compared
to the prior year . All practice groups exhibited growth over the prior year, with the exception of Consumer and Industrial. Foreign exchange rate fluctuations
positively impacted net revenue in 2024 by $1.8 million, or 1.1%. There were 124 Executive Search consultants as of December 31, 2024, and 2023.
Salaries and benefits expense increased $0.8 million, or 0.7%, in 2024, compared to 2023. Fixed compensation decreased $3.8 million due to talent
acquisition and retention costs, separation costs, and retirement and benefits costs, partially offset by increases in base salaries and payroll taxes, and stock-
based compensation. Variable compensation increased $4.7 million due to increased Company performance and an increase in talent acquisition and retention
costs qualifying as variable compensation.
General and administrative expenses increased $2.2 million, or 7.8%, in 2024, compared to 2023, due to office occupancy costs, business development
travel, hiring fees, and bad debt, partially offset by decreases in professional fees, the use of external third-party consultants, and taxes and licenses.
Impairment charges for 2024 were $1.5 million as a result of an interim impairment evaluation on the goodwill of the Europe reporting unit. The
impairment charge is recorded within Impairment charges in the Consolidated Statements of Comprehensive Income (Loss) and the Consolidated Statements
of Cash Flows for 2024.
Europe reported Adjusted EBITDA of $14.8 million in 2024, a decrease of $7.5 million, or 33.5%, compared to $22.2 million in 2023. Adjusted EBITDA
margin was 9.0% in 2024, compared to 13.4% in 2023.
Asia Pacific
The Asia Pacific segment reported net revenue of $96.4 million in 2024, an increase of $5.7 million, or 6.3%, compared to $90.7 million in 2023. The
increase in net revenue was due to an increase in average revenue per executive search, partially offset by a 2.5% decrease in the number of executive search
confirmations. All practice groups, with the exception of Social Impact, Consumer, and Industrial contributed to the increase in revenue. Foreign exchange
rate fluctuations negatively impacted net revenue in 2024 by $1.4 million, or 1.5%. There were 79 Executive Search consultants as of December 31, 2024,
compared to 77 as of December 31, 2023.
Salaries and benefits expense increased $2.6 million, or 4.1%, in 2024, compared to 2023. Fixed compensation decreased $0.1 million due to decreases in
base salaries and payroll taxes, and separation, partially offset by increases in talent acquisition and retention costs, and stock-based compensation. Variable
compensation increased $2.8 million due to higher bonus accruals related to increased consultant productivity.
General and administrative expenses increased $0.7 million, or 4.1%, in 2024, compared to 2023, due to increases in bad debt, taxes and licenses, and
business development travel, partially offset by decreases in professional fees, hiring fees, and office occupancy costs.
Asia Pacific reported Adjusted EBITDA of $13.3 million in 2024, an increase of $2.3 million, or 20.4%, compared to $11.1 million in 2023. Adjusted
EBITDA margin was 13.8% in 2024, compared to 12.2% in 2023.
On-Demand Talent
The On-Demand Talent segment reported net revenue of $168.3 million in 2024, an increase of 10.4% compared to $152.5 million in 2023. The increase
in On-Demand Talent revenue was primarily due to an increase in the volume of on-demand projects and the timing of the Atreus acquisition in February
2023. Foreign exchange rate fluctuations positively impacted net revenue in 2024 by $0.3 million, or 0.2%.
Salaries and benefits expense increased $5.6 million, or 11.8%, in 2024, compared to 2023. Fixed compensation increased $1.6 million due to base
salaries and payroll taxes, talent acquisition and retention costs, and stock-based compensation, partially offset by decreases in separation costs, and retirement
and benefits costs. Variable compensation increased $4.0 million due to higher bonus accruals related to increased productivity.
30
General and administrative expenses increased $3.4 million, or 15.7%, in 2024, compared to 2023, due to hiring fees, an adjustment to increase the
earnout accrual for Atreus, office occupancy costs, business development travel, expenses related to information technology, and taxes and licenses, partially
offset by decreases in intangible amortization, marketing expenses, and professional fees.
Cost of services increased $8.8 million, or 8.8%, in 2024, compared to 2023, primarily due to an increase in the volume of on-demand talent projects.
Impairment charges for 2024 were $58.0 million as a result of an interim impairment evaluation and the annual impairment evaluation on the goodwill of
the On-Demand Talent reporting unit. The impairment charge is recorded within Impairment charges in the Consolidated Statements of Comprehensive
Income (Loss) and the Consolidated Statements of Cash Flows for 2024.
On-Demand Talent reported an Adjusted EBITDA loss of $2.0 million in 2024, a decrease of $3.4 million compared to Adjusted EBITDA of $1.4 million
in 2023. Adjusted EBITDA margin was (1.2)% in 2024, compared to 0.9% in 2023.
Heidrick Consulting
The Heidrick Consulting segment reported net revenue of $111.9 million in 2024, an increase of 18.6% compared to $94.3 million in 2023. The increase
in net revenue was due to a 25.5% increase in confirmations and the timing of the businessfourzero acquisition in April 2023. Foreign exchange rate
fluctuations positively impacted results in 2024 by $0.8 million, or 0.8%. There were 85 Heidrick Consulting consultants as of December 31, 2024, compared
to 89 as of December 31, 2023.
Salaries and benefits expense increased $12.9 million, or 16.9%, in 2024, compared to 2023. Fixed compensation increased $5.1 million due to increases
in base salaries and payroll taxes, and retirement and benefits costs, partially offset by decreases in stock-based compensation, talent acquisition and retention
costs, separation costs, and the deferred compensation plan. Variable compensation increased $7.8 million due to an increase in production due to higher
bonus accruals related to increased consultant productivity.
General and administrative expenses increased $3.5 million, or 17.1%, in 2024, compared to 2023, due to increases in office occupancy costs, business
development travel, intangible amortization, and expenses related to information technology, partially offset by decreases in professional fees and an
adjustment to decrease the earnout accrual for businessfourzero.
Cost of services increased $1.1 million, or 12.2%, in 2024, compared to 2023, due to an increase in the volume of consulting engagements requiring third-
party consultants.
Impairment charges for 2023 were $7.2 million as a result of an interim impairment evaluation on the goodwill of the Heidrick Consulting reporting unit.
The impairment charge is recorded within Impairment charges in the Consolidated Statements of Comprehensive Income (Loss) and the Consolidated
Statements of Cash Flows for 2023.
Heidrick Consulting reported an Adjusted EBITDA loss of $6.2 million in 2024, a decrease of $0.4 million, or 7.1% compared to an Adjusted EBITDA
loss of $5.8 million in 2023. Adjusted EBITDA margin was (5.6)% in 2024, compared to (6.2)% in 2023.
Global Operations Support
Salaries and benefits expenses increased $5.1 million, or 14.5%, in 2024, compared to 2023, due to an increase in base salaries and payroll taxes, stock-
based compensation, variable compensation, retirement and benefits, and separation costs, partially offset by a decrease in talent acquisition and retention
costs.
General and administrative expenses increased $2.6 million, or 12.4%, in 2024, compared to 2023, due to increases in professional fees, expenses related
to information technology, marketing expenses, business development travel, and office occupancy costs, partially offset by decreases in taxes and licenses,
insurance and bank fees, hiring fees, and communication services.
Global Operations Support reported an Adjusted EBITDA loss of $63.9 million in 2024, a decrease of $7.8 million compared to an Adjusted EBITDA
loss of $56.1 million in 2023. Adjusted EBITDA margin was (5.8)% in 2024 compared to (5.5)% 2023.
31
Liquidity and Capital Resources
General. We continually evaluate our liquidity requirements, capital needs and availability of capital resources based on our operating needs. We believe
that our available cash balances, funds expected to be generated from operations and funds available under our committed revolving credit facility will be
sufficient to finance our operations for at least the next 12 months and the foreseeable future, as well as to finance the cash payments associated with our cash
dividends and stock repurchase program.
We pay the non-deferred portion of annual bonuses in the first half of the year following the year in which they are earned. Employee bonuses are accrued
throughout the year and are based on our performance and the performance of the individual employee.
Lines of credit. On February 24, 2023, the Company entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement, dated as
of October 26, 2018 (the “Credit Agreement” and, as amended by the First Amendment to Credit Agreement, dated as of July 13, 2021, and the Second
Amendment, the "Amended Credit Agreement") by and among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto.
The Second Amendment changed the interest rate benchmark, from the London Interbank Offered Rate to the Secured Overnight Financing Rate (“SOFR”).
At the Company's option, borrowings under the Amended Credit Agreement will bear interest at one-, three- or six-month term SOFR, or an alternate base
rate as set forth in the Amended Credit Agreement, in each case plus an applicable margin. Additionally, the Second Amendment provided the Company with
a committed unsecured revolving credit facility in an aggregate amount of $200 million, increased from $175 million as set forth in the Credit Agreement,
which includes a sublimit of $25 million for letters of credit and a sublimit of $10 million for swingline loans, with a $75 million expansion feature. Other
than the foregoing, the material terms of the Amended Credit Agreement remain unchanged. The Amended Credit Agreement matures on July 13, 2026.
Borrowings under the Amended Credit Agreement may be used for working capital, capital expenditures, permitted acquisitions, restricted payments and
for other general corporate purposes of the Company and its subsidiaries. The obligations under the Amended Credit Agreement are guaranteed by certain of
the Company’s subsidiaries.
As of December 31, 2024, and 2023, the Company had no outstanding borrowings. The Company was in compliance with the financial and other
covenants under the Amended Credit Agreement and no event of default existed.
Cash, cash equivalents, and marketable securities. Cash, cash equivalents and marketable securities at December 31, 2024, were $563.5 million, an
increase of $85.4 million compared to $478.2 million at December 31, 2024. The $563.5 million of cash, cash equivalents, and marketable securities at
December 31, 2024, includes $238.5 million held by our foreign subsidiaries. A portion of the $238.5 million is considered permanently reinvested in these
foreign subsidiaries. If these funds were required to satisfy obligations in the United States, the repatriation of these funds could cause us to incur additional
foreign withholding taxes. We expect to pay approximately $317.8 million in bonuses related to 2024 performance in March and April 2025.
Cash flows provided by (used in) operating activities. For the year ended December 31, 2024, cash provided by operating activities was $150.4 million,
primarily reflecting net income net of non-cash charges of $80.1 million, accrued expenses of $47.0 million and income taxes recoverable of $12.3 million.
The increase in accrued expenses is primarily due to 2024 bonus accruals of $317.8 million, partially offset by cash bonus payments related to 2023 of $289.8
million.
For the year ended December 31, 2023, cash used in operating activities was $26.8 million, primarily reflecting a decrease in accrued expenses of $145.1
million, partially offset by net income net of non-cash charges of $101.7 million. The decrease in accrued expenses is primarily due to cash bonus payments
related to 2022 and prior year cash bonus deferrals of $422.0 million, partially offset by 2023 bonus accruals of $289.8 million.
Cash flows provided by (used in) investing activities. For the year ended December 31, 2024, cash used by investing activities was $14.6 million,
primarily due to purchases of available for sale investments of $163.6 and capital expenditures of $26.3 million, partially offset by the proceeds from the
maturity and sale of available for sale investments of $175.3 million. The cash outflow for capital expenditures is primarily the result of office build-outs and
software capitalization related to new product development.
For the year ended December 31, 2023, cash provided by investing activities was $133.6 million, primarily due to proceeds from the maturity and sale of
available for sale investments of $337.9 million, partially offset by purchases of available for sale
32
investments of $141.0 million, acquisition of businesses, net of cash acquired, of $49.9 million, and capital expenditures of $13.4 million. The cash outflow
for capital expenditures is primarily the result of office build-outs and software capitalization related to new product development.
Cash flows used in financing activities. For the year ended December 31, 2024, cash used in financing activities was $16.7 million, primarily due to cash
dividend payments of $12.9 million, and payment of employee tax withholdings on equity transactions of $3.8 million.
For the year ended December 31, 2023, cash used in financing activities was $53.5 million, primarily due to acquisition earnout payments of $35.9
million, cash dividend payments of $12.5 million, payment of employee tax withholdings on equity transactions of $4.1 million, and common stock
repurchases of $0.9 million.
Stock repurchase program. On February 11, 2008, we announced that our Board of Directors authorized management to repurchase shares of our common
stock with an aggregate purchase price of up to $50 million (the "Repurchase Authorization"). We may from time to time and as business conditions warrant
purchase shares of our common stock on the open market or in negotiated or block trades. No time limit has been set for completion of this program. During
the year ended December 31, 2023, the Company purchased 36,000 shares of common stock for $0.9 million. There were no purchases of shares of common
stock in 2024, and prior to the 2023 purchase, the most recent purchase of the Company's shares of common stock occurred during the year ended December
31, 2012. As of December 31, 2024, we have purchased 1,074,670 shares of our common stock pursuant to the Repurchase Authorization for a total of $29.2
million and $20.8 million remains available for future purchases under the Repurchase Authorization.
Contractual obligations. Our lease portfolio is comprised of operating leases for office space and equipment. As of December 31, 2024, we had lease
payment obligations of $100.8 million, with $17.7 million payable within 12 months. Associated with our lease portfolio, we have asset retirement obligations
for the retirement of tangible long-lived assets related to our obligation at the end of the lease term to return office space to the landlord in its original
condition. As of December 31, 2024, we had asset retirement obligations of $3.6 million, with $0.2 million payable within 12 months.
In addition to lease related contractual obligations, we also have liabilities related to certain employee benefit plans. These liabilities are recorded in our
Consolidated Balance Sheet at December 31, 2024. The obligations related to these employee benefit plans are described in Note 12, Employee Benefit Plans,
and Note 13, Pension Plan and Life Insurance Contract, in the Notes to Consolidated Financial Statements. As of December 31, 2024, we did not have a
liability for uncertain tax positions.
Application of Critical Accounting Policies and Estimates
General. Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements,
which have been prepared using accounting principles generally accepted in the United States of America. Our significant accounting policies are discussed in
Note 2, Summary of Significant Accounting Policies and Note 3, Revenue, in the Notes to Consolidated Financial Statements. The preparation of these
financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Historically, we have not made significant changes to the methods for determining these estimates as our
actual results have not differed materially from our estimates. We do not believe it is reasonably likely that the estimates and related assumptions will change
materially in the foreseeable future; however, actual results could differ from those estimates under different assumptions, judgments or conditions. If actual
amounts are ultimately different from previous estimates, the revisions are included in our results of operations for the period in which the actual amounts
become known.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly
uncertain at the time the estimate is made, there are different estimates that reasonably could have been used, or if changes in the accounting estimates are
reasonably likely to occur periodically, that could materially impact the financial statements. Management believes the following critical accounting policies
reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.
Revenue recognition. In our Executive Search segment, revenue is recognized as we satisfy our performance obligations by transferring a good or service
to a client. Generally, each of our executive search contracts contains one performance obligation which is the process of identifying potentially qualified
candidates for a specific client position. In most contracts, the transaction price includes both fixed and variable consideration. Fixed compensation is
comprised of a retainer, equal to
33
approximately one-third of the estimated first year compensation for the position to be filled, and indirect expenses, equal to a specified percentage of the
retainer, as defined in the contract. We generally bill our clients for the retainer and indirect expenses in one-third increments over a three-month period
commencing in the month of a client’s acceptance of the contract. If actual compensation of a placed candidate exceeds the original compensation estimate,
we are often authorized to bill the client for one-third of the excess compensation. We refer to this additional billing as uptick revenue. In most contracts,
variable consideration is comprised of uptick revenue and direct expenses. We bill our clients for uptick revenue upon completion of the executive search, and
direct expenses are billed as incurred.
As required under Accounting Standards Update ("ASU") No. 2014-09, we now estimate uptick revenue at contract inception, based on a portfolio
approach, utilizing the expected value method based on a historical analysis of uptick revenue realized in the Company’s geographic regions and industry
practices, and initially record a contract’s uptick revenue in an amount that is probable not to result in a significant reversal of cumulative revenue recognized
when the actual amount of uptick revenue for that contract is known. Differences between the estimated and actual amounts of variable consideration are
recorded when known. We do not estimate revenue for direct expenses as it is not materially different than recognizing revenue as direct expenses are
incurred.
Revenue from our executive search engagement performance obligation is recognized over time as our clients simultaneously receive and consume the
benefits provided by our performance. Revenue from executive search engagements is recognized over the expected average period of performance, in
proportion to the estimated personnel time incurred to fulfill our obligations under the executive search contract. Revenue is generally recognized over a
period of approximately six months.
Our executive search contracts contain a replacement guarantee which provides for an additional search to be completed, free of charge except for
expense reimbursements, should the candidate presented by us be hired by the client and subsequently terminated by the client for performance reasons within
a specified period of time. The replacement guarantee is an assurance warranty, which is not a performance obligation under the terms of the executive search
contract, as we do not provide any services under the terms of the guarantee that transfer benefits to the client in excess of assuring that the identified
candidate complies with the agreed-upon specifications. We account for the replacement guarantee under the relevant warranty guidance in ASC 460 -
Guarantees.
In our On-Demand Talent segment, we enter into contracts with clients that outline the general terms and conditions of the assignment to provide on-
demand consultants for various types of consulting projects, which consultants may be independent contractors or temporary employees. The consideration we
expect to receive under each contract is dependent on the time-based fees specified in the contract. Revenue from on-demand engagement performance
obligations is recognized over time as clients simultaneously receive and consume the benefits provided by our performance. We have applied the practical
expedient to recognize revenue for these services in the amount to which we have a right to invoice the client, as this amount corresponds directly with the
value provided to the client for the performance completed to date. For transactions where a third-party contractor is involved in providing the services to the
client, we report the revenue and the related direct costs on a gross basis as we have determined that we are the principal in the transaction. We are primarily
responsible for fulfilling the promise to provide consulting services to our clients and we have discretion in establishing the prices charged to clients for the
consulting services and are able to contractually obligate the independent service provider to deliver services and deliverables that we have agreed to provide
to our clients.
In our Heidrick Consulting segment, revenue is recognized as performance obligations are satisfied by transferring a good or service to a client. Heidrick
Consulting enters into contracts with clients that outline the general terms and conditions of the assignment to provide succession planning, executive
assessment, top team and board effectiveness and culture shaping programs. The consideration the Company expects to receive under each contract is
generally fixed. Most of the Company's consulting contracts contain one performance obligation, which is the overall process of providing the consulting
service requested by the client. The majority of our consulting revenue is recognized over time utilizing input methods. Revenue recognition over time for the
majority of our consulting engagements is measured by total cost or time incurred as a percentage of the total estimated cost or time on the consulting
engagement.
Each of our contracts with clients has an expected duration of one year or less. Accordingly, we have elected to utilize the available practical expedient
related to the disclosure of the transaction price allocated to the remaining performance obligations under our contracts. We have also elected the available
practical expedients related to adjusting for the effects of a significant financing component and the capitalization of contract acquisition costs. We charge and
collect from our clients, sales tax and value added taxes as required by certain jurisdictions. We have made an accounting policy election to exclude these
items from the transaction price in our contracts.
34
Income taxes. Determining the consolidated provision for income tax expense, income tax liabilities and deferred tax assets and liabilities involves
judgment. As a global company, we calculate and provide for income taxes in each of the tax jurisdictions in which we operate. This involves estimating
current tax exposures in each jurisdiction as well as making judgments regarding the recoverability of deferred tax assets. Tax exposures can involve complex
issues and may require an extended period to resolve. Changes in the geographic mix or estimated level of annual income before taxes can affect the overall
effective tax rate.
The recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefits associated with temporary
differences, net operating loss carryforwards and tax credits will be utilized. We assess the recoverability of the deferred tax assets on an ongoing basis. In
making this assessment, we consider all positive and negative evidence, and all potential sources of taxable income including scheduled reversals of deferred
tax liabilities, tax-planning strategies, projected future taxable income and recent financial performance.
Deferred taxes have been recorded for U.S. income taxes and foreign withholding taxes related to undistributed foreign earnings that are not permanently
reinvested. Annually, we assess material changes in estimates of cash, working capital and long-term investment requirements in order to determine whether
these earnings should be distributed. If so, an additional provision for taxes may apply, which could materially affect our future effective tax rate.
Goodwill. We perform assessments of the carrying value of goodwill at least annually and whenever events occur or circumstances indicate that a carrying
amount of goodwill may not be recoverable. These circumstances may include a significant change in business climate, attrition of key personnel, changes in
financial condition or results of operations, a prolonged decline in our stock price and market capitalization, competition, and other factors.
We operate five reporting units: the Americas, Europe (which includes Africa), Asia Pacific (which includes the Middle East), On-Demand Talent, and
Heidrick Consulting. The goodwill impairment test is completed by comparing the fair value of a reporting unit with its carrying amount, including goodwill.
The fair value of each of our reporting units is determined using a discounted cash flow methodology. The discounted cash flow approach is dependent on a
number of factors including estimates of future market growth and trends, forecasted revenue and costs, capital investments, appropriate discount rates, certain
assumptions to allocate shared costs, assets and liabilities, historical and projected performance of our reporting units, the outlook for the executive search
industry and the macroeconomic conditions affecting each of our reporting units. The assumptions used in the determination of fair value were (1) a forecast
of revenue growth in the near and long term; (2) the discount rate; and (3) a forecast of operating expense growth in the near and long term. We base our fair
value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. The fair value of our reporting units is also
impacted by our overall market capitalization and may be impacted by volatility in our stock price and assumed control premium, among other factors. As a
result, actual future results may differ from those estimates and may result in a future impairment charge. These assumptions are updated annually, at a
minimum, to reflect information concerning our reportable segments. We recognized an aggregate goodwill impairment charge of $59.5 million in 2024. We
continue to monitor potential triggering events including changes in the business climate in which we operate, our market capitalization compared to our book
value, and our recent operating performance. Any changes in these factors could result in an impairment charge. An impairment charge is recognized for the
amount by which the carrying value of a reporting unit exceeds its fair value; however, the loss recognized is not to exceed the total amount of goodwill
allocated to that reporting unit.
We believe that the accounting estimate related to goodwill impairment is a critical accounting estimate because the assumptions used are highly
susceptible to changes in the operating results and cash flows of our reportable segments.
Contingent consideration. The former owners of certain of the Company's acquired businesses are generally eligible to receive additional cash
consideration based on the attainment of certain operating metrics in the periods subsequent to acquisition. The fair value of these obligations is based on the
present value of the expected future payments to be made to the former owners of the acquired entities in accordance with the provisions outlined in the
respective purchase agreements, which is a Level 3 fair value measurement. We assess the fair value of these liabilities at each balance sheet date based on the
expected performance of the associated business and any changes in fair value are recorded in General and administrative expenses in the Consolidated
Statements of Comprehensive Income (Loss). In determining fair value, we use a variation of the income approach, known as the real options method. The
significant unobservable inputs utilized in the real options method include (1) revenue forecasts; (2) operating expense forecasts; (3) the discount rate; and (4)
volatility. Changes in revenue forecasts, operating expense forecasts, the discount rate, or volatility, would result in a change in the fair value of recorded
earnout obligations. To the extent that our estimates change in the future regarding the likelihood of achieving these targets, we may need to record material
adjustments to our accrued contingent consideration.
35
Recently Issued and Adopted Financial Accounting Standards
The information presented in Note 2, Summary of Significant Accounting Policies, to our Consolidated Financial Statements within this Annual Report on
Form 10-K is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Currency market risk. With our operations in the Americas, Europe and Asia Pacific, we conduct business using various currencies. Revenue earned in
each country is generally matched with the associated expenses incurred, thereby reducing currency risk to earnings. However, because certain assets and
liabilities are denominated in currencies other than the U.S. dollar, changes in currency rates may cause fluctuations in the valuation of such assets and
liabilities. As the local currency of our subsidiaries has generally been designated as the functional currency, we are affected by the translation of foreign
currency financial statements into U.S. dollars. A 10% change in the average exchange rate for currencies of all foreign countries in which we operate would
have increased or decreased our 2024 net income by approximately $3.1 million. For financial information by segment, see Note 18, Segment Information, in
the Notes to Consolidated Financial Statements.
36
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Registered Public Accounting Firm (PCAOB ID: 49)
38
Consolidated Balance Sheets as of December 31, 2024 and 2023
42
Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, 2024, 2023 and 2022
43
Consolidated Statements of Cash Flows For the Years Ended December 31, 2024, 2023 and 2022
44
Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended December 31, 2024, 2023 and 2022
45
Notes to Consolidated Financial Statements
46
37
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Heidrick & Struggles International, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Heidrick & Struggles International, Inc. and its subsidiaries (the Company) as of December
31, 2024 and 2023, the related consolidated statements of comprehensive income (loss), changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 3, 2025 expressed an unqualified opinion on the effectiveness
of the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved
our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Revenue Recognition
As described in Note 3 of the consolidated financial statements, revenue before reimbursements from executive search and consulting engagements of
$818,358,000 and $111,890,000, respectively, is recognized over the expected average period of performance, in proportion to the estimated personnel time or
cost incurred to fulfill the obligations under the executive search or consulting contract. This requires management to make significant estimates including the
amount of effort extended over certain defined time periods of the executive search or consulting engagement. The transaction price for executive search
engagements generally includes variable consideration, known as uptick revenue, in addition to fixed consideration. The Company estimates the amount of
uptick revenue at contract inception based on a portfolio approach utilizing the expected value method based on a historical analysis. This requires
management to make significant estimates including the average amount of uptick revenue earned on an executive search engagement. Changes in the
assumptions used in these estimates could have a significant impact on the revenue recognized during the period.
We identified the Company’s revenue recognition related to executive search and consulting engagements as a critical audit matter because of certain
significant assumptions management makes when estimating progress over time for each and when estimating the average uptick revenue earned specific to
executive search engagements. Management’s assumptions involve (a) determining which historical data should be included in the estimate calculations for
executive search engagements and (b) determining the estimated costs to complete for the consulting engagements. Auditing these assumptions involved a
high
38
degree of judgment and subjectivity as changes in these assumptions could have a significant impact on the amount of revenue recognized.
Our audit procedures related to the assumptions involved in estimating progress over time for executive search and consulting engagements, and estimating
the average uptick revenue earned on executive search engagements included the following, among others:
•
We obtained an understanding of the relevant controls related to management’s estimates of progress over time and average uptick revenue, and
tested such controls for design and operating effectiveness, including management review controls over the completeness and accuracy of data
compiled and used in the estimate.
•
We evaluated whether the historical data utilized to estimate progress over time was complete and accurate based on historical time studies, on a
sample basis.
•
We evaluated the estimate of the average uptick revenue on executive search engagements by comparing the estimate to historical data of the total
uptick revenue billed and total retainer fee for a sample of executive search engagements.
•
We selected a sample of contracts and performed the following procedures:
–
Obtained and read contract source documents for each selection.
–
Tested management’s identification of significant terms for completeness, including the identification of distinct performance obligations
and variable consideration.
–
Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies,
along with their use of estimates, in the determination of revenue recognition conclusions.
–
Tested the inputs and the mathematical accuracy of management’s revenue calculations and recalculated deferred revenue at period end, if
any.
Valuation of On-Demand Talent Reporting Unit for Goodwill Impairment Testing
As described in Notes 2 and 9 to the financial statements, as of December 31, 2024, the Company’s goodwill balance assigned to the On-Demand Talent
reporting unit was $47,121,000 and goodwill impairment relating to this reporting unit during the year ended December 31, 2024, amounted to $58,015,000.
The Company tests for impairment of goodwill at the reporting unit level at least annually and whenever events occur, or circumstances indicate that a
carrying amount of goodwill may not be recoverable. The Company determines the fair value of the On-Demand Talent reporting unit using a discounted cash
flow methodology. An impairment charge is recognized for the amount by which the carrying value of the reporting unit exceeds its fair value; however, the
loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit. When determining the fair value of the On-Demand Talent
reporting unit management makes significant estimates and assumptions, including revenue growth rates, projected operating costs, and discount rates.
We identified the valuation of the On-Demand Talent reporting unit for goodwill impairment testing as a critical audit matter given the significant estimates
and assumptions management makes to determine the fair value of the On-Demand Talent reporting unit. Auditing the reasonableness of management’s
estimates and assumptions related to revenue growth rates, projected operating costs, and discount rates utilized in the valuation of the On-Demand Talent
reporting unit’s quantitative test for goodwill impairment required a high degree of auditor judgment and an increased extent of effort, including the
involvement of our valuation specialists.
Our audit procedures related to revenue growth rates, projected operating costs, and discount rates utilized in the valuation of the Company’s On-Demand
Talent reporting unit included the following, among others:
•
We obtained an understanding of the relevant controls related to the valuation of the Company’s On-Demand Talent reporting unit and tested such
controls for design and operating effectiveness, including management review controls.
•
We evaluated the reasonableness of management’s forecasts of revenue growth rates by comparing the forecasts to: (1) historical results, and (2)
external market and industry data.
39
•
We evaluated the reasonableness of management’s forecasts of operating costs as a percentage of revenue by comparing the forecasts to historical
results, and comparison to guideline public companies.
•
With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s valuation methodology and significant
assumptions by:
–
Evaluating the reasonableness of the discount rate by comparing the underlying source information to publicly available market data and
verifying the accuracy of the calculations.
–
Evaluating the appropriateness of the valuation methods used by management and testing their mathematical accuracy.
/s/ RSM US LLP
We have served as the Company's auditor since 2018.
Chicago, Illinois
March 3, 2025
40
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Heidrick & Struggles International, Inc.
Opinion on the Internal Control Over Financial Reporting
We have audited Heidrick & Struggles International, Inc. and its subsidiaries’ (the Company) internal control over financial reporting as of December 31,
2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity
and cash flows for each of the three years in the period ended December 31, 2024 of the Company and our report dated March 3, 2025 expressed an
unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ RSM US LLP
Chicago, Illinois
March 3, 2025
41
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts)
December 31,
2024
December 31,
2023
Current assets
Cash and cash equivalents
$
515,627
$
412,618
Marketable securities
47,896
65,538
Accounts receivable, net of allowances of $7,296 and $6,954, respectively
134,331
133,128
Prepaid expenses
28,718
23,597
Other current assets
39,935
47,923
Income taxes recoverable
6,470
10,410
Total current assets
772,977
693,214
Non-current assets
Property and equipment, net
51,685
35,752
Operating lease right-of-use assets
83,518
86,063
Assets designated for retirement and pension plans
9,976
11,105
Investments
58,290
47,287
Other non-current assets
25,500
17,071
Goodwill
137,861
202,252
Other intangible assets, net
12,483
20,842
Deferred income taxes, net
41,898
28,005
Total non-current assets
421,211
448,377
Total assets
$
1,194,188
$
1,141,591
Current liabilities
Accounts payable
$
25,088
$
20,837
Accrued salaries and benefits
353,531
322,744
Deferred revenue
51,085
45,732
Operating lease liabilities
17,653
21,498
Other current liabilities
21,369
21,823
Income taxes payable
14,287
6,057
Total current liabilities
483,013
438,691
Non-current liabilities
Accrued salaries and benefits
58,547
52,108
Retirement and pension plans
72,138
62,100
Operating lease liabilities
83,152
78,204
Deferred income tax liability - non-current
1,616
6,402
Other non-current liabilities
42,905
41,808
Total non-current liabilities
258,358
240,622
Total liabilities
741,371
679,313
Commitments and contingencies (Note 20)
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued at December 31, 2024 and 2023
—
—
Common stock, $0.01 par value, 100,000,000 shares authorized, 20,414,915 and 20,127,872 shares issued, 20,409,835 and
20,122,792 shares outstanding at December 31, 2024 and 2023, respectively
204
201
Treasury stock at cost, 5,080 shares at December 31, 2024 and 2023, respectively
(110)
(110)
Additional paid in capital
260,893
251,988
Retained earnings
205,875
210,070
Accumulated other comprehensive income (loss)
(14,045)
129
Total stockholders’ equity
452,817
462,278
Total liabilities and stockholders’ equity
$
1,194,188
$
1,141,591
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.
42
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
December 31,
2024
2023
2022
Revenue
Revenue before reimbursements (net revenue)
$
1,098,573
$
1,026,864
$
1,073,464
Reimbursements
17,103
14,318
10,122
Total revenue
1,115,676
1,041,182
1,083,586
Operating expenses
Salaries and benefits
715,628
656,030
737,430
General and administrative expenses
166,995
156,494
132,678
Cost of services
118,950
109,039
70,676
Research and development
23,055
22,698
20,414
Impairment charges
59,478
7,246
—
Restructuring charges
6,939
—
—
Reimbursed expenses
17,103
14,318
10,122
Total operating expenses
1,108,148
965,825
971,320
Operating income
7,528
75,357
112,266
Non-operating income (expense)
Interest, net
14,422
11,617
5,337
Other, net
8,702
1,697
(2,367)
Net non-operating income
23,124
13,314
2,970
Income before income taxes
30,652
88,671
115,236
Provision for income taxes
21,924
34,261
35,750
Net income
8,728
54,410
79,486
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
(14,417)
4,810
(8,457)
Net unrealized gain (loss) on available-for-sale investments
11
83
(41)
Pension gain (loss) adjustment
232
(575)
2,634
Other comprehensive income (loss), net of tax
(14,174)
4,318
(5,864)
Comprehensive income (loss)
$
(5,446)
$
58,728
$
73,622
Weighted-average common shares outstanding
Basic
20,293
20,029
19,758
Diluted
21,188
20,766
20,618
Earnings per common share
Basic
$
0.43
$
2.72
$
4.02
Diluted
$
0.41
$
2.62
$
3.86
Cash dividends paid per share
$
0.60
$
0.60
$
0.60
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.
43
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2024
2023
2022
Cash flows - operating activities
Net income
$
8,728
$
54,410
$
79,486
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
18,857
18,508
10,603
Deferred income taxes
(19,421)
11,900
7,088
Stock-based compensation expense
12,725
10,830
16,689
Accretion expense related to earnout payments
1,926
1,554
820
Impairment charges
59,478
7,246
—
Gain on marketable securities
(2,663)
(2,918)
(2,406)
Loss on disposal of property and equipment
454
209
392
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable
(4,520)
6,913
4,522
Accounts payable
4,625
(131)
(5,731)
Accrued expenses
47,031
(145,118)
32,892
Restructuring accrual
2,506
—
—
Deferred revenue
6,272
2,035
(7,237)
Income taxes recoverable (payable), net
12,326
(6,692)
(13,606)
Retirement and pension plan assets and liabilities
6,021
7,493
(479)
Prepaid expenses
(5,536)
1,233
(2,850)
Other assets and liabilities, net
1,622
5,736
(895)
Net cash provided by (used in) operating activities
150,431
(26,792)
119,288
Cash flows - investing activities
Acquisition of businesses, net of cash acquired
—
(49,858)
—
Capital expenditures
(26,315)
(13,433)
(11,134)
Purchases of available for sale investments
(163,611)
(140,982)
(269,824)
Proceeds from sale of available for sale investments
175,307
337,872
1,359
Net cash provided by (used in) investing activities
(14,619)
133,599
(279,599)
Cash flows - financing activities
Cash dividends paid
(12,923)
(12,537)
(12,466)
Payment of employee tax withholding on equity transactions
(3,817)
(4,141)
(3,219)
Repurchases of common stock
—
(904)
—
Acquisition earnout payments
—
(35,946)
—
Net cash used in financing activities
(16,740)
(53,528)
(15,685)
Effect of exchange rates fluctuations on cash, cash equivalents and restricted cash
(15,877)
3,850
(13,774)
Net increase (decrease) in cash, cash equivalents and restricted cash
103,195
57,129
(189,770)
Cash, cash equivalents and restricted cash at beginning of period
412,618
355,489
545,259
Cash, cash equivalents and restricted cash at end of period
$
515,813
$
412,618
$
355,489
Supplemental disclosures of cash flow information
Cash paid for
Income taxes
$
26,125
$
22,137
$
41,910
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.
44
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except per share amounts)
Common Stock
Treasury Stock
Additional
Paid in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shares
Amount
Shares
Amount
Balance at December 31, 2021
19,597
196
5
(191)
233,163
101,177
1,675
336,020
Net income
—
—
—
—
—
79,486
—
79,486
Other comprehensive loss, net of tax
—
—
—
—
—
—
(5,864)
(5,864)
Common and treasury stock transactions:
Stock-based compensation
—
—
—
—
16,689
—
—
16,689
Vesting of equity, net of tax withholdings
269
3
—
—
(3,222)
—
—
(3,219)
Re-issuance of treasury stock
—
—
—
—
—
—
—
—
Cash dividends declared ($0.60 per
share)
—
—
—
—
—
(11,857)
—
(11,857)
Dividend equivalents on restricted stock
units
—
—
—
—
—
(609)
—
(609)
Balance at December 31, 2022
19,866
199
5
$
(191)
$
246,630
$
168,197
$
(4,189)
$
410,646
Net income
—
—
—
—
—
54,410
—
54,410
Other comprehensive income, net of tax
—
—
—
—
—
—
4,318
4,318
Common and treasury stock transactions:
Stock-based compensation
—
—
—
—
10,830
—
—
10,830
Vesting of equity, net of tax withholdings
261
2
—
—
(4,143)
—
—
(4,141)
Repurchase of common stock
—
—
36
(904)
—
—
—
(904)
Clawback of equity awards
—
—
10
(307)
(37)
—
—
(344)
Re-issuance of treasury stock
—
—
(46)
1,292
(1,292)
—
—
—
Cash dividends declared ($0.60 per
share)
—
—
—
—
—
(12,043)
—
(12,043)
Dividend equivalents on restricted stock
units
—
—
—
—
—
(494)
—
(494)
Balance at December 31, 2023
20,127
$
201
5
$
(110)
$
251,988
$
210,070
$
129
$
462,278
Net income
—
—
—
—
—
8,728
—
8,728
Other comprehensive loss, net of tax
—
—
—
—
—
—
(14,174)
(14,174)
Common and treasury stock transactions:
Stock-based compensation
—
—
—
—
12,725
—
—
12,725
Issuance of common stock
13
—
—
—
—
—
—
—
Vesting of equity, net of tax withholdings
275
3
—
—
(3,820)
—
—
(3,817)
Cash dividends declared ($0.60 per
share)
—
—
—
—
—
(12,175)
—
(12,175)
Dividend equivalents on restricted stock
units
—
—
—
—
—
(748)
—
(748)
Balance at December 31, 2024
20,415
$
204
5
$
(110)
$
260,893
$
205,875
$
(14,045)
$
452,817
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.
45
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tables in thousands, except share and per share figures)
1. Basis of Presentation
Heidrick & Struggles International, Inc. and subsidiaries (the "Company) is a human capital leadership advisory firm providing executive search,
consulting and on-demand talent services to businesses and business leaders worldwide to help them to improve the effectiveness of their leadership teams.
We help our clients build leadership teams by facilitating the recruitment, management and development of senior executives. The Company operates globally,
including Executive Search operating segments in the Americas, Europe and Asia Pacific.
The consolidated financial statements include Heidrick & Struggles International, Inc. and its wholly owned subsidiaries and have been prepared using
accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Significant items
subject to estimates and assumptions include revenue recognition, allowances for deferred tax assets and liabilities, the assessment of goodwill for impairment,
and contingent consideration liabilities. Estimates are subject to a degree of uncertainty and actual results could differ from these estimates.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents.
Marketable Securities
The Company’s marketable securities consist of available-for-sale debt securities with original maturities exceeding three months.
Concentration of Risk
The Company is potentially exposed to concentrations of risk associated with its financial instruments and accounts receivable. Cash equivalents are
principally invested in short-term money market funds and U.S. Treasury securities or placed with major banks. The Company maintains its cash and cash
equivalents in bank accounts that exceed federally insured FDIC limits. The Company has not experienced any losses in such accounts. Accounts receivable
risk is limited due to the Company’s large number of clients and their dispersion across many different industries and geographies.
Accounts Receivable
The Company’s accounts receivable consists of trade receivables. The Company’s expected credit loss allowance methodology for accounts receivable is
developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' trade
accounts receivables. These factors may change over time, impacting the allowance level. See Note 4, Credit Losses.
Fair Value of Financial Instruments
Cash equivalents are stated at cost, which approximates fair value. The carrying value for receivables from clients, accounts payable, deferred revenue
and other accrued liabilities reasonably approximates fair value due to the nature of the financial instruments and the short-term nature of the items.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful life of the asset or, for
leasehold improvements, the shorter of the lease term or the estimated useful life of the asset, as follows:
46
Office furniture, fixtures and equipment
5–10 years
Computer equipment and software
3–7 years
Leasehold improvements are depreciated over the lesser of the lease term or life of the asset improvement, which typically range from three to ten years.
Depreciation is calculated for tax purposes using accelerated methods, where applicable.
Other Intangible Assets and Long-Lived Assets
The Company reviews its other intangible assets and long-lived assets, including property and equipment and right-of-use assets, for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be
held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by
the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge, equal to the amount by which the
carrying amount of the asset group exceeds the fair value of the asset group, is recognized.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets, Current liabilities
- Operating lease liabilities and Non-current liabilities - Operating lease liabilities in our Consolidated Balance Sheets. The Company does not have any
leases that meet the finance lease criteria.
Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to
make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized on the commencement date based on the present
value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, an incremental borrowing rate based on the
information available at the commencement date is used in determining the present value of lease payments. The operating lease right-of-use asset also
includes any lease payments made in advance and any accrued rent expense balances. Lease terms may include options to extend or terminate the lease when
it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components. For office leases, the Company accounts for the lease and non-lease
components as a single lease component. For equipment leases, such as vehicles and office equipment, the Company accounts for the lease and non-lease
components separately.
Investments
The Company’s investments consist primarily of available-for-sale investments within the U.S. non-qualified deferred compensation plan (the “Plan”).
Available-for-sale investments are reported at fair value with changes in unrealized gains (losses) and realized gains (losses) recorded as a non-operating
expense in Other, net in the Consolidated Statements of Comprehensive Income (Loss).
Goodwill
Goodwill represents the difference between the purchase price of acquired companies and the related fair value of the net assets acquired, which is
accounted for by the acquisition method of accounting. The Company performs assessments of the carrying value of goodwill at least annually and whenever
events occur or circumstances indicate that a carrying amount of goodwill may not be recoverable. These circumstances include a significant change in
business climate, attrition of key personnel, changes in financial condition or results of operations, a prolonged decline in the Company’s stock price and
market capitalization, competition, and other factors.
The goodwill impairment test compares the fair value of a reporting unit to its carrying amount, including goodwill. The Company operates five reporting
units: Americas, Europe (which includes Africa), Asia Pacific (which includes the Middle East), On-Demand Talent and Heidrick Consulting. The goodwill
impairment test is completed by comparing the fair value of a reporting unit with its carrying amount. The fair value of each of the Company’s reporting units
is determined using a discounted cash flow methodology. An impairment charge is recognized for the amount by which the carrying value of the
47
reporting unit exceeds its fair value; however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit.
Restructuring Charges
The Company accounts for restructuring charges by recognizing a liability at fair value when the costs are incurred.
Revenue Recognition
See Note 3, Revenue.
Cost of Services
Cost of services consists of contractor costs related to the delivery of various services in the Company's On-Demand Talent and Heidrick Consulting
operating segments.
Research and Development
Research and development consists of payroll, employee benefits, stock-based compensation, other employee expenses and third-party professional fees
associated with new product development.
Reimbursements
The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue and expense in its Consolidated
Statements of Comprehensive Income (Loss).
Salaries and Benefits
Salaries and benefits consist of compensation and benefits paid to consultants, executive officers, and administrative and support personnel, of which the
most significant elements are salaries and annual performance-related bonuses. Other items in this category are expenses related to sign-on bonuses, forgivable
employee loans and minimum guaranteed bonuses (often incurred in connection with the hiring of new consultants), restricted stock unit, phantom stock unit
and performance share unit amortization, payroll taxes, profit sharing and retirement benefits, and employee insurance benefits.
Salaries and benefits are recognized on an accrual basis. Certain sign-on bonuses, retention awards, and minimum guaranteed compensation are
capitalized and amortized in accordance with the terms of the respective agreements.
Historically, a portion of the Company’s consultants’ and management cash bonuses were deferred and paid over a three-year vesting period. The portion
of the bonus was approximately 15% depending on the employee’s level or position. The compensation expense related to the amounts being deferred was
recognized on a graded vesting attribution method over the requisite service period. This service period began on January 1 of the respective fiscal year and
continued through the deferral date, which coincided with the Company’s bonus payments in the first half of the following year and for an additional three-
year vesting period. The deferrals are recorded in Accrued salaries and benefits within both Current liabilities and Non-current liabilities in the Consolidated
Balance Sheets.
In 2020, the Company terminated the cash bonus deferral for consultants and, in 2021, terminated the cash bonus deferral for management. The Company
now pays 100% of the cash bonuses earned by consultants and management in the first half of the following year. Consultant and management cash bonuses
earned prior to 2020 and 2021, respectively, were paid under the terms of the cash bonus deferral program. The deferrals are recorded in Accrued salaries and
benefits within both Current liabilities and Non-current liabilities in the Consolidated Balance Sheets. The final cash bonus deferrals were paid during the
year ended December 31, 2023.
Income Taxes
Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities, applying
enacted statutory tax rates in effect for the year in which the tax differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
48
Earnings per Common Share
Basic earnings per common share is computed by dividing net income by weighted average common shares outstanding for the year. Diluted earnings per
share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Common equivalent
shares are excluded from the determination of diluted earnings per share in periods in which they have an anti-dilutive effect.
The following table sets forth the computation of basic and diluted earnings per share:
December 31,
2024
2023
2022
Net income
$
8,728
$
54,410
$
79,486
Weighted average shares outstanding:
Basic
20,293
20,029
19,758
Effect of dilutive securities:
Restricted stock units
611
580
644
Performance stock units
284
157
216
Diluted
21,188
20,766
20,618
Basic earnings per share
$
0.43
$
2.72
$
4.02
Diluted earnings per share
$
0.41
$
2.62
$
3.86
Translation of Foreign Currencies
The Company generally designates the local currency for all its subsidiaries as the functional currency. The Company translates the assets and liabilities
of its subsidiaries into U.S. dollars at the current rate of exchange prevailing at the balance sheet date. Revenue and expenses are translated at a monthly
average exchange rate for the period. Translation adjustments are reported as a component of Accumulated other comprehensive income (loss).
Restricted Cash
Periodically, the Company is party to agreements with terms that require the Company to restrict cash through the termination dates of the agreements.
Current and non-current restricted cash is included in Other current assets and Other non-current assets, respectively, in the Consolidated Balance Sheets.
The following table provides a reconciliation of the cash and cash equivalents between the Consolidated Balance Sheets and the Consolidated Statements
of Cash Flows as of December 31, 2024, 2023, and 2022:
December 31,
2024
2023
2022
Cash and cash equivalents
$
515,627
$
412,618
$
355,447
Restricted cash included within other non-current assets
186
—
42
Total cash, cash equivalents and restricted cash
$
515,813
$
412,618
$
355,489
Recently Adopted Financial Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 280): Facilitation of the Effects of Reference Rate Reform on
Financial Reporting. The guidance was intended to provide temporary optional expedients and exceptions to the guidance on contract modifications and hedge
accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other
interbank offered rates to alternative reference rates. The Company adopted the amendment as of December 31, 2024. The adoption did not have an impact on
the Company's financial statements.
49
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The
standard is intended to improve reportable segment disclosure requirements for public business entities primarily through enhanced disclosures about
significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of
segment profit (referred to as the “significant expense principle”). This guidance is effective for annual periods beginning after December 15, 2023, and for
interim periods beginning after December 15, 2024. The Company adopted ASU No. 2023-07 as of December 31, 2024.
Recently Issued Financial Accounting Standards
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU) No. 2023-09, "Income Taxes
(Topic 740): Improvements to Income Tax Disclosures." The standard is intended to expand the disclosure requirements for income taxes, specifically related
to the rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption
permitted. The Company is currently evaluating the impact of this guidance on its financial statement disclosures.
3. Revenue
Executive Search
Revenue is recognized as performance obligations are satisfied by transferring a good or service to a client. Generally, each executive search contract
contains one performance obligation which is the process of identifying potentially qualified candidates for a specific client position. In most contracts, the
transaction price includes both fixed and variable consideration. Fixed compensation is comprised of a retainer, equal to approximately one-third of the
estimated first year compensation for the position to be filled, and indirect expenses, equal to a specified percentage of the retainer, as defined in the contract.
The Company generally bills clients for the retainer and indirect expenses in one-third increments over a three-month period commencing in the month of a
client’s acceptance of the contract. If actual compensation of a placed candidate exceeds the original compensation estimate, the Company is often authorized
to bill the client for one-third of the excess compensation. The Company refers to this additional billing as uptick revenue. In most contracts, variable
consideration is comprised of uptick revenue and direct expenses. The Company bills its clients for uptick revenue upon completion of the executive search,
and direct expenses are billed as incurred.
The Company estimates uptick revenue at contract inception, based on a portfolio approach, utilizing the expected value method based on a historical
analysis of uptick revenue realized in the Company’s geographic regions and industry practices, and initially records a contract’s uptick revenue in an amount
that is probable not to result in a significant reversal of cumulative revenue recognized when the actual amount of uptick revenue for the contract is known.
Differences between the estimated and actual amounts of variable consideration are recorded when known. The Company does not estimate revenue for direct
expenses as it is not materially different than recognizing revenue as direct expenses are incurred.
Revenue from executive search engagement performance obligations is recognized over time as clients simultaneously receive and consume the benefits
provided by the Company's performance. Revenue from executive search engagements is recognized over the expected average period of performance, in
proportion to the estimated personnel time incurred to fulfill the obligations under the executive search contract. Revenue is generally recognized over a
period of approximately six months.
The Company's executive search contracts contain a replacement guarantee which provides for an additional search to be completed, free of charge except
for expense reimbursements, should the candidate presented by the Company be hired by the client and subsequently terminated by the client for performance
reasons within a specified period of time. The replacement guarantee is an assurance warranty, which is not a performance obligation under the terms of the
executive search contract, as the Company does not provide any services under the terms of the guarantee that transfer benefits to the client in excess of
assuring that the identified candidate complies with the agreed-upon specifications. The Company accounts for the replacement guarantee under the relevant
warranty guidance in ASC 460 - Guarantees.
50
On-Demand Talent
The Company enters into contracts with clients that outline the general terms and conditions of the assignment to provide on-demand consultants for
various types of consulting projects, which consultants may be independent contractors or temporary employees. The consideration the Company expects to
receive under each contract is dependent on the time-based fees specified in the contract. Revenue from on-demand engagement performance obligations is
recognized over time as clients simultaneously receive and consume the benefits provided by the Company's performance. The Company has applied the
practical expedient to recognize revenue for these services in the amount to which the Company has a right to invoice the client, as this amount corresponds
directly with the value provided to the client for the performance completed to date. For transactions where a third-party contractor is involved in providing
the services to the client, the Company reports the revenue and the related direct costs on a gross basis as it has determined that it is the principal in the
transaction. The Company is primarily responsible for fulfilling the promise to provide consulting services to its clients and the Company has discretion in
establishing the prices charged to clients for the consulting services and is able to contractually obligate the independent service provider to deliver services
and deliverables that the Company has agreed to provide to its clients.
Heidrick Consulting
Revenue is recognized as performance obligations are satisfied by transferring a good or service to a client. Heidrick Consulting enters into contracts with
clients that outline the general terms and conditions of the assignment to provide succession planning, executive assessment, top team and board effectiveness
and culture shaping programs. The consideration the Company expects to receive under each contract is generally fixed. Most of the Company's consulting
contracts contain one performance obligation, which is the overall process of providing the consulting service requested by the client. The majority of our
consulting revenue is recognized over time utilizing input methods. Revenue recognition over time for the majority of our consulting engagements is
measured by total cost or time incurred as a percentage of the total estimated cost or time on the consulting engagement.
Contract Balances
Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. Contract assets and
liabilities are classified as current due to the nature of the Company's contracts, which are completed within one year. Contract assets are included within
Other current assets on the Consolidated Balance Sheets.
Unbilled receivables: Unbilled receivables represents contract assets from revenue recognized over time in excess of the amount billed to the client and
the amount billed to the client is solely dependent upon the passage of time. This amount includes revenue recognized in excess of billed executive search
retainers and Heidrick Consulting fees.
Contract assets: Contract assets represent revenue recognized over time in excess of the amount billed to the client and the amount billed to the client is
not solely subject to the passage of time. This amount primarily includes revenue recognized for upticks and contingent placement fees in executive search
contracts.
Deferred revenue: Contract liabilities consist of deferred revenue, which is equal to billings in excess of revenue recognized.
The following table outlines the changes in our contract asset and liability balances for the years ended:
December 31,
2024
2023
2022
2023 to 2024 Change
2022 to 2023 Change
Contract assets
Unbilled receivables, net
$
17,610
$
15,318
$
13,940 $
2,292 $
1,378
Contract assets
15,540
16,774
21,348
(1,234)
(4,574)
Total contract assets
33,150
32,092
35,288
1,058
(3,196)
Contract liabilities
Deferred revenue
$
51,085
$
45,732
$
43,057 $
5,353 $
2,675
During the year ended December 31, 2024, we recognized revenue of $41.6 million that was included in the contract liabilities balance at the beginning of
the period. The amount of revenue recognized during the year ended December 31, 2024, from performance obligations partially satisfied in previous periods
as a result of changes in the estimates of variable
51
consideration was $24.0 million.
Each of the Company's contracts with clients has an expected duration of one year or less. Accordingly, the Company has elected to utilize the available
practical expedient related to the disclosure of the transaction price allocated to the remaining performance obligations under its contracts. The Company has
also elected the available practical expedients related to adjusting for the effects of a significant financing component and the capitalization of contract
acquisition costs. The Company charges and collects from its clients, sales tax and value added taxes as required by certain jurisdictions. The Company has
made an accounting policy election to exclude these items from the transaction price in its contracts.
4. Credit Losses
The Company is exposed to credit losses primarily through the provision of its executive search, consulting, and on-demand talent services. The
Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future
economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables,
the estimate of amount of accounts receivable that may not be collected is primarily based on historical loss-rate experience. When required, the Company
adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions.
The Company generally assesses future economic conditions for a period of sixty to ninety days, which corresponds with the contractual life of its accounts
receivables. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of
default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers'
financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.
The activity in the allowance for credit losses on the Company's trade receivables is as follows:
December 31,
2024
2023
2022
Balance at January 1,
$
6,954
$
6,643
$
5,666
Provision for credit losses
7,168
9,574
7,938
Write-offs
(6,689)
(9,275)
(6,830)
Foreign currency translation
(137)
12
(131)
Balance at December 31,
$
7,296
$
6,954
$
6,643
There were no investments with unrealized losses at December 31, 2024, and 2023.
5. Property and Equipment, net
The components of the Company’s property and equipment are as follows:
December 31,
2024
2023
Leasehold improvements
$
49,744
$
45,050
Office furniture, fixtures and equipment
14,384
14,775
Computer equipment and software
47,649
38,798
Property and equipment, gross
111,777
98,623
Accumulated depreciation
(60,092)
(62,871)
Property and equipment, net
$
51,685
$
35,752
Depreciation expense for the years ended December 31, 2024, 2023, and 2022, was $10.8 million, $9.1 million, and $7.4 million, respectively.
52
6. Leases
The Company's lease portfolio is comprised primarily of operating leases for office space and equipment. The majority of the Company's leases include
both lease and non-lease components, which the Company accounts for differently depending on the underlying class of asset. Certain of the Company's leases
include one or more options to renew or terminate the lease at the Company's discretion. Generally, the renewal and termination options are not included in the
right-of-use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal and termination options
and when they are reasonably certain of exercise, includes the renewal or termination option in the lease term.
As most of the Company's leases do not provide an implicit interest rate, the Company utilizes an incremental borrowing rate based on the information
available at the commencement date in determining the present value of lease payments. The Company has a centrally managed treasury function and
therefore, a portfolio approach is applied in determining the incremental borrowing rate. The incremental borrowing rate is the rate of interest that the
Company would have to pay to borrow on a fully collateralized basis over a similar term in an amount equal to the total lease payments in a similar economic
environment.
Office leases have remaining lease terms that range from less than one year to 11.2 years, some of which also include options to extend or terminate the
lease. Most office leases contain both fixed and variable lease payments. Variable lease costs consist primarily of rent escalations based on an established
index or rate and taxes, insurance, and common area or other maintenance costs, which are paid based on actual costs incurred by the lessor. The Company has
elected to utilize the available practical expedient to not separate lease and non-lease components for office leases.
Equipment leases, which are comprised of vehicle and office equipment leases, have remaining terms that range from less than one year to 4.8 years,
some of which also include options to extend or terminate the lease. The Company's equipment leases do not contain variable lease payments. The Company
separates the lease and non-lease components for its equipment leases. Equipment leases do not comprise a significant portion of the Company's lease
portfolio.
Lease cost components included within General and Administrative Expenses in our Consolidated Statements of Comprehensive Income (Loss) for the
year ended December 31, were as follows:
December 31,
2024
2023
Operating lease cost
$
22,837
$
19,587
Variable lease cost
9,810
9,225
Total lease cost
$
32,647
$
28,812
Supplemental cash flow information related to the Company's operating leases for the year ended December 31, is as follows:
December 31,
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
21,598 $
20,856
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$
20,621 $
34,982
53
The weighted average remaining lease term and weighted average discount rate for our operating leases as of December 31, is as follows:
December 31,
2024
2023
Weighted Average Remaining Lease Term
Operating leases
7.7 years
7.3 ye
Weighted Average Discount Rate
Operating leases
5.16 %
4.82
The future maturities of the Company's operating lease liabilities for the years ended December 31, is as follows:
Operating Lease Maturity
2025
$
17,572
2026
17,096
2027
16,896
2028
14,385
2029
13,016
Thereafter
45,611
Total lease payments
124,576
Less: Interest
23,771
Present value of lease liabilities
$
100,805
The Company has an obligation at the end of the lease term to return certain offices to the landlord in its original condition, which is recorded at fair value
at the time the liability is incurred. The Company had $3.6 million and $3.3 million of asset retirement obligations as of December 31, 2024, and 2023,
respectively, which are recorded within Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets.
7. Financial Instruments and Fair Value
Cash, Cash Equivalents and Marketable Securities
The Company's investments in marketable debt securities, which consist of U.S. Treasury bills, are classified and accounted for as available-for-sale. The
Company classifies its marketable debt securities as either short-term or long-term based on each instrument's underlying contractual maturity date.
Unrealized gains and losses on marketable debt securities classified as available-for-sale are recognized in Accumulated other comprehensive income in the
Consolidated Balance Sheets until realized.
The Company's cash, cash equivalents, and marketable securities by significant investment category are as follows:
Amortized Cost
Unrealized
Gains
Fair Value
Cash and Cash
Equivalents
Marketable
Securities
Balance at December 31, 2024
Cash
$
—
$
—
$
—
$
256,638
$
—
Level 1 :
Money market funds
36,781
U.S. Treasury securities
270,050
54
270,104
222,208
47,896
Total Level 1
270,050
54
270,104
258,989
47,896
Total
$
270,050
$
54
$
270,104
$
515,627
$
47,896
(1)
54
Amortized Cost
Unrealized
Gains
Fair Value
Cash and Cash
Equivalents
Marketable
Securities
Balance at December 31, 2023
Cash
$
—
$
—
$
—
$
221,980
$
—
Level 1 :
Money market funds
13,906
U.S. Treasury securities
242,228
42
242,270
176,732
65,538
Total Level 1
242,228
42
242,270
190,638
65,538
Total
$
242,228
$
42
$
242,270
$
412,618
$
65,538
(1) Level 1 – Quoted prices in active markets for identical assets and liabilities.
Investments, Assets Designated for Retirement and Pension Plans and Associated Liabilities
The Company has a U.S. non-qualified deferred compensation plan that consists primarily of U.S. marketable securities and mutual funds. The aggregate
cost basis for these investments was $45.3 million and $37.2 million as of December 31, 2024, and December 31, 2023, respectively.
The Company also maintains a pension plan for certain current and former employees in Germany. The pensions are individually fixed Euro amounts that
vary depending on the function and the eligible years of service of the employee. The Company’s investment strategy is to support its pension obligations
through reinsurance contracts. The BaFin—German Federal Financial Supervisory Authority—supervises the insurance companies and the reinsurance
contracts. The BaFin requires each reinsurance contract to guarantee a fixed minimum return. The Company’s pension benefits are fully reinsured by group
insurance contracts with ERGO Lebensversicherung AG, and the group insurance contracts are measured in accordance with BaFin guidelines (including
mortality tables and discount rates) which are considered Level 2 inputs.
The following tables provide a summary of the fair value measurements for each major category of investments, assets designated for retirement and
pension plans and associated liabilities measured at fair value on a recurring basis:
Balance Sheet Classification
Fair Value
Other Current
Assets
Assets
Designated for
Retirement and
Pension Plans
Investments
Other Current
Liabilities
Retirement and
Pension Plans
Balance at December 31, 2024
Measured on a recurring basis:
Level 1 :
U.S. non-qualified deferred compensation plan
$
58,290
$
— $
—
$
58,290
$
—
$
—
Level 2 :
Retirement and pension plan assets
11,112
1,136
9,976
—
—
—
Pension benefit obligation
(12,404)
—
—
—
(1,136)
(11,268)
Total Level 2
(1,292)
1,136
9,976
—
(1,136)
(11,268)
Total
$
56,998
$
1,136 $
9,976
$
58,290
$
(1,136)
$
(11,268)
(1)
(1)
(2)
55
Balance Sheet Classification
Fair Value
Other Current
Assets
Assets
Designated for
Retirement and
Pension Plans
Investments
Other Current
Liabilities
Retirement and
Pension Plans
Balance at December 31, 2023
Measured on a recurring basis:
Level 1 :
U.S. non-qualified deferred compensation plan
$
47,287
$
— $
—
$
47,287
$
—
$
—
Level 2 :
Retirement and pension plan assets
12,394
1,289
11,105
—
—
—
Pension benefit obligation
(14,416)
—
—
—
(1,289)
(13,127)
Total Level 2
(2,022)
1,289
11,105
—
(1,289)
(13,127)
Total
$
45,265
$
1,289 $
11,105
$
47,287
$
(1,289)
$
(13,127)
(1) Level 1 – Quoted prices in active markets for identical assets and liabilities.
(2) Level 2 – Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial instrument.
Contingent Consideration
The former owners of certain of the Company's acquired businesses are eligible to receive additional cash consideration based on the attainment of certain
operating metrics in the periods subsequent to acquisition. Contingent consideration ("earnout") and compensation are valued using significant inputs that are
not observable in the market, which are defined as Level 3 inputs pursuant to fair value measurement accounting. The Company determines the fair value of
contingent consideration and compensation using a variation of the income approach, known as the real options method. The significant unobservable inputs
utilized in the real options method include (1) revenue forecasts; (2) operating expense forecasts; (3) the discount rate; and (4) volatility. See Note 8,
Acquisitions, for details of the contingent consideration arrangements.
The following table provides a reconciliation of the beginning and ending balance of Level 3 liabilities for the year ended December 31, 2024:
Earnout
Contingent Compensation
Balance at December 31, 2023
$
(38,601) $
(18,878)
Earnout accretion
(1,926)
—
Compensation expense
—
(10,815)
Fair value adjustment
(438)
—
Payments
—
4,821
Foreign currency translation
2,317
1,971
Balance at December 31, 2024
$
(38,648) $
(22,901)
Earnout accruals of $38.6 million and $38.6 million are recorded within Non-current liabilities - Other non-current liabilities as of December 31, 2024,
and 2023, respectively. Contingent compensation accruals of $4.9 million and $6.0 million are recorded within Current liabilities - Accrued salaries and
benefits as of December 31, 2024, and 2023, respectively, and contingent compensation accruals of $18.0 million and $12.9 million are recorded within Non-
current liabilities - Accrued salaries and benefits as of December 31, 2024, and 2023, respectively.
Goodwill
Goodwill represents the difference between the purchase price of acquired companies and the related fair value of the net assets acquired, which is
accounted for by the acquisition method of accounting. The Company performs assessments of the carrying value of goodwill at least annually and whenever
events occur or circumstances indicate that a carrying amount of
(1)
(2)
56
goodwill may not be recoverable. During the three months ended June 30, 2024, an interim goodwill impairment evaluation was conducted to determine the
fair value of the Company's reporting units. As a result of this evaluation, the Company recorded an impairment charge in the On-Demand Talent and Europe
reporting units of $14.8 million and $1.5 million, respectively. During the 2024 fourth quarter, the Company conducted its annual goodwill impairment
evaluation as of October 31, 2024, to determine the fair value of the Company's reporting units. As of October 31, 2024, the Company recorded an impairment
charge of $43.3 million in the On-Demand Talent reporting unit. Goodwill is valued using significant inputs that are not observable in the market which are
defined as Level 3 inputs pursuant to fair value measurement accounting. The Company determines the fair value of its reporting units using discounted cash
flow models.
The following table provides a reconciliation of the beginning and ending balance of Level 3 assets for the year ended December 31, 2024:
Goodwill
Balance at December 31, 2023
$
202,252
Impairment
(59,478)
Foreign currency translation
(4,913)
Balance at December 31, 2024
$
137,861
8. Acquisitions
On February 1, 2023, the Company acquired Atreus Group GmbH ("Atreus"), a leading provider of executive interim management in Germany. The
Company paid $33.4 million in the first quarter of 2023, with a subsequent purchase price adjustment payment of $12.1 million in the fourth quarter of 2023.
The former owners of Atreus are eligible to receive additional cash consideration, which the Company estimated on the acquisition date to be between
$30.0 million and $40.0 million, to be paid in 2026 based on the achievement of certain revenue and operating income milestones for the period from the
acquisition date through 2025. When estimating the present value of future cash consideration, the Company accrued an estimated $32.0 million as of the
acquisition date for the earnout liability. The Company recorded $11.3 million for customer relationships, $5.4 million for software, $2.5 million for a trade
name and $62.4 million of goodwill. Goodwill is primarily related to the acquired workforce and strategic fit and is not deductible for tax purposes. Included
in the Company's results of operations for the year ended December 31, 2023, are $70.4 million of revenue, and $7.9 million of operating loss, from the
acquired entity.
On April 1, 2023, the Company acquired businessfourzero, a next generation consultancy specializing in developing and implementing purpose-driven
change. In connection with the acquisition, the Company paid $9.5 million in the second quarter of 2023 with a subsequent purchase price adjustment
payment of $2.2 million paid in the third quarter of 2023. The former owners of businessfourzero are eligible to receive additional cash consideration, which
the Company estimated on the acquisition date to be between $4.0 million and $8.0 million, to be paid in 2026 based on the achievement of certain revenue
and operating income metrics for the period from the acquisition date through 2025. When estimating the present value of future cash consideration, the
Company accrued an estimated $4.3 million as of the acquisition date for the earnout liability. The Company recorded $3.5 million for customer relationships,
$0.5 million for a trade name, and $7.1 million of goodwill. The goodwill is primarily related to the acquired workforce and strategic fit. Included in the
Company's results of operations for the year ended December 31, 2023, are $11.2 million of revenue, and $11.0 million of operating loss, primarily reflecting
goodwill impairment of $7.2 million in the Heidrick Consulting reporting unit, from the acquired entity.
57
9. Goodwill and Other Intangible Assets
Goodwill
The Company's goodwill by segment (for the segments that had recorded goodwill) is as follows:
December 31, 2024
December 31, 2023
Executive Search
Americas
$
90,740
$
91,740
Europe
1,463
1,494
Asia Pacific
—
—
Total Executive Search
92,203
93,234
On-Demand Talent
105,136
109,018
Heidrick Consulting
7,246
7,246
Goodwill, gross
$
204,585
$
209,498
Accumulated impairment
(66,724)
(7,246)
Total goodwill
$
137,861
$
202,252
Changes in the carrying amount of goodwill by segment for the years ended December 31, 2024, 2023, and 2022 were as follows:
Executive Search
Americas
Europe
Asia Pacific
On-Demand
Talent
Heidrick
Consulting
Total
Goodwill
91,463
1,532
—
45,529
—
138,524
Accumulated impairment losses
—
—
—
—
—
—
Balance at December 31, 2021
91,463
1,532
—
45,529
—
138,524
Foreign currency translation
(80)
(83)
—
—
—
(163)
Balance at December 31, 2022
91,383
1,449
—
45,529
—
138,361
Atreus acquisition
—
—
—
62,371
—
62,371
businessfourzero acquisition
—
—
—
—
7,073
7,073
Impairment
—
—
—
—
(7,246)
(7,246)
Foreign currency translation
357
45
—
1,118
173
1,693
Balance at December 31, 2023
$
91,740
$
1,494
$
—
$
109,018
$
—
$
202,252
Impairment
—
(1,463)
—
(58,015)
—
(59,478)
Foreign currency translation
(1,000)
(31)
(3,882)
—
(4,913)
Goodwill
$
90,740
$
1,463
$
—
$
105,136
$
7,246
$
204,585
Accumulated impairment losses
$
—
$
(1,463)
$
—
$
(58,015)
$
(7,246)
$
(66,724)
Balance at December 31, 2024
$
90,740
$
—
$
—
$
47,121
$
—
$
137,861
In February 2023, the Company acquired Atreus and recorded $62.4 million of goodwill related to the acquisition in the On-Demand Talent operating
segment. In April 2023, the Company acquired businessfourzero and recorded $7.1 million of goodwill related to the acquisition in the Heidrick Consulting
operating segment.
During the three months ended December 31, 2024, the Company conducted its annual goodwill impairment evaluation as of October 31, 2024, in
accordance with ASU No. 2017-04, Intangibles - Goodwill and Other. The goodwill impairment test is completed by comparing the fair value of a reporting
unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value of the reporting unit exceeds its fair value;
however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit.
The impairment test is considered for each of the Company’s reporting units that has goodwill as defined in the accounting standard for goodwill and
intangible assets. The Company operates five reporting units: Americas, Europe (which includes
58
Africa), Asia Pacific (which includes the Middle East), On-Demand Talent, and Heidrick Consulting. As of October 31, 2024, only the Americas and On-
Demand Talent reporting units had recorded goodwill.
During the impairment evaluation process, the Company used a discounted cash flow methodology to estimate the fair value of each of its reporting units
with goodwill. The discounted cash flow approach is dependent on a number of factors, including estimates of future market growth and trends, forecasted
revenue and costs, capital investments, appropriate discount rates, certain assumptions to allocate shared costs, assets and liabilities, historical and projected
performance of the reporting unit and the macroeconomic conditions affecting each of the Company’s reporting units. The assumptions used in the
determination of fair value were (1) a forecast of revenue growth in the near and long term; (2) the discount rate; and (3) a forecast of operating expense
growth in the near and long term.
Based on the results of the impairment analysis, the fair values of the Americas reporting unit exceeded its carrying value by 292%. However, the
Company determined that goodwill within the On-Demand Talent reporting unit was impaired, which resulted in an impairment charge of $43.3 million to
write-off the goodwill related to the excess book value compared to fair value. The impairment in the On-Demand Talent reporting unit was the result of a
reduction in projected revenues and cash flows due to (1) economic uncertainty; (2) macroeconomic conditions; (3) labor market conditions; and (4) client
strategic staffing decisions. Additionally, the Company made several leadership changes during 2024, including a new Chief Executive Officer, President,
Global Managing Partner of On-Demand Talent, introducing new points of view to the Company's On-Demand Talent strategy and budget process in the
fourth quarter of 2024. The impairment charge is recorded within Impairment charges in the Consolidated Statements of Comprehensive Income (Loss) for
the year ended December 31, 2024.
The results of the impairment test are sensitive to the assumptions used in the determination of fair value of the reporting units and the fair value of a
reporting unit may deteriorate and could result in the need to record an impairment charge in future periods. The Company continually monitors for potential
triggering events including changes in the business climate in which it operates, the Company's market capitalization compared to is book value, and the
Company's recent operating performance. Any changes in these factors could result in an impairment charge.
During the three months ended June 30, 2024, as a result of the Company's mid-year forecasting process, it was determined that a reduction in the On-
Demand Talent reporting unit forecast was required. Due to the reduction in the forecasted results for the reporting unit, in addition to the 6% passing margin
in the most recent impairment analysis conducted as of October 31, 2023, the Company determined that it was more likely than not that the fair value of the
reporting unit was less than its carrying value. As a result, the Company identified a triggering event and performed an interim goodwill impairment
evaluation during the three months ended June 30, 2024.
Based on the results of the 2024 interim impairment evaluation, the Company determined that the goodwill within the On-Demand Talent and Europe
reporting units were impaired, which resulted in impairment charges of $14.8 million and $1.5 million, respectively, during the three months ended June 30,
2024. The impairment charges are recorded within Impairment charges in the Consolidated Statements of Comprehensive Income (Loss) for the year ended
December 31, 2024. The impairments were non-cash in nature and they did not affect the Company's current liquidity, cash flows, borrowing capability or
operations; nor did they impact the debt covenants under the Company's credit agreement.
During the three months ended June 30, 2023, the Company acquired businessfourzero and recorded approximately $7.1 million of goodwill in the
Heidrick Consulting reporting unit. Due to the inclusion of goodwill in a reporting unit with a pre-existing fair value shortfall, the Company evaluated the
recent and anticipated future financial performance of the Heidrick Consulting reporting unit and determined that it was more likely than not that the fair value
of the reporting unit was less than its carrying value. As a result, the Company identified a triggering event and performed an interim goodwill impairment
evaluation during the three months ended June 30, 2023.
Based on the results of the 2023 interim impairment evaluation, the Company determined that the goodwill within the Heidrick Consulting reporting unit
was impaired, which resulted in an impairment charge of $7.2 million to write off all of the associated goodwill. The impairment charge is recorded within
Impairment charges in the Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2023, and the Consolidated Statements
of Cash Flows for the year ended December 31, 2023.
The impairments referenced above were non-cash in nature and did not affect the Company's current liquidity, cash flows, borrowing capabilities or
operations, nor did it impact the debt covenants under the Company's credit agreement.
59
Other Intangible Assets, net
The Company’s other intangible assets, net by segment, are as follows:
December 31, 2024
December 31, 2023
Executive Search
Americas
$
5
$
22
Europe
37
95
Total Executive Search
42
117
On-Demand Talent
10,592
17,689
Heidrick Consulting
1,849
3,036
Total other intangible assets, net
$
12,483
$
20,842
In February 2023, the Company acquired Atreus and recorded customer relationships short-term, customer relationships long-term, software and trade
name intangible assets in the On-Demand Talent operating segment of $6.0 million, $5.3 million, $5.4 million, and $2.5 million, respectively. The combined
estimated weighted-average amortization period for the acquired intangible assets is 6.7 years with estimated amortization periods of 5.0, 14.0, 3.0 and 3.0
years for the customer relationships short-term, customer relationships long-term, software and trade name, respectively. In April 2023, the Company acquired
businessfourzero and recorded customer relationships and trade name intangible assets in the Heidrick Consulting operating segment of $3.5 million and
$0.5 million, respectively. The combined estimated weighted-average amortization period for the acquired intangible assets is 8.3 years with estimated
amortization periods of 9.0 and 3.0 years for the customer relationships and trade name intangible assets, respectively.
The carrying amount of amortizable intangible assets and the related accumulated amortization were as follows:
December 31, 2024
December 31, 2023
Weighted
Average
Life (in
years)
Gross Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Client relationships
10.5 $
25,188
$
(15,371)
$
9,817
$
26,195
$
(11,443)
$
14,752
Trade name
3.0
4,836
(4,039)
797
5,067
(3,069)
1,998
Software
3.0
8,285
(6,416)
1,869
8,629
(4,537)
4,092
Total intangible assets
8.9 $
38,309
$
(25,826)
$
12,483
$
39,891
$
(19,049)
$
20,842
Intangible asset amortization expense for the years ended December 31, 2024, 2023, and 2022, was $8.1 million, $9.4 million, and $3.2 million,
respectively.
The Company's estimated future amortization expense related to intangible assets as of December 31, 2024, for the years ended December 31, is as
follows:
2025
5,680
2026
2,421
2027
1,474
2028
866
2029
625
Thereafter
1,417
Total
$
12,483
60
10. Other Non-Current Liabilities
The components of other non-current liabilities are as follows:
December 31,
2024
December 31,
2023
Earnout liability
$
38,648
$
38,601
Other
4,257
3,207
Total other non-current liabilities
$
42,905
$
41,808
11. Line of Credit
On February 24, 2023, the Company entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement, dated as of October 26,
2018 (the “Credit Agreement” and, as amended by the First Amendment to Credit Agreement, dated as of July 13, 2021, and the Second Amendment, the
"Amended Credit Agreement") by and among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto. The Second
Amendment changed the interest rate benchmark, from LIBOR to the Secured Overnight Financing Rate (“SOFR”). At the Company's option, borrowings
under the Amended Credit Agreement will bear interest at one-, three- or six-month term SOFR, or an alternate base rate as set forth in the Amended Credit
Agreement, in each case plus an applicable margin. Additionally, the Second Amendment provided the Company with a committed unsecured revolving credit
facility in an aggregate amount of $200 million, increased from $175 million as set forth in the Credit Agreement, which includes a sublimit of $25 million for
letters of credit and a sublimit of $10 million for swingline loans, with a $75 million expansion feature. Other than the foregoing, the material terms of the
Amended Credit Agreement remain unchanged. The Amended Credit Agreement matures on July 13, 2026.
Borrowings under the Credit Agreement may be used for working capital, capital expenditures, permitted acquisitions, restricted payments and for other
general corporate purposes of the Company and its subsidiaries. The obligations under the Credit Agreement are guaranteed by certain of the Company’s
subsidiaries.
As of December 31, 2024, and 2023, the Company had no outstanding borrowings. The Company was in compliance with the financial and other
covenants under the Amended Credit Agreement and no event of default existed.
12. Employee Benefit Plans
Qualified Retirement Plan
The Company has a defined contribution retirement plan (the “Plan”) for all eligible employees in the United States. Eligible employees may begin
participating in the Plan upon their hire date. The Plan contains a 401(k) provision, which provides for employee pre-tax and/or Roth contributions, from 1%
to 50% of their eligible compensation up to a combined maximum permitted by law. The Company matched employee contributions on a dollar-for-dollar
basis per participant up to the greater of $6,000, or 6.0%, of eligible compensation for the years ended December 31, 2024, 2023, and 2022. Employees are
eligible for the Company match immediately upon entry into the Plan. Those contributions vest annually, provided the employee is employed by the Company
on the last day of the Plan year in which the match is made. The Plan also provides for employees who retire, die or become disabled during the Plan year to
receive the Company match for that Plan year. The Plan provides that forfeitures will be used to reduce the Company’s contributions. Forfeitures are created
by participants who terminate employment before becoming entitled to the Company’s matching contribution under the Plan. The Company also has the
option of making discretionary contributions. There were no discretionary contributions made for the years ended December 31, 2024, 2023, and 2022. The
expense that the Company incurred for matching employee contributions for the years ended December 31, 2024, 2023, and 2022, was $8.8 million, $8.8
million and $7.8 million, respectively.
The Company maintains additional retirement plans in the Americas, Europe and Asia Pacific regions which the Company does not consider as material
and, therefore, additional disclosure has not been presented.
61
Deferred Compensation Plans
The Company also has a deferred compensation plan for certain U.S. employees (the “U.S. Plan”) that became effective on January 1, 2006. The U.S.
Plan allows participants to defer up to 25% of their base compensation and up to the lesser of $500,000 or 25% of their eligible bonus compensation into
several different investment vehicles. These deferrals are immediately vested and are not subject to a risk of forfeiture. In 2024 and 2023, all deferrals in the
U.S. Plan were funded. The compensation deferred in the U.S. Plan was $56.8 million and $46.1 million at December 31, 2024, and 2023, respectively. The
assets of the U.S. Plan are included in Investments and the liabilities of the U.S. Plan are included in Retirement and pension plans in the Consolidated
Balance Sheets as of December 31, 2024, and 2023.
The Company also has a Non-Employee Directors Voluntary Deferred Compensation Plan whereby non-employee members of the Company’s Board of
Directors may elect to defer up to 100% of the cash component of their directors’ fees into several different investment vehicles. As of December 31, 2024,
and 2023, the total amounts deferred under the plan were $1.5 million and $1.2 million, respectively, all of which were funded. The assets of the plan are
included in Investments and the liabilities of the plan are included in Retirement and pension plans in the Consolidated Balance Sheets at December 31, 2024,
and 2023.
The U.S. Plan and Non-Employee Directors Voluntary Deferred Compensation Plan consist primarily of marketable securities and mutual funds, all of
which are valued using Level 1 inputs (See Note 7, Financial Instruments and Fair Value).
13. Pension Plan and Life Insurance Contract
The Company maintains a pension plan for certain current and former employees in Germany. The pensions are individually fixed Euro amounts that vary
depending on the function and the eligible years of service of the employee.
2024
2023
Benefit obligation at January 1,
$
14,416
$
13,951
Interest cost
429
555
Actuarial gain (loss)
(319)
769
Benefits paid
(1,237)
(1,296)
Cumulative translation adjustment
(885)
437
Benefit obligation at December 31,
$
12,404
$
14,416
The benefit obligation amounts recognized in the Consolidated Balance Sheets are as follows:
December 31,
2024
2023
Current liabilities
$
1,136
$
1,289
Non-current liabilities
11,268
13,127
Total
$
12,404
$
14,416
62
The components of and assumptions used to determine the net periodic benefit cost are as follows:
December 31,
2024
2023
2022
Net period benefit cost:
Interest cost
$
429
$
555
$
181
Amortization of net loss
—
—
195
Net periodic benefit cost
$
429
$
555
$
376
Weighted average assumptions
Discount rate (1)
3.45 %
4.09 %
1.03 %
Rate of compensation increase
— %
— %
— %
Assumptions to determine the Company’s benefit obligation are as follows:
December 31,
2024
2023
2022
Discount rate (1)
3.32 %
3.45 %
4.09 %
Rate of compensation increase
— %
— %
— %
Measurement date
12/31/2024
12/31/2023
12/31/2022
(1) The discount rates are based on long-term bond indices adjusted to reflect the longer duration of the benefit obligation.
The amounts in Accumulated other comprehensive income as of December 31, 2024, and 2023, that had not yet been recognized as components of net
periodic benefit cost were $1.0 million and $1.4 million, respectively. As of December 31, 2024, an insignificant amount of the accumulated other
comprehensive income is expected to be recognized as a component of net periodic benefit cost in 2025.
The Company’s investment strategy is to support its pension obligations through reinsurance contracts. The BaFin—German Federal Financial
Supervisory Authority—supervises the insurance companies and the reinsurance contracts. The BaFin requires each reinsurance contract to guarantee a fixed
minimum return. The Company’s pension benefits are fully reinsured by group insurance contracts with ERGO Lebensversicherung AG, and the group
insurance contracts are measured in accordance with BaFin guidelines (including mortality tables and discount rates) which are considered Level 2 inputs (See
Note 7, Financial Instruments and Fair Value). The fair value at December 31, 2024, and 2023, was $11.1 million and $12.4 million, respectively.
Since the pension assets are not segregated in trust from the Company’s other assets, the pension assets are not shown as an offset against the pension
liabilities in the Consolidated Balance Sheets. These assets are included in the Consolidated Balance Sheets at December 31, 2024, and 2023, as a component
of Other current assets and Assets designated for retirement and pension plans.
The benefits expected to be paid in each of the next five years, and in the aggregate for the five years thereafter are as follows:
2025
$
1,136
2026
1,111
2027
1,081
2028
1,047
2029
1,008
2030 through 2035
$
4,343
14. Stock-Based Compensation
On May 23, 2024, the stockholders of the Company approved an amendment and restatement of the Company's Fourth Amended and Restated 2012
Heidrick & Struggles GlobalShare Program (as so amended and restated, the "Fifth A&R Program") to increase the number of shares of common stock
reserved for issuance under the plan by 649,000 shares, among other things. The Fifth A&R Program provides for grants of stock options, stock appreciation
rights, restricted stock units, performance stock units, and other stock-based compensation awards that are valued based upon the grant date fair value of the
awards. These awards may be granted to directors, selected employees and independent contractors.
63
As of December 31, 2024, 4,804,464 awards had been issued under the Fifth A&R Program, including 916,501 forfeited awards, and 953,854 shares
remain available for future awards assuming performance stock units vest at maximum levels. The Fifth A&R Program provides that no awards can be granted
after the first annual meeting of the Company's stockholders to occur on or after May 23, 2034.
The Company measures its stock-based compensation costs based on the grant date fair value of the awards and recognizes these costs in the financial
statements over the requisite service period. The Company analyzes historical data of forfeited awards to develop an estimated forfeiture rate that is applied to
the Company's stock-based compensation expense; however, all stock-based compensation expense is adjusted to reflect actual vestings and forfeitures.
A summary of information with respect to stock-based compensation is as follows:
December 31,
2024
2023
2022
Salaries and employee benefits (1)
$
14,920
$
10,633
$
14,651
General and administrative expenses
1,252
1,013
810
Income tax benefit related to stock-based compensation included in net income
4,409
3,220
4,263
(1) Includes $3.5 million of expense, $0.8 million of expense, and $1.2 million of income, related to cash settled restricted stock units for the years ended
December 31, 2024, 2023, and 2022, respectively.
Restricted Stock Units
Restricted stock units granted to employees are subject to ratable vesting over a three-year or four-year period dependent upon the terms of the individual
grant. Compensation expense related to service-based restricted stock units is recognized on a straight-line basis over the vesting period.
Non-employee members of the Board of Directors may elect to receive restricted stock units or shares of common stock annually pursuant to the Fourth
A&R Program as part of their annual compensation. Based on their respective elections, the Company issued 22,126 and 23,620 restricted stock units for
services provided by the non-employee directors during the years ended December 31, 2024, and 2023, respectively. Restricted stock units issued to non-
employee directors remain unvested until the respective non-employee directors retire from the Board of Directors.
Restricted stock unit activity for the years ended December 31, 2024, and 2023 is as follows:
Number of
Restricted
Stock Units
Weighted-
Average
Grant-date
Fair Value
Outstanding on December 31, 2022
728,285
$
31.97
Granted
276,227
26.91
Vested and converted to common stock
(292,078)
31.08
Forfeited
(25,693)
31.54
Outstanding on December 31, 2023
686,741
30.33
Granted
352,251
33.86
Vested and converted to common stock
(287,336)
30.80
Forfeited
(76,245)
31.46
Outstanding on December 31, 2024
675,411
$
31.85
As of December 31, 2024, there was $7.9 million of pre-tax unrecognized compensation expense related to unvested restricted stock units, which is
expected to be recognized over a weighted average of 2.1 years.
Performance Stock Units
The Company grants performance stock units to certain of its senior executives. The performance stock units are generally subject to a cliff vesting at the
end of a three-year period. The vesting will vary between 0% - 200% based on the attainment of certain performance metrics and market conditions over the
three-year vesting period. Half of the award is based on the
64
achievement of adjusted operating margin or Adjusted EBITDA margin thresholds and half of the award is based on the Company's total shareholder return,
relative to a peer group. The fair value of the awards subject to total shareholder return metrics is determined using the Monte Carlo simulation model. A
Monte Carlo simulation model uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions and the
resulting fair value of the award. The performance stock units are expensed on a straight-line basis over the three-year vesting period.
Certain of the Company's senior executives are granted performance stock units that are subject to ratable vesting over a four-year period. The vesting
will vary between 0% and 100% of the shares subject to the performance stock units based on the attainment of specified stock price hurdles over the vesting
period. The fair value of the awards subject to such stock price hurdles is determined using the Monte Carlo simulation model. The performance stock units
are expensed on a straight-line basis over the derived service period, which ranges from one to four-years.
Performance share unit activity for the years ended December 31, 2024, and 2023 is as follows:
Number of
Performance
Stock Units
Weighted-
Average
Grant-date
Fair Value
Outstanding on December 31, 2022
260,452
$
40.02
Granted
103,916
34.14
Vested and converted to common stock
(124,743)
31.51
Forfeited
—
—
Outstanding on December 31, 2023
239,625
41.91
Granted
273,536
32.64
Vested and converted to common stock
(104,154)
44.18
Forfeited
(55,931)
41.17
Outstanding on December 31, 2024
353,076
$
34.17
As of December 31, 2024, there was $6.0 million of pre-tax unrecognized compensation expense related to unvested performance stock units, which is
expected to be recognized over a weighted average of 2.2 years.
Phantom Stock Units
Phantom stock units are grants of phantom stock with respect to shares of the Company's common stock that are settled in cash and are subject to various
restrictions, including restrictions on transferability, vesting and forfeiture provisions. Shares of phantom stock that do not vest for any reason will be forfeited
by the recipient and will revert to the Company.
Phantom stock units are subject to vesting over a three-year or four-year period, and such vesting is subject to certain other conditions, including
continued service to the Company. As a result of the cash-settlement feature of the awards, the Company classifies the awards as liability awards, which are
measured at fair value at each reporting date and the vested portion of the award is recognized as a liability to the extent that the service condition is deemed
probable. The fair value of the phantom stock awards on the balance sheet date was determined using the closing share price of the Company's common stock
on that date.
The Company recorded phantom stock-based compensation expense of $3.5 million and $0.8 million for the years ended December 31, 2024, and 2023,
respectively. The Company recorded phantom stock-based compensation income of $1.2 million for the year ended December 31, 2022.
65
Phantom stock unit activity for the years ended December 31, 2024, and 2023 is as follows:
Number of
Phantom
Stock Units
Outstanding on December 31, 2022
321,155
Granted
—
Vested
(115,180)
Forfeited
(18,674)
Outstanding on December 31, 2023
187,301
Granted
33,247
Vested
(87,538)
Forfeited
(1,833)
Outstanding on December 31, 2024
131,177
As of December 31, 2024, there was $1.2 million of pre-tax unrecognized compensation expense related to unvested phantom stock units, which is
expected to be recognized over a weighted average of 2.0 years.
Common Stock
Non-employee members of the Board of Directors may elect to receive restricted stock units or shares of common stock annually pursuant to the Fifth
A&R Program as part of their annual compensation. Based on their respective elections, the Company issued 12,564 and 16,134 shares of common stock for
services provided by the non-employee directors during the years ended December 31, 2024, and 2023, respectively.
On February 11, 2008, the Company's Board of Directors authorized management to repurchase shares of the Company's common stock with an
aggregate purchase price of up to $50.0 million (the "Repurchase Authorization"). From time to time and as business conditions warrant, the Company may
purchase shares of its common stock on the open market or in negotiated or block trades. No time limit has been set for completion of this program. There
were no repurchases of common stock during the year ended December 31, 2024. During the year ended December 31, 2023, the Company purchased 36,000
shares of common stock for $0.9 million. Prior to 2023, the most recent purchase of the Company's shares of common stock occurred during the year ended
December 31, 2012. As of December 31, 2024, the Company has purchased 1,074,670 shares of its common stock pursuant to the Repurchase Authorization
for a total of $29.2 million and $20.8 million remains available for future purchases under the Repurchase Authorization.
15. Restructuring
During the year ended December 31, 2024, the Company implemented a restructuring plan (the "2024 Plan") to optimize future growth and profitability
through a workforce reduction.
Restructuring charges for the 2024 Plan incurred to date and for the year ended December 31, 2024, by type of charge and reportable segment are as
follows:
Executive Search
Americas
Europe
Asia Pacific
On-Demand Talent
Heidrick
Consulting
Global Operations
Support
Total
Employee related
$
1,277 $
876 $
157 $
286 $
3,367 $
976 $
6,939
During the year ended December 31, 2020, the Company implemented a restructuring plan (the "2020 Plan") to optimize future growth and profitability.
The primary components of the 2020 Plan included a workforce reduction, a reduction of the Company's real estate expenses and professional fees, and the
elimination of certain deferred compensation programs. The Company did not incur any charges under the 2020 Plan during the years ended December 31,
2022, 2023, and 2024 and does not anticipate incurring any future charges under the 2020 Plan. The final employee related restructuring accruals associated
with the 2020 plan were settled during the year ended December 31, 2023.
66
Changes in the restructuring accrual for the years ended December 31, 2024, 2023, and 2022, were as follows:
Employee Related
Office Related
Other
Total
Accrual balance at December 31, 2021
8,394
—
—
8,394
Cash payments
(4,853)
—
—
(4,853)
Non-cash write-offs
(34)
—
—
(34)
Exchange rate fluctuations
(85)
—
—
(85)
Accrual balance at December 31, 2022
$
3,422
$
—
$
—
$
3,422
Cash payments
(3,516)
—
—
(3,516)
Exchange rate fluctuations
94
—
—
94
Accrual balance at December 31, 2023
$
—
$
—
$
—
$
—
Restructuring charges
6,939
—
—
6,939
Cash payments
(4,344)
—
—
(4,344)
Non-cash write-offs
(6)
—
—
(6)
Other
(116)
—
—
(116)
Exchange rate fluctuations
33
—
—
33
Accrual balance at December 31, 2024
$
2,506
$
—
$
—
$
2,506
Restructuring accruals of $2.5 million associated with the 2024 Plan are recorded within Other current liabilities in the Consolidated Balance Sheets as of
December 31, 2024.
16. Income Taxes
The sources of income before income taxes are as follows:
December 31,
2024
2023
2022
United States
$
32,356
$
52,572
$
57,274
Foreign
(1,704)
36,099
57,962
Income before income taxes
$
30,652
$
88,671
$
115,236
The provision for income taxes are as follows:
December 31,
2024
2023
2022
Current
Federal
$
18,039
$
12,009
$
13,405
State and local
8,559
4,644
6,748
Foreign
13,856
12,721
8,813
Current provision for income taxes
40,454
29,374
28,966
Deferred
Federal
(13,780)
2,996
3,702
State and local
(2,883)
1,334
1,113
Foreign
(1,867)
557
1,969
Deferred provision (benefit) for income taxes
(18,530)
4,887
6,784
Total provision for income taxes
$
21,924
$
34,261
$
35,750
67
A reconciliation of the provision for income taxes to income taxes at the statutory U.S. federal income tax rate of 21% is as follows:
December 31,
2024
2023
2022
Income tax provision at the statutory U.S. federal rate
$
6,437
$
18,621
$
24,199
State income tax provision, net of federal tax benefit
3,217
4,974
5,475
Nondeductible expenses, net
10,297
6,734
4,036
Foreign taxes (includes rate differential and changes in foreign valuation allowance)
(1,496)
4,339
1,647
Additional U.S. tax on foreign operations
(3,672)
(300)
436
Goodwill impairment
6,521
1,522
—
Other, net
620
(1,629)
(43)
Total provision for income taxes
$
21,924
$
34,261
$
35,750
The deferred tax assets and liabilities are attributable to the following components:
December 31,
2024
2023
Deferred tax assets attributable to:
Operating lease liability and accrued rent
$
17,026
$
15,490
Foreign net operating loss carryforwards
12,031
11,658
Accrued compensation and employee benefits
15,971
12,678
Deferred compensation
22,882
19,245
Foreign tax credit carryforwards
6,584
7,820
Other accrued expenses
12,680
10,515
Deferred tax assets, before valuation allowance
87,174
77,406
Valuation allowance
(22,450)
(22,233)
Deferred tax assets, after valuation allowance
64,724
55,173
Deferred tax liabilities attributable to:
Operating lease, right-of-use, assets
12,382
11,715
Goodwill
9,312
17,731
Depreciation on property and equipment
1,960
2,731
Other
788
1,393
Deferred tax liabilities
24,442
33,570
Net deferred tax assets
$
40,282
$
21,603
The recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefits associated with temporary
differences, net operating loss carryforwards and tax credits will be utilized. The Company assesses the recoverability of the deferred tax assets on an ongoing
basis. In making this assessment, the Company considers all positive and negative evidence, and all potential sources of taxable income including scheduled
reversals of deferred tax liabilities, tax-planning strategies, projected future taxable income and recent financial performance.
The valuation allowance increased from $22.2 million at December 31, 2023, to $22.5 million at December 31, 2024. The valuation allowance at
December 31, 2024, was related to foreign net operating loss carryforwards, foreign tax credit carryforwards, and certain foreign deferred tax assets. The
Company intends to maintain these valuation allowances until sufficient evidence exists to support their reversal.
At December 31, 2024, the Company had a net operating loss carryforward of $90.3 million related to its foreign filings. Of the $90.3 million net
operating loss carryforward, $64.1 million is subject to a valuation allowance. Depending on the tax rules of the tax jurisdictions, the losses can be carried
forward for periods ranging from five years to indefinitely. The Company also had a foreign tax credit carryforward of $6.6 million subject to a valuation
allowance of $6.6 million.
At December 31, 2023, the Company had a net operating loss carryforward of $93.3 million related to its foreign filings. Of the $93.3 million net
operating loss carryforward, $58.3 million is subject to a valuation allowance. Depending on the tax
68
rules of the tax jurisdictions, the losses can be carried forward indefinitely or for periods ranging from five to twenty years. The Company also had a foreign
tax credit carryforward of $7.8 million subject to a valuation allowance of $7.8 million.
As of December 31, 2024, and 2023, the Company does not have any unrecognized tax benefits, due to the settlement of all previous unrecognized tax
benefits.
In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxable authorities. The
statute of limitations varies by jurisdiction in which the Company operates. Years 2021 through 2023 are subject to examination by the federal and state taxing
authorities. The years 2020 and prior are subject to examination in certain foreign and state jurisdictions.
The Company is currently under audit by some jurisdictions. It is likely that the examination phase of several of these audits will conclude in the next 12
months. No significant increases or decreases in unrecognized tax benefits are expected to occur by December 31, 2025.
Estimated interest and penalties related to the underpayment of income taxes are classified as a component of the provision for income taxes in the
Consolidated Statements of Comprehensive Income (Loss).
The Company has elected to account for Global Intangible Low-Taxed Income (“GILTI”) tax in the period in which it is incurred, and therefore has not
provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2024.
On December 20, 2021, the Organisation for Economic Co-operation and Development (“OECD”) published Pillar Two Model Rules defining the global
minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD has since issued administrative guidance providing
transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. A number of countries are currently proposing or have
enacted legislation to implement core elements of the Pillar Two proposal. While the Company is still closely monitoring developments and evaluating the
potential impact on future periods, the Company does not expect Pillar Two to have a significant impact on its financial results.
17. Changes in Accumulated Other Comprehensive Income (Loss)
The changes in Accumulated other comprehensive income (loss) (“AOCI”) by component for the year ended December 31, 2024, are summarized below:
Available-
for-
Sale
Securities
Foreign
Currency
Translation
Pension
AOCI
Balance at December 31, 2023
$
42
$
647
$
(560)
$
129
Other comprehensive income (loss) before classification, net of tax
11
(14,417)
232
(14,174)
Balance at December 31, 2024
$
53
$
(13,770)
$
(328)
$
(14,045)
18. Segment Information
The Company has five operating segments. The executive search business operates in the Americas, Europe (which includes Africa) and Asia Pacific
(which includes the Middle East), and the Heidrick Consulting and On-Demand Talent businesses operate globally. The Company's operating segments are
based on the organizational structure for which financial results are regularly reviewed by our chief operating decision-maker to evaluate performance and
allocate resources.
Executive Search partners with our clients - respected organizations across the globe - to help them build and sustain the best leadership teams in the
world, with a specialized focus on the placement of top-level senior executives.
On-Demand Talent provides clients seamless on-demand access to top independent talent, including professionals with deep industry and functional
expertise for interim leadership roles and critical, project-based initiatives.
Heidrick Consulting partners with organizations to unlock the power of their people. The Company's tools and experts use data and technology designed
to bring science to the art of human capital development and organizational design. Our services allow our clients to accelerate their strategies and the
effectiveness of individual leaders, teams and organizations as a whole.
69
The Company's chief operating decision-maker is its Chief Executive Officer. The Company evaluates performance and allocates resources based on the
CODM's review of (1) net revenue and (2) net income before interest, taxes, depreciation and amortization, as adjusted, to the extent they occur, for earnout
accretion, earnout fair value adjustments, contingent compensation, deferred compensation plan income or expense, certain reorganization costs, impairment
charges and restructuring charges ("Adjusted EBITDA"). Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of net revenue in the
same period. The CODM considers actual to historical, actual to budgeted, and actual to forecasted results and variances on a monthly basis using net revenue
and Adjusted EBITDA when making decisions about allocating resources to the segments and assessing performance.
The following table presents a reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA margin:
December 31,
2024
2023
2022
Revenue before reimbursements (net revenue)
$
1,098,573
$
1,026,864
$
1,073,464
Net income
8,728
54,410
79,486
Interest, net
(14,422)
(11,617)
(5,337)
Other, net
(8,702)
(1,697)
2,367
Provision for income taxes
21,924
34,261
35,750
Operating income
7,528
75,357
112,266
Adjustments
Depreciation
10,782
9,113
7,394
Intangible amortization
8,075
9,395
3,209
Earnout accretion
1,926
1,554
820
Earnout fair value adjustments
438
—
(464)
Acquisition contingent consideration
10,815
11,934
3,885
Deferred compensation plan
5,257
6,132
(6,232)
Reorganization costs
—
4,886
—
Impairment charges
59,478
7,246
—
Restructuring charges
6,939
—
—
Total adjustments
103,710
50,260
8,612
Adjusted EBITDA
$
111,238
$
125,617
$
120,878
Adjusted EBITDA margin
10.1 %
12.2 %
11.3 %
70
The following tables present our segment information, including significant segment expenses, for the years ended December 31, 2024, 2023 and 2022:
Year Ended December 31, 2024
Executive Search
Americas
Europe
Asia Pacific
On-Demand
Talent
Heidrick
Consulting
Total
Revenue
Revenue before reimbursements
$
556,944
$
165,018
$
96,396
$
168,325
$
111,890
$
1,098,573
Reimbursements
17,103
Total revenue
1,115,676
Operating Expenses
Salaries and benefits (1)
339,294
120,416
66,816
46,739
85,742
659,007
General and administrative (2)
43,390
29,809
16,253
15,083
21,922
126,457
Cost of services
—
—
—
108,487
10,463
118,950
Total segment operating expenses
382,684
150,225
83,069
170,309
118,127
904,414
Segment Adjusted EBITDA
174,260
14,793
13,327
(1,984)
(6,237)
194,159
Reconciling Items
Research and development expenses (3)
—
—
—
—
—
19,016
Global Operations Support expenses (3)
—
—
—
—
—
63,905
Total reconciling expenses
—
—
—
—
—
82,921
Adjusted EBITDA
$
174,260
$
14,793
$
13,327
$
(1,984)
$
(6,237)
$
111,238
Year Ended December 31, 2023
Executive Search
Americas
Europe
Asia Pacific
On-Demand
Talent
Heidrick
Consulting
Total
Revenue
Revenue before reimbursements
$
522,988
$
166,379
$
90,678
$
152,506
$
94,313
$
1,026,864
Reimbursements
14,318
Total revenue
1,041,182
Operating Expenses
Salaries and benefits (1)
304,486
116,748
64,176
39,395
72,862
597,667
General and administrative (2)
45,144
27,385
15,432
11,965
17,947
117,873
Cost of services
—
—
—
99,712
9,327
109,039
Total segment operating expenses
349,630
144,133
79,608
151,072
100,136
824,579
Segment Adjusted EBITDA
173,358
22,246
11,070
1,434
(5,823)
202,285
Reconciling Items
Research and development expenses (3)
—
—
—
—
—
20,535
Global Operations Support expenses (3)
—
—
—
—
—
56,133
Total reconciling expenses
—
—
—
—
—
76,668
Adjusted EBITDA
$
173,358
$
22,246
$
11,070
$
1,434
$
(5,823)
$
125,617
71
Year Ended December 31, 2022
Executive Search
Americas
Europe
Asia Pacific
On-Demand
Talent
Heidrick
Consulting
Total
Revenue
Revenue before reimbursements
$
612,881
$
176,275
$
112,766
$
91,349
$
80,193
$
1,073,464
Reimbursements
10,122
Total revenue
1,083,586
Operating Expenses
Salaries and benefits (1)
405,816
128,240
76,888
22,568
66,284
699,796
General and administrative (2)
42,872
25,885
16,065
5,638
13,156
103,616
Cost of services
—
—
—
63,479
7,197
70,676
Total segment operating expenses
448,688
154,125
92,953
91,685
86,637
874,088
Segment Adjusted EBITDA
164,193
22,150
19,813
(336)
(6,444)
199,376
Reconciling Items
Research and development expenses (3)
—
—
—
—
—
19,965
Global Operations Support expenses (3)
—
—
—
—
—
58,533
Total reconciling expenses
—
—
—
—
—
78,498
Adjusted EBITDA
$
164,193
$
22,150
$
19,813
$
(336)
$
(6,444)
$
120,878
(1) Includes base salaries, payroll taxes, retirement benefits, separation and stock-based compensation. Excludes contingent compensation, deferred compensation plan income or expense and
reorganization costs as these income/expense items are not included within the Company's measure of segment profitability.
(2) Includes professional fees, business development travel, information technology, communication services, marketing, taxes and licenses, temporary labor, bad debt, and other operating
expenses. Excludes depreciation, intangible amortization, earnout accretion and earnout fair value adjustments as these income/expense items are not included within the Company's
measure of segment profitability.
(3) Excludes depreciation expense and deferred compensation plan income expense as these income/expense items are not included within the Company's measure of segment profitability.
72
Depreciation and amortization, and capital expenditures, by segment, are as follows:
December 31,
2024
2023
2022
Depreciation and amortization
Executive Search
Americas
$
2,918
$
3,092
$
3,498
Europe
1,165
1,343
1,451
Asia Pacific
831
976
1,126
Total Executive Search
4,914
5,411
6,075
On-Demand Talent
7,047
8,197
2,669
Heidrick Consulting
2,294
2,179
878
Total segments
14,255
15,787
9,622
Research and development
3,957
2,073
524
Global Operations Support
645
648
457
Total depreciation and amortization
$
18,857
$
18,508
$
10,603
Capital expenditures
Executive Search
Americas
$
3,846
$
2,351
$
1,890
Europe
12,326
1,827
683
Asia Pacific
1,785
618
1,497
Total Executive Search
17,957
4,796
4,070
On-Demand Talent
586
398
732
Heidrick Consulting
123
559
128
Total segments
18,666
5,753
4,930
Research and development
7,083
7,170
4,878
Global Operations Support
566
510
1,326
Total capital expenditures
$
26,315
$
13,433
$
11,134
Identifiable assets, and goodwill and other intangible assets, net, by segment, are as follows:
December 31,
2024
2023
Current assets
Executive Search
Americas
$
413,380
$
360,111
Europe
147,156
139,803
Asia Pacific
95,571
92,071
Total Executive Search
656,107
591,985
On-Demand Talent
45,814
37,224
Heidrick Consulting
66,628
53,334
Total segments
768,549
682,543
Global Operations Support
4,428
10,671
Total allocated current assets
772,977
693,214
Unallocated non-current assets
270,867
225,283
Goodwill and other intangible assets, net
Executive Search
Americas
90,745
91,762
Europe
37
1,589
Asia Pacific
—
—
Total Executive Search
90,782
93,351
On-Demand Talent
57,713
126,707
Heidrick Consulting
1,849
3,036
Total goodwill and other intangible assets, net
150,344
223,094
Total assets
$
1,194,188
$
1,141,591
73
Net revenue attributed to an individual country, other than the U.S. and Germany in the years ended 2024, 2023, and other than the U.S. in 2022, did not
account for more than 10% of the total net revenue. Net revenue classified by country is as follows:
December 31,
2024
2023
2022
Unites States
$
647,565 $
602,574 $
703,657
Germany
115,439
103,183
32,756
All other countries
335,569
321,107
337,051
Total net revenue
$
1,098,573 $
1,026,864 $
1,073,464
Other than the U.S. and United Kingdom in the years ended 2024 and 2023, no single country had over 10% of the total long-lived assets, excluding
financial instruments, intangible assets and tax assets. Long-lived assets, excluding financial instruments and tax assets, classified by country, are as follows:
December 31,
2024
2023
Unites States
$
62,096 $
57,258
United Kingdom
33,200
27,759
All other countries
39,907
36,797
Total long-lived assets
$
135,203 $
121,814
No single client accounted for more than 10% of our net revenue in 2024, 2023, and 2022.
19. Guarantees
The Company has utilized letters of credit to support certain obligations, primarily for its office lease agreements. The letters of credit were made to
secure the respective agreements and are for the terms of the agreements, which extend through 2033. For each letter of credit issued, the Company would
have used cash to fulfill the obligation if the subsidiary defaults on a lease payment. The maximum amount of undiscounted payments the Company would be
required to make in the event of default on all outstanding letters of credit is approximately $4.8 million as of December 31, 2024. The Company has not
accrued for these arrangements as no event of default exists or is expected to exist.
20. Commitments and Contingencies
Litigation
The Company has contingent liabilities from various pending claims and litigation matters arising in the ordinary course of the Company’s business, some
of which involve claims for damages that are substantial in amount. Some of these matters are covered by insurance. Based upon information currently
available, the Company believes the ultimate resolution of such claims and litigation will not have a material adverse effect on its financial condition, results
of operations or liquidity.
74
PART II (continued)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures as defined in Securities Exchange Act of 1934, as amended, (the “Exchange Act”) Rules 13a-
15(e) and 15d-15(e), that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such
information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure. Any system of controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives.
Management of the Company, with the participation of the principal executive officer and the principal financial officer, evaluated the effectiveness of the
design and operation of the Company’s disclosure controls and procedures as of December 31, 2024. Based on the evaluation, the Company’s principal
executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2024.
(b) Management’s report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal
executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management, and other
personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles (U.S. GAAP) and includes those policies and procedures that:
(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP,
and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies and procedures may deteriorate.
Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013. Based on this evaluation,
management concluded that the Company’s system of internal control over financial reporting was effective as of December 31, 2024.
The Company’s independent registered public accounting firm, RSM US LLP, has issued a report on the Company’s internal control over financial
reporting. The report on the audit of internal control over financial reporting appears in Part II, Item 8 of this Form 10-K.
75
(c) Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the Company's fiscal quarter ended December 31, 2024,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
76
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this Item relating to our directors, executive officers and corporate governance will be included in the Company's definitive
Proxy Statement for its Annual Meeting of Stockholders to be held on May 22, 2025 (the "2025 Proxy Statement") under the captions "Governance,"
"Election of Directors," "Director Biographies," and "Executive Officers," and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item relating to our executive officer and director compensation and the compensation committee of the Board of Directors
will be included in the 2025 Proxy Statement under the captions "Non-Employee Director Compensation," "Compensation Discussion and Analysis" and
"Compensation Tables and Narrative Disclosures" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Information required by this Item relating to security ownership of certain beneficial owners of our common stock and information relating to the security
ownership of our management will be included in the 2025 Proxy Statement under the caption "Stock Ownership Information" and is incorporated herein by
reference.
Equity Compensation Plan Information
The following table sets forth additional information as of December 31, 2024, about shares of our common stock that may be issued upon the vesting of
restricted stock units and performance stock units and the exercise of options under our existing equity compensation plans and arrangements, divided
between plans approved by our stockholders and plans or arrangements not submitted to the stockholders for approval. For a description of the types of
securities that may be issued under our Fourth A&R Program. See Note 14, Stock-Based Compensation.
(a)
(b)
(c)
Plan Category
Number of
securities
to be
issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-
average
exercise
price of
outstanding
options, warrants
and right
Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by stockholders
1,245,670 (1) $
—
953,854
Equity compensation plans not approved stockholders
—
—
—
Total equity compensation plans
1,245,670
—
953,854
(1) Includes 675,411 restricted stock units and 570,259 performance stock units and no options. The performance stock units represent the maximum
amount of shares to be awarded at maximum levels, and accordingly, may overstate expected dilution.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this Item regarding certain relationships and related transactions and director independence will be included in the 2025 Proxy
Statement under the captions "Certain Relationships and Related Party Transactions" and "Director Independence" and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to the discussion under the captions “Fees Paid to Auditor” and "Audit & Finance
Committee Policy and Procedures" in our 2025 Proxy Statement.
77
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
1. Index to Consolidated Financial Statements:
See Consolidated Financial Statements included as part of this Form 10-K beginning on page 35.
2. Exhibits:
Incorporated by Reference
Exhibit
No.
Exhibit Description
Form
Exhibit
Filing Date/Period
End Date
3.01
Amended and Restated Certificate of Incorporation of the Registrant
10-Q
3.01
4/27/2020
3.02
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the
Registrant
10-Q
3.02
4/27/2020
3.03
Amended and Restated By-laws of the Registrant
8-K
3.1
10/2/2024
4.01
Specimen Stock Certificate
S-4
4.01
2/12/1999
4.02
Description of Securities
10-K
4.02
2/24/2020
10.01
Employment Agreement of Krishnan Rajagopalan dated April 9, 2015**
8-K
99.1
4/20/2015
10.02
Heidrick & Struggles International, Inc. Management Severance Pay Plan and Summary Plan
Description as Amended and Restated Effective December 31, 2010**
8-K
10.1
10/25/2011
10.03
2007 Heidrick & Struggles GlobalShare Program**
DEF 14A
App. A
4/25/2011
10.04
Heidrick & Struggles Incentive Plan, as Amended and Restated Effective January 1, 2008**
10-K
10.20
2/27/2009
10.05
Form of Non-Qualified Stock Option Grant Agreement**
8-K
10.5
2/5/2012
10.06
Form of Restricted Stock Unit Participation Agreement **
8-K
10.3
2/5/2012
10.07
Form of Performance Stock Unit Participation Agreement **
8-K
10.4
2/5/2012
10.08
Form of Non-Employee Director Restricted Stock Unit Participation Agreement **
10-K
10.19
3/14/2012
10.09
Heidrick & Struggles International, Inc. U.S. Employees Deferred Compensation Plan**
10-K
10.10
3/10/2006
10.10
Heidrick & Struggles International, Inc. Deferred Compensation Plan **
S-8
4.1
2/8/2002
10.11
First Amendment to the Heidrick & Struggles International, Inc. U.S. Employees Deferred
Compensation Plan **
10-K
10.25
2/27/2009
10.12
Heidrick & Struggles Non-Employee Directors’ Voluntary Deferred Compensation Plan -
Amended and Restated as of September 30, 2016 **
8-K
2.1
10/5/2016
10.13
Heidrick & Struggles International, Inc. Change in Control Severance Plan, as amended and
restated effective December 29, 2011 **
8-K
10.2
1/5/2012
10.14
Amended and Restated 2012 Heidrick & Struggles GlobalShare Plan**
DEF 14A
Annex B
4/18/2014
10.15
Employment Agreement of Krishnan Rajagopalan dated September 21, 2017**
8-K
99.1
9/21/2017
10.16
Employment Agreement between Heidrick & Struggles International, Inc. Andrew LeSueur
dated January 9, 2018 **
8-K
10.2
1/10/2018
78
Incorporated by Reference
Exhibit
No.
Exhibit Description
Form
Exhibit
Filing Date/Period
End Date
10.17
Heidrick & Struggles International, Inc. Management Severance Pay Plan as amended and
restated effective December 31, 2017
8-K
10.3
1/10/2018
10.18
Employment Agreement between Heidrick & Struggles International, Inc. and Mark Harris
dated March 19, 2018 **
8-K
99.1
3/21/2018
10.19
Second Amended and Restated 2012 Heidrick & Struggles GlobalShare Program**
DEF 14A
Annex A
5/11/2018
10.20
Form of Phantom Stock Unit Participation Agreement **
10-Q
10.1
10/29/2018
10.21
Form of Restricted Stock Unit Participation Agreement **
10-Q
10.1
10/29/2018
10.22
Employment Agreement between Heidrick & Struggles International, Inc. and Sarah Payne
dated December 5, 2018 **
8-K
10.1
12/6/2018
10.23
Employment Agreement between Heidrick & Struggles International, Inc. and Michael
Cullen dated February 6, 2019 **
8-K
10.1
2/8/2019
10.24
Form of Performance Stock Unit Participation Agreement **
10-Q
10.1
7/29/2019
10.25
Form of Performance Stock Unit Participation Agreement **
10-K
10.53
7/24/2020
10.26
Form of Restricted Stock Unit Participation Agreement **
10-Q
10.1
7/27/2020
10.27
Form of Performance Stock Unit Participation Agreement **
10-Q
10.2
7/27/2020
10.28
Form of Non-Employee Director Restricted Stock Unit Participation Agreement **
10-Q
10.3
7/27/2020
10.29
Third Amended and Restated 2012 Heidrick & Struggles GlobalShare Program **
8-K
99.1
6/3/2020
10.30
Heidrick & Struggles International, Inc. Management Severance Pay Plan and Summary Plan
Description As Amended and Restated effective December 31, 2020**
10-K
10.58
2/24/2021
10.31
First Amendment to Credit Agreement, dated July 13, 2021, by and among Heidrick &
Struggles International, Inc., the Foreign Subsidiary Borrowers Party Thereto, the Lenders
Party Thereto and Bank of America, N.A.
8-K
10.1
7/19/2021
10.32
Form of Director and Officer Indemnification Agreement
10-Q
10.1
10/25/2021
10.33
Heidrick & Struggles International, Inc. Management Severance Pay Plan and Summary Plan
Description as amended and restated effective April 12, 2022**
8-K
10.1
4/15/2022
10.34
Employment Agreement between Heidrick & Struggles International, Inc. and Tracey Heaton
dated October 31, 2021**
10-Q
10.1
4/25/2022
10.35
Employment Agreement between Heidrick & Struggles International, Inc. and Michael
Cullen dated April 25, 2022**
10-Q
10.1
7/25/2022
10.36
Second Amendment to Credit Agreement, dated February 24, 2023, by and among Heidrick
& Struggles International, Inc, the Foreign Subsidiary Borrowers party thereto, the other
Subsidiary Guarantors party thereto, the Lenders party thereto and Bank of America, N.A., as
administrative agent
10-K
10.40
2/27/2023
10.37
Form of Restricted Stock Unit Participation Agreement pursuant to the Fourth Amended and
Restated Heidrick & Struggles 2012 GlobalShare Program **
10-Q
10.1
7/31/2023
79
Incorporated by Reference
Exhibit
No.
Exhibit Description
Form
Exhibit
Filing Date/Period
End Date
10.38
Form of Performance Stock Unit Participation Agreement pursuant to the Fourth Amended
and Restated Heidrick & Struggles 2012 GlobalShare Program **
10-Q
10.2
7/31/2023
10.39
Form of Non-Employee Director Restricted Stock Unit Participation Agreement pursuant to
the Fourth Amended and Restated Heidrick & Struggles 2012 GlobalShare Program **
10-Q
10.3
7/31/2023
10.40
Fourth Amended and Restated 2012 Heidrick & Struggles GlobalShare Program **
S-8
4.4
6/14/2023
10.41
Employment Agreement between Heidrick & Struggles International, Inc. and Tom Monahan
dated January 23, 2024**
10-K
10.41
3/4/2024
10.42
Employment Agreement between Heidrick & Struggles International, Inc. and Tom Murray
dated January 23, 2024**
10-K
10.42
3/4/2024
10.43
Advisory Agreement between Heidrick & Struggles International, Inc. and Krishnan
Rajagopalan dated January 23, 2024**
10-K
10.43
3/4/2024
10.44
Fifth Amended and Restated 2012 GlobalShare Program **
DEFA 14A
Annex C
5/8/2024
10.45
Advisory Agreement between Heidrick & Struggles International, Inc. and Krishnan
Rajagopalan dated November 1, 2024**
10-Q
10.2
11/4/2023
*10.46
Employment Agreement between Heidrick & Struggles International, Inc. and Nirupam
Sinha dated November 26, 2024 **
*10.47
Separation Agreement between Heidrick & Struggles International, Inc. and Sarah Payne
dated February 2, 2025 ***
*19.1
Heidrick & Struggles International, Inc. Insider Trading Policy
*21.01
Subsidiaries of the Registrant
*23.01
Consent of Independent Registered Public Accounting Firm - RSM US LLP
*31.1
Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
*31.2
Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
†*32.1
Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
†*32.2
Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*97.1
Heidrick & Struggles International, Inc. Policy on Recoupment of Incentive Compensation
*101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document
*101.SCH
Inline XBRL Taxonomy Extension Schema Document
*101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
*101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
80
Incorporated by Reference
Exhibit
No.
Exhibit Description
Form
Exhibit
Filing Date/Period
End Date
*104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
** Denotes a management contract or compensatory plan or arrangement.
*** Certain portions of this exhibit have been redacted.
† Furnished herewith.
(b) SEE EXHIBIT INDEX ABOVE
(c) FINANCIAL STATEMENTS NOT PART OF ANNUAL REPORT
None.
ITEM 16. FORM 10-K SUMMARY
None.
81
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
/s/ Nirupam Sinha
By:
Nirupam Sinha
Title:
Chief Financial Officer
Date:
March 3, 2025
(Duly authorized on behalf of the registrant and in his capacity as
Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 3, 2025.
Signature
Title
/s/ Thomas L. Monahan III
Chief Executive Officer & Director
Thomas L. Monahan III
(Principal Executive Officer)
/s/ Nirupam Sinha
Chief Financial Officer
Nirupam Sinha
(Principal Financial and Accounting Officer)
/s/ Elizabeth L. Axelrod
Director
Elizabeth L. Axelrod
/s/ Mary E. G. Bear
Director
Mary E. G. Bear
/s/ John Berisford
Director
John Berisford
/s/ Timothy Carter
Director
Timothy Carter
/s/ Vijaya Kaza
Director
Vijaya Kaza
/s/ T. Willem Mesdag
Director
T. Willem Mesdag
/s/ Stacey Rauch
Director
Stacey Rauch
/s/ Adam Warby
Director
Adam Warby
82
Exhibit 10.46
233 S. Wacker Drive
Suite 4900
Chicago, Illinois 60610
telephone +1(312) 496-1200
facsimile +1(312) 496-1048
www.heidrick.com
November 26, 2024
Nirupam Sinha
Dear Nirupam:
On behalf of Heidrick & Struggles, Inc. (“HSII” or the “Company”), I am pleased to confirm the terms of your employment arrangement in this letter
agreement (the “Agreement”). All amounts in this Agreement are denominated in U.S. dollars.
1.
Effective Date: The terms of your employment are effective as of January 6, 2025 (the “Effective Date”). The term of this Agreement shall continue
from the Effective Date through the date of a termination of your employment pursuant to Section 14 below.
2.
Title: Commencing on the Effective Date, you will serve as Chief Financial Officer of HSII and you will report to the Company’s Chief Executive
Officer (the “CEO”). You agree that you will devote your full time, energy, and skill to the business of the Company and to the promotion of the
Company’s best interest, and shall not work or perform services for any other employer as an employee, consultant or otherwise during the term of
your employment; provided that you shall be entitled to serve as a member of the board of directors of a reasonable number of other companies, to
serve on civic, charitable, educational, religious, public interest or public service boards, and to manage your personal and family investments, in
each case, to the extent such activities do not violate any applicable policies of the Company and do not interfere with the performance of your duties
and responsibilities hereunder; provided, however, that (1) your participation as a director of other boards is subject to the limitations found within
the Company’s Corporate Governance Guidelines, and (2) you shall not become a director of any for profit entity without first receiving the approval
of the Nominating and Board Governance Committee of the Company’s Board of Directors (the “Board”).
3.
Location: You will be primarily based in the Company’s New York office, traveling between such office and the Company’s other offices and
elsewhere as reasonably necessary for the performance of your duties under this Agreement.
4.
Base Salary: Commencing on the Effective Date, you will receive a monthly salary of $50,000, (which is equivalent to $600,000 annually) (“Base
Salary”), payable in accordance with the Company’s payroll practices for its senior executives.
5.
Management Incentive Plan (MIP) Participation: You will be eligible to participate in the MIP (the Company’s annual bonus program). You will be
eligible for a target annual incentive award under the MIP equal to 100% of your Base Salary (the “Target Bonus Amount”), subject to your
continued employment with the Company and pursuant to the terms of the MIP, as amended from time to time. Performance goals under the MIP will
be established annually by the Human Resources and Compensation Committee of the Board (the “HRCC”). The bonus is discretionary and is not
earned until approved by HRCC and the independent members of the Board. Bonuses are only payable if you are employed by the Company on the
date such bonus is paid (which shall be no later than March 15 in the calendar year following the year to
Exhibit 10.46
which such bonus relates), except at the sole discretion of the HRCC (and subject to the approval of the independent members of the Board) or as
otherwise set forth in the Severance Plans (as defined below).
6.
Annual Long-Term Incentive Awards: Subject to approval by the HRCC and the independent members of the Board, you will be eligible to receive
consideration for annual long-term incentive grants under the Company’s 2012 GlobalShare Program, as amended from time to time (the
“GlobalShare Program”), as part of your performance and compensation review under the Company’s long-term incentive plan for senior
executives of the Company. Your first regular annual long-term incentive grant under this Agreement will be made to you in March 2025 with respect
to fiscal 2025 and will have a grant date target value equal to $900,000. Based on the Company’s current program design, annual grants are made
50% in the form of restricted stock units (time vesting only) and 50% in the form of performance stock units, but the actual composition of your long-
term incentive grant will be determined by the HRCC at the time of grant. Performance conditions for the performance stock units under the annual
long-term incentive program will be established annually by the HRCC. For the avoidance of doubt, you shall not be entitled to an annual long-term
incentive award with respect to fiscal 2024 and, except as provided in Section 8 below, any long-term incentive grants shall be made in the sole
discretion of the HRCC subject to approval by the independent members of the Board and nothing in this Agreement shall entitle you to long-term
incentive grants under the GlobalShare Program or any similar Company plans, programs or arrangements.
7.
Severance Plans: Commencing on the Effective Date, you will be eligible to participate in the Company’s Change in Control Severance Plan and
Management Severance Pay Plan, as such plans may be amended from time to time, in each case at the Tier 1 participant level(the “CIC Severance
Plan” and the “Base Severance Plan”, respectively, and together the “Severance Plans”); provided, that the term “Cause” as used in the Severance
Plans shall have the respective meaning set forth in this Agreement.
8.
Initial Equity Award: Subject to approval by the HRCC, you will be eligible for an initial long-term incentive award to be granted under the
GlobalShare Program in the form of performance stock units, with a grant date fair value of $600,000 (the “Initial Equity Award”), separately and
in addition to the annual long-term incentive awards described in Section 6 above. The value of the Initial Equity Award will be converted into a
number of shares as of the grant date using the average closing price of the Company’s common stock for the thirty consecutive trading days
including and immediately preceding the grant date (the “Base Price”). The Initial Equity Award shall be earned in three equal increments upon the
attainment of the applicable Stock Price Hurdle (as defined below) and which shall vest in three equal annual installments beginning on March 8,
2026, subject to the achievement of the applicable Stock Price Hurdle as of each vesting date and your continuous employment with the Company or
an affiliate through such vesting date and the terms and conditions of the GlobalShare Program and the applicable award agreement. If a Stock Price
Hurdle is not achieved by the applicable vesting date, then the shares subject to the portion of the Initial Equity Award that are subject to such hurdle
shall remain outstanding and be eligible to vest on the next scheduled vesting date. Any shares subject to a portion of the Initial Equity Award that is
subject to a Stock Price Hurdle that is not achieved by March 8, 2028, shall be forfeited. For purposes of the Initial Equity Award, a “Stock Price
Hurdle” shall be attained upon the closing price of the Company’s common stock equaling or exceeding $46.32 during March 9, 2025 to March 8,
2026, $54.04 during March 9, 2026 to March 8, 2027, and $61.76 during March 9, 2027 to March 8, 2028, in each case, for at least thirty consecutive
trading days, provided however, if the closing stock price of company’s stock as of the date of grant is at or above $46.32, the shares subject to the
first stock price hurdle will only be subject to time-based vesting and will vest on March 8, 2026 subject to your continuous employment through
such vest date. In the event of a termination of your employment due to your death or Disability (defined below), the Initial Equity Award, to the
extent unvested, will vest in full for time vesting purposes, with the earned portion of the award to be determined based on the highest Stock Price
Hurdle achieved as of the date of such termination of employment. The Initial Equity Award is subject to the Change in Control (as defined under the
GlobalShare Program) provisions as set forth in detail in the GlobalShare Program, provided that, and notwithstanding anything in the GlobalShare
Program to the contrary, performance for purposes of determining the vesting of the Initial Equity Award shall be determined based on the highest
Stock Price Hurdle achieved on or prior to the Change in Control, with the per share Change in Control consideration to be used to determine
whether the Stock Price Hurdle was achieved as of the date of the Change in Control and the Initial Equity Award shall continue to vest in
installments on the applicable vesting dates commensurate with the attained Stock Price Hurdle(s), subject to any accelerated vesting for a
termination by the Company without Cause (as defined in this Agreement) or your voluntary termination due to the existence of Good Reason (as
defined in GlobalShare Program), in either case, during the two-year period beginning on the date of a Change in Control, as provided in the
GlobalShare Program. For the avoidance of doubt, if your employment is terminated other than (i) due to your death or Disability, or (ii) by the
Company without Cause or by you for Good Reason within two years following a Change in Control, you
Exhibit 10.46
shall forfeit the unvested portion of the Initial Equity Award as of such termination of employment for no consideration.
9.
Sign-on Payment: In addition to your eligibility to participate in the incentive and bonus programs outlined above, the Company will provide you
with a sign-on payment of $250,000 gross, less deductions required by law, within thirty (30) days following your first day of employment, on the
next applicable payroll period. The award may be subject to certain repayment obligations based upon your decision to leave Heidrick, or improper
conduct during your employment as described in Section 10 below.
10.
Repayment Obligations: As mentioned above, the payment made to you pursuant to Section 9 may be subject to certain repayment obligations.
Should you resign from Heidrick for any reason or be terminated for Cause within two years of the date this payment is made to you, you agree to
reimburse Heidrick the gross amount of any such payment, reduced on a pro-rated basis by one twenty fourth (1/24 ) per full month from the date of
payment, within thirty (30) business days following your termination date. For purposes of this Section, the term “Cause” is defined in section 14.d of
this agreement.
11.
Benefits: Commencing on the Effective Date, you will be eligible to participate in the Company’s benefits program to the same extent as other
executives at your level. The Company’s benefits program includes group health, dental, vision, life/AD&D, long-term disability, short-term
disability salary continuation, flexible spending accounts, the Heidrick & Struggles, Inc. 401(k) Profit Sharing and Retirement Plan, and the Heidrick
& Struggles International, Inc. U.S. Employees Deferred Compensation Plan. You will also be eligible to participate in the Company’s Physical
Examination and Financial Planning Program. Your eligibility for all such programs and plans is determined under the terms of those programs/plans.
Any discrepancy between this summary and the Company’s plan documents will be resolved in favor of the plan documents. The Company’s benefits
programs, compensation programs and policies are reviewed from time to time by the Company and may be modified, amended, or terminated at any
time.
12.
Business Expenses: The Company will reimburse you for your reasonable business expenses incurred in the performance of your duties on behalf of
the Company in a manner consistent with the Company’s policies regarding such reimbursements, as may be in effect from time to time.
13.
Compliance with Policies and Other Obligations: Subject to the terms of this Agreement, you agree that you will comply in all material respects with
all policies and procedures applicable to similarly situated employees of the Company, generally and specifically and as modified and amended from
time to time following notice to you, including, but not limited to, the Heidrick & Struggles International, Inc. Policy on Recoupment of Incentive
Compensation, the Heidrick & Struggles International, Inc. Misconduct Clawback Policy, the Company’s Code of Ethics, the Global Company
Handbook, the U.S. Company Handbook Schedule and the Company’s insider trading policy and stock ownership guidelines. You also confirm and
agree that (i) you shall not at any time disclose to the Company or any of its affiliates or representatives, or use for any purpose in the course of your
employment, any confidential or proprietary information of any other person or entity, including without limitation any former employer; (ii) you
have returned to all former employers any and all property belonging to any of them (including without limitation all electronically stored
information), and will not at any time use any such property for any purpose in the course of your employment; and (iii) you are not a party to or
bound by any employment or services agreement, confidentiality agreement, noncompetition agreement, other restrictive covenant, fiduciary
obligation, order, judgment or other obligation or agreement that would or could prohibit or restrict you from executing this Agreement, being
employed by the Company or from performing any of your duties under this Agreement.
14.
Termination of Employment:
a.
Employment at Will: You will be an “employee at will” of the Company, meaning that either party may terminate the employment
relationship at any time for any reason (with or without Cause or reason) upon written notice to the other party. A period of notice shall only
be required if it is expressly provided in writing under written Company employment policies in effect at the time of such termination, and
the Company reserves the right to pay you severance in the form of salary continuation payments in lieu of any such required notice.
b.
No Notice Period in Case of Termination for Cause: Notwithstanding any period of notice under written Company employment policies in
effect at the time of termination, including, but not limited to, the CIC Severance Plan, the Company shall have the right to terminate your
employment for Cause or due to your death or Disability (each as defined below) immediately upon written notice.
th
Exhibit 10.46
c.
Compensation Upon Termination: Upon the termination of your employment, you will be paid your Base Salary up through your last day of
work (the “Termination Date”), any amounts due under the Company’s benefit plans and programs in accordance with their respective
terms (including but not limited to the GlobalShare Program, the CIC Severance Plan, and Base Severance Plan, as applicable),
reimbursement of all business expenses incurred in accordance with the Company’s policies, and any other amounts required by law.
d.
Definition of Cause: For purposes of this Agreement, as well as under the Severance Plans and the Initial Equity Award, “Cause” shall mean
any of the following: (i) your engagement, during the performance of your duties hereunder, in acts or omissions constituting dishonesty,
gross negligence, fraud, intentional breach of fiduciary obligation or intentional wrongdoing or malfeasance; (ii) your indictment of, or plea
of nolo contendere to, a crime constituting a (x) a felony under the laws of the United States or any state thereof or (y) misdemeanor
involving moral turpitude; (iii) your material violation or breach of the written policies of the Company or any of its affiliates (including
without limitation the Company’s Code of Ethics and the Company’s policies relating to anti-harassment and hostile work environment,
insider trading, and conflicts of interest, each as in effect from time to time), your material violation or breach of a material obligation that
you owe to the Company pursuant to your duties and obligations under the Company’s by-laws, or your material violation or breach of any
provision of this Agreement or any award or other agreement between you and the Company or any of its affiliates, and, in any of the
foregoing instances, failure to cure such breach or violation within thirty (30) days of receipt of notice of the violation or breach (where such
cure is possible); (iv) your unauthorized use or disclosure of confidential information pertaining to the Company’s business in violation of
this Agreement or a written policy of the Company; (v) any knowing or negligent act or omission by you or at your direction which results
in the restatement of the financial statements of HSII or a subsidiary of HSII; (vi) your willful engagement in conduct causing demonstrable
injury to the Company or its reputation; (vii) your willful and unreasonable failure or refusal to perform your duties as the Company
reasonably requires and the continuation thereof after the receipt by you of written notice from the Company and failure to cure within thirty
(30) days of receipt of the notice (where such cure is possible); or (viii) your habitual or gross use of alcohol or controlled substances which
interferes with the performance of your duties and obligations on behalf of the Company. For purposes of this definition, no act or failure to
act on your part shall be considered “willful” unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that
your action or omission was in the best interests of the Company. The determination of whether you have been terminated for “Cause” will
be made at the sole discretion of the HRCC.
e.
Definition of Disability: For purposes of this Agreement, “Disability” shall mean that you have been unable, for one hundred twenty (120)
consecutive days, to perform your duties under this Agreement even with accommodation, because of physical or mental illness or injury.
f.
Return of Company Materials: Upon the termination of your employment by either party for any or no reason, or upon request of the
Company, you agree to return to the Company, all Company property, including all materials furnished to you during your employment
(including but not limited to keys, computers, automobiles, electronic communication devices, files, identification cards, and any documents
or things containing any confidential or proprietary information of the Company) and all materials created by you during your employment;
provided, however, that notwithstanding anything to the contrary in this Agreement, you may retain a copy of (i) this Agreement; and (ii)
documents concerning your compensation and benefits, including but not limited to documents concerning any equity award(s), incentive
award(s) or severance benefits. In addition, you agree that upon the termination of your employment, or upon request of the Company, you
will provide the Company with all passwords and similar information for Company-provided systems and programs that will be necessary
for the Company to access materials on which you worked or to continue in its business.
15.
Confidentiality: In the course of your employment with the Company, you will be given access to and otherwise obtain knowledge of certain trade
secrets and confidential and proprietary information pertaining to the business of the Company and its affiliates, and you acknowledge that your
services have been and/or will be of special unique and extraordinary value to the Company and its affiliates. During the term of your employment
with the Company and thereafter, and subject to Section 19(i) of this Agreement and except as required by law or authorized in advance by the
Company, you will not, directly or indirectly, without the prior written consent of the Company, disclose or use for the benefit of any person,
corporation or other entity, or for yourself, any trade secrets or other confidential or proprietary information concerning the Company or its affiliates,
including, but not limited to, information pertaining to their clients, services, products, earnings, finances, operations, marketing, methods or other
activities; provided, however, that the
Exhibit 10.46
foregoing shall not apply to information which is of public record or is generally known, disclosed or available to the general public or the industry
generally (other than as a result of your breach of this covenant or the breach by another employee of his or her confidentiality obligations). Nothing
herein prevents you from disclosing such information as is required by law pursuant to a validly issued subpoena or during any legal proceeding or to
your personal representatives and professional advisers as is required for purposes of rendering tax or legal advice; provided that, subject to Section
19(i) below, (a) you shall first promptly notify the Company if you receive a subpoena, court order, or other order requiring disclosure of any
confidential or proprietary information, to allow the Company to seek protection therefrom in advance of any such legally compelled disclosure; and
(b) with respect to disclosure to any personal representatives and professional advisers, you shall inform them of your obligations hereunder and take
all reasonable steps to ensure that such professional advisers do not disclose the existence or substance thereof. Further, upon termination of
employment for any reason or upon request by the Company, you shall return, and you shall not, directly or indirectly, remove or retain, any records,
computer disks or files, computer printouts, business plans or any copies or reproductions thereof, or any information or instruments derived
therefrom, arising out of or relating to the business of the Company and its affiliates or obtained as a result of your employment by the Company.
16.
Intellectual Property Rights:
a.
Definitions: “IP Rights” means all rights in and to United States and foreign intellectual property and all similar or equivalent rights or
forms of protection throughout the world, in each case whether registered or unregistered, including: (i) patents, patent applications,
provisional patent applications, and similar instruments (including any and all substitutions, divisions, continuations, continuations-in-part,
reissues, renewals, extensions, or the like) as well as any foreign equivalents thereof and all documentation associated therewith,
(ii) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source
or origin, together with the goodwill symbolized by any of the foregoing, (iii) copyrights and copyrightable works (including computer
programs), mask works, moral rights, and rights in data and databases, and (iv) trade secrets, know-how, and other confidential information.
“Develop” means to create, prepare, produce, author, edit, amend, invent, conceive, develop, assemble, or reduce to practice or, in the case
of works of authorship, to fix in a tangible medium of expression. “Work Product” means all writings, works of authorship, technology,
inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any
nature whatsoever that are Developed by you, individually or jointly with others, during the period of your employment by the Company
and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from
any work performed by you for the Company (in each case, regardless of when or where the work product is prepared during the period of
your employment with the Company or whose equipment or other resources is used in preparing the same), all rights and claims related to
the foregoing, and all printed, physical, and electronic copies and other tangible embodiments thereof; provided, however, that, solely to the
extent 765 I.L.C.S. 1060/2 is deemed to apply, Work Product shall not include any invention for which no equipment, supplies, facilities, or
trade secret information of the Company was used, and which was developed entirely on your own time, unless the invention either relates
to the Company’s business or its actual or demonstrably anticipated research or development or the invention results from any work that you
perform for the Company.
b.
Work Made for Hire; Assignment: You acknowledge that, by reason of being employed by the Company at the relevant times, to the extent
permitted by applicable law, all Work Product consisting of copyrightable subject matter is a “work made for hire” as defined in the
Copyright Act of 1976 (17 U.S.C. § 101), and such copyrights are therefore owned by the Company. To the extent that the foregoing does
not apply or all right, title and interest in and to the Work Product and all IP Rights therein and improvements thereto does not automatically
vest as the exclusive property of the Company, you hereby irrevocably assign to the Company (for itself and for the benefit of its successors
and assigns), for no additional consideration, all of my right, title, and interest throughout the world in and to any and all Work Product and
all IP Rights therein and improvements thereto, including the right to sue, counterclaim, and recover for all past, present, and future
infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world.
c.
Moral Rights: Any assignment of copyrights by you to the Company includes all rights of attribution, paternity, integrity, modification,
disclosure, withdrawal, and any other rights throughout the world that may be known or referred to as “moral rights,” “artist’s rights,” “droit
moral,” or the like (collectively, “Moral Rights”). To the extent that Moral Rights cannot be
Exhibit 10.46
assigned under applicable law, you hereby irrevocably waive in favor of the Company and agree not to enforce any and all Moral Rights,
including any right to identification of authorship or limitation on subsequent modification, that you may have in the assigned copyrights.
d.
Further Assurances; Power of Attorney: During and after your employment with the Company, you will (i) assist and cooperate with the
Company (or its designee), without charge by you to the Company (or its designee) but at no expense to you, in every proper way to secure
the Company’s rights (including IP Rights) in the Work Product and maintain, protect, and enforce the same in any and all jurisdictions
throughout the world and (ii) execute and deliver such additional documents, instruments, conveyances, and assurances, and take such
further actions, as may reasonably be necessary or desirable to carry out the purposes and intent hereof. If, due to your mental or physical
incapacity or unreasonable refusal to cooperate with the Company, the Company is unable to secure your signature with respect to any Work
Product, then you hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as your agent and
attorney in fact, to act for and in your behalf and stead, to execute, file, and deliver any and all applications, oaths, declarations, affidavits,
waivers, assignments, and other documents and instruments as may be requested by the Company and to do all other lawfully permitted acts
with respect to such Work Product with the same legal force and effect as if executed by you. The foregoing power of attorney is coupled
with an interest in and to the Work Product, shall be irrevocable, and shall not be affected by your subsequent incapacity or death.
17.
Non-Competition/Non-Solicitation.
a.
Without the prior written consent of the Company, during the term of your employment with the Company and for a period of twelve (12)
months after the termination of your employment with the Company for any reason (the “Restricted Period”), you shall not:
i.
become engaged in or otherwise obtain a financial interest in, directly or indirectly (whether as an owner, officer, employee,
consultant, director, stockholder, or otherwise), any company, enterprise or entity that provides, or to your knowledge has made
substantial preparation to provide, services or products that compete with any portion of the “Business” (as defined below in
Section 17(b)), in each case anywhere in any geographic area where all or any portion of the Business is conducted or, to your
knowledge, is in active planning to be conducted at any time during your employment or, at the time of your termination and with
respect to which you, at any time during the last two years of employment, provided services or had material presence,
responsibilities, or influence (the “Territory”); provided, that it shall not be a violation of this restriction to engage in the passive
investment in securities of publicly traded companies that are not in excess of two percent (2%) of any such company’s outstanding
securities;
ii.
directly or indirectly solicit, or assist any other person in soliciting for a competitive Business, or to otherwise interfere with the
Company’s relationship with, (x) any client of the Company or its affiliates which engaged the Company for services in the twelve
(12) months prior to your employment termination date, or (y) any prospective client of the Company (I) with respect to whom you
had direct professional contact during the twelve (12) months immediately prior to the termination of your employment with the
Company, or (II) about whom you learned confidential information as a result of your employment; provided, that this subpart
16(a)(ii) shall not apply to any clients of the Company with respect to whom the Company received aggregate annual gross revenue
(determined on a fiscal year basis) of less than $100,000;
iii.
directly or indirectly solicit, or assist any other person in soliciting, any person who was an employee of the Company or its
affiliates as of your termination of employment with the Company, or any person who, as of such date, was actually known by you
to have been in the process of being recruited to become an employee by the Company or its affiliates, or induce any such
employee or person to terminate his or her employment or prospective employment with the Company or its affiliates (in each case,
other than a personal or executive assistant whose primary role and responsibilities were related to supporting your day-to-day
activities); or
iv.
hire, or assist another person in hiring, any employee of the Company or its affiliates who possesses or is reasonably likely to
possess the Company’s or any of its affiliates’ confidential information for a position where the employee’s knowledge of such
Exhibit 10.46
information is reasonably likely to be relevant to the position or such information is reasonably likely to be disclosed.
b.
As used in this Section 17:
i.
the term “Business” shall mean the business of the Company and its direct and indirect parents and subsidiaries at the time of
termination of your employment with the Company and shall include (I) executive search, which includes facilitating the
recruitment, management and deployment of senior executives for executive management and board director positions; (II)
consulting services, which includes succession planning, culture assessment and leadership assessment and development; (III) on-
demand talent; (IV) talent and human capital digital offerings; and (V) during the term of this Agreement and as of the date of your
termination of employment, any other service or product provided by the Company or for which the Company had made substantial
preparation to enter into or offer that is a Material Business or was reasonably projected in writing by the Board to constitute a
Material Business within 2 years following your termination of employment; and
ii.
the term “Material Business” shall mean a service or product or other line of business which generates 10% or more of the
Company’s gross annual revenues.
c.
Nothing in this Section 17 shall prohibit you from providing services or products (other than services or products similar to those provided
by the Company in the conduct of the Business) to an entity that is not engaged in a business, or providing products or services, which
compete with a Business (a “Competitive Activity”) but which has one or more affiliates, divisions or business units that is engaged in a
Competitive Activity; provided that (i) the entity does not derive more than 10% of its gross annual revenues from such Competitive
Activity, and (ii) (x) your duties, responsibilities and authority with respect to such entity do not result in your being directly involved in the
conduct or facilitation of such Competitive Activity, and (y) if your duties, responsibilities and authority with respect to such entity would
otherwise result in your being indirectly (through supervision or otherwise) involved in the conduct or facilitation of such Competitive
Activity (“Indirect Activity”), appropriate safeguards, reasonably acceptable to the Company, are implemented in order to prevent your
engagement in such Indirect Activity. For the avoidance of doubt, nothing in this Agreement or related plans or policies regarding non-
compete restrictions following termination of your employment will prohibit you from becoming employed by a client of the Company,
provided that the client is not a competitor of the Company or engaged in a business that competes with the Company (as defined in such
non-compete provisions).
d.
Each of the foregoing restrictions contained in Section 17 constitutes an entirely separate and independent restriction on you and shall be
read and construed independently of the other undertakings and agreements herein contained. You and the Company agree that the
restrictions contained in Section 17 are reasonable in scope and duration and are necessary to protect the Company’s confidential
information and other business interests. If any provision of Section 17 as applied to any party or to any circumstance is adjudged by an
arbitrator or court of competent jurisdiction to be invalid or unenforceable, the same will in no way affect any other circumstance or the
validity or enforceability of this Agreement. If any such provision, or any part thereof, is held to be unenforceable because of the scope,
duration or geographic area covered thereby, the parties agree that the court or arbitrator making such determination will have the power to
reduce the scope and/or duration and/or geographic area of such provision, and/or to delete or revise specific words or phrases, and in its
modified form, such provision will then be enforceable to the fullest extent possible and will be enforced.
18.
Remedies; Acknowledgment Respecting Breach. You acknowledge and agree that the protections of the Company set forth in Sections 15 and 17 are
fair and reasonable. The parties agree and acknowledge that the breach of any provision of Sections 15 or 17 will cause immediate and irreparable
damage to the Company and its affiliates for which full damages cannot readily be calculated and for which damages are an inadequate remedy.
Accordingly, you agree that, upon actual or threatened breach of any provision of either Section, the Company and its affiliates will be entitled to
seek from a court of competent jurisdiction immediate injunctive relief, specific performance or other equitable relief without the necessity of posting
a bond or other security and that this will in no way limit any other remedies which the Company and its affiliates may have (including, without
limitation, the right to seek monetary damages). The Company and you agree that in any action by the Company or any of its affiliates to enforce its
or their rights under
Exhibit 10.46
Sections 15 or 17 of this Agreement, the prevailing party in such action shall be awarded its reasonable attorneys’ fees and court costs.
19.
Other Legal Matters:
a.
No Other Agreements/Obligations: You have advised the Company that your execution and performance of the terms of this Agreement do
not and will not violate any other agreement binding on you or the rights of any third parties and you understand that in the event this advice
is not accurate the Company will not have any obligation to you under this Agreement. You acknowledge and affirm that you will comply
with any restrictive covenant and confidentiality obligations applicable to you from any prior employer during the period such restriction(s)
is or are in effect. You further represent and warrant that you shall not disclose to the Company or any of its affiliates or induce the
Company or any of its affiliates to use any confidential or proprietary information or material belonging to any previous employer or others.
b.
Acknowledgment: By signing this Agreement, you acknowledge and agree that: (i) you have read and understand the terms and effects of
this Agreement; (ii) you are hereby advised to consult with an attorney if you so choose (at your cost) before executing this Agreement; (iii)
you negotiated the terms of this Agreement with the Company and that you enter into this Agreement knowingly and voluntarily; and (iv)
you have had a sufficient period of time of at least 14 calendar days (the “Review Period”) in which to consider and review this Agreement
before the Effective Date; provided that to the extent you review and sign this Agreement before the expiration of the Review Period, you
acknowledge and agree that you have voluntarily and knowingly waived such additional time.
c.
Applicable Legal Standards; Venue: You will be an employee of the Company’s United States operations and agree that the laws of the
United States of America and the State of Illinois shall govern your employment with the Company. The parties hereby irrevocably consent
to, and agree not to object or assert any defense or challenge to, the jurisdiction and venue of the state and federal courts located in Chicago,
Illinois, and agree that any claim which may be brought in a court of law or equity shall be brought in any such Chicago, Illinois court.
d.
Notice: All notices and other communications under this Agreement shall be in writing to you at the above-referenced address or to the
Company at its Chicago Headquarters, directed to the attention of the General Counsel.
e.
Full and Complete Agreement: This Agreement (and the plans and other agreements referenced herein) contains our entire understanding
with respect to your employment and can be amended only in writing and signed by you and either the Chief Legal Officer or other duly
authorized officer. This Agreement supersedes any and all prior agreements, whether written or oral, between you and the Company that are
not specifically incorporated by reference herein. In the event of any inconsistency between this Agreement and any other plan, program,
practice or agreement in which you are a participant or a party, as in effect from time to time (collectively, “Other Programs”), this
Agreement will control, unless any applicable such Other Program either is more favorable to you or you agree in writing that such Other
Program controls. You and the Company specifically acknowledge that no promises or commitments have been made that are not set forth in
this letter. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
f.
Severability: If any provision of this Agreement or the application thereof is held invalid, such invalidity shall not affect other provisions or
applications of this Agreement that can be given effect without the invalid provision or application and, to such end, the provisions of this
Agreement are declared to be severable.
g.
Survival of Provisions: The provisions of Sections 14(b) and (c) and 15 through 19 of this Agreement shall survive the termination of your
employment with the Company and the expiration or termination of this Agreement.
h.
Immigration Reform and Control Act: In compliance with the Immigration Reform and Control Act of 1986, on your first day of work we
ask that you bring documents that will establish your identity and your eligibility to work in the United States. Some examples include your
driver's license and social security card, your birth certificate, or a current passport. For a comprehensive
Exhibit 10.46
list of acceptable documents, please visit the following link: http://www.uscis.gov/files/form/i-9.pdf.
i.
Protected Rights: Notwithstanding any other provision of this Agreement, nothing contained in this Agreement prohibits you from reporting
possible violations of federal law or regulation to or file a charge or complaint with any governmental agency or commission or regulatory
authority, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency
Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation, or
providing truthful testimony in response to a lawfully-issued subpoena or court order. Further, this Agreement does not limit your ability to
communicate with any governmental agency or commission or regulatory authority or otherwise participate in any investigation or
proceeding that may be conducted by any governmental agency or commission or regulatory authority, including providing documents or
other information, without notice to the Company. Furthermore (i) you shall not be held criminally or civilly liable under any federal or state
trade secret law for the disclosure of a trade secret that: (A) is made (x) in confidence to a federal, state, or local government official, either
directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is
made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal, and (ii) if you file a lawsuit
for retaliation by the Company for reporting a suspected violation of law, you may disclose a trade secret to your attorney and use the trade
secret information in the court proceeding, if you file any document containing the trade secret under seal and do not disclose the trade
secret except pursuant to court order. Nothing in this Agreement prohibits or creates liability for any such protected conduct.
j.
Disclosures to Future Employers: You agree to promptly disclose your obligations to the Company under Sections 15 and 17 of this
Agreement to any future employer or other person or entity with whom you may become, or may seek to become, employed or engaged to
perform services of any kind following your employment with the Company. You further agree that the Company may in its discretion
disclose this Agreement or any part thereof to any such actual or prospective employer or other person or entity, and that you shall not have
or assert any claims of any kind against the Company for doing so.
k.
Withholding: All payments and benefits under this Agreement are subject to withholding of all applicable taxes.
l.
Code Section 409A: It is intended that any amounts payable under this Agreement shall be exempt from or shall comply with Section 409A
of the Internal Revenue Code of 1986, as amended (including the Treasury regulations and other published guidance relating thereto)
(“Section 409A”), and the Company’s and your exercise of authority or discretion hereunder shall comply therewith so as not to subject you
to the payment of any interest or additional tax imposed under Section 409A. To the extent any amount payable to you from the Company,
per this Agreement or otherwise, would trigger the additional tax imposed by Section 409A, the payment arrangements shall be modified, in
a manner intended to the maximum extent possible to preserve the business arrangements contemplated hereunder, to avoid such additional
tax. This provision includes, but is not limited to, a six-month delay in payment of deferred compensation to a “specified employee” (as
defined in the Treasury regulations under Section 409A) upon a separation from service, to the extent applicable. To the extent that
reimbursements or other in-kind benefits under this Agreement constitute deferred compensation under Section 409A, (i) all expenses or
other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such
expenses were incurred by you, (ii) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another
benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any
way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. For purposes of Section
409A, your right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and
distinct payments.
Exhibit 10.46
Nirupam, the entire Board is very excited to have you as our Chief Financial Officer.
Sincerely,
Tom Monahan
Chief Executive Officer
I hereby accept the terms and conditions of employment outlined in this Agreement.
Nirupam Sinha
Date
Copy:
Sarah Payne, Chief Human Resources Officer
Tracey Heaton, Chief Legal Officer and Corporate Secretary
Exhibit 10.47
Pursuant to Item 601(b)(10)(iv) of Regulation S-K, confidential information (indicated by [***]) has been omitted from Exhibit 10.47 because it (i) is
not material and (ii) would likely cause competitive harm to the Registrant if publicly disclosed.
CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE
This Confidential Separation Agreement and General Release (“Agreement”) is made by and between Sarah Payne (“Employee”) and Heidrick &
Struggles, Inc. (the “Company”), (the Company and Employee collectively, the “Parties”) as of this 2nd day of February, 2025.
WHEREAS, Employee was employed by the Company on an at-will basis;
WHEREAS, Employee’s employment with the Company shall terminate effective June 30, 2025 the (“Termination Date”);
WHEREAS, Employee will continue to serve in the role of Chief Human Resources Officer through March 31, 2025, and will thereafter transition to
an advisory role, effective until the end of the second quarter, June 30, 2025;
WHEREAS, in certain circumstances, Employee is entitled to certain benefits upon separation of employment from the Company pursuant to the
Company’s Management Severance Pay Plan (the “MSPP”); and
WHEREAS, the Parties mutually desire to resolve any and all disputes, claims, controversies, and matters between them, including settlement of any
potential claims under the MSPP, whether or not currently asserted or known, on the terms set forth in this Agreement.
NOW, THEREFORE, in recognition of the foregoing and in consideration of the mutual covenants and obligations contained herein and in the
Reaffirmation (as defined herein), and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Employee and the
Company agree as follows:
1. Termination Date and Obligations. Employee’s employment with the Company shall cease as of the Termination Date. Until and through the
Termination Date, Employee is expected to continue work activities and responsibilities as assigned by the Company, in exchange for Employee’s normal base
pay. Thereafter, and except as may be expressly directed in writing by the Company’s Chief Executive Officer, Employee shall not perform any work for or on
behalf of the Company, hold herself out to any person as having any actual or apparent authority to engage in any actions or communications on the
Company’s behalf, or return uninvited to any of the Company’s offices. The benefits and promises made by the Company and contained in this Agreement
rely and are contingent upon representations that Employee will continue to work, as needed, through and until the Termination Date, and to transition such
work to individuals assigned by the Company (unless otherwise agreed to by the parties). Employee understands and agrees that if she fails to fulfill these
obligations, she will have no right to receive the Consideration described in Section 5.
2. Payment of Final Compensation and Receipt of All Benefits. Employee acknowledges and represents that, other than the Consideration set forth in this
Agreement, the Company has paid or provided all salary, wages, overtime pay, vacation pay, bonuses, incentives, commissions, and any deferred
compensation due to Employee, with the exception of i) her final payroll check for her salary or wages earned through the Termination Date above, and (ii)
any vested benefits under any of the Company's employee benefit plans which shall be governed by the terms of the applicable plan document and award
agreements. Employee also acknowledges that except as specified herein, she has no right to and will not receive any additional compensation, bonuses,
incentives, commissions, payments or benefits from the Company or any of the Released Parties (as defined below), and that no representations or promises to
the contrary have been made to Employee.
Exhibit 10.47
3. Reimbursement of Business Expenses. If Employee incurs any business-related expenses through the Termination Date for which Employee requires
reimbursement, Employee must submit all required information and supporting documentation to the Company no later than forty-five (45) days after the
Termination Date. If Employee fails to submit all such information and supporting documentation for a business-related expense by that date, Employee shall
be treated as having chosen not to seek or receive any reimbursement for that expense. As to any such information and documentation that is submitted by that
date, the Company will reimburse Employee for any expenses that are reimbursable pursuant to the terms of the Company’s business expense policy.
4. Benefits. Except as otherwise provided in Section 5.1.4, Employee’s coverage under all of the Company’s employee benefit plans and programs will end
on the last day of the month in which the termination occurs.
5. Consideration.
5.1 In the event Employee timely executes and does not revoke this Agreement and the Reaffirmation, the Company agrees that the following
Consideration shall be given from the Company to Employee:
5.1.1 Separation Payment. In consideration of Employee’s execution of and continuing compliance with the terms and conditions of this Agreement and
the Reaffirmation, the Company shall pay to Employee the total gross amount of $918,750.00, less required tax withholdings and any deductions made
pursuant to Section 5.2, payable in equal monthly installments of $51,041.67 over eighteen months (the “Severance Period”) in accordance with the
Company’s normal payroll schedule, starting on the first pay period following the Termination Date.
5.1.2 RSU Vesting Acceleration. In consideration of Employee’s execution of and continuing compliance with the terms and conditions of this
Agreement, the Company shall accelerate the vesting of 3,655 RSUs in accordance with the terms set out in the MSPP.
5.1.3 Bonus. Pursuant to the MSPP, Employee will be entitled to a discretionary bonus for fiscal year 2025 in an amount determined at the sole
discretion of the Company, but, in any event, no less than 3 months of Employee’s salary plus target bonus.
5.1.4 Benefits Continuation. As further consideration for the promises made by Employee herein and provided that Employee applies for and is eligible
for COBRA, the Company will subsidize the cost and pay for such premiums for continuation coverage under COBRA, with the same terms in effect
immediately prior to the Termination Date, through the earlier of: a) one year following the Termination Date; b) the end of the Severance Period or c) the date
on which you become employed and covered under another employer’s benefit plan (the “Benefits Continuation Period”). After the Benefits Continuation
Period, Employee will be responsible for the full cost of premiums for the remainder of the duration benefits are continued through COBRA. Receipt of this
subsidy is contingent upon Employee enrolling in COBRA.
5.2 Employee and the Company acknowledge and agree that the payments made under Sections 5.1.1 through 5.1.3 shall be “wages” for purposes of tax
payments and withholdings, and that the Company shall withhold federal income tax, FICA tax, and state income tax from such payments.
5.3 Employee expressly acknowledges and agrees that Employee is not otherwise entitled to the payments and benefits described in Sections 5.1.1
through 5.1.4 (collectively, the “Consideration”) and that Employee is receiving the Consideration solely in exchange for Employee’s agreement to enter into
and be bound by the terms of this Agreement. Employee further acknowledges and agrees that the Consideration is inclusive of and exceeds any amounts
Employee might ever have claimed to be owed in connection with Employee’s employment with or separation of employment from the Company, whether
pursuant to any claimed promise, policy, practice, or any other reason. Except for the obligations expressly set forth in this Agreement, the Company shall
make no further payments or contributions on behalf of Employee, whether for salary, vacation, sick days, or for any other compensation of benefits following
the Termination Date.
Exhibit 10.47
6. Definitions. As used in this Agreement:
6.1 “Affiliate” means any corporation, company, partnership, or other business entity which directly or indirectly controls the Company, is controlled by
the Company, or is under common control with the Company.
6.2 “Released Parties” means:
6.1.1 the Company and all of its past, present, and future Affiliates;
6.1.2 all predecessors, successors and assigns of any of the entities described in Section 6.1.1; and
6.1.3 all past and present employees, agents, officials, officers, directors, members, partners, shareholders, employee benefit plans (and all
administrators, fiduciaries, and sponsor of any such plan), insurers, and attorneys of any of the Released Parties described in Section 6.1.1 or Section 6.1.2.
7. Release and Agreement Not to Sue.
7.1 Employee (on behalf of Employee and her agents, representatives, attorneys, assigns, heirs, executors, and administrators) fully releases each of the
Released Parties from, and agrees not to bring any suit, action, or proceeding against any of the Released Parties regarding, any and all liability, claims,
demands, actions, causes of action, suits, grievances, debts, sums of money, agreements, promises, damages, back and front pay, costs, expenses, attorneys’
fees, and remedies of any type, whether now known or unknown to Employee (collectively, “Claims”), relating to any act or failure to act that occurred before
Employee signed this Agreement, including, without limitation, all Claims arising out of or in connection with Employee’s employment or termination of
employment with the Company, and including but not limited to:
(a) any and all Claims for violation of any federal, state, or local law, including but not limited to the Age Discrimination in Employment Act, Title VII
of the Civil Rights Act of 1964, the Civil Rights Act of 1866 (42 U.S.C. § 1981), the Americans with Disabilities Act, the federal Equal Pay Act, the Family
and Medical Leave Act, the Employee Retirement Income Security Act, the Worker Adjustment and Retraining Notification (WARN) Act; the Connecticut
Family and Medical Leave Act, Conn. Gen. Stat. Ann. §§ 31-51kk et seq; Connecticut's whistleblower law, Conn. Gen. Stat. Ann. § 31-51m; Connecticut's
free speech law, Conn. Gen. Stat. Ann. § 31-51q; the Connecticut Fair Employment Practices Act, Conn. Gen. Stat. Ann. §§ 46a-58, et seq.; Connecticut's
minimum wage and wage payment laws, Conn. Gen. Stat. Ann. §§ 31-58 to 31-76m; the anti-retaliation provision of Connecticut’s workers' compensation
statute, Conn. Gen. Stat. Ann. § 31-290; or any other applicable state or local civil or human rights law or ordinance prohibiting unlawful discrimination,
and/or any other Federal, state, local and foreign law (statutory, regulatory or otherwise) that may be legally waived and released);
(b) any and all Claims arising out of any constitutional provision, law, statute, ordinance, regulation, or executive order relating to employment,
termination of employment, discrimination or retaliation in employment, wages, compensation, or employee benefits, including but not limited to those arising
under the MSPP;
(c) any and all common law Claims, including but not limited to Claims for breach of contract (whether written or oral, or express or implied),
promissory estoppel, wrongful or retaliatory discharge of employment, termination in violation of public policy, fraud, misrepresentation, interference with
contract or prospective economic advantage, defamation, negligence, personal injury, invasion of privacy, and infliction of emotional distress;
(d) any Claims based on Employee having voluntarily chosen to use the Company’s information systems, including its computers, servers, email
systems, or word processing software, to create or store any personal data or information; and
Exhibit 10.47
(e) any and all Claims for attorneys’ fees and costs;
Employee agrees that the release set forth in this Section 7 shall be and remain in effect in all respects as a complete general release as to the matters
released. This release does not extend to any obligations incurred under this Agreement. This release does not release claims that (i) rights or claims arising
under any Restricted Stock Unit Participation Agreement between Employee and the Company; (ii) rights or claims that arise following the execution of this
Agreement and Reaffirmation; or (iii) rights or claims that cannot be released as a matter of law. Employee understands that nothing in this Agreement shall
prohibit Employee from reporting factual information relating to possible violations of federal, state, or local law or regulation to any governmental agency or
entity, including but not limited to the Equal Employment Opportunity Commission (“EEOC”) and/or equivalent state agency, the National Labor Relations
Board (“NLRB”), and the Securities and Exchange Commission (in relation to Rule 21F), or from making other disclosures that are protected under the
whistleblower provisions of federal law or regulation; provided, however, that Employee does not personally seek, and fully waives any right to,
reinstatement, damages, remedies, or other relief as to any claim that Employee has released. Employee agrees and acknowledges that Employee does not
need the prior authorization of the Released Parties to make such reports or disclosure, and that Employee is not required to notify the Released Parties that
Employee has made such reports or disclosures. Pursuant to 18 U.S.C. § 1833(b), Employee understands that Employee shall not be held criminally or civilly
liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or
to any attorney solely for the purpose of reporting or investigating a suspected violation of law. Employee shall not be held criminally or civilly liable under
any federal or state trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if
such filing is made under seal. If Employee files a lawsuit for retaliation by the Released Parties for reporting a suspected violation of law, Employee may
disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, provided that Employee files any document
containing the trade secret under seal, and Employee does not otherwise disclose the trade secret, except pursuant to court order.
7.2 Employee (on behalf of Employee and all of her agents, representatives, attorneys, assigns, heirs, executors, and administrators) also waives and gives
up any right to become, and promises not to agree or consent to become, a member of any class or group of plaintiffs in a case in which any Claims are made
against any of the Released Parties that are related in any way to Employee’s employment with the Company or the termination of that employment.
Employee affirms that that to her knowledge, she is not now a member of any such class or group. If Employee learns that she has been made a member of
any such class or group, she will leave and opt out of the class or group at the earliest possible opportunity.
8. No Pending or Future Lawsuits. Employee agrees and acknowledges that Employee (a) has not suffered any type of industrial or work-related injury as
a result of employment with the Company or any of the Released Parties; (b) does not possess any claim for unpaid overtime, benefits or any other form of
compensation and has not filed any such claim with the Department of Labor or any other administrative agency or court of law; (c) has not filed any
complaints, charges, applications or lawsuits against the Company or any of the Released Parties with any governmental agency or court that raises any Claim
released in Section 7.1; and (d) has not assigned or otherwise transferred any rights or interests in any actual or potential claims Employee might ever have
asserted against the Company or any of the Released Parties. Employee also represents that Employee does not intend to, and shall not, bring any claims
against the Company or any of the Released Parties. Except for an action arising out of a breach of the terms of this Agreement, or with respect to any claims
which cannot be waived or released pursuant to applicable law, Employee agrees never to bring (or cause to be brought) any claim, action or proceeding
against the Company or any of the Released Parties regarding any act or failure to act that occurred up to and including the Effective Date of this Agreement,
including but not limited to any claim, action or proceeding relating to Employee’s employment or Employee’s separation of employment from the Company.
9. Affirmation. Employee affirms that she has reported to the Company all hours that Employee worked for the Company to the full extent that she was
asked or required to do so, and is not aware of any facts to indicate that the Company has violated any law governing the timing or amount of wages to be paid
to employees, including but not limited to any laws requiring the payment of minimum wages or overtime pay.
Exhibit 10.47
10. Neutral Reference. Upon Employee's signed request, the Company will provide a prospective employer written confirmation of employment with the
Company, including dates of employment and to the extent so requested, salary information.
11. Continuing Obligations. Notwithstanding anything else in this Agreement and the termination of Employee’s employment with the Company,
Employee agrees and acknowledges that she is and remains bound by the following obligations set forth in Employee’s Offer Letter, dated December 3, 2018,
and as modified below, which restricts or limits Employee, following the Termination Date and for a period of twelve (12) months, from: (i) working for or
providing services to any of the Specified Companies in a substantially similar corporate function as such Employee held with the Company during the two-
year period prior to the Employee’s Termination Date; (ii) directly or indirectly soliciting, or assisting any other person in soliciting, any employee of the
Company or its affiliates (as of the Termination Date) or any person who, as of such date, was in the process of being recruited by the Company or its
affiliates, or induce any such employee to terminate his or her employment with the Company or its affiliates; or (iii) hiring or assisting another in hiring any
employee of the Company or its affiliates who potentially possesses the Company’s or its Affiliate's Confidential Information for a position where the
employee's knowledge of such information might be relevant (together, the “Continuing Obligations”). In addition to the restrictions and obligations found in
the MSPP, these Continuing Obligations remain in effect and shall be treated as though they were set forth here in full. The “Specified Companies” are [***].
12. Non-Defamation or Encouragement of Claims. Unless otherwise prohibited or limited by applicable law, Employee agrees not to, at any time, say,
write or cause to be said or written, any defamatory or maliciously false statements relating to Employee’s employment with the Company, or regarding the
Company or the Released Parties (including through posts on social media sites such as Facebook, Instagram, LinkedIn or Glassdoor, whether made under
Employee’s name or anonymously). Nothing in this Agreement is intended to prohibit Employee from engaging in communications allowable under
applicable law, including from making any truthful statements about any harassment and/or employment discrimination. Nothing in this Agreement is
intended to prohibit Employee from participating in any protected concerted activity under the National Labor Relations Act (if applicable), or from making
any statements to or in cooperation with any government agency, including the National Labor Relations Board, or another federal, state or local official
responsible for investigating and/or enforcing criminal laws or unlawful practices. Likewise, the Company agrees and represents that it will not authorize
anyone to make statements on behalf of the Company that defame or disparage Employee to any third party, either orally or in writing.
13. Breach. Employee agrees that if Employee institutes or pursues any claims released pursuant to this Agreement or otherwise violates this Agreement,
then, in addition to any remedies or damages available to the Company, Employee expressly agrees both (i) to repay to the Company the Separation Payment
provided to Employee under this Agreement pursuant to Section 5.1.1, less One Thousand Dollars and Zero Cents ($1,000) to be retained by Employee as
consideration in support of Employee’s continuing release of claims, covenants, and obligations under this Agreement; and (ii) to be liable and to reimburse
the Company for any attorneys’ fees and/or costs or expenses incurred by the Company in defending against any such claims or otherwise enforcing this
Agreement.
14. Reaffirmation. Employee agrees that at the end of her last day of employment with the Company, she will sign the Reaffirmation and Coverage of
Waiver and Release (hereinafter the “Reaffirmation”) located at the end of this Agreement as Exhibit B and return to the Chief Legal Officer. This is a material
term of the Agreement and the Company would not have entered into this Agreement but for her agreement to reaffirm the representations she makes herein at
the end of her last day of employment.
15. Return of Property and Confidential Information. Employee affirms that by no later than the Termination Date, she shall return to the Company all
originals and copies of all property and all Confidential Information of the Company and all Affiliates that was (or is) in Employee’s possession, custody or
control, wherever or however such property or Confidential Information may have been located or stored, and that Employee
Exhibit 10.47
has no lawful way to obtain access to any originals or copies of any such property or Confidential Information. The property covered by this Section 15
includes but is not limited to: all computer hardware (including, without limitation, all desktop and laptop computers, cell phone devices, and personal data
assistants), all contents of all such hardware, and all passwords and codes needed to obtain access to or operate effectively any such hardware; all electronic
storage devices (including but not limited to hard drives, disk drives, jump or flash drives, diskettes, CDs, and DVDs), all contents of all such devices, and all
passwords and codes needed to obtain access to or effectively operate any such device; and all computer software and programs, keys, access cards, security
badges, credit cards, telephone cards, telephones, equipment, e-mails, correspondence, work product, financial information, accounting information, computer
printouts, manuals, flow charts, policies, lists of and information about any current or prospective clients, lists of and information about any current or
prospective vendors or suppliers, data, materials, documents, books, files, records, notes, marketing information, specifications, plans, data base information
and lists, mailing lists, and all materials describing, reflecting or containing any Confidential Information of the Company or any Affiliates, including but not
limited to the originals and all copies of any such property or materials that are electronically stored. As used herein, “Confidential Information” means any
trade secret or confidential information concerning the internal affairs of the Company or any of its Affiliates, including but not limited to information
pertaining to its or their clients, prospective clients, services, products, earnings, finances, operations, methods, or other activities, other than information
which is generally available to the public by reasons other than a violation by Employee of any agreement or other legal obligation.
16. Cooperation and Assistance. Upon reasonable notice by the Company, Employee shall voluntarily provide thorough, timely, and accurate information
and testimony to and on behalf of the Company regarding (i) any investigation, litigation, arbitration, or other claim or proceeding initiated by, or brought or
threatened against, the Company, and (ii) any dispute between the Company and any person or entity other than Employee, in either case arising from or
related to any act or failure to act that actually or allegedly occurred during Employee’s employment by the Company. Employee’s assistance and cooperation
shall include but not be limited to attending meetings with attorneys representing the Company and voluntarily testifying at depositions, trials, or other
proceedings without the need for a subpoena. In providing such information and testimony, Employee shall reasonably accommodate her schedule to
cooperate with the Company and their counsel, and such persons shall make reasonable efforts to reasonably accommodate Employee’s schedule. Except as
may be required by law, Employee shall not disclose to or to discuss with anyone who is not directing, assisting or providing legal advice to the Company in
any such investigation, litigation, claim, or dispute (other than Employee’s own attorney) the fact of or subject matter of the investigation, litigation, claim, or
dispute. To the full extent permitted by law, the Company shall reimburse Employee for reasonable travel and other similar out-of-pocket expenses that
Employee incurs in connection with providing the assistance described in this Section 16 that are approved in advance by the Company and supported by
documentation promptly supplied by Employee that is reasonably deemed adequate by the Company. In engaging in any conduct described in this Section 16,
Employee shall not act in the capacity of an employee of the Company, and such assistance shall not make Employee eligible to participate in any of the
Company’s employee benefit plans or programs.
17. Confidentiality of Agreement. Employee agrees to keep the financial terms of this Agreement strictly confidential except to the extent that disclosure is
required by law, court order, subpoena (after giving prior written notice to the Company) or as expressly authorized by the Company in writing. Employee
may disclose the financial terms of this Agreement to Employee’s tax or legal advisors and immediate family, but only after advising such individuals of the
confidential nature of the financial terms of this Agreement and securing their binding promise not to disclose its financial terms. Employee understands that
Employee will be responsible for any wrongful disclosure that derives from Employee or from an individual with whom Employee shares the terms of this
Agreement.
18. Governing Law; Jurisdiction and Venue; Waiver of Jury Trial. This Agreement shall be governed by the laws of the State of Connecticut, without
regard to any principles of conflicts of law. Any suit, action or proceeding arising under or related to this Agreement must be brought and pursued only in the
state or federal courts in Hartford, Connecticut. Employee and the Company freely consent to the personal jurisdiction and venue of those courts, waive any
right to argue that personal jurisdiction or venue in any such court is improper, inappropriate, or inconvenient, and agree never to consent to any suit, action or
proceeding arising under or related to this Agreement
Exhibit 10.47
being brought in, transferred to, or litigated in any other court. Employee and the Company voluntarily waive the right to have a jury hear or decide any
claim arising under or relating to this Agreement.
19. Tax Consequences. The Company makes no representations or warranties with respect to the tax consequences of the payments and benefits described
in Sections 5.1.1 through 5.1.4 provided to Employee or made on Employee’s behalf under the terms of this Agreement. Employee agrees and understands
that Employee is responsible for payment, if any, of local, state, and/or federal taxes on the payments and any other consideration provided hereunder by the
Company and any penalties or assessments thereon. Employee further agrees to indemnify and hold the Released Parties harmless from any claims, demands,
deficiencies, penalties, interest, assessments, executions, judgments, or recoveries by any government agency against the Company for any amounts claimed
due on account of (a) Employee’s failure to pay or delayed payment of federal or state taxes, or (b) damages sustained by the Company by reason of any such
claims, including attorneys’ fees and costs.
20. Treas. Reg. Section 409A of the Code. Notwithstanding anything herein to the contrary, amounts payable to Employee pursuant to Section 5 shall be
made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). For this
purpose each payment shall be considered a separate and distinct payment, and to the extent of reliance on Treas. Reg. Section 1.409A-1(b)(9), no separation
pay amounts shall be payable unless Employee’s termination of employment constitutes a “separation from service” within the meaning of Treas. Reg. Section
1.409A-1(h)). However, to the extent any such payments are treated as non-qualified deferred compensation subject to Section 409A of the United States
Internal Revenue Code of 1986, as amended (the “Code”), if the 85-day payment period set forth in Section 5.1 commences in one taxable year and ends in
another, then no payments shall commence until the second taxable year. The parties acknowledge and agree that, to the extent applicable, this Agreement
shall be interpreted in accordance with Section 409A of the Code and guidance issued thereunder. Further, to the extent subject to Section 409A of the Code,
in no event shall any reimbursements be made later than the end of the calendar year following the year in which the expense was incurred, the expenses
eligible for reimbursement in a taxable year shall not affect the expenses eligible for reimbursement in any other taxable year, and the right to reimbursements
is not subject to liquidation or exchange for any other benefit.
21. Miscellaneous.
21.1 This Agreement is not an admission by any of the Released Parties, and the Company specifically denies, that any action that any of the Released
Parties has taken or failed to take with respect to Employee is or was wrongful, unlawful, or capable of causing Employee any harm. This Agreement, the fact
it was signed, or the fact it was put into effect by the parties, may not be used as evidence or admissible in any proceeding except one that Employee or the
Company brings claiming that this Agreement has been violated.
21.2 This Agreement, including the Continuing Obligations incorporated herein by reference under Section 11, contains the entire agreement and
understanding between Employee and the Company concerning the matters described herein and supersedes all of their earlier agreements, discussions,
negotiations, understandings, and proposals. The terms of this Agreement cannot be changed except in a document signed by Employee and an authorized
officer of the Company which states that it is changing this Agreement. A party’s failure to insist upon strict compliance with any part of this Agreement, or its
failure to assert any right it may have thereunder, shall not be considered a waiver of any of its rights under that or any other part of or right under this
Agreement.
21.3 If a court determines that any part of this Agreement is void, illegal, unenforceable, or in conflict with any applicable law, every other part of this
Agreement shall nonetheless remain fully valid and enforceable. If a court refuses to enforce any part of this Agreement on the grounds that it imposes an
unreasonable or unlawful restriction or is overly broad, the Parties agree that the court should modify that part to the least extent necessary to make it
enforceable, and fully enforce it and all other parts of this Agreement as so modified.
21.4 Neither party may assign any of its rights and obligations under this Agreement to any other person or entity without the other party’s advance
written consent; provided, however, that without Employee’s consent, the Company may assign its rights and obligations hereunder to any of its Affiliates or
to any corporation or
Exhibit 10.47
other entity that acquires all or substantially all of the Company’s assets or that succeeds to the Company’s business. Subject to the foregoing, this Agreement
shall bind the Parties’ respective successors, heirs, assigns, administrators, executors, and legal representatives.
21.5 This Agreement shall be interpreted in accordance with the plain meaning of its terms and not strictly for or against Employee or the Company. The
section headings in this Agreement shall not affect its meaning.
21.6 Employee agrees to perform all acts and sign and deliver all documents that may be reasonably necessary to carry out any of the terms of this
Agreement.
21.7 This Agreement and the Reaffirmation may be executed in counterparts and each counterpart shall be deemed an original and all of which
counterparts taken together shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the
undersigned. The counterparts of this Agreement and the Reaffirmation may be executed and delivered by facsimile, photo, email PDF, or other electronic
transmission or signature.
22. Advice to Consult with Attorney. The Company hereby advises Employee to consult with an attorney of her choice before signing this
Agreement.
23. Older Workers Benefit Protection Act (OWBPA) / Knowing and Voluntary / Revocation and Effective Date.
23.1 Employee understands that she may take a period of twenty-one (21) days within which to consider this Agreement. Employee understands that she
may revoke this Agreement during the seven (7) days following the execution of this Agreement and that the Agreement will become effective on the Effective
Date (i.e., the eighth day after Employee signs this Agreement) (the “Effective Date”), so long as Employee does not revoke this Agreement pursuant to this
Section 23. In order to revoke the Agreement, Employee must send a notice of revocation by email to Chief Legal Officer Tracey Heaton, at
theaton@heidrick.com, which shall only be effective if the Company receives it no later than the seventh day after Employee signs the Agreement. If Employee
revokes the Agreement, she will not be entitled to any of the payments, benefits or other consideration provided to her in this Agreement.
(a) Employee has carefully read this Agreement and fully understands what it means, including that by signing this Agreement, Employee is
releasing all known and unknown claims that she may have against any of the Released Parties as described in Section 7;
(b) Employee has had a full and adequate opportunity and reasonable time period of up to 21 days from the date Employee received this
Agreement to review its terms before signing it, and if Employee signed this Agreement before the end of that 21-day period, Employee did so of her own free
will;
(c) Employee has had an opportunity, and has been advised in writing by this Agreement, to consult with an attorney of Employee’s choosing
about the terms of this Agreement before signing it;
(d) Employee is voluntarily signing this Agreement without any threat or coercion; and
(e) Everything Employee has received or will receive for signing this Agreement is described herein, and Employee is not relying on any other
promises or representations in deciding to sign it.
Exhibit 10.47
IN WITNESS WHEREOF, each party signs this Agreement voluntarily and of their own free act and deed as follows:
Sarah Payne
Signature
Dated: February 2, 2025
HEIDRICK & STRUGGLES, INC.
By
Tracey Heaton
Chief Legal Officer
Dated: February 2, 2025
Exhibit 10.47
EXHIBIT A
REAFFIRMATION AND COVERAGE OF WAIVER AND RELEASE
I acknowledge that I have read and understand this Agreement, I agree to its terms, and reaffirm all statements and releases above that cover
from the time of my signature of the above Acceptance of Agreement through and including my last day of employment.
By: Date:
Sarah Payne
Exhibit 19.1
INSIDER TRADING POLICY
I. SUMMARY
As part of our work as trusted advisors, we often become aware of non-public information which could have an impact on the market price of the
securities of Heidrick & Struggles International, Inc. (“Heidrick” and/or the “Company”), a Heidrick client or another related company. Consistent with our
bedrock value of always acting with integrity, any Personnel who is aware of material nonpublic information regarding Heidrick or any other company must
not:
•
Trade in that company’s stock;
•
Disclose that information to others who may buy or sell securities of that company; or
•
Otherwise use the information for their personal advantage or the personal advantage of others.
When in doubt, the general rule is don’t Trade.
This Policy explains what insider trading is in more detail, how we should deal with such information and the measures and procedures Heidrick has
in place to prevent insider trading. Please note that there are several capitalized words and phrases in the Policy and their specific meanings are detailed in the
glossary for your reference and convenience.
II. PROHIBITIONS
1.
Heidrick Securities. Our Personnel shall NOT Trade any Heidrick securities (NASDAQ:HSII) during any Blackout Period or while in the
possession of material nonpublic information regarding Heidrick. “Trading” may include the gifting of shares – see definition below.
2.
Securities of Clients and Other Companies. In our work at Heidrick, we may learn of sensitive information about other companies, including
clients and other companies with whom Heidrick may engage in important business transactions such as mergers, acquisitions, renewal or
termination of significant contracts or other arrangements. Information learned in connection with these engagements, transactions and relationships
may constitute material non-public information about the other company. Our Personnel may NOT purchase or sell the securities of clients of the
Company, or other firms with whom the Company may be engaged in such transactions, while aware of material non-public information about the
other company.
Trading in the securities of clients or otherwise investing in clients is also subject to the rules and restrictions in the Company’s Conflicts of Interest
(CoI) Policy, which can be found here. The CoI Policy explains pre-approval procedures, applicable restrictions and certain prohibitions on
trading in client securities. It is incumbent on Personnel to review and comply with the CoI Policy before engaging in such trading or investing.
3.
Hedging, Pledging, Short Sales and Derivative Transactions. Our Personnel shall NOT (i) hold Heidrick securities in a margin account or
purchase Heidrick securities on margin, (ii) pledge Heidrick securities as collateral for a loan, (iii) engage in short sales of Heidrick securities (sale of
stock that the seller does not own or a sale that is completed by delivery of borrowed stock), (iv) enter into derivative or similar transactions with
respect to Heidrick securities or (v) otherwise engage in transactions that either hedge or offset any decrease in value of Heidrick securities.
4.
Tipping. Our Personnel shall NOT directly or indirectly pass along material non-public information about Heidrick, our clients or any of the
companies mentioned above to Related Persons or any others except (i) to Heidrick’s lawyers, accountants or advisors who have a need to know
such information; or (ii) to Heidrick Personnel that have a need-to-know such information. Additionally, our Personnel may NOT suggest that
anyone purchase or sell any company’s securities while they are aware of material nonpublic
1
Exhibit 19.1
information about that company. These behaviors are known as “tipping” and are considered violations of the securities laws. The civil and criminal
penalties applicable to a person engaged directly in insider trading also apply equally to a person engaged in ‘tipping’, even if they do not receive any
money or derive any benefit from trades made by persons to whom they passed material non-public information.
5.
Standing and Limit Orders. Standing and limit orders (other than orders under approved Rule 10b5- 1 trading plans, as described below) create
heightened risks for insider trading violations given the lack of control over when trades are executed – you could give your broker a standing or limit
order when you are not in possession of material non-public information but subsequently your broker could execute a trade under that order at a time
when you have become aware of material non-public information. Heidrick therefore discourages Personnel from placing standing or limit orders for
Heidrick’s securities. If you determine you must use a standing order or a limit order, the order should be limited to a very short duration and should
otherwise comply with the restrictions and procedures outlined in this Policy.
These restrictions apply to transactions conducted in your personal account or any other account over which you have direct or indirect control.
III. WHO MUST FOLLOW THIS POLICY
This Policy applies to all Heidrick Personnel globally (including our employees, officers and Board of Directors) both during their time with Heidrick and
after their employment or service with Heidrick terminates until such time any material non-public information you are aware of about Heidrick, a client or
third party is publicly disclosed or is no longer material. The same restrictions that apply to you apply to all Related Persons. Our Personnel are privy to a
great deal of information due to our role as trusted advisors, and as Insiders under this Policy must act with the highest integrity.
IV. PROCEDURES INTENDED TO PREVENT INSIDER TRADING
Heidrick has established – and will maintain and enforce - the following procedures, in an effort to prevent insider trading. Personnel are required to
follow these procedures:
a.
Pre-Clearance of All Trades by All Restricted Persons
To prevent inadvertent violations of this Policy or applicable laws, and to avoid even the appearance of wrongdoing, all Trades in Heidrick securities
by Restricted Persons must receive written permission from Heidrick’s CLO (or their delegate) before engaging in any Trade (referred to as “pre-
clearance”). If you are a Restricted Person, you must obtain preclearance for Trades even if the Blackout Period has expired and the trading window
is open. If your shares are held in Heidrick’s Morgan Stanley platform, Shareworks, you may obtain pre-clearance by submitting a request via the
platform. If your shares are held in a brokerage account outside of Shareworks, your clearance request should be submitted in writing (which includes
submitting, via DocuSign to precleartrade@heidrick.com, a preclearance form with the amount of shares you intend to purchase and/or sell, as well
as the anticipated execution date (see “Exhibit A”)) in advance of the proposed Trade(s) to Heidrick’s CLO or their delegate. This form may be found
on Heidrick’s internal platform, Gateway. Pre-clearance of a transaction is valid for 3 business days. If the transaction order is not placed or executed
within those 3 business days, if approved, pre-clearance of the transaction must be re-requested, including submitting an additional pre-clearance
form. If pre-clearance is denied, the person requesting such pre-clearance must keep the fact of that denial confidential as it could result in an
unintended distribution of information about a pending material event. Any Section 16 Reporting Person must promptly report any completed
transaction to Heidrick’s CLO (or their delegate) to facilitate reporting to the SEC.
Examples of prohibited derivative transactions include, but are not limited to, purchases or sales of puts and calls (whether written or purchased or sold), options (whether “covered” or not), forward
contracts, including but not limited to prepaid variable forward contracts, put and call “collars” (“European” or “American”), “equity” or “performance” swap or exchange agreements or any similar
agreements or arrangements however denominated in Heidrick securities
1
Exhibit 19.1
b.
10b5-1 Trading Plans
Rule 10b5-1 under the US securities laws provides for an affirmative defense against insider trading liability if trades occur pursuant to a prearranged
“trading plan” that meets specified conditions. In light of this, and in recognition of the constraints that the restrictions in this Policy impose on
Personnel for Trading in Heidrick securities, Heidrick will allow Personnel to enter into a written trading plan under Rule 10b5-1 (or modify an
existing plan) only if the plan or modification meets specific criteria and is approved by Heidrick’s CLO (or their delegate).
Because this rule is complex, Heidrick recommends that you work with a broker and be sure you fully understand the limitations and conditions of
the rule before you establish a 10b5-1 trading plan. Please contact the CLO if you are interested in establishing a trading plan – details regarding the
requirements and limitations will be provided to you and your broker. You should also obtain approval from Heidrick’s CLO prior to modifying or
terminating a 10b5-1 trading plan.
c.
Revisions to this Policy
Heidrick may change the terms of this Policy from time to time to respond to developments in law and practice and will take reasonable steps to
inform all affected persons of any material change to this Policy. If you have any questions about this Policy and/or need to send requests for
approval of a 10b5-1 trading plan, please send those questions and/or requests directly to Heidrick’s CLO or their delegate, via email to
precleartrade@heidrick.com. You should note, however, that you are ultimately responsible for complying with insider trading laws and this Policy.
V. COMPLIANCE
Any Personnel who fails to comply with this Policy will be subject to disciplinary action, up to and including the termination of employment. Insider-
trading violations are not limited to trading or tipping by our Personnel. Persons other than our Personnel also can be liable for insider trading,
including those who trade on material non-public information tipped to them or individuals who trade on material non-public information that has
been misappropriated.
In addition, penalties for trading on or tipping material non-public information can greatly exceed any profits made or losses avoided for the
individuals engaging in such unlawful conduct. The Securities and Exchange Commission, Financial Industry Regulatory Authority and Department
of Justice have made the civil and criminal prosecution of insider trading violations a top priority. Enforcement remedies available to the government
or private plaintiffs under the federal securities laws include criminal and civil penalties as well as SEC administrative sanctions.
VI. SCENARIOS
Q. I am working on a search and have found out that the client is going to acquire one of its competitors. I want to trade stock in the
company it is acquiring. When am I allowed to do so?
A. After the acquisition is publicly disclosed, then you may trade assuming you do not possess any other material non-public information about that
company.
Q. I am currently doing a CEO search and once placed, the intention is for the CEO to do a complete overhaul of the future strategy of the
company. Recently, the fact that the CEO was being replaced was reported in the national news. Is this still material non-public information?
A. The information reported in the national news is now public information, however you may still be privy to material non-public information about
the client. Also, the restrictions on trading in a client’s stock in our CoI Policy would still apply.
Exhibit 19.1
Q. A friend at a dinner party last weekend recommended I buy stock in the company that he works for because the company is about to be
acquired. The deal is still confidential but is about to close anyway and I didn’t receive this information through Heidrick so is it acceptable to trade
stock of this company?
A. No. This would still be deemed as tipping which is prohibited under the securities laws, and both the ‘tipper’ and the ‘tippee’ could face civil and
criminal liability for trades effected utilizing the insider information. Material non-public information can be received through any form of communication
including conversations at social or business gatherings.
Q. I placed a limit order with my broker but the stock price I specified was not attained prior to the start of the Blackout Period or when I
obtained material non-public information. Can I leave the limit order open?
No. You must monitor any open limit orders you have placed. A limit order executed by a broker when you are aware of material non-public
information may be deemed insider trading. Heidrick discourages Personnel from placing standing or limit orders for our securities. If you determine you must
use a standing order or a limit order, the order should be limited to a very short duration and should otherwise comply with the restrictions and procedures
outlined in this Policy.
VII. GLOSSARY
“Blackout Period” means the period beginning fourteen calendar days before the last business day of any fiscal quarter of Heidrick and ending one full
trading day after the public release of earnings data for such fiscal quarter. This “blackout period” is subject to change as deemed necessary by Heidrick and,
under certain circumstances, Heidrick may extend the blackout period to prohibit trading by some or all Personnel. Heidrick may also impose additional
event-specific blackout periods such as for a pending material partnership, contract, merger, acquisition or other type of transaction, or a material
investigation. To note, many people often refer to this trading window as being “open” (end of the Blackout Period) or “closed” (commencement of the
Blackout Period).
“Insider trading” occurs when any person purchases or sells a security while aware of material nonpublic information relating to a security. The SEC has
indicated that it may also treat gifting a security while aware of material non-public information as insider trading.
An “Insider” means any person (generally officers, directors and employees) who possess material non-public information as well as “temporary insiders”
who occasionally receive such information, such as underwriters, lawyers, accountants, or consultants. The definition of insider is transaction specific; that is,
an individual is an insider with respect to each material nonpublic item of which he or she is aware. Insiders also have independent fiduciary duties to Heidrick
and its stockholders not to trade on material non-public information relating to Heidrick’s securities.
“Material Information” means any information that has a substantial likelihood to influence (either positively or negatively) someone to buy, hold or sell the
respective securities. It does not have to be related to the respective business, for example, the contents of a forthcoming newspaper column that is expected to
affect the market price of a security can be material. The materiality of particular information is subject to reassessment on a regular basis. Some examples of
material information include:
1.
Financial results and projections of future earnings or losses
2.
News of pending or proposed joint ventures, mergers, acquisitions or divestitures
3.
Gain or loss of a substantial contract or alliance partner
4.
Significant new product announcements or pricing changes
5.
New equity or debt offerings
6.
Significant litigation exposure due to actual or threatened litigation
7.
Changes in senior management
Exhibit 19.1
8.
Impending bankruptcy or financial liquidity problems
9.
Changes in dividend policy, stock splits, spin-offs or other special distributions (including stock repurchase programs)
10. Sensitive cyber incident related information.
It is not possible to define all categories of material information, and you should recognize that the public, the media and the courts may use hindsight in
judging what is material. Therefore, it is important to err on the safe side and assume information is material if there is any doubt.
“Material Non-Public Information” means material information that is not publicly disclosed information.
A “Material Position” means acquiring beneficial ownership of greater than 5% of such company’s outstanding securities or investing 10% or more of your
net worth in such securities.
“Personnel” means all Heidrick employees, officers and the Heidrick Board of Directors.
“Public Information” or “publicly disclosed information” means (i) information that is widely disseminated through appropriate channels (e.g. press
release, widely disseminated statement from a senior officer with broad media and news coverage) so that it is generally available to investors (circulation of
rumors may not constitute public dissemination) and (ii) enough time has lapsed since that public disclosure to permit the trading markets to absorb and
evaluate the information – generally after one full trading day following the public disclosure.
“Related Persons” means any family members who reside with you, anyone else who lives in your household, and any family members who do not live in
your household but whose transactions in Heidrick securities are directed by you or are subject to your influence or control (such as parents or children who
consult with you before they trade in Heidrick securities) partnerships in which an Insider is a partner; trusts of which an Insider is a trustee; and estates of
which an Insider is an executor.
“Restricted Persons” are those who are at an enhanced risk of possessing inside information and who therefore must exercise greater diligence to comply
with insider trading prohibitions. This group includes all members of the Heidrick Board of Directors, Executive Officers and certain senior finance, legal,
HR, business development, investor relations, corporate communication and other selected Partners, as well as any other associates in a role that makes it
likely they will have involvement with material non-public information regarding Heidrick. This list is updated periodically by the Legal and Finance
Departments. You will be notified by the Legal Department if you are considered a Restricted Person under this policy.
“Securities” include common stocks, bonds, notes and debentures, as well as options to purchase, warrants and similar instruments related to such stock,
bonds, notes and debentures and any other securities Heidrick or the Client may issue from time to time, such as preferred stock, warrants or convertible
debentures. Heidrick’s securities also include derivative securities relating to Heidrick’s stock, even if not issued by Heidrick (e.g. exchange-traded options).
“Trade” means purchasing or selling the securities, or gifting the securities when you know, or have reason to believe, that the recipient may sell the securities
shortly after receiving them. A purchase or sale includes the actual purchase or sale of a security, as well as the entry into any contract to purchase/sell or
otherwise acquire/dispose of a security. Purchases include not only the actual purchase of a security, but any contract to purchase or otherwise acquire a
security. Sales include not only the actual sale of a security, but any contract to sell or otherwise dispose of a security.
Amended: 09/28/2023
Exhibit 19.1
Exhibit A – Preclearance Form
Request for Pre-Clearance Form (available on Gateway, to be completed via DocuSign and emailed to preclearance@heidrick.com)
To: Chief Legal Officer or Appointed Delegate
From:
Date:
Re: Request for pre-clearance for transactions in Heidrick and Struggles (“HSII”)
Pursuant to the HSII Insider Trading Policy (the “Policy”), I request clearance for the following proposed transaction in Company securities:
Type of Transaction (circle one)
Open Market or Private Purchase Open Market or Private Sale Cashless Exercise of Stock Option
Other Acquisition or Disposition (specify):
Securities Involved in Transaction:
Number of shares:
Number of shares represented:
by option:
Other (please explain):
Beneficial Ownership (if not applicable, please indicate “N/A”):
Name of beneficial owner if other than yourself:
Relationship of beneficial owner to yourself:
By completing this form and submitting it to the Chief Legal Officer, I hereby represent all of the following:
1.
I have read and am in compliance with the HSII Insider Trading Policy;
2.
I am not currently in possession of material non-public information regarding HSII, and at the time I complete the transaction noted above, I will not
be in possession of material non-public information regarding HSII.
(Signature of Requestor)
(Chief Legal Officer or Appointed Delegate)
Exhibit 21.01
SUBSIDIARIES OF HEIDRICK & STRUGGLES INTERNATIONAL, INC.
The following are subsidiaries of Heidrick & Struggles International, Inc. as of December 31, 2024:
BEIJING HEIDRICK & STRUGGLES INTERNATIONAL MANAGEMENT CONSULTING COMPANY LIMITED, a China limited partnership (joint
venture 90% ownership)
HEIDRICK & STRUGGLES LEADERSHIP CONSULTING, LTD., a United Kingdom corporation
H&S HOLDINGS LIMITED, a Thailand corporation
HEIDRICK & STRUGGLES AB, a Sweden corporation
HEIDRICK & STRUGGLES AG, a Switzerland corporation
HEIDRICK & STRUGGLES ARGENTINA S.A., an Argentina corporation
HEIDRICK & STRUGGLES ASIA-PACIFIC, LLC, a Delaware limited liability company
HEIDRICK & STRUGGLES AUSTRALIA PTY., LTD., an Australia corporation
HEIDRICK & STRUGGLES B.V., a Netherlands corporation
HEIDRICK & STRUGGLES CANADA, INC., a Canada corporation
HEIDRICK & STRUGGLES (CAYMAN ISLANDS), INC., a Cayman Islands corporation
HEIDRICK & STRUGGLES CYPRUS LTD., a Cyprus corporation
HEIDRICK & STRUGGLES ESPANA, INC., an Illinois corporation
HEIDRICK & STRUGGLES FAR EAST LIMITED, a Hong Kong corporation
HEIDRICK & STRUGGLES (GIBRALTAR) HOLDINGS LIMITED, a Gibraltar corporation
HEIDRICK & STRUGGLES (GIBRALTAR) LIMITED, a Gibraltar corporation
HEIDRICK & STRUGGLES HOLDING B.V., a Netherlands corporation
HEIDRICK & STRUGGLES HONG KONG, LTD., an Illinois corporation
HEIDRICK & STRUGGLES, INC., a Delaware corporation
HEIDRICK & STRUGGLES (INDIA) PRIVATE LIMITED, an India corporation
HEIDRICK & STRUGGLES INTERNATIONAL S.R.L, an Italy corporation
HEIDRICK & STRUGGLES JAPAN GODO KAISHA, a Japan limited liability company
HEIDRICK & STRUGGLES JAPAN, LTD., an Illinois corporation
HEIDRICK & STRUGGLES (KOREA), INC., a Korea corporation
HEIDRICK & STRUGGLES LATIN AMERICA, INC., an Illinois corporation
Exhibit 21.01
HEIDRICK & STRUGGLES (MIDDLE EAST) LTD., a United Arab Emirates corporation
HEIDRICK & STRUGGLES (RUSSIA) LLC, a Russia corporation
HEIDRICK & STRUGGLES S.A. de C.V., a Mexico corporation
HEIDRICK & STRUGGLES SINGAPORE PTE LTD., a Singapore corporation
HEIDRICK & STRUGGLES SP. ZO.O, a Poland corporation
HEIDRICK & STRUGGLES RECRUITMENT (THAILAND), LTD., a Thailand corporation
HEIDRICK & STRUGGLES (UK) FINANCE COMPANY LIMITED, a United Kingdom company
HEIDRICK & STRUGGLES (UK) LIMITED, a United Kingdom corporation
HEIDRICK & STRUGGLES UNTERNEHMENSBERATUNG GMBH & CO. KG, a Germany limited partnership
HEIDRICK & STRUGGLES UNTERNEHMENSBERATUNG VERWALTUNG, GMBH, a Germany limited liability company
HEIDRICK & STRUGGLES A/S, a Denmark corporation
HEIDRICK & STRUGGLES IRELAND, LIMITED, an Ireland corporation
SENN-DELANEY LEADERSHIP CONSULTING GROUP, LLC, a California limited liability company
HEIDRICK & STRUGGLES RECRUTAMENTO & CONSULTIVO HOLDING LTDA., a Brazil corporation
HEIDRICK & STRUGGLES RDJ RECRUTAMENTO & CONSULTIVO LTDA., a Brazil corporation
HEIDRICK & STRUGGLES RECRUTAMENTO ESPECIALIZADO LTDA., a Brazil corporation
HEIDRICK & STRUGGLES CONSULTIVO LTDA., a Brazil Corporation
HEIDRICK & STRUGGLES HOLDING SWEDEN AB, a Sweden Corporation
PRIME BLOCKER CORP, a Delaware Corporation
BUSINESS TALENT GROUP, LLC, a California limited liability company
BUSINESS TALENT GROUP EUROPE LTD., a United Kingdom corporation
BTG USA, INC., a Delaware corporation
H&S GLOBAL HOLDINGS, INC., a Delaware corporation
HEIDRICK SEARCH AND CONSULTING LTD., an Israel corporation
PRIMARY TALENT CONSULTANCY, INC., a Cayman Islands corporation
PRIMARY TALENT CONSULTANCY LIMITED, a Hong Kong Corporation
HEIDRICK & STRUGGLES (SHANGHAI) TALENT CONSULTING CO., LTD., a China Corporation
Exhibit 21.01
HEIDRICK & STRUGGLES FINLAND HOLDING OY, a Finland Corporation
H&S FINLAND OY, a Finland Corporation
H & S EUROPE COE SP ZO.O, a Poland corporation
HEIDRICK & STRUGGLES MIDDLE EAST LTD., a Saudi Arabia Corporation
BUSINESS 3.0 LIMITED, a United Kingdom corporation
HEIDRICK & STRUGGLES SEARCH AND CONSULTING COLOMBIA SAS, a Colombia Corporation
ATREUS GROUP GMBH, a Germany corporation
H&S AUSTRALIA HOLDING PTY LTD, an Australia corporation
HEIDRICK & STRUGGLES AFRICA (PTY) LTD, a South Africa corporation
HEIDRICK & STRUGGLES SOUTH AFRICA (PTY) LTD, a South Africa corporation
ATREUS GMBH, a Germany corporation
ATREUS INTERIM MANAGEMENT GMBH, a Germany corporation
MYHEAD GMBH, a Germany corporation
ATROVA GMBH, a Germany corporation
HEIDRICK & STRUGGLES HOLDING COMPANY, a Delaware Corporation
HEIDRICK & STRUGGLES CHILE SpA, a Chilean Corporation
Exhibit 23.01
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (No, 333-279680, No. 333-272643, No. 333-239337, No. 333-225436, No. 333-
181712, No. 333-147476, No. 333-130143, No. 333-82424, No. 333-58118, No. 333-32544, and No. 333-73443) on Form S-8 of Heidrick & Struggles
International, Inc. of our reports dated March 3, 2025, relating to the consolidated financial statements and the effectiveness of internal control over financial
reporting of Heidrick & Struggles International, Inc. and its subsidiaries, appearing in this Annual Report on Form 10-K of Heidrick & Struggles International,
Inc. for the year ended December 31, 2024.
/s/ RSM US LLP
Chicago, Illinois
March 3, 2025
Exhibit 31.1
CERTIFICATION
I, Thomas L. Monahan, certify that:
1. I have reviewed this annual report on Form 10-K of Heidrick & Struggles International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Dated:
March 3, 2025
/s/ Thomas L. Monahan III
Thomas L. Monahan III
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Nirupam Sinha, certify that:
1. I have reviewed this annual report on Form 10-K of Heidrick & Struggles International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Dated:
March 3, 2025
/s/ Nirupam Sinha
Nirupam Sinha
Chief Financial Officer
Exhibit 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the
undersigned officer of Heidrick & Struggles International, Inc., a Delaware corporation (the “Company”), does hereby certify that:
The Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”) of the Company fully complies with the requirements of
section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Dated:
March 3, 2025
/s/ Thomas L. Monahan III
Thomas L. Monahan III
Chief Executive Officer
Exhibit 32.2
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the
undersigned officer of Heidrick & Struggles International, Inc., a Delaware corporation (the “Company”), does hereby certify that:
The Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”) of the Company fully complies with the requirements of
section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Dated:
March 3, 2025
/s/ Nirupam Sinha
Nirupam Sinha
Chief Financial Officer
Exhibit 97.1
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
POLICY ON RECOUPMENT OF INCENTIVE COMPENSATION
Introduction
The Human Resources and Compensation Committee (the “HRCC”) of the Board of Directors (the “Board”) of Heidrick & Struggles International, Inc. (the
“Company”) has adopted this Policy on Recoupment of Incentive Compensation (this “Policy”), which provides for the recoupment of compensation in
certain circumstances in the event of a restatement of financial results by the Company. This Policy shall be interpreted to comply with the requirements of
U.S. Securities and Exchange Commission (“SEC”) rules and Nasdaq Stock Market (“Nasdaq”) listing standards implementing Section 954 of the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and, to the extent this Policy is in any manner deemed inconsistent
with such rules, this Policy shall be treated as retroactively amended to be compliant with such rules.
Administration
This Policy shall be administered by the HRCC. Any determinations made by the HRCC shall be final and binding on all affected individuals. The HRCC is
authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy, in all
cases consistent with the Dodd-Frank Act. The Board or HRCC may amend this Policy from time to time in its discretion.
Covered Executives
This Policy applies to any current or former “executive officer,” within the meaning of Rule 10D-1 under the Securities Exchange Act of 1934, as amended, of
the Company or a subsidiary of the Company (each such individual, an “Executive”). This Policy shall be binding and enforceable against all Executives and
their beneficiaries, executors, administrators, and other legal representatives.
Recoupment Upon Financial Restatement
If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement
under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the
previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the
current period (a “Financial Restatement”), the HRCC shall cause the Company to recoup from each Executive, as promptly as reasonably possible, any
erroneously awarded Incentive-Based Compensation, as defined below.
No-Fault Recovery
Recoupment under this Policy shall be required regardless of whether the Executive or any other person was at fault or responsible for accounting errors that
contributed to the need for the Financial Restatement or engaged in any misconduct related to the circumstances giving rise to the need for the Financial
Restatement.
Compensation Subject to Recovery; Enforcement
This Policy applies to all compensation granted, earned or vested based wholly or in part upon the attainment of any financial reporting measure determined
and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measure that is derived wholly or in
part from such measures, whether or not presented within the Company’s financial statements or included in a filing with the SEC (including stock price and
total shareholder return (“TSR”)), including but not limited to performance-based cash, stock, options or other equity-based awards paid or granted to the
Executive (“Incentive-Based Compensation”). Compensation that is granted, vests or is earned based solely upon the occurrence of non-financial events, such
as base salary, restricted stock or options with time-based vesting, or a bonus awarded solely at the discretion of the Board or HRCC and not based on the
attainment of any financial measure, is not subject to this Policy.
In the event of a Financial Restatement, the amount to be recovered will be the excess of (i) the Incentive-Based Compensation received by the Executive
during the Recovery Period (as defined below) based on the erroneous data and calculated without regard to any taxes paid or withheld, over (ii) the Incentive-
Based Compensation that would have been received by the Executive had it been calculated based on the restated financial information, as determined by the
HRCC. For purposes of this Policy, “Recovery Period” means the three completed fiscal years immediately preceding the date on which the Company is
required to prepare the Financial Restatement, as determined in accordance with the last sentence of this paragraph, or any transition period that results from a
change in the Company’s fiscal year (as set forth in Section 5608(b)(i)(D) of the Nasdaq
Exhibit 97.1
Listing Rules). The date on which the Company is required to prepare a Financial Restatement is the earlier to occur of (A) the date the Board or a Board
committee (or authorized officers of the Company if Board action is not required) concludes, or reasonably should have concluded, that the Company is
required to prepare a Financial Restatement or (B) the date a court, regulator, or other legally authorized body directs the Company to prepare a Financial
Restatement.
For Incentive-Based Compensation based on stock price or TSR, where the amount of erroneously awarded compensation is not subject to mathematical
recalculation directly from the information in the Financial Restatement, then the HRCC shall determine the amount to be recovered based on a reasonable
estimate of the effect of the Financial Restatement on the stock price or TSR upon which the Incentive-Based Compensation was received and the Company
shall document the determination of that estimate and provide it to Nasdaq.
Incentive-Based Compensation is considered to have been received by an Executive in the fiscal year during which the applicable financial reporting measure
was attained or purportedly attained, even if the payment or grant of such Incentive-Based Compensation occurs after the end of that period.
The Company may use any legal or equitable remedies that are available to the Company to recoup any erroneously awarded Incentive-Based Compensation,
including but not limited to by collecting from the Executive cash payments or shares of Company common stock, by forfeiting any amounts that the
Company owes to the Executive or cancelling outstanding cash, equity-based or equity awards held by the Executive.
No Indemnification
The Company shall not indemnify any Executive or pay or reimburse the premium for any insurance policy to cover any losses incurred by such Executive
under this Policy or any claims relating to the Company’s enforcement of rights under this Policy.
Exceptions
The compensation recouped under this Policy shall not include Incentive-Based Compensation received by an Executive (i) prior to beginning service as an
Executive or (ii) if he or she did not serve as an Executive at any time during the performance period applicable to the Incentive-Based Compensation in
question. The HRCC (or a majority of independent directors serving on the Board) may determine not to seek recovery from an Executive in whole or part to
the extent it determines in its sole discretion that such recovery would be impracticable because (A) the direct expense paid to a third party to assist in
enforcing recovery would exceed the recoverable amount (after having made a reasonable attempt to recover the erroneously awarded Incentive-Based
Compensation and providing corresponding documentation of such attempt to Nasdaq), (B) recovery would violate the home country law that was adopted
prior to November 28, 2022, as determined by an opinion of counsel licensed in the applicable jurisdiction that is acceptable to and provided to Nasdaq, or (C)
recovery would likely cause the Company’s 401(k) plan or any other tax-qualified retirement plan to fail to meet the requirements of Section 401(a)(13) or
Section 411(a) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
Other Remedies Not Precluded
The exercise by the HRCC of any rights pursuant to this Policy shall be without prejudice to any other rights or remedies that the Company, the Board or the
HRCC may have with respect to any Executive subject to this Policy, whether arising under applicable law (including pursuant to Section 304 of the Sarbanes-
Oxley Act of 2002), regulation or pursuant to the terms of any other policy of the Company, employment agreement, equity award, cash incentive award or
other agreement applicable to an Executive, including without limitation the rights and remedies set forth in the Heidrick & Struggles International, Inc.
Misconduct Clawback Policy. Notwithstanding the foregoing, there shall be no duplication of recovery of the same Incentive-Based Compensation under this
Policy and any other such rights or remedies.
Acknowledgment
To the extent required by the HRCC, each current Executive shall be required to sign and return to the Company the acknowledgement form attached hereto as
Exhibit A pursuant to which such Executive will agree to be bound by the terms of, and comply with, this Policy. For the avoidance of doubt, each Executive
shall be fully bound by, and must comply with, the Policy, whether or not such Executive has executed and returned such acknowledgment form to the
Company.
Effective Date
This Policy has been adopted by the Board on September 28, 2023 (the “Effective Date”) and shall apply to any Incentive-Based Compensation that is
received by an Executive on or after the Effective Date.
EXHIBIT A
Exhibit 97.1
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
POLICY ON RECOUPMENT OF INCENTIVE COMPENSATION
ACKNOWLEDGEMENT FORM
Capitalized terms used but not otherwise defined in this Acknowledgement Form (this “Acknowledgement Form”) shall have the meanings ascribed to such
terms in the Policy.
By signing this Acknowledgement Form, the undersigned acknowledges, confirms and agrees that the undersigned: (i) has received and reviewed a copy of
the Policy; (ii) is and will continue to be subject to the Policy and that the Policy will apply both during and after the undersigned’s employment with the
Company; and (iii) will abide by the terms of the Policy, including, without limitation, by reasonably promptly returning any recoverable compensation to the
Company as required by the Policy, as determined by the HRCC in its sole discretion.
Sign: _____________________________
Name: [Employee]
Date: _____________________________