Heidrick & Struggles International Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 4, 2025

Key Takeaways

  • Positive Sentiment: Q2 Revenue and Growth: Second quarter revenue reached $317 million, a 14% increase YoY, exceeding the high end of guidance.
  • Positive Sentiment: Profitability and Cash: Adjusted EBITDA was $34 million with a 10.7% margin (+40 bps), and cash on hand rose to $400 million.
  • Negative Sentiment: Margin Impact from Hiring: Planned investments in global talent will drive hiring costs in H2, leading to quarterly margin pressure despite annual progress.
  • Positive Sentiment: Long-Term Targets Reaffirmed: Management maintains its medium-term goals of mid-to-high single-digit organic revenue growth and 5-8% organic adjusted EBITDA expansion.
  • Neutral Sentiment: Macro Trends and Client Demand: Ongoing geopolitical uncertainty and AI adoption are fueling demand for leadership services, although some clients remain cautious.
AI Generated. May Contain Errors.
Earnings Conference Call
Heidrick & Struggles International Q2 2025
00:00 / 00:00

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Operator

Thank you and welcome to Hendrik and Struggles twenty twenty five Second Quarter Conference Call. Participating on the call today are company's CEO, Tom Monahan and CFO, Nirupam Sinha. Accompanying slides are posted on the IR homepage of the company's website at hendrick.com. You are encouraged to view these slides for additional context. Please note that in the materials presented today, management may refer to non GAAP financial measures that the company believes provide additional insight to the underlying results.

Operator

Reconciliations between these non GAAP financial measures and the most comparable GAAP measures may be found in the earnings press release. Also, certain forward looking statements may be made in management's remarks. Please refer to the Safe Harbor language also included in today's press release. I will now turn the call over to Tom Monahan. Please go ahead.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Thank you for the kind introduction. Let me add my welcome and share an outline of the agenda for today's call. I'll start by touching on our Q2 results and our strong current operating performance, provide some context for our outlook on the rest of 2025 and provide an update on our strategic priorities. Then I'll hand the call over to Nirupam to walk us through a closer look at our Q2 results or go forward outlook and will both be available for Q and A. Maintaining our strong start in 2025, our Q2 results exceeded the high end of our revenue range.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

While we are pleased, we continue to stay close to clients as economic and geopolitical events remain very uncertain. Let me quickly reflect on the macro trends that shape our business and strategy and comment on how they are currently affecting our business. In the near to mid term, we see three big trends that affect our clients and provide us with a unique opportunity to grow our business and our impact. The first is probably the least volatile, but the most important. Great leadership talent is in chronically short supply, But there are both short and long term tailwinds that make it scarcer than ever.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

First, in the near term, the volatility that we all see is increasing demand for great leaders capable of managing organizations through this period of complexity. Simply put, clients need our help both to discover new leaders and to enable existing leaders to lead differently. Second, over the long term, demographic headwinds touch all our markets across the coming decades, which will obviously affect general labor availability, but squeeze the pool of top talent even further. The second major trend is that for more than a decade now, dating back to Brexit, if not earlier, changing geopolitics and global economic relationships are reconfiguring business strategy. Our clients aren't backing away from global markets, supply chains, or talent pools, but they do need to adjust strategy to reflect changing context.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

This obviously continues to be a really important theme in client conversations. Even as our overall business remains strong, we can and do see intermittent pockets of hesitance as clients digest industry specific implications of, say, tariffs or tax policy. Finally, new technologies continue to remake work. AI is the most obvious of these and clients continue to adapt their strategies to this powerful new asset. As we have learned in previous technology revolutions, fully realizing the potential of AI requires rethinking leadership, organization, and work itself.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Our job is to be their partner in transforming the promise of new technologies into progress against their goals through great leaders, teams, and high performing organizations. And at the same time, we need to continue to leverage these technologies in our own organization to drive great client impact. Against this backdrop, we saw growth in both revenue and confirmations across the firm and believe that we are entering the second half of the year in a great position to sustain and extend our impact on clients. All three of our reported solution lines saw growth and contributed to profit through outstanding work in solving client problems against the backdrop of this complex environment. In the near term, we know that our diverse business mix across sector, region, service lines, and client driven solutions gives our team the ability to perform even against this complex environment. In the medium and long term, this complexity and the growing client need for great leaders leading in the right way reminds us just how much white space we have available in our existing core business areas.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

We have an enormous opportunity both to drive broader client relationships and secure new client relationships in nearly every sector around the world. And we are working hard to grow the teams necessary to realize this opportunity. As we have shared, the number one driver of growth in our business or any professional services firm is a simple formula of how many great people you have multiplied by how productive they are. Given the white space opportunity in our existing business areas, we are intensely focused on two things. One, growing our talent base.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

This of course begins with ensuring that we retain, develop, and inspire our incredible global community of outstanding Heidrick professionals. Our great retention of top performers combined with our track record of promoting from within are evidence that we take this really seriously. Achieving our goals also demands that we bring great new people on board effectively at all levels of the firm. Second, driving great enablement of those people via training, development, and importantly, cutting edge analytic technology. Those of you at Investor Day saw a few of the tools that we've developed, but we've seen an opportunity to accelerate innovation even further and faster.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

This focus governs how we think about the consistent margin progression we targeted at Investor Day. You can see that we maintained a healthy margin in the first half. As we look to the second half of the year, we expect to see quarterly margins cycle down as we make progress on our hiring plans for the year. Even with this focus, we still anticipate making margin progress on an annual basis and setting ourselves up for continued expansion next year on a full year basis. Before I hand the call over to Nirupam, let me update you on our three areas of strategic priority.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

First, we aim to build differentiated relationships by being the most trusted leadership partner to the c suite and board. The need here is great, as illustrated by the most recent edition of our annual route to the top analysis that looks at CEO succession across major markets globally. The most surprising finding was that although the majority of boards agreed that CEO succession was a critical strategic priority, 30% of them admitted that time on this topic was crowded up by more urgent and likely less important tasks. This creates a huge opportunity and a huge obligation for us to consistently partner with CEOs and boards to shape their leadership strategy on an ongoing basis. Second, we work to deepen client relationships by partnering with them on transformation in this new world of leadership.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

We've made great progress in standing up consultant toolkits for key recurring client challenges like cost transformations. These should allow us to bring a fuller set of our capabilities to bear when clients are driving major work. Finally, we aim to create durable client relationships through innovations that embed our solutions more consistently in client workflows. Adding great people combined with intense focus on our long term strategic priorities will enable us to create unrivaled value for clients, colleagues, and shareholders by creating differentiated, and durable client relationships. In sum, our strong Q2 results reflect our team's energy and focus on our compelling and integrated growth opportunities across executive search, consulting, and on demand talent.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

This performance gives us confidence in our medium term through cycle target shared at our Investor Day, organic revenue growth of mid to high single digits and organic adjusted EBITDA growth between 58% per year. While top line growth and margins won't always move in a straight line, we see an attractive opportunity for our entire suite of increasingly digitally enabled professional services as our clients move leadership strategy to the forefront of their corporate initiatives. With that, I'll now hand the call over to Nirupam to provide a detailed review of our financial performance and outlook.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Thank you, Tom. We delivered strong results in the 2025 with outperformance in revenue that exceeded the high end of our outlook as well as robust profitability. In the next few minutes, I'll walk through the details of our performance along with our Q3 outlook. Second quarter revenue reached approximately $317,000,000 marking a 14% increase compared to Q2 twenty twenty four. Adjusted EBITDA improved $5,000,000 to $34,000,000 and adjusted EBITDA margin expanded 40 basis points to 10.7.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Looking more deeply at operating expenses, salary and benefits increased 17.6% from the prior year quarter. Fixed compensation increased $14,100,000 in the 2025 due to higher base salaries and payroll taxes, expenses related to our deferred compensation plan, talent acquisition and retention costs, retirement and benefit costs, and stock compensation. Variable compensation increased $17,200,000 benefiting from an increase in consultant productivity. As a percentage of net revenue, salary and benefits was 65.9% versus 63.8% in the year ago period. Excluding a $5,200,000 change in the market based deferred compensation, salary and benefits would have been 64.3%.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Consistent with our prior commentary, for the full year, we continue to expect the normalized run rate to be in the 65% range. General and administrative expenses improved by $4,300,000 to $42,200,000 or 9.2% from the prior year quarter, includes a fair value earn out adjustment, which is excluded from our adjusted results. As a percentage of net revenue, general and administrative expenses improved three forty basis points from the prior year to 13.3%. Obviously, this is a significant improvement. Part of the improvement is driven by the one time fair value adjustment, but a major portion is also due to the progress we're making across the enterprise in scaling G and A.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

With respect to R and D, as we have described previously, we continue to invest in the future of Heidrick. At the core of this investment is IP that powers all our businesses, including search, Heidrick Consulting, and our digital product portfolio, which includes digital assessments. R and D spend for the second quarter was $6,000,000 or 1.9% of net revenue. We continue to look for ways to maximize the return of our technology spend. Now, let's turn to our service lines for further details. In Executive Search, revenue grew 13% to $238,000,000 Looking at our regional performance compared to the prior year quarter, we saw revenue increases of 9% in The Americas, 31% in Europe, and 12% in APAC.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

As you know, we have a diversified practice platform with great client engagement. During the second quarter, we saw outperformance by the majority of our practice groups. Consultant productivity annualized in the second quarter at $2,300,000 up from $2,000,000 on the same basis in the year ago quarter. And we saw increases in confirmations and average revenue per Executive Search. Executive Search continues to produce strong profitability, with adjusted EBITDA of $54,600,000 and an adjusted EBITDA margin of 22.9%.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Turning to On Demand Talent, revenue increased 14% to $48,000,000 marking a continued outperformance in mid market dynamics. We saw growth in both wins and project extensions. On Demand Talent reported adjusted EBITDA of $1,000,000 versus an adjusted EBITDA loss of $1,600,000 in the year ago period. Clients continue to benefit from our ability to address urgent needs, which complements our search business and enhances our ability to serve clients comprehensively. Looking at Heidrick Consulting, we saw second quarter revenue increase 17% year over year to $31,000,000 driven by increases in leadership assessment as we implement a more intense focus on pairing assessments with different client solutions.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Adjusted EBITDA was positive at $600,000 for the quarter. Moving forward, we are focused on growing the business and ensuring continued efficiency gains. We're refining and simplifying Heidrick Consulting's offerings focused on its core strengths, including assessment, leadership development, and performance culture. Turning to the bottom line performance, adjusted net income for the quarter was $18,100,000 twenty twenty five second quarter adjusted diluted EPS was $0.85 which was 27% above last year's performance. Now I'll turn to the balance sheet.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

We ended the second quarter in a strong cash position of $400,000,000 up $103,000,000 from $297,000,000 at the June 2024. This balance, coupled with our credit facility, gives us great strength and flexibility to execute our strategic plan. As you will know, we're heading into higher watermark seasonality for cash. With bonus payouts in Q1, cash levels typically build across the rest of the year. Moving forward, we expect third quarter revenue to be within a range of $295,000,000 to $315,000,000 This compares to $279,000,000 in 2024, with the midpoint being almost 10% growth.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

As we discussed previously, the current economic climate can heighten uncertainty, which may lead clients to delay initiating new projects. In most cases, the underlying demand does not dissipate, and the client work resumes once there's greater clarity or stability in the macro environment. Similarly, we also find that client demand can accelerate quickly if critical client needs arise. As Tom mentioned, we're also focused on ensuring continued growth into 2026 and beyond. If you look to the second half of the year, we'd expect to see margins ebb down as we make progress on our hiring plans and subsequent expense comes online.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

We still anticipate making margin progress on an annual basis. In conclusion, our performance underscores the ability to deliver for clients across a variety of market environments. We're fortunate to have dedicated and focused global teams who remain committed to serving our clients with excellence. As we look ahead, we remain confident in the ability to navigate the evolving landscape with discipline and continue to drive long term value for our shareholders. With that, operator, please open the lines. Tom and I would be happy to take questions.

Operator

To ask a question, simply press star followed by the number one on your telephone keypad. And our first question comes from the line of Mark Riddick with Sidoti. Please go ahead.

Marc Riddick
Senior Equity Analyst at Sidoti & Company, LLC

Hello?

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

There

Marc Riddick
Senior Equity Analyst at Sidoti & Company, LLC

we are. Sorry. Hi, good evening. I wanted to start with the hiring plan announcements that you mentioned for the back half of the year and maybe given the macro, maybe we could get a little bit deeper into that and give maybe some extra thoughts there as to the thought process there as well as maybe how many additions you're looking to add and availability of maybe the right candidates, if you will.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Yeah. As I said in our prepared remarks, growing our team is one of the two foundations for growing the business. The other, of course, is ensuring that those people are super productive through development, making them great with their jobs, and technology that undergirds how they can be fantastic, high impact client advisors. We're focused on this lever for two reasons. First, when we plan the business, we see tons of white space in two directions, both existing clients we can grow faster across our service lines and lots of clients we just haven't engaged in their first service line yet.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

So we see two ways to grow the business. We know that's by adding people. Second, we know that our people and culture are a source of competitive advantage. We have a distinctive culture which has yielded great retention of top performers at all levels, and we'll obviously stay laser focused on this. But we know we also need to leverage this culture to add great talent more consistently than we have in the past.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

We have a distinctive strategy for adding talent, at least for our sector, that leans heavily on hiring folks early in their careers, often from industry or other professional services sectors, and growing them through development and apprenticeship. And of course, we always keep our eye out for great senior talent in all of our areas as well. But those combinations put us in a great place to go off and create marketing. Claring around the strategy lets us be more consistent in adding talent and lets us get after that white space quicker. I'll let Nirupam just talk for a minute about the quantum you should be thinking about.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Yeah. Hi, Mark. In terms of the last part around dollars and cents and sort of thinking about the numbers of people, I mean, it's not a huge number, relatively speaking. I think it's just important to note that some of the hiring we've done in the first half will come into the cost base in the second half of the year, and that's not completely an expected part of the strategy, as Tom outlined, to ensure we're set up for 'twenty six and beyond. And so I think you'll see this as not a huge, huge addition, but just enough where we think it will set us up well for the growth that we have outlined for you.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

In terms of finding the talent, I know some people are really good at that. So we're happy to put our own skills to work on behalf of building the firm.

Marc Riddick
Senior Equity Analyst at Sidoti & Company, LLC

Okay. And is there sort of a general time frame that we should think about as far as the pace of adding and then maybe when those expenses would take place through the year? Are we expecting that to sort of be a smooth process through the remainder of the year?

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

I think, Mark, it's mostly smooth through the end of the year. I think this is an evergreen kind of thing for us, right? I think we're just highlighting that this year, particularly, we've had a lot of hiring in the first half that's just coming online in the second half. But it's a smooth, I think, throughout the back half of the year and an evergreen for us in terms of our strategy.

Marc Riddick
Senior Equity Analyst at Sidoti & Company, LLC

Okay. Great. And then switching gears, wanted to sort of touch a little bit as far as cash usage and prioritization beyond the internal investments, maybe what you're looking at as far as has the prioritization changed? Or have you seen any opportunity sets that would sort of maybe be a little bit more highlighted than it would have been at the beginning of the year?

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Yeah, I think the broader theme there, Mark, is just white space. Saw strength in our businesses across the board. And look, it's a very complex geopolitical environment right now. Every day there's news in The US and around the world. And as we said before, complexity is our friend.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

No one ever called Hydrogen Struggles because they were completely happy or believed they had a great leadership team in place to address the challenges. And so when there's more challenges, there's opportunities for our people to be out in front of clients creating great impact. And that's that's what you see happening. You know, there's always gonna be micro climates in the business, geo industry, etcetera. But one of the real strengths of the business is we're strong across industries, we're strong across service lines, we're strong across solutions areas, we're strong across geos.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

And that gives us the ability to flex the business and meet clients where they are.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Mark, in terms of the cash flow, there's a couple of things just to point out there. One is we still have earn out payments in Q1 twenty twenty six that we're managing the cash flows paid for. And certainly, our cash usages factor that in. And then I think, as Sam said, we believe that the right investments are organic. But often in this business, as we've highlighted in the past, some of those hiring conversations sometimes turn into acquisitions or lift outs, and that's where we think there's use of cash.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

So some of the hiring that we mentioned, the strategy on the evergreen hiring, it turns into use of cash of the balance sheet. And I think that's just the life of a professional services firm.

Marc Riddick
Senior Equity Analyst at Sidoti & Company, LLC

Thank you very much.

Operator

Your next question comes from the line of Kevin Steinke with Barrington Research. Please go ahead.

Kevin Steinke
Managing Director at Barrington Research Associates

Hey, thank you and good afternoon. Just wanted to start out by digging into the third quarter revenue guidance range a little bit. Obviously, implies really solid year over year growth. It does point to a sequential decline versus the second quarter, but I think that it's probably explained by typical summer seasonality around vacations. But beyond that, given the global macro environment you talked about with continued uncertainty, potential project delays and pockets of hesitancy among clients, have you attempted to kind of factor that into the guidance range in terms of some potential conservatism?

Kevin Steinke
Managing Director at Barrington Research Associates

And maybe could you talk about the assumptions behind what would get you to the low end versus the high end of that range in terms of just, you know, the macro?

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Yeah. Certainly, Kevin. So it's a very fair question, first and I think we feel good about the guidance of two ninety five to two fifteen for the quarter. We're trying to be prudent. I think, you know, we've not witnessed a slowdown in the business.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

And as you point out, the sequential is is just seasonality that you would see normally. But the uncertainty of the macro certainly doesn't seem to be going away. And so if you think about it from the way you positioned it in terms of what can help us to the upper end, I think it continues to be the demand that we're seeing that assumes a bit of uncertainty as normal, frankly. We've seen clients sometimes actually move more quickly to launch a search as client needs vary by sector and geo. And I think every week brings something different there for certain clients.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

I think we continue to see the acceleration of the focus in consulting around its strengths, including assessment, leadership development, and performance culture. That continues to be and that pushes to the upper end. And then the acceleration of the tie between search and interim search placements with on demand. So I think if we continue to see what we've been seeing, I think we feel good about the upper end. What can pull us down?

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

The macro uncertainty. You know, as we've said and you kind of alluded to in the question, we often can see client demand push back. Usually, as we've talked about, it doesn't usually go away, but we can see it push back.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

And so even with booked business, client a gets delayed to start a project or making an offer to a candidate, and that has an impact on us.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

So I think the broader story here is our teams are staying close to clients, focusing very clearly on client needs, and we feel good about the range, and we feel good about the growth.

Kevin Steinke
Managing Director at Barrington Research Associates

Great. Well, that's really helpful color. I appreciate it. I wanted to follow-up by asking about the executive search productivity in the quarter was really strong $2,300,000 annualized. And the company has historically talked in the past about kind of a target range of 1,800,000.0 to $2,000,000 there.

Kevin Steinke
Managing Director at Barrington Research Associates

Do you view that 2,300,000.0 is a little hot and part of the reason you have to ramp up hiring? Or do you think there's potential longer term to maybe exceed that range that's been discussed in the past?

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Yeah, I'm happy to take that, Kevin. So I think generally we did see the $2,300,000 for the quarter annualized. But if you look at trailing 12, it's still 2,000,000 And so I think we still see the range as sort of around that 2,000,000. But part of what you say is, you know, when you start seeing a little bit of that, it just tells you how much white space you have and how much client demand needs to be there for our services. And so I think that does make us comfortable kind of moving forward on hiring.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

But I think from a longer term trend, still around $2,000,000

Kevin Steinke
Managing Director at Barrington Research Associates

Okay, great. Obviously you also talked about the hiring investments you're making and the impact that will have on margins in the second half of the year. Should we think about that as across segments, pretty broad based hiring? And then the second part of that is you did see some nice profitability increase in the non search segments in the quarter. Do you think that continues in the second half? Or does the hiring impact that?

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

I think most of the investments are just across the business. In general, we see, as we've talked about before, the synergies across the service lines to serve clients. Clients in some ways don't care which service line things are coming out of right. They just think that the client needs all. So I think we see the demand across all three.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

But having said that, I think what we saw in the non served service line is the trajectory that we want. And I think longer term, the guidance that we've given around those two service lines, we continue to feel good about that guidance. And I think from an annual basis, we continue to see progression towards it. That's the goal, to see that annual progression. We feel good about the progression we're seeing.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

I think as Nirban said, we manage the business on an annual basis. So it will be perfectly linear quarter to quarter, but we feel very comfortable with the amount of the business getting to the numbers we put out there at the Investor Day. That's a long term target, but it shows we're making progress.

Kevin Steinke
Managing Director at Barrington Research Associates

Okay, thanks. And then just lastly, of a housekeeping question. I think in the year ago second quarter, there were some expenses related to a global consultants conference that you held internally. Is there anything on the horizon like that over the remainder of the year that we should think about in terms of just the G and A expense line?

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

When we don't do global consultants conferences, we tend to do regional things, but those are spread out more evenly across the year. So the reason it was notable last year in Q2 is we kind of do it all at once in one quarter versus smoothing it out across the year. So safely assume we believe getting our people together is a great idea because they connect with each other, they teach each other, they learn from each other, they strategize around client solutions. So we'll still do that, but it doesn't all show up in one quarter. It's spread out more evenly through the year.

Kevin Steinke
Managing Director at Barrington Research Associates

Okay. Thanks. Thanks for the insights. And I will turn it back over.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Thank you.

Operator

And our final question comes from the line of Tobey Sommer with Truist Securities. Please go ahead.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

Thank you. I was wondering if you could dig into some of the regional differences in executive search EBITDA margin with Europe and Asia increasing. Is that sustainable? And the Americas contracting, I'm just kind of curious what's driving that given the top line across the geos is pretty good.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Yeah. No. Thanks, Obi. It's Nirupam. So a couple of things going on there.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

So first and foremost, I mean, I think you saw, especially in Europe, right, just kind of a great growth number, you know, 31%. And so first and foremost, just props to the team for great execution there. But second, as we've seen that, I mean, there is a little bit of just, you know, scale built in there and bonuses, you know, people hitting targets earlier, which allows us to just have a little bit of room in the system. And so I think what you're seeing in the non US or non North American regions is just a little bit of the growth and the scale that's coming in there. I think in The U.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

S, you have a phenomenon where obviously that is the largest and the most profitable, where have basically what we call the production, where certain producers may produce more in the first half of the year, so they're trading higher tiers, which means there's more bonuses going to them that get to catch up to the rest of the year. And so seeing that problem is why you've seen probably the quarter come down a little bit. We don't anticipate any structural changes in terms of what margins are in any of these regions.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

We think the long term margin rate we put out there is going to be the right rate business as a whole. It's also it's a quarter. Right? So it's yeah. I think we're we'll we'll say, well, I don't think we're seeing any changes to the economic structure that we put out there.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

How are what are you hearing from customers, particularly those that touch capital markets? Because we've seen some deal flow be pretty good, I guess, last week, for example. And you know, I I don't think the regulatory hurdle for mergers is, as high as it has been in the past. So, you know, if that really gets going, it can it can help the industry and the company. So what are you hearing from customers?

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Yeah. I mean, right now, the world's a thousand different microclimates, realistically. So there are places where there can be more enthusiasm due to a change in the regulatory environment. The flip side is there's still uncertainty in some cases around tariff structures, cost of inputs, tax treatments, etcetera. So it's a complex time.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Don't think we've yet seen again, complexities are a friend in that people need different types of help, new sorts of help, new roles, etcetera. And I'd say our teams have done a great job even when deal flow wasn't coming at the rate it was going to be the next big thing in deal flow for a couple of years now. Our team's been doing a very good job staying in front of clients who weren't able to do deals and still need to change management teams or accelerate performance or restructure a business. I think that's our job, is to build an all weather firm that can be in front of clients no matter what external factors they have because they always have challenges.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

What industry verticals are you most optimistic about for the balance of '25?

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Yeah, look, I think it tends to be you've seen our business good balance across industry verticals across time. It tends to be more thematic, where people say you can imagine right now pretty much every industry is thinking about structure, trying to move AI from promise to actual outcome, what talent do they need specifically to AI, what other talent do they need in the business, how they organize around it. So I don't think we see necessarily kind of a spike in an industry, although you see, obviously, find pockets of frontier technologies, etcetera, that are growing quickly because people are investing them from a private capital basis. More broadly, it tends to be thematic within the existing client base rather than little segments popping here and there.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

And if I could sneak in the last one, I'd be remiss if I didn't. Take the opportunity just to invite you to say that margins and and consulting are on a trajectory that's durable and likely to be sustained here over the balance of the year and into next?

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Toby, I will accept your invitation. Look, I think it's a quarter. So we're pleased with the progress. I think we're probably rather than spiking the football after one quarter, we're more pleased with the incredible both growth and progress those teams are making. And we feel very comfortable with the long term targets we put out there for those businesses.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

And those teams have taken those challenges and run at them very hard. So, yeah, we're very pleased. We're not there by any stretch of the imagination, and it won't be perfectly linear to those zones. And if I know these teams, when we get to the target zones, they'll want to push harder, faster and higher. That's who those people are.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

We work with them. We know how ambitious they are. But it's one quarter, but it's a good dot point in the trajectory we want to set in motion.

Nirupam Sinha
Nirupam Sinha
CFO at Heidrick & Struggles International

Thank you.

Operator

With no further questions in queue, will now turn the call back to Tom Monahan for closing remarks. Thank you.

Tom Monahan
Tom Monahan
CEO & Director at Heidrick & Struggles International

Thanks, Tina, and thanks, everyone, for joining us today. We appreciate your continued interest in hydrogen struggles, and I will keep you updated as we move through the second half of the year. Please don't hesitate to reach out with additional questions. I hope everyone enjoys their summer, and I'm sure Nirupam and I will see you out on the road.

Operator

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

Executives
    • Tom Monahan
      Tom Monahan
      CEO & Director
    • Nirupam Sinha
      Nirupam Sinha
      CFO
Analysts
    • Marc Riddick
      Senior Equity Analyst at Sidoti & Company, LLC
    • Kevin Steinke
      Managing Director at Barrington Research Associates
    • Tobey Sommer
      Managing Director at Truist Securities
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